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The EUR/JPY currency exchange rate managed to pass the resistance of the 131.00 mark on Tuesday. However, the following surge was not long, as the rate started to decline, before reaching the 131.50 mark. By the start of Wednesday's European trading hours, the pair had retreated to fluctuate near the 131.00 mark. Although, it appeared that the 131.00 mark did not provide support.

In the case that the pair declines, it could look for support in the 50-hour simple moving average near 130.80. Despite being shortly pierced, the SMA pushed the rate up on Tuesday. Below the SMA, a trend line that connects December 19 and January 3 low levels might act as support. Further below, the 130.50 mark and the weekly simple pivot point at 130.45 might act as support levels.

On the other hand, a potential surge might make an attempt to pass the resistance of the 131.50 mark and the weekly R1 simple pivot point at 131.52.

The price for gold has been slowly surging, as after passing the resistance of the 50 and 100-hour simple moving averages the price traded close above them. In general, on Wednesday, Tuesday's forecasts remained intact.

If the price for gold continues to move higher, it could reach the resistance zone of the 2021 summer and the 2022 New Years' eve above the 1,830.00 mark. Higher above, the 1,850.00 level might stop a surge.

Meanwhile, a potential decline of the commodity price might find support in the simple moving averages near 1,815.00 and 1,810.00. Further below, note the support of the 1,800.00 mark.

Daily Pivots: (S1) 115.50; (P) 115.93; (R1) 116.56; More...

A temporary top is formed at 116.34 in USD/JPY and intraday bias is turned neutral first. Some consolidations could be seen. But downside should be contained well above 114.26 support turned resistance to bring another rally. On the upside, sustained break of 61.8% projection of 109.11 to 115.51 from 112.52 at 116.47 will pave the way to 100% projection at 118.90, which is close to 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. For now, this will remain the favored case as long as 112.52 support holds, in case of deep pull back.

Daily Pivots: (S1) 0.9135; (P) 0.9165; (R1) 0.9192; More....

Intraday bias in USD/CHF remains neutral for the moment. On the upside, break of 0.9200 resistance will argue that fall from 0.9372 has completed with three waves down to 0.9101. Intraday bias will be back on the upside for 0.9372 resistance. On the downside, sustained break of 0.9084 support should confirm that choppy rise from 0.8925 has completed, and suggests that fall from 0.9471 is resuming. Deeper decline would be seen through 0.8925.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We'd pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Daily Pivots: (S1) 1.1265; (P) 1.1294; (R1) 1.1315; More...

No change in EUR/USD's outlook as sideway trading continues. Intraday bias remains neutral first. On the upside, firm break of 1.1385 resistance will resume the rebound from 1.1186. Sustained trading above 55 day EMA (now at 1.1392) will bring stronger rise back to 1.1663 support turned resistance. On the downside, break of 1.1185 will resume larger decline from 1.2348. Next target is 161.8% projection of 1.2265 to 1.1663 from 1.1908 at 1.0934.

In the bigger picture, there are various ways of interpreting the fall from 1.2348 (2021 high). It could be a correction to rise from 1.0635 (2020 low), 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 1.1703 support turned resistance holds. Sustained break of 61.8% retracement of 1.0635 to 1.2348 at 1.1289 would pave the way back to 1.0635.

Daily Pivots: (S1) 1.3473; (P) 1.3515; (R1) 1.3570; More...

Intraday bias in GBP/USD remains on the upside with focus on 1.3570 support turned resistance. We're seeing corrective fall from 1.4248 as complete with three waves down to 1.3158, after hitting 1.3164 medium term fibonacci level. . Sustained break of 1.3570 resistance will further affirm this bullish case and target 1.3833 resistance next. However, break of 1.3375 will turn bias back to the downside for 1.3158 low again.

In the bigger picture, focus remains on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, after rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493. However, strong rebound from current level will revive argue that up trend from 1.1409 is still in progress, and probably ready to resume.

Markets turned mixed as traders await FOMC minutes. The much stronger than expected US private job data provides little inspiration to the markets. Dollar pares back some gains but remain the second strongest for the week next to Sterling. Yen is also recovering but remains the worst performing, followed by Canadian. Euro is mixed together with commodity currencies.

Technically, Gold is regaining some buying after brief pull back. With 1789.31 support intact, rise from 1752.32 is still in favor to continue. Break of 1831.66 will resume this rally towards 1877.05 resistance. Such development, if happens, could be accompanied by some weakness in Dollar, in particular against Sterling and commodity currencies.

In Europe, at the time of writing, FTSE is up 0.20%. DAX is up 0.69%. CAC is up 0.67%. Germany 10-year yield is down -0.0111 at -0.128. Earlier in Asia, Nikkei rose 0.10%. Hong Kong HSI dropped -1.64%. China Shanghai SSE dropped -1.02%. Singapore Strait Times dropped -0.56%. Japan 10-year JGB yield dropped -0.0024 to 0.087.

US ADP employment grew 807k in Dec, broad-based gains

US ADP private employment grew 807k in December, much better than expectation of 358k. Looking at some details, small businesses added 204k jobs. Medium businesses added 214. Large businesses added 389k. By sector, goods-producing jobs grew 138k. Service-providing jobs grew 669k.

"December's job market strengthened as the fallout from the Delta variant faded and Omicron's impact had yet to be seen," said Nela Richardson, chief economist, ADP. "Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth. December's job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year. While job gains eclipsed 6 million in 2021, private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels."

From Canada, building permits rose 6.8% mom in November, versus expectation of 1.5% mom. New housing price index rose 0.8% mom in November versus expectation of 0.7% mom.

Eurozone PMI composite finalized at 53.3, weakest growth since Mar

Eurozone PMI Services was finalized at 53.1 in December, down from November's 55.9. PMI Composite was finalized at 53.3, down from November's 55.4, lowest since March.

Looking at some member states, Ireland PMI composite dropped to 9-month low at 56.5. France dropped to 55.8. Spain dropped to 55.4, an 8-month low. Italy dropped to 54.7. Germany dropped to 49.9, an 18-month low.

Joe Hayes, Senior Economist at IHS Markit said:

"The accelerated expansion in output we saw in November unfortunately turned out to be brief. Amid a resurgence of COVID-19 infections across the euro area, growth slowed to the weakest since March in December. In Germany, where measures to combat COVID-19 have been more stringent than other monitored euro area countries, levels of economic activity broadly stagnated in December. Nonetheless, slower growth was seen across the board.

"There was also little to cheer with regards to inflation. Although there was a marginal easing of price pressures, we're still in excessively hot territory – increases in both input and output costs were the second-quickest on record... As euro area nations deal with the latest developments in the pandemic, it's clear that risks to the economy are now greater as tighter restrictions to curb the spread of COVID-19 are more likely than they have been recently."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3473; (P) 1.3515; (R1) 1.3570; More...

Intraday bias in GBP/USD remains on the upside with focus on 1.3570 support turned resistance. We're seeing corrective fall from 1.4248 as complete with three waves down to 1.3158, after hitting 1.3164 medium term fibonacci level. . Sustained break of 1.3570 resistance will further affirm this bullish case and target 1.3833 resistance next. However, break of 1.3375 will turn bias back to the downside for 1.3158 low again.

In the bigger picture, focus remains on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, after rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493. However, strong rebound from current level will revive argue that up trend from 1.1409 is still in progress, and probably ready to resume.

Economic Indicators Update

Investors are expecting the release of the FOMC minutes and, more crucially, the release of non-farm payrolls in the US later this week. Following a robust surge in government bond yields, the yen has remained the currency with the worst performance for the time being. The pound has managed to outperform the euro. Although the dollar is the second strongest currency, it is still stuck in a range, except against the yen.

FX market view and FOMC minutes expectation

The dollar is weakening ahead of the ADP employment report. The dollar index is down, but it remains around the 96.00 level. Dollar/yen has reversed lower after trading at its highest level since January 2017, near 116.35 on Tuesday. The single currency is still heavy but is trying to overcome the $1.1300 psychological number. The British pound is gaining some ground near $1.3540 after the rebound off the one-year trough of 1.3165. US futures look to be mixed as the S&P 500 and Nasdaq 100 suggest a negative open, though the Dow Jones is headed for a positive open.

The minutes of the FOMC meeting will be critical. Since the Fed's December meeting expedited tapering, markets will look for signs on when the requirements for liftoff will most likely be met. Kashkari indicated yesterday that he anticipates two rate increases in 2022 but cautioned that high prices could enhance inflation expectations.

Since the ECB doesn't meet again until February 3rd, it will have more time to figure out how the economy is performing as more data comes out. That said, this meeting may not be that important the Bank has already said that PEPP will end in March as planned.

OPEC agreed to add production in February

OPEC+ decided to boost output by 400,000 bpd in February, as major oil producers expect just a little impact from the omicron variant. WTI futures have turned positive in recent days, around $73.07.

In other markets, gold prices are holding above the 200-day simple moving average (SMA) as well as well above the $1,800 round number.

US ADP private employment grew 807k in December, much better than expectation of 358k. Looking at some details, small businesses added 204k jobs. Medium businesses added 214. Large businesses added 389k. By sector, goods-producing jobs grew 138k. Service-providing jobs grew 669k.

"December's job market strengthened as the fallout from the Delta variant faded and Omicron's impact had yet to be seen," said Nela Richardson, chief economist, ADP. "Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth. December's job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year. While job gains eclipsed 6 million in 2021, private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels."

Full release here.

The Canadian dollar is trading slightly above the 1.27 line in the European session. Looking at today’s schedule, Canada Building Permits for November is expected to accelerate to 2.3%, up from 1.3% a month earlier. In the US, a flurry of job reports kicks off with the ADP Employment report, which is forecast to slow to 400 thousand in December, down from 534 thousand in November. Interestingly, the highlight of the week, nonfarm payrolls, has an identical estimate. Investors will also be all ears as the FOMC releases the minutes of the December policy meeting.

Busy times ahead for Fed

The Federal Reserve will be busy, as it is expected to double the tapering of its USD 120 billion bond purchase programme from 15 billion dollars to 30 billion dollars. The Fed may raise interest rates as early as March, which has become imperative due to red-hot inflation, which is currently running at a clip of 6.8%, its highest level in 40 years. The Fed dot plot at the December meeting indicated that policymakers plan on two rate hikes of 0.25% in 2022, but the markets, which are more hawkish, have priced in three rate hikes. With the US economy performing well, it appears that the economy is strong enough to withstand a series of rate hikes this year.

Treasury yields have been rising this week, as investors continue to sell Treasury bills on improved sentiment that the latest wave of the Omicron variant, although extremely contagious, will be less severe than originally feared. In the US, Omicron cases are exploding, with the average number of new cases breaking above 400 thousand, a 200% increase in the past 14 days. However, hospitalisation rates have not jumped higher and Covid-related deaths have actually declined slightly during this period. With no indications that Omicron will have a devastating effect on the global economy, investors remain in a risk-on mood.

USD/CAD Technical

• USD/CAD has support at 1.2558 and 1.2477
• There is resistance at 1.2784. Above, there is resistance at 1.2929