Sample Category Title

Daily Pivots: (S1) 0.9226; (P) 0.9256; (R1) 0.9274; More....

Intraday bias in USD/CHF remains neutral, at this point as range trading continues. 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) 114.91; (P) 115.55; (R1) 116.07; More...

Intraday bias in USD/JPY remains mildly on the downside at this point. Corrective pattern from 116.34 is in its third leg. Deeper fall would be seen to 114.14 support first. Break will target 113.46 next. On the upside, firm break of 116.34 will resume larger up trend from 102.58. Next target is 118.65 long term resistance.

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.

Daily Pivots: (S1) 0.7128; (P) 0.7188; (R1) 0.7229; More...

Intraday bias in AUD/USD remains neutral for the moment. Further rise would remain in favor as long as 0.7050 support holds. Above 0.7247 will target 0.7313 resistance. Decisive break there argue that correction from 0.8006 has completed at 0.6966, after hitting 0.6991 key support. Outlook will be turned bullish for 0.7555 resistance next. On the downside, however, break of 0.7050 support will bring retest of 0.6966 low instead.

In the bigger picture, focus remains on 0.6991 key structural support. Sustained break there will argue that the whole up trend from 0.5506 might be finished at 0.8006, after rejection by 0.8135 long term resistance. Deeper decline would then be seen back to 61.8% retracement of 0.5506 to 0.8006 at 0.6461. Meanwhile, strong rebound from 0.6991 will retain medium term bullishness. That is, whole up trend from 0.5506 is still in progress.

Daily Pivots: (S1) 1.2683; (P) 1.2719; (R1) 1.2768; More...

Intraday bias in USD/CAD remains neutral for the moment, and further rise is still mildly in favor. On the upside, break of 1.2795 will resume the rally from 1.2448 to 1.2963 resistance next. However, break of 1.2634 support will turn bias back to the downside for 1.2448 support instead.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.

Daily Pivots: (S1) 1.0455; (P) 1.0517; (R1) 1.0551; More....

Intraday bias in EUR/CHF remains neutral for the moment. On the downside, break of 1.0439 support will argue that rebound from 1.0298 has completed, ahead of 38.2% retracement of 1.1149 to 1.0298 at 1.0623. Deeper fall will then be seen back to retest 1.0298 low. On the upside, sustained break of 1.0623 will raise the chance of trend reversal and target 61.8% retracement at 1.0824 next.

In the bigger picture, a medium term bottom was formed at 1.0298 on bullish convergence condition in daily MACD. Rebound from there is still tentatively viewed part of a corrective pattern. That is, larger down trend from 1.2004 (2018) could still extend through 1.0298 to 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. However, sustained trading above 55 week EMA (now at 1.0673) will argue that the down trend is over, and bring stronger rise back to 1.1149 next.

Daily Pivots: (S1) 0.8342; (P) 0.8386; (R1) 0.8412; More...

Intraday bias in EUR/GBP remains on the downside for retesting 0.8282 low. Sustained break of 0.8276 key long term support will carry larger bearish implication. On the upside, above 0.8411 minor resistance will turn bias back to the upside for 0.8476 resistance. Break there will resume the rebound from 0.8282.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen a corrective pattern that should be contained by 0.8276 long term support (2019 low). Bullish convergence condition in daily MACD and break of 55 day EMA raises the chance that it might be completed. Sustained trading above 38.2% retracement of 0.9499 to 0.8282 at 0.8747 will affirm this bullish case. However, sustained break of 0.8276 will argue that the long term trend has reversed.

Daily Pivots: (S1) 1.5841; (P) 1.5922; (R1) 1.5983; More...

Intraday bias in EUR/AUD remains neutral at this pint. Further rise remains mildly in favor with 1.5776 support intact. Above 1.6223 will resume whole rise from 1.5354 to 1.6434 resistance first. However, break of 1.5776 will turn bias back to the downside for 1.5559 support instead.

In the bigger picture, rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low. Further rise cannot be ruled out, but even in that case, strong resistance should be seen at 38.2% retracement of 1.9799 to 1.5250 at 1.6988. Larger down trend from 1.9799 is in favor to extend through 1.5250 at a later stage.

Daily Pivots: (S1) 130.05; (P) 131.34; (R1) 132.29; More....

Intraday bias in EUR/JPY remains on the downside at this point. Corrective pattern from 134.11 is extending with another falling leg. Deeper fall would be seen to 128.23 support first. break will target 127.36 support and below. On the upside break of 133.13 will bring retest of 134.11 high.

In the bigger picture, price actions from 134.11 are currently seen as a consolidation pattern only. As long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

US Inflation has skyrocketed in January to 7.5%, recording the largest annual increase in 40 years. This jump in prices is the fastest pace of inflation since 1982.

Part of the Fed's job is to prevent inflation from getting out of control — and bring it back every time it rises to the bank's 2% target. To curb current inflation, the Fed plans to increase interest rates several times this year - possibly as many as five times.

Investors are waiting for the Fed to raise rates at its next March meeting. The question now is not whether the Fed will raise rates, but whether it the rate hike is by 50 basis points or 25 basis points.

How does raising interest rates curb inflation?

1. Higher interest rates reduce demand

The Federal Reserve controls the federal funds rate, which is often referred to as the target rate. It is also the rate banks use for providing overnight loans to each other. Banks borrow money to be able to deliver loans to consumers and businesses. Therefore, when the Fed hikes rates, it raises the cost of borrowing for banks that need money to lend to others or meet their regulatory requirements. Of course, banks pass these higher costs on to consumers and businesses. If the Fed raises the interest rate by 25 basis points or 0.25%, consumers and businesses will also have to pay more to borrow money.

As the cost of borrowing increases, demand and economic activity decline. For example, if a car loan becomes more expensive, you as a consumer may decide that now is not the time to buy that new car. Or, perhaps, a company is less likely to invest in a new factory and hire additional workers if the interest it has to pay to get a loan to finance its business increases. That is the cost to pay when the Fed raises rates.

2. Lower demand reduces inflation

Since raising rates lowers demand and puts the brakes on the economy, that's exactly what slows down inflation. Usually, the prices of goods and services rise when the demand for them increases, fuelling inflation. However, as borrowing becomes more expensive, the demand for goods and services decrease throughout the economy.

Prices may not necessarily decrease and return to their old rates after raising rates, but at least their inflationary rate will decrease. The Fed follows this cycle to control inflation. Inflation rises strongly, so the US central bank hikes rates until the demand for goods and services decreases, and thus prices calm down, and so does inflation. Will the Fed succeed this time?

Market movers today

The tense situation between Russia, Ukraine and the West remains a key focus for markets, as German chancellor Olaf Scholz travles to Kyiv today and meets president Putin in Moscow tomorrow.

While there are no economic releases of significance in the euro-area today, ECB President Lagarde is scheduled to speak late in the day.

Given the high inflation pressures in the US, Fed speakers this week will be in focus, starting with Barkin Today. Key focus this week is also US retail sales and minutes of the January Fed meeting on Wednesday.

The 60 second overview

Russia-West stand-off intensifies again: On Friday the US lead the way in warning a conflict is coming to Ukraine advising all non-essential staff to leave the country. This was followed by other western countries over the weekend. It remains quite unclear as to what is geopolitical grandeur and what is reality on both sides of the conflict. In addition, politicians across EU and US have had calls with president Putin - generally without appearance of progress. Following the increasing concerns about an imminent conflict, EUR/RUB went higher together with oil prices and EUR/USD lower. Needless to say, if conflict becomes public and evident, there will be a substantial sell-off in RUB and we think the news flow since Friday does suggest an escalation of the risk premium embedded in RUB.

Growing pressure on Fed to take action: This morning we published a new Fed call in light of the strong inflation print last week together with very hawkish comments from Fed governor James Bullard. We now expect the Fed to deliver 200bp rate hikes this year (versus 125bp previously). We expect the Fed to hike by 50bp in March and 25bp on each of the following six meetings. If so, the Fed funds target range should be 2.00-2.25% by the end of the year. The door is open to an emergency rate hike before the March meeting (like on 18 April 1994), but it is not our base case, as it is very rare. We would not be surprised if the Fed announces it ends QE immediately although it did not happen over the weekend. Fed Update - We expect a total of 200bp rate hikes this year starting with 50bp in March, 14 February.

Equities: Risk-off in Friday markets as investors digested inflation, the new Fed route, weakening consumer spending - topped with increased geopolitical tension. While the latter is usually ignored by the market, the escalation comes at a time when least resistance has shifted. Hence, geopolitics can get more air time than usual in the coming weeks - particularly if the oil price continues to surge. Defensives outperformed cyclicals by roughly 2pp in the US session, while the distinction between value vs growth was less pronounced. All sectors lower, except energy on the booming oil prices. VIX rose just south of 30, while S&P closed down -1.9% and just off the lows in January. Nasdaq -2.8%, Russell 2000 -1% and Dow -1.4%. Asian markets are following the move lower this morning, while US futures have turned positive.

FI: Relative to the price movements early last week, the European session saw more modest price moves on Friday. Bunds ended broadly unchanged on the day at 0.29%, while the rest of EGB space underperformed Germany. Unsurprisingly Italy was the weakest performance with now 166bp spreads to Bunds (10y), although Friday's Italian supply probably did not make the situation better. However, the biggest moves were observed by the US markets, where the 10y UST yield dropped more than 10bp late in the session, on headline of geopolitical concerns and military action possible relatively soon.

FX: The end to last week in FX markets was characterised by rising geopolitical risk (Russia) and speculations of a potential in-between-meetings policy announcement from the Federal Reserve. While oil prices rose on higher geopolitical risk, commodity (and risk) sensitive currencies followed RUB lower with the Russian currency being the clear underperformer among majors. USD/RUB moved back above the 76-figure while EUR/USD has moved below 1.1350. In the Scandies, EUR/NOK is trading at 10.05 while EUR/SEK is trading just below 10.60.

Credit: CDS indices were under severe pressure on Friday where iTraxx Xover widened 12bp and Main 2.3bp. Cash bonds were more stable and HY bonds widened 3bp while IG was unchanged.