Sample Category Title

US initial jobless claims dropped -6k to 186k in the week ending January 21, below expectation of 211k. Four-week moving average of initial claims dropped -9k to 197.5k.

Continuing claims rose 20k to 1675k in the week ending January 14. Four-week moving average of continuing claims dropped -11k to 1664k.

Full release here.

US durable goods orders rose 5.6% mom to USD 286.9B in December, above expectation of 2.5% mom. Ex-transport orders dropped -0.1% mom to USD 178.8B, below expectation of 0.0% mom. Ex-defense orders rose 6.3% mom to USD 269.6B. Transportation equipment rose 16.7% mom to USD 108.1B.

Full release here.

US exports of goods dropped -1.6% mom to USD 166.8B in December. Imports of goods rose 1.9% mom to USD 257.1B. Goods trade deficit rose 8.8% mom to USD -90.3B, versus expectation of USD -88.8B.

Wholesale inventories rose 0.1% mom to USD 934.1B. Retail inventories rose 0.5% mom to USD 742.2B.

Full release here.

US GDP grew 2.9% annualized in Q4, slightly above expectation of 2.8%. The increase in real GDP reflected increases in private inventory investment, consumer spending, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment and exports. Imports, which are a subtraction in the calculation of GDP, decreased.

For 2022, GDP grew 2.1%, compared with an increase of 5.9% in 2021. The increase in real GDP in 2022 primarily reflected increases in consumer spending, exports, private inventory investment, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment and federal government spending. Imports increased.

Full release here.

The British Pound is testing the $1.2400 level this week, above which it failed to consolidate in the middle of last month. The GBPUSD has yet to trade consistently higher since last June.

Looking at the entire rally from September’s historic lows at 1.0327, the retreat from December’s highs to 1.19 is a fairly common Fibonacci retracement to the 76.4% area of the original move, though not the classic 61.8%.

Technically, two important moving averages, the 50- and 200-day moving averages, acted as support in early January, preventing the pair from falling any further while allowing it to take some profits from the initial rally.

The pattern now suggests that GBPUSD has the potential to rise to 1.37-1.38, where the highs of last January and the 161.8% level of the first wave of the rally are concentrated. A move in this direction has every chance of becoming the main trend this year, although we expect a very significant battle for 1.3000 over the next few quarters.

However, the tactical stance is more cautious. The pound has been hitting a glass ceiling just above 1.2430 for over a week now. The inability to rewrite the previous highs is not a formal signal for further growth.

At the same time, a divergence with the Relative Strength Index is forming on the daily timeframe, as the price’s repeated highs are coming from the index’s lower local peaks, which is a bearish signal.

Without a strong rally above 1.2430, we should be prepared for a deeper local correction. The area of the January lows, also crossed by the 200 SMA, looks like a good target for another pullback.

A deeper correction towards 1.1630, where 61.8% of the recent rally and last October’s local peak are located, cannot be ruled out. Such a full-blown correction would fully recharge the pound bulls and pave the way for further growth.

Gold price eases from new multi-month high ($1949) in European trading on Thursday, as larger bulls take a breather ahead of release of key US GDP data.

The US economy is expected to show growth of 2.6% in the last three months of 2022, down from 3.2% expansion in Q3, which adds to signals of slowing US economy.

In such scenario, the Fed would opt for further easing in its policy tightening cycle and go for 25 basis points hike on Feb 1 policy meeting, compared to 0.5% raise in the last meeting.

Lower rates would deflate dollar and help bullion to extend its three-month strong rally, with targets at $1962/$2000 (Fibo 76.4% of $2070/$1614 / psychological).

Rising 10DMA ($1925) offers initial support, with extended dips to find ground above $1900 to keep bulls in play and mark pullback as a healthy correction.

Res: 1949; 1962; 1971; 2000.
Sup: 1925; 1900; 1896; 1890.

Tokyo CPI expected to rise

Inflation has been on the rise in Japan and the trend is expected to continue with the release of Tokyo CPI later today. The headline figure is expected to rise to 4.4% in December, up from 4.0% in November, while the core rate is forecast to climb to 4.2%, up from 4.0%. Earlier this week, BoJ Core CPI, the central bank’s preferred inflation gauge, rose to 3.1%, up from 2.9% prior and above the forecast of 2.9%. BoJ Core CPI has now accelerated for 11 straight months, challenging the BoJ’s stance that inflation is transitory.

The BoJ is projecting that inflation will peak at 3% in March, but this forecast seems questionable, given that rising energy and food prices have been driving inflation higher and higher. With wage growth lagging behind inflation, the cost of living is squeezing consumers, who are likely to cut back on consumption which will hurt Japan’s fragile economy.

Kanda sends warning to speculators

The yen has been relatively quiet over the past two weeks, but Japan’s top “currency diplomat” sent out a warning today. Vice Finance Minister for International Affairs Kanda said that sharp, one-sided moves in the currency markets would not be tolerated. Kanada oversaw the currency intervention in October after the yen had fallen close to 152 to the dollar. The yen has since rebounded and is currently trading close to 130 to the dollar. Kanda’s message is aimed at speculators, but with inflation rising and the BoJ’s ultra-loose policy looking increasingly anachronistic, speculators are likely to continue betting that the BoJ will have to tighten policy and the yen will rise as a result. The IMF had a message of its own for the BoJ, suggesting that the central bank allow more flexibility in 10-year bond yields, which would mean a shift in BoJ policy.

It’s a busy day on the economic calendar, with the US releasing GDP and durable goods. GDP is expected to slow to 2.6% in Q4, which would still point to solid growth. Durable Goods is forecast to rebound and gain 2.5% in December, following a soft reading of -2.1% in November. Traders can expect some volatility from the US dollar in the North American session, as the markets have jumped on any soft readings as a signal that the Fed will have to ease up on its aggressive rate policy, and this has sent the US dollar lower.

USD/JPY Technical

• There is resistance at 130.36 and 131.69
• 129.46 and 128.40 are providing support

IMF said in a statement that "accommodative monetary policy stance remains appropriate" for BoJ. But it warned of the "exceptionally high uncertainty around baseline inflation projections with risks tilted to the upside".

Upside risks include "delayed effects of exchange rate depreciation, border reopening, second round effects of imported inflation, fiscal support, and higher-than-expected wage growth." Downside risks are mainly from slowdown in the global economy.

"Given the two-sided risks to inflation, more flexibility in long-term yields would help to avoid abrupt changes later... providing clear guidance on the pre-conditions for a gradual policy rate change in the future would help anchor market expectations and strengthen the credibility of the BoJ's commitment".

"BoJ could consider the following options to allow further flexibility and increases in long-term yields: widening the 10-year target band and/or raising the 10-year target, shortening the yield curve target, or shifting from a JGB yield target to a quantity target of JGB purchases".

Full statement here.

The AUDUSD hit new 5-month high on Thursday, following strong bullish acceleration on Wednesday, sparked by unexpected rise in consumer prices in Q4, which signals that the RBA would continue to raise interest rates in coming meetings.

Break and close above Fibo barrier at 0.7091 (61.8% of 0.7661/0.6170) on Wednesday, generated initial bullish signal, which will require verification on weekly close above this barrier (reinforced by nearby 200WMA at 0.7071).

Bulls eye immediate barrier at 0.7136 (Aug 2022 high), followed by falling 100WMA / weekly cloud top (0.7170) and May 2022 high (0.7283).

Overbought daily studies warn of limited pullback before larger bulls resume, with broken psychological 0.70 barrier reverted to solid support and reinforced by 10DMA).

Res: 0.7128; 0.7136; 0.7170; 0.7283.
Sup: 0.7071; 0.7048; 0.7000; 0.6924.

The Euro maintains firm tone and continues to pressure pivotal barriers at 1.0930/42 (top of thick weekly cloud / 50% retracement of 1.2349/0.9535).

Overall picture is bullish as the pair is on track for the fourth straight strong monthly advance, with break of 1.0930/42 and psychological 1.10 barrier to signal continuation of an uptrend from 0.9535 (2022 low) and expose targets at 1.1083 (100WMA); 1.1225 (200WMA) and 1.1274 (Fibo 61.8% of 1.2349/0.9535) in extension.

Although bulls hold grip, the action may take a breather under pivotal barriers, due to headwinds caused by overbought conditions and fading bullish momentum on daily chart.

Dips should provide better buying opportunities and ideally to be contained by rising 10DMA (1.0849), though extended pullback towards 1.0766/62 (Jan 18 trough /20DMA) expected not to be harmful for bulls.

Res: 1.0930; 1.0942; 1.1000; 1.1083.
Sup: 1.0886; 1.0849; 1.0762; 1.0714.