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Risk appetite was surprisingly strong into the US inflation data, expected to advance to another forty-year high at today’s print.

The S&P500 jumped above its 100-DMA, and Nasdaq hit its 200-DMA after pulling out an important Fibonacci resistance, the major 38.2% retracement on November – January selloff, hinting at a short-term bullish reversal in Nasdaq 100 index.

The pre-CPI rally in the US stocks suggests that the hawkish Federal Reserve (Fed) expectations have been broadly priced in, and that the perception that the worst reaction to the Fed rate hikes is mostly done.

But there is a risk that investor optimism is premature, and a stronger-than-expected inflation read could send all the recent gains crashing, as there is still room for Fed hawks to price in a tighter Fed policy. Activity on Fed fund futures hint that there is only about 20% chance of a 50bp hike from the Fed in March. There is room to bet for a more aggressive first rate hike from the Fed if inflation goes further out of control.

So, US equity futures are pointing to the downside at the time of writing, as the US inflation data is still a threat to the overall market mood, and could be a pivot moment for this week. Either we will see a reasonable CPI read and the equity rally could carry on, or we will see an ugly number, and the bears will run into the marketplace and destroy the recent gains.

One last thing about inflation. The Fed cannot do miracles by hiking the rates faster as inflation doesn’t necessarily come from the demand side. One of the biggest drivers of higher consumer prices has been the supply chain crisis. Maersk, for example, which handles a fifth of containers shipped globally has been capable of rising its prices by 80% last year without putting costumers off- Although the company warned that supply chain crisis will improve from the second half of the year, the rising consumer prices could continue translating into higher wages and higher rents and make inflation stickier.

And if rising the rates doesn’t bring inflation down, it could cause recession. Therefore, the Fed’s got to find the right balance, to be patient and to tighten gradually.

There is a decent acceleration in the gold prices. The price of an ounce rebounded 3% since its $1780 dip two weeks ago. Gold is now behaving positively in risk-on markets, and negatively in risk-off markets as the rising yields hit appetite in gold as much as they hit appetite in equities. Therefore, if we see the markets changing direction and hit the south, again, we could well see gains in gold crumble and pull the price of an ounce back below the $1800 mark.

Daily Pivots: (S1) 156.11; (P) 156.48; (R1) 156.77; More...

Intraday bias in GBP/JPY stays mildly on the upside for 157.74/158.19 resistance zone Decisive break there will resume larger up trend. On the downside, break of 155.11 minor support will turn bias back to the downside, to extend the consolidation pattern from 158.19 with another falling leg.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

Daily Pivots: (S1) 131.70; (P) 131.93; (R1) 132.23; More....

Intraday bias in EUR/JPY remains neutral for the moment. As noted before, corrective pattern from 134.11 should have completed three waves down to 127.36. Firm break of 132.11 will bring retest of 133.44/134.11 resistance zone. Decisive break there will resume larger up trend from 114.42. In case of deeper pull back, downside should be contained well above 128.23 support to bring another rally.

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.

Daily Pivots: (S1) 0.8419; (P) 0.8435; (R1) 0.8456; More...

EUR/GBP is staying in consolidation from 0.8476 and intraday bias remains neutral first. On the upside, break of 0.8476 will resume the rebound from 0.8282 to 0.8598 resistance. Decisive break there will add to the case of trend reversal and target 38.2% retracement of 0.9499 to 0.8282 at 0.8747 next. However, break of 0.8398 minor support will turn bias back to the downside for retesting 0.8282 low.

In the bigger picture, price actions from 0.9499 (2020 high) are still see 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 and target 61.8% retracement at 0.9034 and above.

Daily Pivots: (S1) 1.5876; (P) 1.5932; (R1) 1.5962; More...

Intraday bias in EUR/AUD remains neutral and outlook is unchanged. Further rally will remain in favor as long as 1.5776 support holds. 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) 1.0545; (P) 1.0556; (R1) 1.0570; More....

EUR/CHF is staying in consolidation from 1.0602 temporary top and intraday bias remains neutral. Further rally is expected as long as 1.0439 support holds. A medium term bottom should be in place at 1.0298 already. Above 1.0602 will target 38.2% retracement of 1.1149 to 1.0298 at 1.0623 first. Sustained trading above there will raise the chance of trend reversal and target 61.8% retracement at 1.0824 next. However, break of 1.0439 will dampen this bullish view and bring retest of 1.0298 instead.

In the bigger picture, current development suggests that a medium term bottom is 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) 1.2652; (P) 1.2684; (R1) 1.2702; More...

Intraday bias in USD/CAD remains neutral first as sideway trading continues. With 1.2648 minor support intact, further rise is 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 1.2648 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) 0.7151; (P) 0.7173; (R1) 0.7204; More...

Intraday bias in AUD/USD is back on the upside as rebound from 0.6966 resumed by breaking through 0.7167. Further rise would be seen back to 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) 115.35; (P) 115.52; (R1) 115.71; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. Overall, consolidation pattern from 116.34 is still extending. On the upside, break of 115.68 will resume the rebound from 113.46 to retest 116.34 high first. On the downside, break of 114.14 should extend the consolidation with another falling leg through 113.46 support.

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) 0.9224; (P) 0.9240; (R1) 0.9257; More....

Range trading continues in USD/CHF and intraday bias remains neutral at this point. Further rise will remain mildly in favor as long as 0.9090 support holds. 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.