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Cable remains in red for the fourth straight day and probes below psychological 1.20 support, hitting new one-month low.

Strong support at 1.1951 (200DMA / Fibo 23.6% of 1.0348/1.2447) is under pressure and break here to generate fresh bearish signal for extension towards pivotal support at 1.1841 (Jan 6 low), loss of which would confirm a double-top 1.2446 and risk deeper pullback.

Bearish momentum is rising on daily chart and in addition to multiple bear crosses of MA’s (10/20/30/55) maintains pressure, though oversold stochastic may produce headwinds to bears.

Stronger dollar on Fed’s hawkish shift in rate view also contributes to pound’s negative near-term stance.
Focus turns to Fed chair Powell who will be speaking today, with fresh pressure on sterling expected on more hawkish than expected remarks from Fed chief.

Broken 1.20 level reverted to immediate resistance, with upticks to be capped by daily cloud top (1.2099) and daily Kijun-sen (1.2144) to keep fresh bears in play.

Res: 1.2000; 1.2077; 1.2099; 1.2144
Sup: 1.1951; 1.1900; 1.1841; 1.1796

Daily Pivots: (S1) 131.79; (P) 132.35; (R1) 133.18; More...

Intraday bias in USD/JPY is turned neutral with current retreat. But further rally is in favor. Above 132.89 will resume the rebound from 127.20 short term bottom to 38.2% retracement of 151.93 to 127.20 at 136.64, even just as a correction to the decline from 151.93. Nevertheless, sustained break of 4 hour 55 EMA (now at 130.48) will bring retest of 127.20 low.

In the bigger picture, prior of 55 week EMA (now at 131.39) 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.

Daily Pivots: (S1) 0.9243; (P) 0.9267; (R1) 0.9306; More...

Focus stays on 0.9287 resistance as intraday bias in USD/CHF remains neutral. Firm break there 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) 1.0692; (P) 1.0745; (R1) 1.0781; More...

EUR/USD's decline from 1.1032 short term top extends to 1.0685 so far. Intraday bias stays on the downside to 1.0482 support, which is close to 38.2% retracement of 0.9534 to 1.1032 at 1.0463. On the upside, above 1.0798 minor resistance will turn intraday bias neutral first.

In the bigger picture, current development suggests that 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.

While Dollar is now the strongest one for the week, buying remains not too committed, except versus the weak Pound. The greenback is indeed mixed, awaiting more guidance from Fed Chair Jerome Powell's speech. Yen is currently the strongest one for today,. Australian Dollar is trailing as the impact of RBA's hawkish hike is fading quickly. Euro is following Sterling is the second weakest and both are pressured by selling against Swiss Franc.

Technically, while USD/JPY retreats after hitting 132.89, further rally will remain in favor as long as 4 hour 55 EMA (now at 130.43). Current rise from 127.20 might just be a correction to the decline from 151.93 high. But even in such case, it should extend to 38.2% retracement of 151.93 to 127.20 at 136.64 before completion.

In Europe, at the time of writing, FTSE is up 0.34%. DAX is down -0.35%. CAC is down 0.16%. Germany 10-year yield is up 0.032 at 2.329. Earlier in Asia, Nikkei dropped -0.03%. Hong Kong HSI rose 0.36%. China Shanghai SSE rose 0.29%. Singapore Strait Times dropped -0.15%. Japan 10-year JGB yield dropped -0.0047 to 0.495.

US trade deficit widened to USD -67.4B in Dec

US international trade deficit widened from USD -61.0B to USD -67.4B in December, smaller than expectation of USD -68.5B. Goods deficit widened by USD 7.4B to USD -90.6B. Services surplus widened to USD 1.0B to USD 23.2B.

Exports of goods and services dropped -0.9% mom to USD 250.2B. Imports of goods and services rose 1.3% mom to USD 317.6B.

Fed Kashkari: I haven't seen anything yet to lower my rate path

Minneapolis Fed President Neel Kashkari told CNBC, "We have a job to do. We know that raising rates can put a lid on inflation. We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy."

Last week's job data a "tells me that so far we're not seeing much of an imprint of our tightening to date on the labor market. There's some evidence that it's having some effect, but it's pretty muted so far," Kashkari said.

"I haven't seen anything yet to lower my rate path, but I'm obviously keeping my eyes open and we'll see how the data comes in," he added.

ECB Villeroy: No need to choose between fighting inflation and avoiding recession

ECB Governing Council member Francois Villeroy de Galhau said the improved economic situation in Eurozone makes it easy to fight inflation with monetary policy.

"I don't think we have to choose between fighting inflation and avoiding a recession," he added.

Also, he believed that Eurozone was not very far from the peak of inflation.

RBA hikes 25bps, further increases needed over the months ahead

RBA raises the cash rate target by 25bps to 3.35% as widely expected. The Board also expects that "further increases in interest rates will be needed over the months ahead". To assess "how much" further hike is needed, close attention will be paid to "developments in the global economy, trends in household spending and the outlook for inflation and the labour market."

The central noted that underlying inflation at 6.9% in December was "high than expected" with "strong domestic demand "adding to the inflationary pressures in a number of areas of the economy." Inflation is expected to decline to 4.75% this year, then to around 3% by mid-2025. Medium-term inflation expectation remain" well anchored".

GDP growth is expected to slow to 1.50% in 2023 and 2024. Unemployment rate is projected to rise form current 3.50% to 3.75% by the end of 2023, and then 4.50% by mid-2025.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1993; (P) 1.2035; (R1) 1.2064; More...

GBP/USD's fall from 1.2446 extends further to 1.1960 so far today. Intraday bias stays on the downside for 1.1840 support and possibly below. Nevertheless, such decline is seen as the third leg of the corrective pattern from 1.2445. Downside should be contained by 38.2% retracement of 1.0351 to 1.2445 at 1.1645 to bring rebound. On the upside, above 1.2076 minor resistance will turn intraday bias neutral first.

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.

Economic Indicators Update

Daily Pivots: (S1) 1.1993; (P) 1.2035; (R1) 1.2064; More...

GBP/USD's fall from 1.2446 extends further to 1.1960 so far today. Intraday bias stays on the downside for 1.1840 support and possibly below. Nevertheless, such decline is seen as the third leg of the corrective pattern from 1.2445. Downside should be contained by 38.2% retracement of 1.0351 to 1.2445 at 1.1645 to bring rebound. On the upside, above 1.2076 minor resistance will turn intraday bias neutral first.

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.

US international trade deficit widened from USD -61.0B to USD -67.4B in December, smaller than expectation of USD -68.5B. Goods deficit widened by USD 7.4B to USD -90.6B. Services surplus widened to USD 1.0B to USD 23.2B.

Exports of goods and services dropped -0.9% mom to USD 250.2B. Imports of goods and services rose 1.3% mom to USD 317.6B.

Full release here.

Minneapolis Fed President Neel Kashkari told CNBC, "We have a job to do. We know that raising rates can put a lid on inflation. We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy."

Last week's job data a "tells me that so far we're not seeing much of an imprint of our tightening to date on the labor market. There's some evidence that it's having some effect, but it's pretty muted so far," Kashkari said.

"I haven't seen anything yet to lower my rate path, but I'm obviously keeping my eyes open and we'll see how the data comes in," he added.

ECB Governing Council member Francois Villeroy de Galhau said the improved economic situation in Eurozone makes it easy to fight inflation with monetary policy.

"I don't think we have to choose between fighting inflation and avoiding a recession," he added.

Also, he believed that Eurozone was not very far from the peak of inflation.

• WTI crude oil reversed from support level 72.50
• Likely to rise to resistance level 78.40

WTI crude oil recently reversed up from the key support level 72.50, which stopped the previous minor correction (b) from the start of January.

The upward reversal from the support level 72.50 stopped the previous short-term impulse wave (iii).

Given the oversold daily Stochastic, WTI crude oil can be expected to rise further toward the next resistance level 78.40.