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The EURUSD pair rose sharply after the latest interest rate decision by the European Central Bank. The pair initially moved sideways and then rose during the speech of Christine Lagarde. In its statement, the country’s central bank said that it will leave interest rates unchanged until inflation moves comfortably above 2%. However, in her press conference, Lagarde refused to rule out an interest rate hike this year. Analysts believe that the rate hike will happen in the third or fourth quarter. The 10-year German bund rose to the highest level in almost three years.

The US dollar index declined against most currencies in the overnight session. It declined mostly because of the strong performance of the euro and British pound after the ECB and BOE decisions. The currency also retreated because of relatively weak initial jobless claims numbers. Later today, it will react to the latest US initial jobless claims numbers. Analysts expect the data to show that the country’s unemployment rate remained unchanged at 3.9% in January. They also expect that the economy created over 150k jobs in January. On Wednesday, data by ADP revealed that the country’s private sector lost more than 300k jobs.

American stocks declined sharply as investors continued to dump technology stocks. One of the worst-performing stocks was Facebook, whose shares declined by 25%. The decline was because of the company’s weak earnings and challenging environment. As a result, other social media-focused companies like Snap, Pinterest, and Twitter also declined. Most growth stocks have crashed by more than 30% from their all-time high.

EURUSD

The EURUSD pair continued its bullish momentum after the hawkish statement by Christine Lagarde. It jumped to a multi-high week high of 1.1435, which was substantially higher than last month’s low of 1.1120. On the four-hour chart, the pair has moved above the 25-day moving average and the Ichimoku cloud. It is also fast-approaching its highest level in January. Therefore, there is a likelihood that the pair will continue rising ahead of the NFP data.

GBPUSD

The GBPUSD pair has been in a strong bullish trend lately. The pair jumped to a high of 1.3615, which was the highest level since January. On the four-hour chart, the pair is approaching the median line of the Andrews Pitchfork tool. It has also moved to the 23.6% Fibonacci retracement level. It also moved above the 25-day moving average. The path of the least resistance for the pair is to the upside.

EURCAD

The EURCAD pair also jumped sharply after the ECB decision and ahead of the latest Canadian jobs numbers. It rose to a high of 1.4500, which was the highest level since December 30. On the four-hour chart, the pair moved above the 61.8% Fibonacci retracement level. It is also along the upper side of the Bollinger Bands. Therefore, the pair will likely keep rising although a pullback is also possible ahead of the Canada jobs numbers.

Market movers today

The most important release today will be the jobs report from the US. Based on the ADP jobs report and comments from the White House, non-farm payrolls probably declined due to sick days (omicron). As labour demand remains sky high, a weak print should be disregarded. Focus may be on the so-called "household survey", where people without paid sick days are still counted as employed.

In Europe, we will look out for factory orders in Germany and euro area retail sales, which will likely reflect the very poor German retail sales we got on Tuesday.

At 10:00 today, ECB will publish its survey of professional forecasts on inflation and Main findings from the ECB's recent contacts with non-financial companies.

We will also keep an ear out for talks between Russian president Vladimir Putin and Chinese president Xi Jinping ahead of the opening of the Beijing Winter Olympics, as Putin pledges to deepen diplomatic and economic ties between the two countries.

In Norway, we will look for the government's decision on new the Norges Bank governor, see Nordic section below.

The 60 second overview

ECB: After the hawkish ECB meeting yesterday, we changed our ECB call and now expect the ECB to hike the deposit facility rate by 25bp in December and in March 2023, which will bring the deposit facility rate to 0%. For now, our call is for a 'two-and-done'. We expect Danmarks Nationalbank (DN) to follow the ECB and hike the deposit rate to minus 0.10%. We discuss in further detail in ECB Review: New call - ECB to hike in December 2022 and March 2023, 3 February.

Bank of England: Also the Bank of England sent a hawkish signal to markets by indicating that further rate hikes are likely in coming months (four out of nine policymakers voted for a 50bp rate hike) and that they may start actively selling government bonds to markets later this year. The Bank of England is concerned about high energy price inflation causing more persistently high inflation.

Equities: Equities ended sharply lower yesterday, dragged down by US, tech, growth and cyclical stocks. Please note this again happens with positive correlation to fixed income i.e. yields high, equities lower. The reason is the same as that in early January with more stagflation fear building and now more central banks, BoE and ECB, admitting this and hence adjusting policies accordingly. Put on top of some lacklustre earnings reports to make things worse (that changed in very positive directions after the bell). VIX ticked higher but not in a classic risk-off way. The telecom sector (not media (!)) actually rose in the US yesterday and hence rotations is the name of the game. Very seldom to see defensives outperforming cyclicals by almost 3% on day where S&P 500 drops 2.4%.

In US yesterday Dow -1.5%, S&P 500 -2.4%, Nasdaq -3.7% and Russell 2000 -1.9%. More markets are reopening for trading in Asia this morning post Lunar New Year celebration with Hong Kong i.e. China H-shares flying. Futures in the US are sharply higher this morning lifted by the tech sector but also European fugures are pointing higher.

FI: A virtually unchanged decision was soon replaced by a very hawkish Lagarde during the press conference with upside risks to inflation highlighted. Lagarde had several possibilities to close the door for a rate hike in 2022, but she intentionally left the door open ensuring that she did not want to make pledges without conditionality. Markets clearly took this as a hawkish signal and sent Dec22 €STR pricing 17bp higher on the day, to stand at 47bp. At this point, we cannot rule out the possibility of accelerated taper as well.

The market signals from yesterday's price action suggest a significant slowdown is coming in Europe. European curves pivoted around the 5y point with yet again the belly underperforming (2s5s10s widened 4bp to 20bp, which is 15bp wider than before the FOMC meeting last week). The 10s30s flattened 8bp to -4bp. This is the first time since the GFC that the 10s30s has inverted except for a very short period ahead of the PEPP announcement. Spreads widening 10y BTPs-Bund spread 11bp wider. Heading into the US labour market report today, we believe these trends will continue this morning. The sources stories released so far suggest a 'sizeable minority' called for a change and calling for QE end in Q3. With accelerated taper amid French elections soon on the agenda, we believe French bonds will underperform.

FX: EUR/USD rose above 1.14 and closer to 1.15 yesterday supported by hawkish comments from ECB's Lagarde suggesting that the ECB may join the "hiking club" later this year. EUR/GBP moved above 0.84 as hawkish comments from the Bank of England were dominated by comments from the ECB.

Credit: The credit market had a risk-off day yesterday, taking the lead from a bad US session, where various notable corporate tech companies reported disappointing Q4 numbers. This was seasoned with renewed hawkish central bank signals spurring an elevated equity sell-off which filtered through to credit. Itraxx main widened 4.6bp to 62.1bp and Xover widened 18.8bp to 230.1bp. We saw similar widening trends in the cash space.

Nordic macro

In Norway, the government will announce the choice of new central bank governor. The outcome is a close race between the current vice Governor Ida W. Bache and the NATO secretary general Jens Stoltenberg. If Bache is selected, that will of course imply business as usual, whereas the choice of Stoltenberg could create some uncertainty. Keep in mind though; the rate setting is conducted by a 5 person-committee, so risk is limited.

Daily Pivots: (S1) 1.1322; (P) 1.1386; (R1) 1.1505; More...

Intraday bias in EUR/USD remains on the upside for 1.1482 resistance. Considering bullish convergence condition in daily MACD, a medium term bottom could be in place already. Break of 1.1482 will affirm this case and target 38.2% retracement of 1.2348 to 1.1120 at 1.1639 next. On the downside however, break of 1.1329 minor support will mix up the outlook and turn intraday bias neutral first.

In the bigger picture, the strength of the the decline from 1.2348 (2021 high) suggests that it's not a corrective move. But still, it could be the fourth leg of a sideway pattern from 1.0339 (2017 low), or resuming long term down trend. In any case, outlook will now stay bearish as long as 1.1482 resistance holds. Next target would be 1.0635 low. However, firm break of 1.1482 will raise the chance that whole fall from 1.2348 has completed, and turn focus back to 1.1703 resistance for confirmation.

Daily Pivots: (S1) 1.3549; (P) 1.3589; (R1) 1.3639; More...

Intraday bias in GBP/USD remains mildly on the upside as rebound from 1.3356 is in progress for 1.3748 resistance. Firm break there will revive the case that correction from 1.4248 has completed with three waves down to 1.3158. Further rally should then be seen through 1.3833 to retest 1.4248 high. On the downside, though, below 1.3515 minor support will turn bias back to the downside for 1.3356 support.

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) 0.9175; (P) 0.9206; (R1) 0.9234; More....

With 0.9250 minor resistance intact, further fall is still mildly in favor in USD/CHF, to 0.9090 support. Firm break there will argue that choppy rise from 0.8925 has completed, and turn near term outlook bearish. Nevertheless, above 0.9250 will turn bias back to the upside for 0.9341, and then 0.9372 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) 114.54; (P) 114.77; (R1) 115.20; More...

Intraday bias in USD/JPY remains neutral for the moment. Overall, corrective pattern from 116.34 is extending. Below 114.14 will target 113.46 and possibly further to 112.52 support. On the upside, above 115.68 will bring retest of 116.34 high.

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 111.07) holds.

Daily Pivots: (S1) 0.7111; (P) 0.7139; (R1) 0.7169; More...

Intraday bias in AUD/USD remains mildly on the upside as rebound from 0.6966 should target 0.7313 resistance. Decisive break there should confirm that 0.6991 key support was defended and turn near term outlook bullish. On the downside, below 0.7075 minor support will bring retest of 0.6966. Sustained break of 0.6991 will resume the larger fall from 0.8006 and carry larger bearish implication.

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) 1.2651; (P) 1.2684; (R1) 1.2709; More...

Intraday bias in USD/CAD remains neutral as consolidation from 1.2795 is still extending. With 1.2558 minor support intact, further rally is still in favor. On the upside, break of 1.2795 will target 1.2812 and then 1.2963 resistance. However, break of 1.2558 minor support will turn bias back to the downside for 1.2448 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) 155.46; (P) 155.97; (R1) 156.90; More...

Intraday bias in GBP/JPY remains on the upside for retesting 157.74/158.19 resistance. Firm break there will resume larger up trend from 123.94. On the downside, break of 154.46 minor support will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, price actions from 158.19 are currently 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) 129.97; (P) 130.76; (R1) 132.32; More....

EUR/JPY's break of 131.59 resistance confirms resumption of whole rebound from 127.36. More importantly, the development revives the case that consolidation pattern from 134.11 has finished with three waves at 127.36. Intraday bias is back on the upside for retesting 133.44/134.11 resistance zone. Firm break there will resume larger up trend from 114.42. On the downside, below 130.62 minor support will turn intraday bias neutral and bring consolidation first, before staging 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.