Sample Category Title

UK inflation outperforms

The markets were bracing for inflation to accelerate in February, and the readings were even higher than expected. CPI hit 6.2% YoY, a new 30-year high. This was up from 5.5% in January and above the consensus estimate of 5.9%. Core CPI rose 5.2%, up from 4.4% and ahead of the forecast of 5.0%. The inflation data failed to boost the pound, which has dropped 0.54% on the day and is back below the 1.32 level.

The rise in inflation has been driven by soaring food, fuel and energy costs. The Bank of England has projected that inflation will hit 8% in the second quarter and has warned that it could rise to 10% by the end of the year. The Bank has raised rates at three successive meetings, from 0.10% to 0.75%, but sounded rather dovish at the last meeting. BoE policy makers face a quandary – the rate tightening cycle will have to continue to wrestle inflation lower, but the war in Ukraine and rising energy prices could slow the economy later this year and aggressive tightening could choke off economic growth.

The US Federal Reserve has come out swinging this week, as Chair Powell and other officials have talked tough about raising rates in order to win the battle against inflation. The Fed has been widely criticized for being too slow in its response to rising inflation, as Powell was preaching that inflation was transitory even as CPI rose month after month.

On Monday, Powell said that inflation was putting the recovery at risk and said that 0.50% rate hikes were on the table if needed. The hawkish remarks sent US Treasury yields higher, which has boosted the US dollar.

GBP/USD Technical

• GBP/USD faces resistance at 1.3259 and 1.3341
• There is support at 1.3130 and 1.3048

The US yields keep rising, which makes JPY very weak as stocks are also seen in an uptrend. So its' not a surprise to see USDJPY moving higher, which however has five subwaves up within wave 5 so there can be a new slow down coming, for a corrective retracement. Kee in mind that Nikkei is also turning bullish now, meaning more gains after a pullback meaning that higher degree uptrend on USDJPY may not come to an end anytime soon.

USDJPY keeps moving higher, now already above 120.00 level but there is still a risk for a deeper pullback into wave 4, so buying here can be very risky. We still favor a pullback before uptrend resume towards even higher prices, and ideally, the retracement will show when the current wave 3) channel is going to be broken. Support could then be near 118.70 which was Dece 2016 high.

USD/JPY 4h Elliott Wave analysis

Daily Pivots: (S1) 119.82; (P) 120.43; (R1) 121.41; More...

Intraday bias in USD/JPY remains on the upside. Current rally should target 100% projection of 109.11 to 116.34 from 114.40 at 121.63. Sustained break there will pave the way to 161.8% projection 126.09, which is close to 125.85 long term resistance. On the downside, below 120.37 minor support twill turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, the break of 118.65 resistance (2016 high) suggest that up trend from 98.97 (2016 low) is resuming, with rise from 101.18 (2020 low) as the third leg. Medium term outlook will remain bullish as long as 113.46 low. Next target is 125.85 (2015 high).

Daily Pivots: (S1) 0.9303; (P) 0.9339; (R1) 0.9365; More....

Intraday bias in USD/CHF stays neutral for the moment. On the downside, below 0.9293 will extend the pull back from 0.9459 to 55 day EMA (now at 0.9254). On the upside, above 0.9381 minor resistance will flip bias back to the upside. Firm break of 0.9471 will resume the rise from 0.8756 to 61.8% projection of 0.8756 to 0.9471 from 0.9090 at 0.9532.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that whole down trend form 1.0342 (2016 high), has completed with waves down to 0.8756. A medium term up trend should be set up to target 1.0237/0342 resistance zone.

Daily Pivots: (S1) 1.0979; (P) 1.1013; (R1) 1.1064; More...

Range trading continues in EUR/USD and intraday bias remains neutral at this point. On the downside, below 1.0899 minor support will turn bias back to the downside for 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786. However, firm break of 1.1120 will confirm short term bottoming at 1.0805. Bias will be back on the upside for 55 day EMA (now at 1.1198) and above.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extending term range trading first.

Daily Pivots: (S1) 1.3164; (P) 1.3219; (R1) 1.3318; More...

Intraday bias in GBP/USD is turned neutral as it retreated sharply after hitting 1.3297. On the downside, break of 1.3119 minor support will turn bias back to the downside for retesting 1.2999. Firm break there will resume larger down trend from 1.4248. On the upside, above 1.3297 will resume the rebound to 55 day EMA (now at 1.3355). Sustained break there will target medium term channel resistance (now at 1.3590).

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In any case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Yen is finally recovering slightly today, as selloff in bonds ease. That is by no means an indication of reversal. But the Japanese currency should be turning into a consolidation phase after recent massive selloff. Dollar is also firming up slightly too, except versus Yen and Aussie. On the other hand, the rebound in Sterling seems to have lost all its momentum, except versus Euro, which is turning weaker again too.

Technically, WTI crude oil's rebound from 93.98 resumes after brief retreat and it's back above 115.5. For now further rise is in favor as long as 109.03 minor support holds. Firm break of 61.8% retracement of 131.82 to 93.98 at 117.36 could pave the way back to 131.82 high. Such development could have a knock on the rebound in stocks, or at least cap the momentum.

In Europe, at the time of writing, FTSE is down -0.09%. DAX is down -1.30%, CAC is down -1.00%. Germany 10-year yield is down -0.0193 at 0.487. Earlier in Asia, Nikkei rose 3.00%. Hong Kong HSI rose 1.21%. China Shanghai SSE rose 0.34%. Japan 10-year JGB yield rose 0.0063 to 0.226.

UK CPI rose to 6.2% yoy in Feb, core CPI up to 5.2% yoy

UK CPI rose 0.8% mom in February, above expectation of 0.6% mom. That's also the largest monthly rise since 2009. On a 12-month basis, CPI surged from 5.5% to 6.2% yoy, above expectation of 5.9% yoy. That's the highest on record since 1997, and the highest rate is historic modelled series since March 1992. CPI core also rose from 4.4% yoy to 5.2% yoy, above expectation of 4.8% yoy.

Also release, PPI input was at 1.4% mom, 14.6% yoy in February, versus expectation of 1.2% mom, 13.9% yoy. PPI output was at 0.8% mom, 10.1% yoy, versus expectation of 0.7% mom, 10.2% yoy. PPI output core was at 0.7% mom, 9.9% yoy, versus expectation of 0.9% mom, 10.0% yoy.

GBP/AUD heading to 1.74 as near term fall resumes

GBP/AUD's fall from 1.9218 resumed by breaking through 1.7729 support last today. For now, near term outlook stays bearish as long as 1.8173 resistance holds, next target is 1.7412 low.

Current fall from 1.9812 is seen as resuming the medium term down trend from 2.0840 (2020 high). Break of 1.7412 will target 61.8% projection of 2.0840 to 1.7412 from 1.9218 at 1.7099.

Nikkei gained 3%, broke near term structural resistance

Nikkei staged another power full rally today after a gap up, gained 3.00% or 816.05 pts to 28040.16. Export-oriented shares led the rally, with help from recent decline in Yen exchange rate. Japan Prime Minister Fumio Kishida also promised to  carry out solid counter-measures for rising prices of oil, raw materials and goods, to revive Japan's economy".

Nikkei's break of 27880.69 resistance argues that corrective pull back from 30795.66 might have finished at 24681.74 already. Sustained of falling channel resistance (now at 26650) will affirm this bullish case and pave the way to retest 30795.77 high.

In the bigger picture, 38.2% retracement of 16358.19 to 30795.77 at 25280.61 is seen as being defended already, despite a brief breach earlier this month. The break above 55 week EMA is also a positive sign. Up trend from 16358.19 might be ready to resume during next quarter.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3164; (P) 1.3219; (R1) 1.3318; More...

Intraday bias in GBP/USD is turned neutral as it retreated sharply after hitting 1.3297. On the downside, break of 1.3119 minor support will turn bias back to the downside for retesting 1.2999. Firm break there will resume larger down trend from 1.4248. On the upside, above 1.3297 will resume the rebound to 55 day EMA (now at 1.3355). Sustained break there will target medium term channel resistance (now at 1.3590).

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In any case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Economic Indicators Update

Nikkei staged another power full rally today after a gap up, gained 3.00% or 816.05 pts to 28040.16. Export-oriented shares led the rally, with help from recent decline in Yen change rate. Japan Prime Minister Fumio Kishida also promised to carry out solid counter-measures for rising prices of oil, raw materials and goods, to revive Japan's economy".

Nikkei's break of 27880.69 resistance argues that corrective pull back from 30795.66 might have finished at 24681.74 already. Sustained of falling channel resistance (now at 26650) will affirm this bullish case and pave the way to retest 30795.77 high.

In the bigger picture, 38.2% retracement of 16358.19 to 30795.77 at 25280.61 is seen as being defended already, despite a brief breach earlier this month. The break above 55 week EMA is also a positive sign. Up trend from 16358.19 might be ready to resume during next quarter.

GBP/AUD's fall from 1.9218 resumed by breaking through 1.7729 support last today. For now, near term outlook stays bearish as long as 1.8173 resistance holds, next target is 1.7412 low.

Current fall from 1.9812 is seen as resuming the medium term down trend from 2.0840 (2020 high). Break of 1.7412 will target 61.8% projection of 2.0840 to 1.7412 from 1.9218 at 1.7099.

EURGBP’s latest decline traced the lower Bollinger band before unearthing some positive traction from the 0.8300 handle, which is the 61.8% Fibonacci retracement of the up leg from the more than 5½-year low of 0.8202 until the 0.8457 high. The longer-term 100- and 200-period simple moving averages (SMAs) continue to endorse the now one-month neutral trend, while the falling 50-period SMA, is reflecting the recent dominance in bearish forces.

Meanwhile, the short-term oscillators are indicating that bullish forces are strengthening. The MACD, far beneath the zero mark, is flattening below its red trigger line, implying waning in negative impetus. The positively charged stochastic oscillator and the improving RSI together are conveying that upward drive in the pair is intensifying.

In the positive scenario, buyers may face nearby resistance from the 50.0% Fibo of 0.8329 before encountering a zone of resistance from the 100-period SMA at 0.8352 until the 200-period SMA at 0.8365. Overshooting this fortified barrier, which also holds the mid-Bollinger band, the bulls could then tackle upside constraints arising from the 50-period SMA at 0.8383 and the neighbouring 23.6% Fibo of 0.8397. Nonetheless, buying interest would need to endure to steer the price north of the 0.8416 high.

If upside drive starts to fade, initial support could transpire from the 61.8% Fibo of 0.8300 and the lower Bollinger band at 0.8288. Assuming the negative trajectory resumes, the price may find difficulty in diving past the support band between the 0.8271 low and the 76.4% Fibo of 0.8261. However, in the event sellers overrun these obstacles, traders’ focus could then turn towards the 0.8220 low and the 68-month trough of 0.8202. Should negative tendencies gain the upper hand, the bear’s aim may shift towards the 0.8142 level, which is the 123.6% Fibo extension of the 0.8202-0.8457 up leg.

Summarizing, EURGBP is exhibiting a broader neutral-to-bearish bias below the SMAs and the 0.8457 and 0.8478 highs. A strong dive beneath the 0.8300 barrier could reignite the fall in the pair towards the lower end of the short-term neutral trading range. That said, the price would need to propel beyond the 0.8416 high to rekindle any convincing odds for a bullish bias to return.