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EURUSD is flirting with the 1.0670 support level, falling below the medium-term upward sloping channel and the short-term simple moving averages (SMAs). The MACD oscillator is weakening below its trigger line and near the zero level, while the RSI is moving sideways below the neutral threshold of 50.

If price action remains above 1.0670 (immediate support), there is scope to test the 50- and then the 20-day SMAs at 1.0710 and 1.0815 respectively. Clearing these key levels would see additional gains towards the 1.1000 psychological mark and the previous nine-month top at 1.1032. This is considered to be a strong resistance area which has been tested a few times in the past. Rising above it would see prices re-test the 1.1180 barrier, taken from the peak in March 2022.

If 1.0670 support fails, then the focus would shift to the downside towards 1.0480, shifting the bias to neutral. More declines would increase downside pressure, meeting the 200-day SMA at 1.0320 and bringing about a reversal of the trend.

Overall, EURUSD has been bullish since peaking at 1.1032. Near-term weakness is expected to remain as long as price action takes place in the lower end of the ascending channel.

EURAUD is making a higher degree wave (A)-(B)-(C) corrective rally after potentially completing the leading diagonal at 1.43 area in summer 2022. Notice that recovery in wave (A) was impulsive, so more gains will be expected after the current wave (B) set-back which is still in progress as a complex correction, ideally A-B-C irregular/expanded flat. Support for a potential irregular correction is around 1.52 - 1.50, where bears may slow down and put bulls back in play for a wave (C) bounce.

Markets

On Friday, markets gradually moved further in the direction of central bankers holding rates higher, at least for a bit longer. We don’t draw any firm conclusion yet, but also the persistent trend of further inversion of the yield curve that dominated (US) interest rate markets of late at least took a breather. US yields gained between 3.5 bps (2-y) and 8.9 bps (30-y), with higher real yields driving the move. Eco data were few. Consumer confidence of the U. of Michigan improved from  64.9 to 66.4, but according to the University recent developments have led to mixed attitude among consumers as sentiment remains well below the historical average. Consumers’ inflation expectations for the next 12 months also rose from 3.9% to 4.2%. Earlier, the US BLS, amongst others, also upwardly revised inflation data for the last three months of last year. Fed’s Harker advocated to raise the policy rate above 5.0%, but at the same saw a chance of the Fed engineering a soft landing. German yields rose between 7.0 bps (5-y) and 5.1 bps (30-y). Equities initially traded in risk-off modus, probably at least partially due to Russia announcing another 500k b/month oil production cut starting in March (EuroStoxx50 -1.23%). Sentiment improved later in US dealings with indices closing mixed (Dow +0.50%; Nasdaq -0.61%). The dollar continued its rebound, even as the pace of the rally slowed as the session continued. Still, EUR/USD closed at 1.0678 (from 1.0739). The yen initially strengthened sharply on headlines that Kazuo Ueda likely would become the new BOJ governor. However, initial speculation on a big policy change evaporated soon. USD/JPY closed only modestly lower at 131.36. Sterling also gained slightly further against the euro (close EUR/GBP 0.8853).

Most Asian markets are starting the week in, admittedly mild, risk-off modus (Nikkei -0.88%, S&P/ASX 200 -0.21%; CSI 300 +0.84%). With little hard economic news available this morning, geopolitical noise (US again shot down an unidentified object above its territory) captures investors’ attention. The DXY index gains modestly (103.69) mainly driven by a further rebound in USD/JPY (132.15). EUR/USD trades little changed at 1.0675. Later today, the economic calendar is almost empty, with the European Commission economic forecasts the exception to the rule. An modestly better economic outlook gives the ECB more room to keep its focus on inflation. However, the main focus for markets remains on tomorrow’s US CPI release. Recently, markets tentatively grew a bit more concerned that persistent core/services inflation might cause the disinflationary process to develop more slowly than initially hoped for. If confirmed, this might put a floor for global core yields. Money market yields now discount a Fed cycle peak rate near 5.20%. The US 2-y yield regained the 4.5% barrier. Markets gradually shifting towards the higher for longer Fed interest rate scenario also supports the USD rebound. EUR/USD decisively dropped below the 1.0735 previous top. 1.0461/84 (38% retr. since Sept/YTD low) is next support.

News Headlines

Germany’s SPD lost the state elections in Berlin to the CDU. According to projections, the party of Chancellor Scholz gathered only 18.4% of the votes, down from 21% and about the same as the Greens. The CDU party soared more than 10 ppts, securing 28.2%. This does bring no guarantee about a CDU-led government coalition though as it lacks support from the other parties. Instead, if the SPD’s current leader Giffey can’t hold on to power, she could be replaced by someone from the Greens in a redo of the 2016 three-way coalition together with the Left Party. The Berlin state elections were a rerun of the 2021 edition that was so chaotic its results were annulled by the city’s top court.

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.

Full release here.

Gold price started a fresh decline from the $1,890 zone against the US Dollar. The price declined steadily below $1,880 and moved into a bearish zone.

The bears even pushed the price below the $1,865 level and the 50 hourly simple moving average. The price traded as low as $1,852 and recently attempted a minor recovery wave. An immediate resistance on the upside is near the $1,860 level.

The first major resistance is near the $1,862 level and a bearish trend line on the hourly chart. The next main resistance could be near the $1,868 level, above which the price could start a steady increase towards the $1,880 level.

On the downside, an immediate support is near $1,857 on FXOpen. The next major support is near the $1,852 level, below which the price might decline towards the $1,840 support level in the near term.

Daily Pivots: (S1) 157.47; (P) 158.55; (R1) 159.56; More...

Range trading continues in GBP/JPY and intraday bias remains neutral. Further decline is mildly in favor. On the downside, break of 155.33 low will resume the fall from 172.11 to 153.70 fibonacci level next. On the upside, sustained trading above 55 day EMA (now at 160.99) will turn bias to the upside, for stronger rise back to 169.26/172.11 resistance zone.

In the bigger picture, as long as 163.02 support turned resistance holds, decline from 172.11 medium term top is expected to continue to 38.2% retracement of 123.94 to 172.11 at 153.70. Sustained break there will raise the change of trend reversal and target 61.8% retracement at 142.34. Nevertheless, break of 163.02 support turned resistance will argue that the decline has completed, and retain medium term bullishness.

Daily Pivots: (S1) 139.44; (P) 140.47; (R1) 141.38; More....

Range trading continues in EUR/JPY and intraday bias stays neutral. Further decline is mildly in favor. Break of 137.37 will resume the whole fall from 148.38 to 135.40 fibonacci level. On the upside, however, break of 142.84 will argue that the correction from 148.38 has completed at 137.37 already. Further rise would be seen to 146.71 resistance next.

In the bigger picture, as long as 55 week EMA (now at 138.87) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, firm break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40. Sustained break there will raise the chance of trend reversal, and target 61.8% retracement at 127.39.

Daily Pivots: (S1) 0.8828; (P) 0.8851; (R1) 0.8877; More...

Intraday bias in EUR/GBP remains neutral for the moment. Further rally is expected as long as 0.8720 support holds. On the upside, break of 0.8977 will resume whole rebound from 0.8545 towards 0.9267 high. On the downside, however, break of 0.8270 will turn near term outlook bearish again.

In the bigger picture, the notable support from 55 day EMA (now at 0.8780) retains near term bullishness. Break of 0.8896 should target 0.9267 (2022 high) and possibly above, to resume whole up trend from 0.8201 (2022 low). However, break of 0.8270 support and sustained trading below 55 day EMA will set the stage for 0.8545 and below.

Daily Pivots: (S1) 1.5377; (P) 1.5445; (R1) 1.5498; More...

Intraday bias in EUR/AUD remains neutral for the moment. On the downside, firm break of 1.5254/71 will carry larger bearish implication and resume the fall from 1.5976. On the upside, above 1.5650 will resume the rebound to 1.5749 resistance.

In the bigger picture, it's still early to confirm if rise from 1.4281 represents bullish trend reversal. But as long as 1.5271 support holds, such rally is in favor to continue. Break of 1.5976 will target 1.6434 key resistance next. On the other hand, firm break of 1.5271 will retain medium term bearishness instead.

Daily Pivots: (S1) 0.9847; (P) 0.9877; (R1) 0.9893; More....

EUR/CHF's fall form 1.0067 could still extend lower. But downside should be contained by 38.2% retracement of 0.9407 to 1.0095 at 0.9832 to complete the corrective pattern from 1.0095. On the upside, break of 0.9905 minor resistance will turn bias back to the upside for 4 hour 55 EMA (now at 0.9923) and above.

In the bigger picture, the rejection by 55 week EMA (now at 1.0025) mixed up the outlook. On the upside, sustained trading above 55 week EMA will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). However, firm break of 0.9832 support will revive medium term bearishness and bring retest of 0.9407 low instead.