Sample Category Title

Markets

Markets started off in good spirits. European equities add 0.75%, Wall Street opens 0.2% higher. There weren’t any data scheduled for release but the European Commission’s updated forecasts helped support sentiment. Brussels turned more upbeat on the European economy, predicting a narrow escape from a recession and growth this year of 0.9% vs 0.3% previously. Reasons include a resilient labour market, the mild winter & high gas storage levels. As it happens, the Dutch gas TTF future (€52.05/MWh) is on track for the lowest close since September 2021. Growth for 2024 stayed at 1.5%. Inflation for this year and the next was brought down from 6.1% to a still-high 5.6% and from 2.6% to 2.5% respectively. Some ECB members took the floor today. Governing council member Centeno said the March forecasts will be very important in determining and communicating the path and peak of the policy rate. VP de Guindos underscored the ECB’s data dependence. He said they turned a bit more positive on the economy as well. Fed’s Bowman said the central bank will keep hiking rates to bring inflation back down to 2%. She cited the too-strong labour market. Their comments didn’t really affect core bond markets though. Investors are counting down to tomorrow’s US January CPI reading. The US yield curve’s inversion deepens a tad with the front end adding a few bps (1.6-3.2 bps). The 2y yield (4.54%) is further closing in on its previous cycle high (4.72% close). German yields moves are similar but in more choppy trading. Japan’s 10y yield closed at about the 0.50% upper bound as we go into the official announcement of the new BoJ governor tomorrow. The yen is the notable underperformer in FX space though. USD/JPY rallies to 132.77, testing recent highs/resistance levels. EUR/JPY soars to 141.77. Other currency pairs trade muted. EUR/USD was testing the 1.068 support level this morning … and is still there 10 hours later. It is a strong reference though, coinciding with the 23.6% dollar recovery on the Sep 2022-Feb 2023 decline and the lower bound of the upward sloping EUR/USD trend channel. The trade-weighted greenback holds near recent highs at around 103.67. Sterling awaits a load of economic data later this week, including the labour market report, January inflation and retail sales. That doesn’t prevent the pound from gaining a few ticks on the upbeat risk environment. EUR/GBP again went for a test of the 0.882 support before paring losses to 0.884 after a break lower failed.

News & Views

Inflation in Switzerland in January reaccelerated at a faster pace than expected. Headline inflation rose 0.6% M/M bringing the Y/Y measure at 3.3% (compared with -0.2% M/M and 2.8% Y/Y in December). The rise was mainly due to higher electricity and gas prices. Prices at restaurants and hotels also rose substantially (2.1% M/M). Goods prices gained 1.1% M/M and 5.9% Y/Y. For services this was respectively 0.3% M/M and 1.3% Y/Y. Core inflation was unchanged from December, but 2.2% higher compared to the same month last year. While Swiss inflation stays low compared the other European countries, (headline and core) inflation holding above the 0.0%/2.0% zone remains a source of concern for the Swiss National Bank. The SNB raised the policy rate by a cumulative 175 bps starting in June of last year to currently 1.0%. The next SNB policy meeting is scheduled on March 23. Above target inflation and decisive action from the ECB keep the debate open on even an additional 50 bps SNB hike. After some modest losses mid-January the Swiss franc recently rebounded back below the EUR/CHF parity (currently 0.9855).

The current account balance in Poland deteriorated in December to a deficit of PLN 11.8 bln consisting amongst others of a negative trade balance of goods (PLN 12.7 bln), negative primary and secondary income balance (PLN 11.8 bln) and positive balance of services (PLN 12.7 bln). With respect to trading of goods, volumes of both exports and imports declined  substantially from November, but still were respectively 13.0% and 13.7% higher compared to December 2021. The increase in the value of exports was driven primarily by the performance of the automotive sector. Fuel continued to have the largest impact on the growth of imports. The trade balance deficit at PLN 12.7 bln was PLN 2.2 bigger compared to the same month last year. While smaller than the peak deficit in March 2022, the trade deficit remains rather high by historical standards. The polish zloty recently underperformed the Czech koruna and the Hungarian forint and this trend continued today. The zloty weakened to currently trade at EUR/PLN 4.7925.

On Monday, a Brent barrel is declining to 85.50 USD.

At the end of last week, crude oil prices grew by almost 2%. This was the market reaction to the decision of the Russian Federation to cut down on oil mining by 0.5 million barrel a day starting March 2023. Decreased production volumes might balance out the supply/demand ratio and will let suppliers wait for the recovery of the Chinese economy without extra emotions.

At the same time, the growth of the USD holds back too obvious growth of oil prices.

Drilling activity in the US has increased. According to Baker Hughes, over a week the number of oil drilling rigs grew by 10 facilities to 609 drilling rigs.

On H4, a wave of growth to 87.60 is continuing. After this level is reached, a correction to the low of 83.30 should become possible, followed by growth to 92.10. The goal is local. Technically, this scenario is confirmed by the MACD. Its signal line is headed strictly upwards to new highs.

On H1, Brent keeps developing the fifth structure of growth to 87.60. After this level is reached, a decline to 82.54 should follow (a test from above), and next – growth to 88.00. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under 20, getting ready to start growing. It should reach 50, break through it and even reach 80.

Fed Governor Michelle Bowman said in a speech, "we are still far from achieving price stability, and I expect that it will be necessary to further tighten monetary policy to bring inflation down toward our goal".

"My views on the future path of monetary policy will continue to be informed by the incoming data and its implications for the outlook," she said.

"I will continue to look for consistent evidence that inflation remains on a downward path when considering further rate increases and at what point we will have achieved a sufficiently restrictive stance for the policy rate."

Full speech here.

Daily Pivots: (S1) 1.2023; (P) 1.2081; (R1) 1.2116; More...

Intraday bias in GBP/USD stays neutral at this point. Further decline is still mildly in favor. On the downside, break of 1.1960 will resume the fall from 1.2446, as the third leg of the corrective pattern from 1.2445, to 1.1840 support, and possibly below. On the upside, though, break of 1.2192 will resume the rise from 1.1960 to retest 1.2445/6.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Daily Pivots: (S1) 0.9206; (P) 0.9229; (R1) 0.9261; More...

Outlook in USD/CHF is unchanged and intraday bias stays neutral. On the upside, firm break of 0.92879 resistance will confirm short term bottoming at 0.9058, and bring stronger rise to 0.9407 resistance. On the downside, however, sustained break of 0.9058 will resume larger decline from 1.0146 instead.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 should be a medium term down trend itself. Next target is a test on 0.8756 low. Strong support should be seen there to bring rebound. Still, further decline will now be expected as long as 0.9407 resistance holds, in any case.

Daily Pivots: (S1) 1.0644; (P) 1.0699; (R1) 1.0731; More...

Intraday bias in EUR/USD stays on the downside at this point. Fall from 1.1032 is in progress for 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support should be seen around there to bring rebound, at least on first attempt. On the upside, above 1.0790 minor resistance will turn bias back to the upside for retesting 1.1032 high instead.

In the bigger picture, the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

Daily Pivots: (S1) 130.21; (P) 131.04; (R1) 132.28; More...

Intraday bias in USD/JPY remains on the upside at this point. Break of 132.89 will resume whole rebound from 127.20 short term bottom. Further rally should then be seen to 38.2% retracement of 151.93 to 127.20 at 136.64, even as a correction to the decline from 151.39. For now, further rise is in favor as long as 129.79 support holds, in case of retreat.

In the bigger picture, prior of 55 week EMA (now at 131.47) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong rebound from current level, followed by sustained break of 38.2% retracement of 151.93 to 127.20 at 136.64 will argue that price actions from 151.93 is merely a corrective pattern. However, rejection by 136.64 will solidify medium term bearishness for 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 75.56 to 151.93 at 122.75.

Selloff in Yen continues today even though 10-year JGB yield closed above BoJ's 0.5% cap. Traders are probably positioning for a not-that-hawkish BoJ governor nomination by the government tomorrow. Dollar also softens as major European indexes rise, together with US futures. Sterling firms up ahead of a string of economic data this week, including employment (Tue), CPI (Wed) and retail sales (Fri). Aussie and Kiwi are also trading slightly higher. Euro is mixed for now, even though European Commission projects a better economic outlook with higher growth and lower inflation for this year.

Technically, GBP/CHF should be close to complete the corrective pattern from 1.1574. Firm break of 1.1206 minor resistance should have 4 hour 55 EMA taken out too. Bias will be turned back to the upside for 1.1433 resistance first. Sustained break there will raise the chance of resuming larger rally through 1.1574 high. The next few days would be important for the pound, with clearing of 1.1206 as the first step for GBP/CHF.

In Europe, at the time of writing, FTSE is up 0.25%. DAX is up 0.46%. CAC is up 0.83%. Germany 10-year yield is up 0.015 at 2.381. Earlier in Asia, Nikkei dropped -0.88%. Hong Kong HSI dropped -0.12%. China Shanghai SSE rose 0.72%. Singapore Strait Times dropped -1.07%. Japan 10-year JGB yield rose 0.0129 to 0.504.

European commission upgrades 2023 growth forecasts, lowers inflation slightly

In the Winter interim Forecast, European commission upgraded growth projections for Eurozone in 2023 and downgraded inflation projections.

"Europe's economy is proving resilient in the face of current challenges. We were able to narrowly avoid a recession. We are somewhat more optimistic about growth prospects and the projected decline in inflation this year," said Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People.

"We have entered 2023 on a firmer footing than anticipated: the risks of recession and gas shortages have faded and unemployment remains at a record low," said Paolo Gentiloni, Commissioner for Economy.

GDP growth forecasts for:

• 2023 at 0.9% (upgraded from Autumn's 0.3%).
• 2024 at 1.5% (unchanged).

HICP inflation forecasts for:

• 2023 at 5.6% (downgraded from 6.1%).
• 2024 at 2.5% (downgraded from 2.6%).

ECB Centeno: For sure, we're much closer to that terminal rate than before

ECB Governing Council member Mario Centeno told BloombergTV, "for sure, we're much closer to that terminal rate than before... We're approaching it and I think March will be a great moment for us to be very clear about it."

Meanwhile, for the central bank to slow tightening pace from current 50bps per meeting, Centeno said, "we really need to see inflation converging to 2% in the medium term".

He added, the new forecasts in March are "going to tell us exactly where we are in that process".

Swiss CPI bounce back to 3.3% yoy in Jan

Swiss CPI rose 0.6% mom in January, above expectation of 0.5% mom. Core CPI (excluding fresh and seasonal products, energy and fuel) was flat mom. Domestic product prices rose 1.0% mom while imported product prices dropped -0.6% mom.

Compared with the same month of the previous year, CPI accelerated from 2.8% yoy to 3.3% yoy, well above expectation of 2.9% yoy. Core CPI rose from 2.0% yoy to 2.2% yoy. Domestic product inflation jumped from 1.9% yoy to 2.6% yoy. Imported product inflation slowed from 5.8% yoy to 5.2% yoy.

NZ BusinessNZ services rose to 54.5, but negative comments trend higher

New Zealand BusinessNZ Performance of Services Index rose from 52.0 to 54.5 in January. Looking at some details, activity/sales rose form 51.9 to 52.1. Employment rebounded strongly from 46.9 to 51.9. New orders/business dropped from 57.7 to 54.5. Stocks/inventories rose from 51.6 to 54.3. Supplier deliveries dropped from 53.9 to 52.0.

BusinessNZ chief executive Kirk Hope said: "Despite the halt in lower expansionary levels, the trend of a higher proportion of negative comments continued in January (61.7%), compared with 58.2% in December and 47.3% in November. The holiday season was a common theme, along with the shortage of labour and general market uncertainty that has been evident for some months now".

BNZ Senior Economist Doug Steel said that "as encouraging as January's PSI result might look, we are reluctant to read too much into one month's result – especially around the holiday period".

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 130.21; (P) 131.04; (R1) 132.28; More...

Intraday bias in USD/JPY remains on the upside at this point. Break of 132.89 will resume whole rebound from 127.20 short term bottom. Further rally should then be seen to 38.2% retracement of 151.93 to 127.20 at 136.64, even as a correction to the decline from 151.39. For now, further rise is in favor as long as 129.79 support holds, in case of retreat.

In the bigger picture, prior of 55 week EMA (now at 131.47) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong rebound from current level, followed by sustained break of 38.2% retracement of 151.93 to 127.20 at 136.64 will argue that price actions from 151.93 is merely a corrective pattern. However, rejection by 136.64 will solidify medium term bearishness for 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 75.56 to 151.93 at 122.75.

Economic Indicators Update

Hello Traders in this blog we will see how CL_F Crude Oil Futures found support from equal legs area and reacted higher within wave 2. Many traders are wondering whether Crude Oil will still trade lower or higher after it’s larger degree peak it made from March 7th, 2022. In this article we will only look at the near term 1 hour cycle. Here at Elliott Wave Forecast we teach our members how the market is trading in our age. Elliott Wave is just the language we use to determine a cycle.

These days high frequency computers are moving the market most of the time. We call these high frequency trading areas, equal legs and blue boxes. Let’s now have a look at Crude Oil and see within it’s short term 4 hour cycle where it was going.

CL_F 4 Hour 02.04.2023 Weekend Update Update

It was apparent that cycle from 12.09.2022 ended wave 1 and started to pullback. After completing the first leg lower in ((w)) and bounced in ((x)) we can then calculate the reaction area lower. In this case equal legs area goes from 73.59 – 69.82 in which in was reached and reacted higher as we will see. These equal legs areas of the market is where we are expecting a reaction with an 85% chance. This is where buyers and sellers agree to a reaction.

CL_F 4 Hour Weekend Update 02.11.23

And as seen above it moved higher and already ended wave ((i)) of 3. Pullback in ((ii)) is in place and moved higher in (i) of ((iii)). Next it expects pullback in (ii) before next move higher in (iii) of ((iii)) of 3. You can learn what’s next for Crude Oil as well as the longer term view by becoming a member here at Elliott Wave Forecast. You can learn how to trade the right side and when to enter and/or exit the market. Alongside with daily Live Analysis Sessions & Live Trading Room. On top of that we have a 24 hour live chat and chat room in which we answer any questions for each instrument. Click the links below to sign up or try first our 14 day trial.

Cable dips further in early Monday’s trading, remaining at the back foot, following Friday’s 0.56% fall.

Fresh weakness retraced over 61.8% of last week’s 1.1960/1.2193 recovery leg, which was strongly rejected last Thursday and left a bull-trap above 55DMA.

Near-term structure is negative, as daily studies show strong bearish momentum and a multiple bear-crosses of 10;20;30;55 DMA’s.

Bears pressure psychological 1.20 support, where last week’s action faced strong headwinds and was rejected.

Violation of 1.20 level would risk test of key supports at 1.1960 (Feb 7 spike low and 1.1942 (200DMA), break of which would spark an acceleration towards next key supports at 1.1841/1.1796 (Jan 6 trough/daily cloud base).

Broken Fibo support at 1.2073 (61.8%) now acts as resistance and should ideally cap upticks to keep fresh bears intact.

Res: 1.2073; 1.2100; 1.2144; 1.2179.
Sup: 1.2000; 1.1942; 1.1900; 1.1841.