Sample Category Title

Daily Pivots: (S1) 1.2264; (P) 1.2339; (R1) 1.2415; More...

GBP/USD is staying in range of 1.2252/2446 and intraday bias remains neutral first. On the downside, firm break of 1.2252 minor support will turn bias to the downside, and extend the corrective pattern from 1.2445 with another falling leg. On the upside, decisive break of 1.2445 will confirm resumption of whole rise from 1.0351. Next target will be 1.2759 fibonacci level.

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) 1.0850; (P) 1.0874; (R1) 1.0913; More...

Intraday bias in EUR/USD is turned neutral first but further rally is expected with 1.0765 support intact. Break of 1.0925 will resume the rally from 0.9534 to 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0557).

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.

Australian Dollar remains the strongest one for today, maintaining most of post-CPI gains. But Yen is catching up with broad based recovery. Euro softens despite improvement in German business climate, and Sterling is trading lower too, while Kiwi stays as the worst. Dollar and Canadian are mixed awaiting BoC rate decision.

Technically, EUR/CHF is worth a watch in the upcoming session. Up trend resumption through 1.0095 is not envisaged in the first attempt. Indeed, break of 0.9992 minor support will argue that corrective pattern from 1.0095 is already starting the third leg. Deeper decline would then be seen back towards 0.9873 support. If happens, that might be accompanied by weakness in Euro elsewhere, in particular a deeper pull back in EUR/USD.

In Europe, at the time of writing, FTSE is down -0.11%. DAX is down -0.39%. CAC is down -0.32%. Germany 10-year yield is down -0.073 at 2.082. Earlier in Asia, Nikkei rose 0.35%. Japan 10-year JGB yield rose 0.0319 to 0.444. Singapore Strait Times rose 1.79%. Hong Kong and China were still on holiday.

Germany Ifo business climate rose to 90.2, starting new year with more confidence

Germany Ifo Business Climate rose slightly from 88.6 to 90.2 in January, below expectation of 90.5. Current Assessment ticked down from 94.4 to 94.1, below expectation of 95.0. Expectations index, on the other hand, improved from 83.2 to 86.4, above expectation of 85.0.

By sector, manufacturing rose from -5.7 to -0.7. Services rose from -1.2 to 0.2. Trade rose from -20.0 to -15.4. Construction also rose slightly from -21.9 to -21.6.

Ifo said: "Sentiment in the German economy has brightened. The ifo Business Climate Index rose to 90.2 points in January, up from 88.6 points in December. This is due to considerably less pessimistic expectations. Companies were, however, somewhat less satisfied with their current situation. The German economy is starting the new year with more confidence."

Japan government downgrades economic assessment

Japan Cabinet Office lowers its monthly economic assessment for the first in 11 months. It said, "the economy is recovering moderately but some weakness is seen recently."

Also assessment on exports was downgraded for the first time since 2011. Both exports and imports are "weakening recently" compared with its previous view of "almost flat" last month.

"China's coronavirus rebound could affect Japan's exports and production and such a possibility has become clearer than last month," said an official at the Cabinet Office.

Assessment on domestic demand and private consumption was maintained as "picking up moderately".

New Zealand CPI unchanged at 7.2% yoy in Q4

New Zealand CPI rose 1.4% qoq in Q4, slightly below expectation of 1.5% qoq. Annual CPI was unchanged at 7.2% yoy, above expectation of 7.1% yoy, comparing to the peak at 7.3% yoy in Q2.

StatsNZ said, "Housing and household utilities was the largest contributor to the December 2022 annual inflation rate. This was due to rising prices for both constructing and renting housing."

The quarterly rise in inflation was "influenced by rising prices in the housing and household utilities, food, and recreation and culture groups."

Australia CPI rose to 8.4% yoy in Dec, 7.8% yoy in Q4

Australia CPI rose 1.9% qoq in Q4, above expectation of 1.7% qoq. Annual CPI accelerated from 7.3% yoy to 7.8% yoy, above expectation of 7.5% yoy. RBA trimmed mean CPI also accelerated from 6.1% yoy to 6.9% yoy, above expectation of 6.5% yoy.

Michelle Marquardt, ABS head of prices statistics, said "This is the fourth consecutive quarter to show a rise greater than any seen since the introduction of the Goods and Services Tax (GST) in 2000. The increase for the quarter was slightly higher than the quarterly movements for the September and June quarters last year (both 1.8 per cent)."

"The annual increase for the CPI is the highest since 1990. Annual inflation for goods such as new dwellings and automotive fuel steadied this quarter, however we saw an uptick in inflation for services such as holidays and restaurant meals," Marquardt said.

Monthly CPI accelerated from 7.3% yoy to 8.4% yoy in December, well above expectation of 7.7% yoy.

Marquardt said, "The monthly indicator recorded the largest annual rise in the series in December. The most significant contributors in the 12 months to December were New dwellings, up 16.0 per cent, and Holiday travel and accommodation, up 29.3 per cent. Airfare and accommodation prices rose in response to strong demand over the Christmas holiday period."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0850; (P) 1.0874; (R1) 1.0913; More...

Intraday bias in EUR/USD is turned neutral first but further rally is expected with 1.0765 support intact. Break of 1.0925 will resume the rally from 0.9534 to 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0557).

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.

Economic Indicators Update

AUD is the mover of the day after CPI yoy jumped unexpectedly to 8.4% in Australia up from 7.3%. Thats big and can potentially mean that RBA will be foreced to riase rates further. AUDUSD is moving aggressively higher, but still trading at some key trendline up here, with fifth wave. A lot of majors are trading at resistance vs USD, so if suddenly USD index would rally, then Aussie can come back down, but would most likely suffer less than others. From a longer term perspective we see AUDUSD clearly in bullish mode for much more upside, but ideally after a higher degree pullback.

The New Zealand dollar is under pressure on Wednesday. In the European session, NZD/USD is trading at 0.6478, down 0.41%.

Markets eye New Zealand CPI

The New Zealand dollar reacted negatively to today’s CPI release, falling as much as 0.60% before paring these losses. Fourth-quarter CPI remained unchanged at 7.2%, a notch above the consensus of 7.1%. More importantly, the reading was below the Reserve Bank of New Zealand’s forecast of 7.5%, which could mean that the central bank will ease up on the pace of rate hikes.

The central bank has been aggressive, as it raised rates by some 325 basis points in 2022, bringing the cash rate to 4.25%. Similar to the Fed’s experience, the markets aren’t buying into the RBNZ’s hawkish message and are betting that rates will peak at 5.0%, lower than the RBNZ’s projection of 5.5%. The central bank delivered a supersize 75-basis point hike in November, and prior to the inflation release, the market had priced in a 75 bp or 50 bp hike as a 50/50 toss-up. Following the CPI reading, that has changed to 70/30 in favour of a 50-bp move. Inflation has been falling globally while domestically, consumer spending and confidence have fallen due to the rising cost of living. This has raised speculation that the RBNZ could wind up its current rate cycle earlier than it anticipated.

The US releases GDP for the fourth quarter on Thursday and we could see some volatility from the US dollar. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still a respectable pace of growth. On Wednesday, US PMIs pointed to contraction in the manufacturing and services sectors, pointing to cracks in the US economy as high rates continue to take their toll. The US dollar remains under pressure as soft readings have raised hopes that the Fed will ease up on rate policy due to the slowing economy.

NZD/USD Technical

• 0.6455 is under pressure in support.  The next support line is 0.6379
• There is resistance at 0.6547 and 0.6648

Germany Ifo Business Climate rose slightly from 88.6 to 90.2 in January, below expectation of 90.5. Current Assessment ticked down from 94.4 to 94.1, below expectation of 95.0. Expectations index, on the other hand, improved from 83.2 to 86.4, above expectation of 85.0.

By sector, manufacturing rose from -5.7 to -0.7. Services rose from -1.2 to 0.2. Trade rose from -20.0 to -15.4. Construction also rose slightly from -21.9 to -21.6.

Ifo said: "Sentiment in the German economy has brightened. The ifo Business Climate Index rose to 90.2 points in January, up from 88.6 points in December. This is due to considerably less pessimistic expectations. Companies were, however, somewhat less satisfied with their current situation. The German economy is starting the new year with more confidence."

Full release here.

Japan Cabinet Office lowers its monthly economic assessment for the first in 11 months. It said, "the economy is recovering moderately but some weakness is seen recently."

Also assessment on exports was downgraded for the first time since 2011. Both exports and imports are "weakening recently" compared with its previous view of "almost flat" last month.

"China's coronavirus rebound could affect Japan's exports and production and such a possibility has become clearer than last month," said an official at the Cabinet Office.

Assessment on domestic demand and private consumption was maintained as "picking up moderately".

USDCAD has been moving sideways over the past two weeks, building a floor around 1.3370, but the bears seem determined to lead their market on their own way ahead of the BoC rate decision today at 15:00 GMT.

With the RSI pulling below its 50 neutral mark and the MACD sliding back below its red signal line within the negative area, downside moves are more likely than upside ones in the coming sessions. The stochastic oscillator is also on a decline, though it’s not far away from oversold territory, suggesting that some consolidation may soon develop.

The tentative support trendline from June’s low could immediately come to the rescue at 1.3313 if selling pressures strengthen. Should the bears snap that base, the price could revisit the 38.2% Fibonacci retracement of the 1.2006-1.3976 upleg at 1.3270, where November’s bullish rotation took place. Note that the 200-day simple moving average (SMA) is converging towards that zone. Hence, a decisive close lower could aggressively press the price towards the crucial 1.3026 level, where the constraining 200-SMA is flattening in the weekly chart, unless the 1.3120 handle provides a strong footing beforehand.

In the bullish scenario, a bounce higher may initially rechallenge the 20-day SMA at 1.3450 ahead of the 23.6% Fibonacci level of 1.3511. Still, only a sustainable recovery above the tentative resistance trendline currently around 1.3600 could prompt a meaningful rally up to the key 1.3700-1.3745 constraining area. The 1.3800 psychological number could be the next target.

Summing up, the technical picture for USDCAD is currently discouraging, flagging more downside. Yet traders may wait for a close below 1.3313 before they reduce their exposure to the market. 

NZDUSD had experienced a steep downtrend in 2022, posting a 31-month low of 0.5510 in early October. However, the pair has staged a substantial rebound since then, which seems to be running out of steam slightly below the recent seven-month high of 0.6528.

The momentum indicators currently suggest that buying forces are subsiding but remain in control. Specifically, the RSI is pointing downwards above its 50-neutral mark, while the MACD histogram is softening but holds above both zero and its red signal line.

If buying pressures intensify, the price could test its recent resistance region of 0.6528, which is also a seven-month high. Conquering this barricade, the bulls could then aim for the June peak of 0.6575 before 0.6812 appears on the radar. A break above the latter could set the stage for the 2022 high of 0.7032.

On the flipside, should the pair reverse lower, the recent support of 0.6364 could act as the first line of defense. Violating that zone, the price may descend towards 0.6305 or lower to test the 2023 low of 0.6190. Failing to halt there, any further declines could cease at the November support of 0.6063.

Overall, despite the latest weakness, NZDUSD seems ready to storm to fresh highs as the short-term oscillators are promoting a bullish near-term picture. Therefore, a clear jump above the 0.6528 could signal the resumption of the pair’s advance.

The British Pound started a downside correction from the 1.2450 resistance zone against the US Dollar. The GBP/USD pair declined below the 1.2350 level, but it remained well bid near 1.2260.

The pair is now rising above the 1.2300 level, but it is still below the 50 hourly simple moving average. It is now consolidating near the 1.2325 level, with an immediate resistance at 1.2340 on FXOpen.

The first major resistance is near the 1.2365 level and a trend line on the hourly chart. If there is a clear upside break above the 1.2365 resistance, the pair could rise steadily towards the 1.2400 level in the near term. The next major resistance sits near the 1.2450 level.

On the downside, the first major support is near the 1.2300 level. The main support is forming near the 1.2265 level. A break below the 1.2265 support could push the pair towards the 1.2220 support.