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EURUSD is moving with weak momentum over the last couple of sessions, holding within the short-term simple moving averages (SMAs) and the Ichimoku cloud. The technical indicators are mirroring the latest movements as the MACD is moving sideways around the zero level and the RSI is touching its neutral threshold of 50.

If the market manages to pick up speed, the 40-period SMA at 1.1375 could offer nearby resistance ahead of the 1.1400 psychological mark. A significant close above the latter would break the 1.1480 and the three-month high of 1.1495, raising the chances of further increases.

Should prices decline, immediate support could be found around the 200-period SMA at 1.1340 before visiting the 1.1320 barrier. Then a leg below that level, the pair could meet the 1.1280 level before the focus shifts to the 20-month low of 1.1120.

Overall, EURUSD is bullish in the near term as long as it holds above the 200-period SMA. In case it violates this line, bears could take the upper hand. 

Rising economic activity and lower inflation from Japan could dampen further gains in USD/JPY just as the broad US dollar’s ascent shows signs of stalling.

USD/JPY has been the best performing major currency pair over the past twelve months. Past performance, however, is not a guarantee of future performance. Rising economic activity and lower inflation from Japan could dampen further gains in USD/JPY just as the broad US dollar’s ascent shows signs of stalling.

But it hasn’t just been the Japanese yen that has been a loser against the US dollar. Dollar strength has driven all the other major currencies lower against the US dollar over the past year. Propelled by an increasingly hawkish Federal reserve, a strong rebound in economic activity over 2021, and from its role as maximum safe-haven currency during times of global economic and geopolitical upheaval.

US dollar tailwinds, however, could easily turn into headwinds as the US economy grapples with a slower pace of growth, record high inflation, and as other developed economies further recover from their post-pandemic slump in 2022.

Furthermore, market expectations around future interest rates from the Federal reserve already look full. At the time of writing, the market was pricing 150 bps of policy tightening in 2022, up from c. 75 bps at the start of the month.

Granted, the Bank of Japan looks nowhere near tightening policy anytime soon as it looks to defend low long-term bond yields, but inflation in Japan is still running low at 0.8% versus 7.5% in the US. In fact, Japan’s low inflation rate could benefit the yen should inflation remain stubbornly high in the US and growth end up surprisingly low.

Meanwhile, on a broader basis, last year’s big assent in the US dollar index (DXY), has begun to show signs of stalling. The index, which has more or less traded within a range of 96.929 – 95.504 since, now trades nearer to the bottom. Should the broader DXY stumble, expect the USD/JPY to be a big beneficiary.

Daily Pivots: (S1) 1.1347; (P) 1.1372; (R1) 1.1398; More...

Intraday bias in EUR/USD remains neutral and outlook is unchanged With 1.1265 minor support intact, further rally will remain mildly in favor. On the upside break of 1.1482 will target 38.2% retracement of 1.2348 to 1.1120 at 1.1589 next. Sustained break there will argue that whole fall from 1.2348 has completed too and target 61.8% retracement at 1.1879. On the downside, however, break of 1.1265 support will dampen this bullish view and bring retest of 1.1120 low instead.

In the bigger picture, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). Sustained trading above 55 week EMA (now at 1.1613) will argue that it has completed and stronger rise would be seen back towards top of the range between 1.2348 and 1.2555. However, 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.

Daily Pivots: (S1) 1.3544; (P) 1.3572; (R1) 1.3613; More...

Intraday bias in GBP/USD stays neutral with focus on 1.3642. Break there will resume the rebound from 1.3356 to 1.3748 resistance. Firm break there will revive the bullish case that correction from 1.4248 has completed with three waves down to 1.3158. Further rally should then be seen to retest 1.4248 high. On the downside, though, break of 1.3485 will turn bias to the downside for 1.3356 support instead.

In the bigger picture, as long as 38.2% retracement of 1.1409 to 1.4248 at 1.3164 holds, up trend from 1.1409 (2020 low) is still in progress. On resumption, next target will be 38.2% retracement of 2.1161 to 1.1409 at 1.5134. Nevertheless sustained break of 1.3164 will argue that whole rise from 1.1409 has completed and bring deeper fall to 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9199; (P) 0.9230; (R1) 0.9253; More....

Range trading continues in USD/CHF and intraday bias remains neutral at this point. Overall, further rally is mildly in favor as long as 0.9090 support holds. On the upside, break of 0.9372 will resume the choppy rally from 0.8925 to 0.9471 high. However, break of 0.9090 will turn bias back to the downside for 0.8925 support instead.

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 the trend has already reversed and rebound the rally from 0.8756 with another impulsive move.

Daily Pivots: (S1) 115.28; (P) 115.53; (R1) 115.71; More...

Intraday bias in USD/JPY is back on the downside with break of 115.00 temporary low. Fall from 116.33 is seen as the third leg of the corrective pattern from 116.34. Deeper decline should be seen to 114.14 support, and then 113.46. On the upside, however, break of 115.86 will turn bias back to the upside for 116.34 resistance instead.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.21) holds.

The markets are overall mixed today, as investors are holding their breath, awaiting confirmation on whether Russia is going to invade Ukraine, or not. Gold jumps notably and is now eyeing 1900 handle on nervous sentiment. In the currency markets, Yen is currently the stronger one, followed by Kiwi and then Sterling. Canadian Dollar is the weakest, followed by Dollar. There isn't a very clear direction yet.

Technically, USD/JPY's break of 115.00 temporary low is in line with the view that fall from 116.33 is still in progress, as the third leg of the corrective pattern from 116.34. Attention will be on whether EUR/JPY would follow by breaking through 130.03, and whether GBP/JPY would break 155.11.

In Europe, at the time of writing, FTSE is down -0.57%. DAX is down -0.19%. CAC is up 0.12%. Germany 10-year yield is down -0.0303 at 0.247. Earlier in Asia, Nikkei dropped -0.83%. Hong Kong HSI rose 0.30%. China Shanghai SSE rose 0.06%. Singapore Strait Times rose 0.07%. Japan 10-year JGB yield rose 0.0026 to 0.224.

Gold to press 1900 as rally resumes

Gold's rally resumes today by taking out 1879.24 temporary top and hits as high as 1893.24 so far, just shy of 1900 handle. Further rally is now expected as long as 1844.30 support holds. Current rise is seen as part of the whole rally from 1682.60. Gold should break through 1916.30 resistance to 100% projection of 1682.60 to 1877.05 from 1752.12 at 1946.57.

Meanwhile, it should be noted that firstly, firm break of 1916.30 should confirm completion of the correction from 2074.84 at at 1682.60. Secondly, further break of 1946.57 will suggest medium term up side acceleration. In this case, retest of 2074.84 high should be quickly within reach.

US initial jobless claims rose to 248k, above expectation

US initial jobless claims rose 23k to 248k in the week ending February 12, above expectation of 219k. Four-week moving average of initial claims dropped -11k to 243k. Continuing claims dropped -25k to 1593k in the week ending February 5. Four-week moving average of continuing claims dropped -8k to 1626k.

Housing starts dropped to 1.64m annualized rate in January. Building permits rose to 1.90m. Philadelphia Fed manufacturing survey dropped to 16 in February, below expectation of 21.

Japan monthly trade deficit at 8-yr high in Jan, as imports surged to record

Japan exports rose 9.6% yoy to JPY 6332B in January. Imports surged 39.6% yoy to record JPY 8523B. Trade balance came in as JPY -2191B deficit, largest single month deficit since January 2014.

Exports to China dropped -5.4% yoy, first contraction in 19 months. Imports from China rose 23.7% yoy, highest in four months. Exports to US rose 11.5% yoy.

In seasonally adjusted term, exports rose 0.1% mom to JPY 7355B. Imports rose 4.9% mom to JPY 8287B. Trade balance was at JPY -933B deficit.

Australia employment grew 12.9k driven by part-time jobs, hours worked fell

Australia employment grew 12.9k in January, better than expectation of 0k. Full-time jobs dropped -17k but part-time jobs rose 30k.

Unemployment rate was unchanged at 4.2%, but participation rate rose 0.1% to 66.2%. Monthly hours worked, however, dropped -8.8% mom.

Bjorn Jarvis, head of labour statistics at the ABS, "While we again saw higher than usual numbers of people taking annual leave – even more so than last year – the 8.8 per cent fall in hours worked in January 2022 also reflected much higher than usual numbers of people on sick leave."

"As with earlier rapid changes in the labour market during the pandemic, hours continue to be much more affected than employment. This reflects people working reduced or no hours, without necessarily losing their jobs."

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 115.28; (P) 115.53; (R1) 115.71; More...

Intraday bias in USD/JPY is back on the downside with break of 115.00 temporary low. Fall from 116.33 is seen as the third leg of the corrective pattern from 116.34. Deeper decline should be seen to 114.14 support, and then 113.46. On the upside, however, break of 115.86 will turn bias back to the upside for 116.34 resistance instead.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.21) holds.

Economic Indicators Update

Dollar stuck between opposing directional forces

The ongoing tensions between Ukraine and Russia continue to be the main driving force behind market moves today as yesterday’s signs of de-escalation have completely evaporated. Specifically, the two sides are exchanging accusations over violations of ceasefire near the Eastern-Ukrainian borders, triggering risk-off sentiment in the markets. However, the dollar is trading flat on the day, failing to capitalize on the increasing risk aversion.

Apart from this, the cautiously hawkish FOMC minutes released yesterday, alongside the retreat in US Treasury yields today seem to further undermine the dollar. On Wednesday, Fed policymakers agreed that it would be appropriate to remove policy accommodation at a faster pace than anticipated if inflation continues to remain above projections. However, their statements failed to reinforce expectations for a 50 basis points rate hike in March, which had helped the greenback to gain some decent traction in the recent sessions.

Forex arena provides mixed signals; euro weakens

The Japanese yen, alongside the Swiss franc, are the absolute winners today as the intensifying geopolitical tensions in Ukraine are boosting their safe haven demand. In addition, commodity-linked currencies such as the kiwi and aussie are trading higher, even if oil prices are falling, probably capitalizing on the dollar’s weakness.

Earlier today, ECB policymaker Pablo Hernandez de Cos stated that a premature monetary tightening would only add to the negative consequences and the ECB should rather proceed with a gradual and predictable plan in order to avoid market overreaction. After this dovish statement the euro is on the retreat, while the general risk-off sentiment seems to be increasing the downside pressure.

In other news, earlier today the Central Bank of the Republic of Turkey (CBRT) announced that it will keep its rate unchanged at 14% despite the increasing and persistent inflationary pressures.

Stocks struggle as war fears intensify

Wall Street is set to open lower as geopolitical tensions continue to rattle the markets. The major US indexes failed to benefit from lower Treasury yields as investor sentiment remains the leading force behind today’s trading activity. More specifically, e-mini futures for the Nasdaq, S&P 500 and Dow Jones are taking a hit, currently losing 0.45%, 0.3% and 0.2% on the day, respectively.

In individual stock news, Amazon sealed a worldwide deal with Visa to continue accepting payments from its credit cards, ending a tense and long-lasting stand off over elevated transaction fees. Both stocks appear to have gained from this agreement, nudging higher in pre-market trade.

Gold shines; oil tumbles

Gold is trading at fresh eight-month high levels as the ongoing geopolitical tensions and tumbling Treasury yields are bolstering its safe-haven demand. On the other hand, oil futures are pointing lower on the day amid an imminent Iran nuclear deal, which is expected to partially lessen the supply-demand imbalance.

Bitcoin and the broader cryptocurrency market continue to be a sea of red today heavily pressured by the soaring risk aversion in markets.

US initial jobless claims rose 23k to 248k in the week ending February 12, above expectation of 219k. Four-week moving average of initial claims dropped -11k to 243k.

Continuing claims dropped -25k to 1593k in the week ending February 5. Four-week moving average of continuing claims dropped -8k to 1626k.

Full release here.

Stock markets in Europe are mixed, while US futures are edging lower on Thursday, as uncertainty remains around Russia's intentions in Ukraine.

It's been a rather strange week that started with warnings of an imminent invasion - repeatedly denied by Russia - followed by claims of troops withdrawing following the completion of planned drills which has since been rejected by Ukraine and NATO, who have instead insisted that numbers are rising, not falling. It's no wonder investors don't know which way to turn.

Clearly, tensions are going to remain until we see a confirmed and substantial reduction of troops at the border but rather than abandon risk as they did late last week and early this, investors seem comfortable sitting on the fence. Of course, that could change if we see any escalation or as we head into the weekend if we have no further clarity.

The West remains convinced that an invasion remains highly likely and that flare-ups in Eastern Ukraine between Russian-backed separatists and Ukrainian forces could be used to justify crossing the border. Whether the intelligence is trustworthy or hysteria, as Russia has labelled it, will soon become clear but in the interim, efforts towards a diplomatic solution continue which will keep investors on edge.

Fed minutes offer little insight into March hike

Inflation remains the key focus for investors as they navigate a tightening environment like no other. The pandemic has delivered widespread price pressures that have lasted longer and far exceeded expectations. Central banks have been forced into action while markets continue to price in more and more hikes this year.

The Fed minutes on Wednesday offered little new information on that front and anything in them that came across as potentially less hawkish is probably out of date by now. The central bank will kick off its tightening cycle next month and a number of consecutive hikes will likely follow. Whether they'll kick things off with a 50 basis point hike isn't yet clear and will depend on the data in the coming weeks but there doesn't appear to be consensus for it yet, despite markets pricing in a fair chance of it happening.

Lira steady as CBRT leaves rates unchanged

The lira continues to trade in a relatively tight range after the CBRT left the repo rate unchanged at 14% for the second consecutive meeting. A series of rate cuts late last year triggered a collapse in the currency and sent inflation soaring - reaching 48.7% in January - as President Erdogan imposed his unconventional beliefs on the supposedly independent central bank. The stability in the currency has come as the central bank has paused its easing cycle while it conducts a comprehensive review of its policy framework. What the outcome of the review will be is anyone's guess given how the central bank has behaved under the "leadership" of Governor Şahap Kavcıoğlu.

Oil slides as US and Iran near nuclear deal

There's no shortage of volatility in the oil market at the moment, with multiple forces combining to create very lively conditions. The market is obviously extremely tight which is why we're seeing some large moves on a daily basis and the price could already be in triple-figure territory if not for the nuclear talks between the US and Iran.

And it's this that's driving the declines today, with reports suggesting an agreement is days away. That would be huge as it could mean around 1.3 million barrels per day of crude quickly re-entering the market and easing some of those supply-side pressures. You can imagine the US has been very motivated to get this deal over the line ahead of the midterms later this year, given how ineffective its last efforts were to bring prices down.

Gold still has plenty of appeal

Gold is continuing to rally amid all the geopolitical uncertainty. Not only do the events on the Ukrainian border have investors seeking out safe-havens, but it also offers inflation protection at a time of surging prices and the prospect of higher oil and gas prices, if Russia does invade.

The latest move has seen gold hit its highest level since mid-June and there still appears to be momentum in the move so we could see $1,900 tested. That's the next big test for the yellow metal and a big escalation in Ukraine could be the catalyst for such a move.

Bitcoin struggling at key resistance

Bitcoin is almost 2% lower on Thursday, appearing to lose a little momentum on approach to $45,500, a major barrier of resistance. It has shown real resilience in recent weeks but is struggling to generate the momentum needed to take the next step. The uncertainty in the markets probably isn't helping, although it hasn't held it back recently. A break above here could be a very bullish development for bitcoin.