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Daily Pivots: (S1) 1.2107; (P) 1.2153; (R1) 1.2195; More...

Intraday bias in GBP/USD stays neutral at this point. On the upside, above 1.2208 will resume the rise to retest 1.2445 high. Decisive break there will resume whole rally from 1.0351 to 1.2759 fibonacci level. Nevertheless, break of 1.1840 will resume the correction from 1.2445 to 38.2% retracement of 1.0351 to 1.2445 at 1.1645.

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) 131.60; (P) 132.04; (R1) 132.68; More...

No change in USD/JPY's outlook as range trading continues. Intraday bias remains neutral at this point. On the upside, firm break of 134.49 should confirm short term bottoming, and bring stronger rise to 138.16 cluster resistance (38.2% retracement of 151.93 to 129.49 at 138.06). However, break of 129.49 will resume the whole decline from 151.93 instead.

In the bigger picture, a medium term top was in place at 151.93. Sustained trading below 55 week EMA (now at 131.73) would raise the chance of bearish trend reversal. Deeper fall would be seen to 61.8% retracement of 102.58 to 151.93 at 121.43. This will now remain the favored case as long as 55 day EMA (now at 137.08) holds.

Daily Pivots: (S1) 0.9198; (P) 0.9225; (R1) 0.9254; More...

USD/CHF's rebound from 0.9165 extends higher today but stays well below 0.9407 resistance. Intraday bias remains neutral and further decline is still in favor. On the downside, break of 0.9165 will resume the decline from 1.0146, to 100% projection of 0.9545 to 0.9199 from 0.9407 at 0.9061 next. However, firm break of 0.9407 will turn bias back to the upside for strong 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.

The euro is drifting on Wednesday, trading at 1.0730. EUR/USD has climbed about 1% this week, and Monday’s high of 1.0760 is its highest level since June 22^nd. Can the euro continue to push higher?

ECB unlikely to change aggressive stance

Eurozone inflation has fallen back into single digits, raising hopes that inflation may have finally peaked. The headline rate slowed to 9.2% in December, down from 10.1% in November and beating the forecast of 9.7%. The slowdown is welcome news for the ECB, but investors shouldn’t count on the central bank becoming dovish and ending its current rate-tightening cycle, even if inflation continues its downturn in the coming months.

The drop in headline inflation has been fuelled by energy subsidies by governments in Germany and other eurozone members, as well as lower energy prices. Core inflation rose to 5.2% in December, up from 5.0% in November, which indicates that underlying price pressures remain strong. The ECB is unlikely to ease its pace of hikes until the core rate shows a sustained fall as well as a drop in wage growth. In the meantime, the ECB’s message remains hawkish. ECB President Lagarde said in December that the markets were underestimating how high rates would go and noting that the ECB was likely to continue raising rates in 50-bp increments “for a period of time”.

The US releases December CPI on Thursday, and we’ve seen in recent months how inflation reports can move the equity and currency markets. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. In recent months, soft inflation reports have sent the US dollar lower, as the markets have assumed that the Fed will not be able to continue hiking in the face of falling inflation. I would expect a similar reaction if December’s inflation numbers are lower than expected.

EUR/USD Technical

• EUR/USD has support at 1.0711 and 1.0612
• There is resistance at 1.0800 and 1.0953

Daily Pivots: (S1) 0.9883; (P) 0.9899; (R1) 0.9922; More....

EUR/CHF's break of 0.9953 resistance finally confirms resumption of whole rise from 0.9407. Notable support from 55 day EMA is a bullish sign. Intraday bias is back on the upside. Further rise should be seen to 61.8% projection of 0.9407 to 0.9953 from 0.9720 at 1.0057, which is close to 1.0072 medium term fibonacci level. On the downside, below 0.9896 minor support will dampen the bullish case and turn intraday bias neutral first.

In the bigger picture, as long as 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds, price actions from 0.9407 medium term bottom will be treated as a corrective pattern. That is, long term down trend would resume through this low at a later stage. Nevertheless, firm break of 1.0072 will also have 55 week EMA (now at 1.0041) taken out. That would be an initial sign of long term bullish reversal.

EUR/CHF is providing some excitement in otherwise dull markets today. The cross finally breaks out from the sideway pattern started back in October. Some buying is also seen in Euro against Sterling and Aussie, but it's staying in very tight range against the greenback. Indeed, Euro and Dollar are currently the strongest ones for the day, , followed by Loonie and Aussie. Swiss Franc is the worst, followed by Kiwi and then Yen. Overall, still, most traders should be waiting for tomorrow's US CPI before taking a larger bet.

Technically, one focus is now on 1.1265 minor resistance in GBP/CHF, if selloff in CHF intensifies. Break there will argue that the corrective pattern from 1.1574 has completed with three waves to 1.1094, and bring retest of 1.1574 high. But of course, as EUR/GBP is also on the verge of breaking through 0.8876 resistance, GBP/CHF might be capped if Sterling is under similar pressure against Euro.

In Europe, at the time of writing, FTSE is up 0.63%. DAX is up 0.93%. CAC is up 0.89%. Germany 10-year yield is down -0.0905 at 2.220. Earlier in Asia, Nikkei rose 1.03%. Hong Kong HSI rose 0.49%. China Shanghai SSE dropped -0.24%. Singapore Strait Times rose 0.226%. Japan 10-year JGB yields dropped -0.0062 to 0.506.

ECB Villeroy: France should avoid hard landing

ECB Governing Council member Francois Villeroy de Galhau told Radio Classiqu, "activity in France is showing a better than expected resistance," and a hard landing should be avoided. He expects inflation in France to peak in H1 2023, then falls back to 4% towards the end of the year.

Villeroy also said that ECB should aim to reach terminal interest rate by summer, and emphasized the need to be pragmatic about the pace of tightening.

BoJ Public Survey: 32.5% expects prices to go up significantly, up from 28.9%

According to BoJ's December Survey on the General Public's Views and Behavior, 32.5% of respondents expect prices will go up significantly one year from now, up from September's survey of 28.9%. Those expecting prices to go up slightly dropped to 52.5%, down from 56.8%. Together, those expecting prices to go up dropped to 85.0%, down slightly from 85.7%. Only 2.4% expects prices to go down.

Regarding economic condition one year from now, those expecting improvement dropped to 9.1%, down from 10.5%. Those expecting unchanged dropped to 44.4%, down from 46.0%. Those expect worsening conditions rose to 46.2%, up from 42.9%. DI dropped to -37.1, down from -32.4.

Australia monthly CPI rose back to 7.3% yoy in Nov, ongoing inflationary pressures

Australia monthly CPI accelerated from 6.9% yoy to 7.3% yoy in November, above expectation of 7.2% yoy.

Michelle Marquardt, ABS Head of Prices Statistics, said "This month's annual movement of 7.3% compares to 6.9% in October and 7.3% in September, indicating ongoing inflationary pressures."

The most significant contributors to the annual rise in November were Housing (+9.6%), Food and non-alcoholic beverages (+9.4 per cent), Transport (+9.0%), Furniture, household equipment and services (+8.4%) and Recreation and culture (+5.8%).

Australia retail sales rose 1.4% mom in Nov on Black Friday sales

Australia retail sales rose 1.4% mom in November, well above expectation of 0.7% mom. The seasonally adjusted turnover of AUD 35.92B was a new record high.

Ben Dorber, ABS head of retail statistics, said, "While we typically see a rise in spending around Black Friday sales, the strong seasonally adjusted rise in November 2022 shows that the effect is increasing over time, as the event has become more common across retailers and sales periods become longer."

"Given the increasing popularity of Black Friday sales, the smaller increase in October may reflect consumers waiting to take advantage of discounting in November, particularly in light of cost-of-living pressures."

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9883; (P) 0.9899; (R1) 0.9922; More....

EUR/CHF's break of 0.9953 resistance finally confirms resumption of whole rise from 0.9407. Notable support from 55 day EMA is a bullish sign. Intraday bias is back on the upside. Further rise should be seen to 61.8% projection of 0.9407 to 0.9953 from 0.9720 at 1.0057, which is close to 1.0072 medium term fibonacci level. On the downside, below 0.9896 minor support will dampen the bullish case and turn intraday bias neutral first.

In the bigger picture, as long as 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds, price actions from 0.9407 medium term bottom will be treated as a corrective pattern. That is, long term down trend would resume through this low at a later stage. Nevertheless, firm break of 1.0072 will also have 55 week EMA (now at 1.0041) taken out. That would be an initial sign of long term bullish reversal.

Economic Indicators Update

The US Dollar started a fresh decline from the 134.80 resistance zone against the Japanese Yen. The USD/JPY pair traded as low as 131.30 and recently started an upside correction.

There was a clear move above the 132.00 zone and the 50 hourly simple moving average. The pair is now consolidating below the 132.65 zone. An immediate resistance on the upside is near the 132.65 level.

The next major resistance is near the 133.00 zone. A clear break above the 133.00 resistance could push the price towards 134.00. The next major resistance is near 134.75 on FXOpen, where the bears might emerge.

On the downside, an initial support is near the 132.10 zone and a trend line on the hourly chart. The next major support sits near the 131.50 level, below which there is a risk of more downsides towards the 130.00 level.

The USDJPY remains constructive and edges higher on Wednesday, following weak Japanese data overnight and a bear trap under Fibo support at 131.51 (61.8% of 129.50/134.77).

Wednesday’s action, however, is rather quiet, as markets await stronger signals from US inflation data, due on Thursday, with flat momentum on daily chart, contributing to current mode.

Fresh bulls need to register repeated close above daily Tenkan-sen (132.13) to keep a minor bullish bias, with lift above daily Kijun-sen (133.84) to tighten grip and open way for stronger recovery.

Close below Tenkan-sen, on the other hand would keep the downside at risk for renewed probe through psychological 130 support and test of January low at 129.50.

US inflation data are likely to be a catalyst for stronger acceleration, with Dec values to define direction.

Res: 132.74; 133.84; 134.50; 134.77.
Sup: 132.13; 131.55; 130.56; 130.00.

The Australian dollar is trading quietly on Wednesday. AUD/USD is at 0.6904, up 0.14%.

Australian CPI climbs to 7.3%

Australian inflation pushed higher in November, rising to 7.3% following a 6.9% gain in October. This matched the forecast. The trimmed mean rate, a key gauge of core inflation, rose to 5.6% in November, up from 5.4% a month earlier and its highest level since 2018. The drivers behind the increase were higher jet fuel prices as well as accommodation prices. The drop in inflation in October (6.9%, down from 7.3% prior) had raised hopes that inflation might have peaked, but the rise in the November release has dampened such hopes. Retail sales for November jumped 1.4%, buoyed by Black Friday sales. This was much higher than the forecast of 0.6% and the October read of 0.4%. Consumer spending remains strong despite the double-whammy of rising interest rates and high inflation.

What will be the RBA’s take on this data? The trimmed mean rate indicates that the rise in inflation is broad-based, a reminder that the RBA has more work to do as it tackles high inflation. The strong retail sales data shows that the economy can still bear further hikes, and the markets have priced in a 25-basis point increase at the February 7^th meeting.

The RBA rate policy is data-dependent, which means that the quarterly CPI release on January 25th could determine what decision the central bank takes at the meeting. The minutes of the December meeting indicated that the RBA considered three options at that meeting – a 25 bp hike, a 50-bp hike and a pause. In the end, RBA members opted for the 25-bp increase. I would expect the RBA to show similar flexibility at the February meeting.

Fed Chair Powell finds himself under constant scrutiny, not just for his comments but also for what he doesn’t say. Powell participated on a panel at a symposium of the Swedish central bank on Tuesday. The topic was central bank independence, and Powell did not touch upon the economy or monetary policy. The markets took this as a dovish sign and the US dollar pared gains as a result.

AUD/USD Technical

• 0.6931 remains a weak resistance line, followed by 0.7044
• 0.6817 and 0.6747 are providing support

NZDUSD got trapped around 0.6370 immediately after the bounce on the 50- and 200-day simple moving averages (SMAs) at 0.6200. Interestingly, the congestion is developing around the lower boundary of the broken 2021-2022 bearish channel.

While the bullish SMA crosses flag a resumption of the latest upleg, the momentum indicators are still reflecting some caution. Although above its 50 neutral mark, the RSI is struggling to gain impetus, while the MACD remains capped below its red signal line. Moreover, the stochastics are already flirting with overbought levels, increasing the risk for a downside correction in the short term.

If buyers breach the 0.6370 threshold, the price may advance straight up to the key barricade of 0.6465. The 61.8% Fibonacci retracement of the 0.7032-0.5510 downleg is slightly higher at 0.6550 and may attract some attention before the focus shifts to the channel’s tough resistance trendline at 0.6700 coming from the March 2021 peak. A successful violation of that bar could spark a new rally.

On the downside, a close below the 20-day SMA could bring the 0.6200 region back under the spotlight. If selling forces intensify, the next destination might be the 38.2% Fibonacci support zone of 0.6092. Even lower, a break below the 0.6000 psychological mark is expected to squeeze the pair forcefully towards the 23.6% Fibonacci of 0.5870. Note that the descending trendline drawn from April’s high of 0.7032 is positioned around the same area.

In brief, market sentiment is fragile in NZDUSD. A sustainable move above 0.6370 is required to raise fresh buying interest. Otherwise, the pair may drift lower to find fresh support.