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The currency major has tested six-month highs and remains at 1.0610.

By now, investors have got maximum information from December. The US Fed has increased the interest rate to 4.50% and promised further increases in accordance with inflation. The European Central Bank has lifted the rate to 2.50% as expected but the comments turned out to be even more carnivorous than expected.

The final inflation report in the Euro zone in November demonstrated growth to 10.1% y/y against the forecast 10.0%. Meanwhile, the base CPI remained at 5.0% y/y.

Until Christmas, the markets will continue analysing the information to become active again after winter holidays.

On H4, the pair has completed an impulse of decline to 1.0586. Today a consolidation range is expected to form above it. With an escape downwards, a wave of decline to 1.0507 might become possible. The goal is local. Then growth to 1.0585 and a decline to 1.0440 will become possible. Technically, the scenario is confirmed by the MACD: its signal line is headed strictly down, suggesting further development of the wave of decline.

On H1, the pair has formed a structure of decline to 1.0585. A link of correction to 1.0640 is not excluded, followed by falling to 1.0555, from where the wave might continue to 1.0510. The goal is local. Technically, the scenario is confirmed by the Stochastic: its signal line is above 80 and is preparing to develop a new impulse of decline to 20.

• AUDJPY reversed from pivotal support level 91.00
• Likely to rise to resistance level 93.00

AUDJPY under the bullish pressure after the price reversed up from the pivotal support level 91.00 (which has been reversing the price from the start of July), coinciding with the lower daily Bollinger Band and the 38.2% Fibonacci correction of the upward impulse from February.

The upward reversal from the support level 91.00 stopped the previous downward impulse wave C from the middle of November.

AUDJPY can be expected to rise further toward the next resistance level 93.00 (which stopped wave (iv) earlier this month)).

• AUDCHF reversed from support level 0.6220
• Likely to rise to resistance level 0.6350

AUDCHF recently reversed up from the major support level 0.6220 (which stopped the sharp downtrend in October), coinciding with the lower daily Bollinger Band.

The upward reversal from the support level 0.6220 runs counter to the strong multi-month downtrend inside which the pair has been trading from April.

Given the clear bullish divergence on the daily Stochastic indicator, AUDCHF can be expected to rise further toward the next resistance level 0.6350.

EURCHF has been trading in a consolidative manner lately, staying slightly above the 0.9820 zone, which is near the 50- and 100-day exponential moving averages (EMA). That said, it also remains below the 0.9950 hurdle, which provided resistance between October27 and November 9, and also lies slightly below the 200-day EMA. Despite the pair staging a decent recovery after hitting a record low of 0.9400 on September 26, a break above parity may be needed to reinforce the bullish case.

Both the daily oscillators are detecting positive momentum, but they are flattening, confirming the fading speed of the latest recovery. That’s another development adding credence to the narrative that a break above 1.0000 may be needed to brighten the outlook.

A clear and decisive break above parity could pave the way towards the 1.0155 territory, marked by the high of June 27, or the 1.0225 zone, which provided strong support between May 19 and June 2. If neither zone is able to stop the bulls, then the advance may continue towards the 1.0340 barrier, marked by the inside swing low of June 14.

On the downside, a break below 0.9705 may be the move signaling that the bears have gained the upper hand again. It would confirm a lower low on the daily chart and may see scope for declines towards the low of August 24, at 0.9550. Should that barrier fail to attract the bulls, the slide may extend towards the record low of 0.9400.

To sum up, EURCHF has staged a relatively decent comeback since September 26, when it hit an all-time low at 0.9400. However, for the recovery to continue, a break above parity may be needed.

Germany’s business sentiment index rose in December for the third month, returning to August levels on the back of more optimistic expectations, while assessment of the current situation has improved just slightly. Ifo Business Climate Index for Germany jumped from 86.4 to 88.6 in December, better than the 87.6 expected. In a commentary on the publication, the President of the ifo Institute notes that “business is entering the holiday season with a sense of hope”.

Market participants closely follow the Ifo index because of its strong predictive power for the economy. But even more interesting is that the strong reversal from decline to growth coincided with the turnaround in the German indices.

The rise in German business sentiment may also be good news for EURUSD buyers. In 2020 and 2009, EURUSD accompanied the index’s recovery for the first several months. However, breaking the multi-year downtrend may take a significant fundamental change, which is too early to tell.

The EURUSD appears locally tired after its two-and-a-half-month rally and in a tactically overbought condition. The Euro has been losing ground against the USD during the last two trading sessions, retracing from 1.0730 to 1.0600. Still, it is the only major currency that has managed to break above the 200-day MA, which many consider a technical change in the long-term trend.

The bullish trend in the single currency might continue if the ECB’s decisiveness in fighting inflation does not negatively impact business sentiment.

Daily Pivots: (S1) 1.0561; (P) 1.0612; (R1) 1.0639; More...

Range trading continues in EUR/USD and intraday bias remains neutral. Further rally is expected as long as 1.0481 resistance turned support holds. Firm break of 61.8% projection of 0.9729 to 1.0481 from 1.0289 at 1.0754 will pave the way to 100% projection at 1.1041. However, firm break of 1.0481 will confirm short term topping and bring deeper fall to 1.0289 support.

In the bigger picture, focus stays on 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Rejection by 1.0609 will suggest that price actions from 0.9534 medium term bottom are developing into a corrective pattern. Thus, medium bearishness is retained for another fall through 0.9534 at a later stage. However, sustained break of 1.0609 will raise the chance of trend reversal and target 61.8% retracement at 1.1273.

Daily Pivots: (S1) 1.2097; (P) 1.2160; (R1) 1.2200; More...

Outlook in GBP/USD remains unchanged and intraday bias stays mildly on the downside. Fall from 1.2445 short term top is in progress for 55 day EMA (now at 1.1863). Firm break there will target 38.2% retracement of 1.0351 to 1.2445 at 1.1645. For now, risk will stay on the downside as long as 1.2445 resistance holds, in case of recovery.

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. This will remain the favored case as long as 55 day EMA (now at 1.1863) holds.

Daily Pivots: (S1) 0.9282; (P) 0.9314; (R1) 0.9373; More...

Outlook in USD/CHF is unchanged and intraday bias stays neutral. On the downside, break of 0.9214 will resume the fall and target 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056. However, break of 0.9378 resistance will indicate short term bottoming and turn bias back to the upside for 0.9545 resistance instead.

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 might be a medium term down trend itself. Sustained break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 0.9545 resistance holds.

Daily Pivots: (S1) 136.07; (P) 136.97; (R1) 137.64; More...

USD/JPY is staying in range below 138.16 temporary top and intraday bias stays neutral. On the upside, break of 138.16 will resume the rebound to 55 day EMA (now at 140.15). On the downside, however, firm break of 133.61 support and 133.07 medium term fibonacci level will confirm resumption of whole fall from 151.93.

In the bigger picture, price actions from 151.93 medium term could be just a corrective pattern to up trend from 102.58 (2021 low). Strong support from 38.2% retracement of 102.58 to 151.93 at 133.07 and 55 week EMA (now at 131.85) will set the range for such corrective pattern. However, sustained break of 55 week EMA will pave the way to 61.8% retracement at 121.43.

Overall risk sentiment is steady in the financial markets today. Aussie and Canadian Dollars are firming up slightly, while Dollar and Yen soften. The upcoming BoJ rate decision in Asia is unlikely to give Yen any special support. Euro was lifted briefly by better than expected Germany data, but buying didn't last long. European majors are generally mixed for now.

Technically, CAD/JPY is still bounded in consolidation pattern from 99.46, in form of an expanding triangle. While more sideway trading could be seen, outlook will stay bearish as long as 101.18 resistance holds. Further decline is expected expected to 200% projection of 110.87 to 104.55 from 110.33 at 97.69. But firm break of 101.18 will confirm short term bottoming and bring rebound.

In Europe, at the time of writing, FTSE is up 0.52%. DAX is up 0.42%. CAC is up 0.44%. Germany 10-year yield is up 0.064 at 2.217. Earlier in Asia, Nikkei dropped -1.05%. Hong Kong HSI dropped -0.50%. China Shanghai SSE dropped -1.92%. Singapore Strait Times rose 0.49%. Japan 10-year JGB yield dropped -0.0004 to 0.256.

Germany Ifo rose to 88.6, entering holiday with a sense of hope

Germany Ifo Business Climate rose from 86.4 to 88.6 in December, above expectation of 87.2. Current Situation Index rose from 93.2 to 94.4, above expectation of 93.5. Expectations Index rose from 80.2 to 83.2, above expectation of 82.0.

By sector, manufacturing rose from -11.5 to -5.6. Services rose from -5.3 to -1.2. Trade rose from -26.9 to -20.0. Construction, however, dropped from -21.5 to -22.2.

Ifo said: "Sentiment in the German economy has brightened considerably. The ifo Business Climate Index rose to 88.6 points in December, up from 86.4 points (seasonally adjusted) in November. Companies assessed their current situation as better again. This comes on the heels of six consecutive falls in the indicator for the current situation. Expectations also improved noticeably. German business is entering the holiday season with a sense of hope."

ECB de Guindos: I absolutely honest don't know rate hikes will continue until when

ECB Vice-President Luis de Guindos said today, "there will be more interest rate hikes, until when, I don't know. I am absolutely honest, I don't know." He added that the central bank was committed to bring inflation down to its 2% target.

Separately, Governing Council member Gediminas Simkus said, "there will undoubtedly be a 50 bps increase in February."

NZ BNZ performance of services dropped to 53.7

New Zealand BusinessNZ Performance of Services Index declined from 57.1 to 53.7 in November, still above long-term average of 53.6. Looking at some details, activity/sales dropped from 61.0 to 58.1. Employment tumbled from 57.1 to 51.8. New orders/business declined from 59.6 to 57.3. Stocks/inventories fell from 56.1 to 55.0. Supplier deliveries fell from 52.0 to 47.3.

BusinessNZ chief executive Kirk Hope said: "With its sister survey the PMI again showing contraction in November and economic headwinds approaching, the easing of expansion in activity is not unexpected. Also, with the Global PSI result of 48.1 at a 29-month low, it will be a tall order for the New Zealand services sector to continue the overall trends experienced during the second half of 2022".

BNZ Senior Economist Craig Ebert said that "November's PSI proved, for the third month running, to be an important counterpoint to the weakening PMI. It looks as though the services industries – just like they did in Q3 – will more than make up for any weakness in manufacturing in Q4, such that GDP for that quarter manages an expansion".

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 136.07; (P) 136.97; (R1) 137.64; More...

USD/JPY is staying in range below 138.16 temporary top and intraday bias stays neutral. On the upside, break of 138.16 will resume the rebound to 55 day EMA (now at 140.15). On the downside, however, firm break of 133.61 support and 133.07 medium term fibonacci level will confirm resumption of whole fall from 151.93.

In the bigger picture, price actions from 151.93 medium term could be just a corrective pattern to up trend from 102.58 (2021 low). Strong support from 38.2% retracement of 102.58 to 151.93 at 133.07 and 55 week EMA (now at 131.85) will set the range for such corrective pattern. However, sustained break of 55 week EMA will pave the way to 61.8% retracement at 121.43.

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