Sample Category Title

Market movers today

We get the US 5-10 years consumer inflation expectations from the University of Michigan, which the Fed follows closely. It is currently at 2.9%, which still suggests that inflation expectations are anchored.

Germany releases GDP for all of 2022 while Sweden is next in line to publish CPI inflation for December.

Today, ECB will publish the early voluntary repayment of the January option. While it is notoriously difficult to predict, our expectations are in the lower end of the estimates around EUR100bn (ECB's survey of monetary analysts has a median of EUR130bn, while Bloomberg survey is higher at EUR213bn). The number is released at 12:05 CET.

We also have three Fed speakers talking this afternoon (Kashkari, Williams and Harker). It will be interesting to hear their reflection on the outlook for inflation and Fed policy following the CPI release yesterday.

The 60 second overview

US CPI: At a first glance, US December CPI came out close to our and consensus expectations, but the details suggested underlying price pressures could be starting to moderate. Core services inflation picked up to 0.5% m/m (from 0.4%), but the uptick was driven by higher shelter and health care components, while the most wage-sensitive components showed easing price pressures. Combined with the lower average hourly earnings in the most recent jobs report, the figures ease pressure on Fed to keep hiking rates aggressively. Following the release, Fed's Harker (voter) and Barkin (non-voter) favoured slower rate hikes from here, while Bullard (non-voter) said he still prefers frontloading hikes to 'north of 5%'. While we have previously been calling for a 50bp hike in the February meeting, 25bp seems like the clear base case for now. We continue to think that easing financial conditions, less negative growth outlook and economic recovery in China create persistent inflation risks, and still think Fed will eventually hike the policy rate to 5.00-5.25% in May (prev. March). See US Labour Market Monitor, 11 January and Global Inflation Watch - Central banks welcome easing inflation, 13 January, for our latest thoughts on inflation developments.

EUR/USD rise: EUR/USD continued to tick up yesterday breaching 1.085 level and challenging our call for a stronger USD. We think a lot of optimism is now priced into the EUR (Chinese reopening, natural gas prices, outperformance in European equities) which leaves EUR/USD asymmetrically vulnerable to negative news. While we still see fundamentals driving a stronger USD, we also think that in near term it is difficult to pinpoint a trigger for a reversal. We are in the process of revising our EUR/USD forecasts but we still have a bias towards a lower cross in 6-12M time.

Russia-Ukraine: Russian President Putin's defence minister appointed a new war commander yesterday as Russia's most senior general, Chief of the General Staff Valery Gerasimov, will now also be in position to lead operations in Ukraine. Experts see his appointment as a signal of Russia's determination and commitment to a long war in Ukraine if need be. Since last week, media has been reporting that Russia could be planning a new round of mobilisation, aiming at extra 500,000 conscripts in addition to the 300,000 mobilised since October.

FI: The US CPI came broadly in line with expectations which after some initial jitters left bond yields broadly unchanged on the release. An early rally in bonds, driven by carry over from an ECB sources story, staged the 4bp lower bond yield on the day. Spreads were broadly unchanged on the day. Fed's Harker called for 25bp rate hikes going forward.

FX: Yesterday's session was all about USD weakness and a stronger JPY amid US CPI details turning out to the weak side and expectations for further Bank of Japan policy tweaks next week rising. USD/JPY has consequently broken below the 130 threshold while EUR/USD has broken above 1.08. EUR/NOK remains just north of 10.70 while EUR/SEK is trading close to the 10.30 mark ahead of Swedish inflation.

Credit: Credit markets seemed confused about how to interpret the US CPI figures. Initially, spreads sold off sharply, but they quickly recouped the losses with iTraxx Xover finishing the day 5.8bp tighter and Main 2.2bp.

Nordic macro

Sweden. We expect December's soaring electricity prices (expected to have risen by 40% m/m) to lift both CPI and CPIF to new highs at 12.0% y/y and 9.9% y/y, respectively. For comparison, the latest Riksbank forecast puts CPIF at 9.1% y/y in December. However, the Riksbank is likely more concerned about core inflation, and we forecast CPIF ex energy at 8.2% vs the Riksbank's 8.3%, in our view marking the peak in core inflation. Looking at the latest inflation prints of our Nordic neighbours, there might be some downside risk to our estimate stemming from food prices, which declined in both Denmark and Norway (our forecast entail rising food prices).

Copper (HG) rally from 9.28.2022 low is unfolding as a nesting impulse Elliott Wave structure. A nest is a series of 1-2-((i))-((ii)) which is an extended version of an impulsive structure. Up from 9.28.2022 low, wave 1 ended at 3.96 and wave 2 pullback ended at 3.5410. Wave 3 is currently in progress with internal subdivision as another impulse in lesser degree. Up from wave 2, wave ((i)) ended at 3.929. The 1 hour chart below shows pullback in wave ((ii)) ended at 3.708. The metal has extended higher again in wave ((iii)).

Up from wave ((ii)), wave i ended at 3.865, and pullback in wave ii ended at 3.7985. The metal extends higher again in wave iii towards 3.988, pullback in wave iv ended at 3.932, and final leg wave v ended at 4.044 which completed wave (i). Pullback in wave (ii) then ended at 3.987. The metal extends higher again in wave (iii) towards 4.186 and pullback in wave (iv) ended at 4.129. Expect wave (v) higher to complete soon with a few more high and that should complete wave ((iii)) in higher degree. Afterwards, the metal should pullback in wave ((iv)) to correct cycle from 1.4.2023 low before it resumes higher. Near term, as far as pivot at 3.708 low stays intact, expect pullback to find support in 3, 7, or 11 swing for further upside.

Copper 60 Minutes Elliott Wave Chart

Daily Pivots: (S1) 156.81; (P) 158.88; (R1) 160.04; More...

Break of 158.49 minor support indicates that rebound from 155.33 has finished at 161.22, ahead of 162.32 resistance. Intraday bias is back on the downside. Whole decline from 172.11 is likely resuming and break of 155.33 will target 153.70 fibonacci level.

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 153.02 support turned resistance will argue that the decline has completed, and retain medium term bullishness.

Daily Pivots: (S1) 139.40; (P) 140.96; (R1) 141.91; More....

Break of 140.15 minor support suggests that rebound from 137.37 has completed at 142.84. Rejection by 142.92 resistance indicates that larger decline from 148.38 is still in progress. Intraday bias is back on the downside for retesting 137.37 low. Break there will target 135.40 fibonacci level next.

In the bigger picture, as long as 55 week EMA (now at 138.64) 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) 0.8846; (P) 0.8871; (R1) 0.8908; More...

EUR/GBP's rally from 0.8545 finally resumed by breaking through 0.8876 resistance. Intraday bias is back on the upside for further rally to 61.8% projection of 0.8545 to 0.8876 from 0.8768 at 0.8973. On the downside, below 0.8831 minor support will turn intraday bias neutral first. But near term outlook will stay bullish as long as 0.8768 support holds, in case of retreat.

In the bigger picture, with 55 week EMA (now at 0.8616) intact, the favored case is that rise from 0.8545 is part of the whole up trend from 0.8201 (2022 low). Sustained trading above 61.8% retracement of 0.9276 to 0.8545 at 0.8997 will pave the way to retest 0.9267 high next.

Daily Pivots: (S1) 1.5509; (P) 1.5564; (R1) 1.5627; More...

Intraday bias in EUR/AUD stays neutral and outlook is unchanged. While further fall cannot be ruled out, strong support could be seen from 38.2% retracement of 1.4281 to 1.5976 at 1.5329 to complete the correction from 1.5976. Firm break of 1.5614 minor resistance will turn bias back to the upside for retesting 1.5976. However, sustained trading below 1.5329 will carry larger bearish implication and target 61.8% retracement at 1.4928.

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) 1.0024; (P) 1.0052; (R1) 1.0093; More....

EUR/CHF rally is still accelerating and hits as high as 1.0095 so far today. Further rally should be seen to 100% projection of 0.9407 to 0.9953 from 0.9720 at 1.0266 next. On the downside, below 1.0017 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, break of 38.2% retracement of 1.1149 to 0.9407 at 1.0072 and 55 week EMA (now at 1.0041) is taken as an initial sign of long term bullish reversal. Further rally is expected as long as 55 days EMA (now at 0.9860) holds. Next target is 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). Reactions from there should reveal long term momentum.

Daily Pivots: (S1) 1.3328; (P) 1.3388; (R1) 1.3431; More....

Intraday bias in USD/CAD is back on the downside with breach of 1.3355 support. Further decline might be seen but downside should be contained above 1.3224 key support level. Above 1.3451 minor resistance will turn bias back to the upside for 1.3704 resistance. However, sustained break of 1.3222/4 cluster support will resume the whole fall from 1.3976 and carry larger bearish implications.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Daily Pivots: (S1) 0.6906; (P) 0.6945; (R1) 0.7007; More...

Intraday bias in AUD/USD stays on the upside for the moment. Current rally from 0.6169 is in progress to 61.8% projection of 0.6169 to 0.6892 from 0.6721 at 0.7444. On the downside, break of 0.6875 minor support will turn intraday bias neutral and bring consolidations again. But overall outlook will stay bullish as long as 0.6721 support holds, in case of retreat.

In the bigger picture, corrective decline from 0.8006 (2021 high) should have completed with three waves down to 0.6169 (2022 low). Further rally should be seen to 61.8% retracement of 0.8006 to 0.6169 at 0.7304. Sustained break there will pave the way to retest 0.8006. This will now remain the favored case as long as 0.6721 support holds.

Daily Pivots: (S1) 1.0766; (P) 1.0816; (R1) 1.0902; More...

Intraday bias in EUR/USD remains on the upside at this point. Current rise from .9534 should target 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, below 1.0729 minor support will turn intraday bias neutral again first. But near term outlook will stay bullish as long as 1.0482 support holds, in case of retreat.

In the bigger picture, current development suggests that the rally from 0.9534 low is a medium term up trend rather than a correction. Further rally 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.