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Daily Pivots: (S1) 0.9181; (P) 0.9228; (R1) 0.9269; More...

USD/CHF is still bounded in range of 0.9165/9407 and intraday bias stays neutral. Also, outlook remains bearish as long as 0.9407 resistance holds. Break of 0.9165 will resume whole fall from 1.0146. However, firm break of 0.9407 will turn bias back to the upside for stronger rebound.

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) 127.71; (P) 128.44; (R1) 128.88; More...

USD/JPY rebounds notably but there is no confirmation of reversal yet. Intraday bias remains neutral first. On the upside, firm break of 133.61 support turned resistance will firstly confirm short term bottoming at 127.20. More importantly, whole correction from 151.93 might have completed too. Bias will then be turned back to the upside for 38.2% retracement of 151.93 to 127.20 at 136.64 first. However, break of 127.20 will resume the decline form 151.93 to 121.43 fibonacci level next.

In the bigger picture, the firm break of 55 week EMA (now at 131.59) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong support could be seen around 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 38.2% retracement of 75.56 to 151.93 at 122.75 to bring rebound. But break of 134.76 resistance is needed to indicate bottoming first. Otherwise further fall will remain in favor.

Yen falls broadly after BoJ defied some speculations and kept yield cap unchanged today. The announcement also sent Nikkei sharply higher while shot 10-year JGB yield down. Nevertheless, it's still a bit early to confirm reversals in Yen crosses. Meanwhile, commodity currencies are trading firmer today. European majors are on the weaker side. In particular, Euro looks relatively vulnerable in crosses on reports that ECB is considering to slow down rate hike in March. Dollar is mixed for now, and looks forward to retail sales and PPI data.

Technically, one focus today is on whether Euro's selloff will gain further momentum. Firm break of 0.8768 support in EUR/GBP, which is close to 38.2% retracement of 0.8545 to 0.8896 at 0.8762, will argue that whole rebound from 0.9545 has completed. Deeper fall would be seen back to 61.8% retracement at 0.8679, and possibly further to retest 0.8545 low. If happens, such development would likely be accompanied by deeper selloff in EUR/CHF towards 0.9720 support too.

In Asia, at the time of writing, Nikkei is up 2.54%. Hong Kong HSI is up 0.10%. China Shanghai SSE is up 0.13%. Singapore Strait Times is up 0.20%. Japan 10-year yield is down -0.0802 at 0.424, after diving to as low as 0.368. Overnight, DOW dropped -1.14%. S&P 500 dropped -0.20%. NASDAQ rose 0.14%. 10-year yield rose 0.024 to 3.535.

BoJ keeps yield cap unchanged, downgrades growth forecast

BoJ kept the yield curve control unchanged today, disappointing some who bet for a tweak. Short term policy interest rate is held at -0.10%. The central will continue to purchase JGBs, without setting an upper limit, to keep 10-year yield at around 0%. The range 10-year JGB yield allowed to fluctuate is also kept at around plus and minus 0.50%. The decision was made by unanimous vote.

In the Outlook for Economic Activity and Prices:

• Forecasts of real GDP growth were downgraded across horizon, with fiscal 2022 down from 2.0% to 1.9%, fiscal 2023 down from 1.9% to 1.7%, fiscal 2024 down from 1.5% to 1.1%.
• Forecast of CPI core (all item less fresh food) for fiscal 2022 was raised from 2.9% to 3.0%, fiscal 2023 unchanged at 1.6%, and fiscal 2024 raised from 1.6% to 1.8%.
• Forecast of CPI core-core (all item less fresh food and energy) for fiscal 2022 was raised from 1.8% to 2.1%, fiscal 2023 raised from 1.6% to 1.8%, and fiscal 2024 unchanged at 1.6%.

Fed Barkin: You just can't declare victory too soon

Richmond Fed President Thomas Barkin told Fox Business yesterday that recent inflation reports have been encourage. But the median CPI is "still too high" and, "you just can't declare victory too soon."

"I would want to see inflation compellingly back to our target" before easing up on rate hikes, he said. Meanwhile the terminal rate will be dependent on the "path of inflation".

Looking ahead

UK CPI will be the main focus in European while Eurozone will also released CPI final. Later in the day, US retail sales and PPI will take center stage, with industrial production and business inventories. Canada will release IPPI and RMPI. Fed will also publish the Beige Book economic report.

USD/JPY Daily Outlook

Daily Pivots: (S1) 127.71; (P) 128.44; (R1) 128.88; More...

USD/JPY rebounds notably but there is no confirmation of reversal yet. Intraday bias remains neutral first. On the upside, firm break of 133.61 support turned resistance will firstly confirm short term bottoming at 127.20. More importantly, whole correction from 151.93 might have completed too. Bias will then be turned back to the upside for 38.2% retracement of 151.93 to 127.20 at 136.64 first. However, break of 127.20 will resume the decline form 151.93 to 121.43 fibonacci level next.

In the bigger picture, the firm break of 55 week EMA (now at 131.59) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong support could be seen around 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 38.2% retracement of 75.56 to 151.93 at 122.75 to bring rebound. But break of 134.76 resistance is needed to indicate bottoming first. Otherwise further fall will remain in favor.

Economic Indicators Update

BoJ kept the yield curve control unchanged today, disappointing some who bet for a tweak. Short term policy interest rate is held at -0.10%. The central will continue to purchase JGBs, without setting an upper limit, to keep 10-year yield at around 0%. The range 10-year JGB yield allowed to fluctuate is also kept at around plus and minus 0.50%. The decision was made by unanimous vote.

In the Outlook for Economic Activity and Prices:

• Forecasts of real GDP growth were downgraded across horizon, with fiscal 2022 down from 2.0% to 1.9%, fiscal 2023 down from 1.9% to 1.7%, fiscal 2024 down from 1.5% to 1.1%.
• Forecast of CPI core (all item less fresh food) for fiscal 2022 was raised from 2.9% to 3.0%, fiscal 2023 unchanged at 1.6%, and fiscal 2024 raised from 1.6% to 1.8%.
• Forecast of CPI core-core (all item less fresh food and energy) for fiscal 2022 was raised from 1.8% to 2.1%, fiscal 2023 raised from 1.6% to 1.8%, and fiscal 2024 unchanged at 1.6%.

Full statement here.

Full Outlook for Economic Activity and Prices.

Richmond Fed President Thomas Barkin told Fox Business yesterday that recent inflation reports have been encourage. But the median CPI is "still too high" and, "you just can't declare victory too soon."

"I would want to see inflation compellingly back to our target" before easing up on rate hikes, he said. Meanwhile the terminal rate will be dependent on the "path of inflation".

Australia’s employment report for August is scheduled to be released on Thursday at 01:30 GMT, and it is believed that these data will attract some interest. Ahead of the data, the Australian dollar fell near $0.6900 after a significant pullback off the five-month high around $0.7000. While the domestic economy is robust, the country's heavy exposure to China is giving investors another reason to be bullish on the currency after China’s reopening.

Stable unemployment rate is expected

A solid labor market is partially responsible for the present surge in consumer confidence, robust household spending, and high earnings and inflation, all of which have contributed to the RBA's current cycle of rate hikes.

The number of people with jobs climbed by 64k in November, which contributed to the unemployment rate being at a 50-year low of 3.4%. In keeping with a softening in previous polls, it is anticipated that employment growth will drop to 22.5k in December. Furthermore, job vacancies fell by 4.9% over the three months leading up to November. It is anticipated that the unemployment rate will not move from its current level of 3.4%.

Interest rate futures are pricing in a probability of approximately 65% for a rate increase of 25 basis points (bps) at the RBA's board meeting in February. This would bring the cash rate up from 3.10% to 3.35%. Further along the rates curve, the market anticipates one more rate hike of 25 bps in the first half of this year. This would bring the cash rate to 3.60%, which is predicted to be at or near the RBA's estimate of the terminal level.

The Australian dollar, which is very sensitive to developments in China, has been the best performing major currency so far this year, as concerns about a worldwide recession have been fueled by disappointing economic data from China as a result of strict Covid-19 controls, so its strong performance is unlikely to continue. A combination of positive sentiment toward risk assets, anticipation of China's reopening, and the recent announcement that China will lift its embargo on some Australian exports has sent the Australian dollar higher.

Aussie shows signs for bull-market

Aussie/dollar is showing some positive signs after the bounce off the 30-month low of $0.6170 on October 13. The pair has been developing within an ascending channel since mid-November and the 50- and the 200-day simple moving averages (SMA) are ready for a golden cross.

The pair could move higher if the employment report surprises on the strong side and unemployment declines further. The price is likely to test the $0.7010 resistance level, taken from the latest highs ahead of the $0.7135 barrier.

On the other hand, if the unemployment rate rises, the bears may sell the pair, visiting the bullish crossover within the SMAs near $0.6820. Steeper downside pressures may lead to the lower boundary of the channel and the 50-day SMA at $0.6750. Any moves lower could open the way for a bearish market.

Key Highlights

• Gold price started a fresh increase above the $1,900 resistance.
• A key bullish trend line is forming with support near $1,875 on the 4-hours chart.
• EUR/USD is consolidating gains above the 1.0780 support.
• GBP/USD might continue to rise above the 1.2300 resistance zone.

Gold Price Technical Analysis

Gold price formed a base above the $1,850 level against the US Dollar. The price started a steady increase above the $1,870 and $1,880 levels.

The 4-hours chart of XAU/USD indicates that the price gained pace above the $1,892 resistance zone. The price even moved above the $1,900 level and settled well above the 100 simple moving average (red, 4-hours) plus the 200 simple moving average (green, 4-hours).

The price tested the $1,930 and started a consolidation phase. On the upside, the price might face sellers near the $1,925 level.

The next major resistance is near the $1,930 level. Any more gains might send the price towards the $1,950 resistance level, above which gold price might visit the $2,000 resistance.

On the downside, an initial support is near the $1,900 level. The next major support is near the $1,880 level. There is also a key bullish trend line forming with support near $1,875 on the same chart.

The main support is near $1,865, below which gold price might struggle to stay above the $1,850 zone. In the stated case, gold price could slide towards the $1,820 support.

Looking at EUR/USD, the pair could attempt a fresh increase if it clears the 1.092 resistance zone in the coming sessions.

Economic Releases to Watch Today

• UK Consumer Price Index for Dec 2022 (YoY) – Forecast +10.6%, versus +10.7% previous.
• UK Core Consumer Price Index for Dec 2022 (YoY) – Forecast +6.6%, versus +6.3% previous.
• Euro Zone CPI for Dec 2022 (YoY) - Forecast +9.2%, versus +9.2% previous.
• Euro Zone CPI for Dec 2022 (MoM) - Forecast -0.3%, versus -0.3% previous.
• US Industrial Production for Dec 2022 (MoM) – Forecast -0.1%, versus -0.2% previous.

• Silver reversed from resistance level 24.15
•  Likely to fall to support level 23.00

Silver recently reversed down from the key resistance level 24.15 (which has been reversing the pair from the start of December), intersecting with the upper daily Bollinger Band.

The downward reversal from the resistance level 24.15 stopped the previous intermediate ABC correction (2) from the start of January.

Silver can be expected to fall further toward the next support level 23.00 (low of the previous impulse wave (1)).

• EURCAD reversed from key resistance level 1.4585
• Likely to fall to support level 1.4400

EURCAD recently reversed down from the key resistance level 1.4585 (which has been repeatedly reversing the pair from the end of 2021 as can be seen below).

The downward reversal from the resistance level 1.4585 continues the active weekly downtrend from the start of 2020.

Given the overbought reading on both the daily and the weekly Stochastic indicators, EURCAD can be expected to fall further toward the next support level 1.4400.