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Daily Pivots: (S1) 128.18; (P) 128.64; (R1) 129.45; More....

Despite rebounding to 129.09, EUR/JPY quick retreated. Intraday bias remains neural first. On the upside, break of 129.09 will extend the rebound to 55 day EMA (now at 129.72). On the downside, below 127.36 will target 126.58 medium term fibonacci level. We'd look for some support from there to bring rebound. But sustained break of 126.58 will carry larger bearish implications.

In the bigger picture, 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 medium term bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

Daily Pivots: (S1) 0.8535; (P) 0.8567; (R1) 0.8631; More...

Intraday bias in EUR/GBP remains on the upside as rise from 0.8379 is in progress. Firm break of 0.8593 resistance will be the first sign of larger bullish reversal and target 0.8656 resistance next. On the downside, break of 0.8487 support is needed to indicate completion of the rebound. Otherwise, near term outlook will stay cautiously bullish in case of retreat.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8593 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8593 will now be an early sign of medium term bottoming. Further break of 0.8656 will pave the way to 38.2% retracement of 0.9499 to 0.8379 at 0.8807.

Daily Pivots: (S1) 1.5788; (P) 1.5826; (R1) 1.5857; More...

As long as 1.5743 resistance turned support holds, further rise is still in favor in EUR/AUD. Above 1.5980 minor resistance will turn bias to the upside for 1.6168 first. Break will resume rise form 1.5354 to 1.6434 resistance next. However, firm break of 1.5743 will indicate that rebound from 1.5354 is over and bring deeper fall back to 1.5250/5354 support zone.

In the bigger picture, medium term outlook is neutral for the moment. Rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low first. Further rise could be seen through 1.6434 towards 38.2% retracement of 1.9799 to 1.5250 at 1.6988. On the downside, however, sustained trading below 55 day EMA (now at 1.5759) will turn focus back to 1.5250 low instead.

Daily Pivots: (S1) 1.0422; (P) 1.0438; (R1) 1.0460; More....

EUR/CHF is staying in consolidation from 1.0365 and intraday bias remains neutral first. Further fall is still expected as long as 1.0511 resistance holds. On the downside, break of 1.0365 will resume larger down trend to 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next. Nevertheless, firm break of 1.0511 will confirm short term bottoming, and bring stronger rebound to 55 day EMA (now at 1.0572) and possibly above.

In the bigger picture, long term down trend from 1.2004 (2018 high) is now extending. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. On the upside, break of 1.0694 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.

Markets

A Pfizer announcement yesterday dominated trading. The company said that three doses of its vaccine neutralized omicron, easing fears further that the highly infectious strain would derail the economic recovery. The news abruptly halted an intraday rise in core bonds to send them off a cliff. German yields surged 2.5 bps (2y) to 7.7 bps (30y) higher. US yields changed from -1 bp (2y) over +4.7 bps (10y) to 9 bps (30y). The $36bn 10y auction went smooth. The Bund’s short end underperformance helped EUR/USD higher. The currency pair went beyond the 1.129 level (61.8% dollar recovery of the 03/20-01/21 EUR/USD uptrend) to meet resistance from the downward sloping trendline at 1.1343. The trade-weighted DXY returned to the 96 barrier. The Japanese yen lost quite some ground on the rise in core bond yields, in particular against the euro. The Swiss franc on the other hand was remarkably resilient. European stocks closing 1% lower compared to gains up to 0.6% on WS was equally striking. Both the Swiss franc and European equities may have been alerted by developments in a country nearby, the UK. The spread of the virus forced PM Johnson to impose tougher rules, starting next week. It hurt sterling as well. EUR/GBP almost jumped a big figure, from 0.85 to just shy of 0.86. UK money markets continue to price out a first (small) rate hike at next week’s BoE meeting. Asian-Pacific markets are less worried. The equity scoreboard is a bit more mixed this time around but with nice gains nevertheless for the likes of China (1-2%). Consumer inflation in the country rose to 2.3% in November, the highest since August 2020. PPI however eased from a 26-year high at 13.5% to 12.9%. For markets, this meant more scope for the PBOC to ease policy and support the economy. They saw their case also strengthened by a weaker-than-expected yuan-fixing today, signaling some unease with the current strong level of the Chinese currency. Most major currencies trade little changed. The Aussie en kiwi dollar outperform, the euro lags. Sentiment and technical considerations remain key for trading today. Equity buoyancy has eased but may stick to a gradual recovery if the good news around omicron keeps coming. The downside in core bond yields is probably limited, especially in Europe where there’s relative more room to recoup after the recent sharp risk-off repositioning. The German 10y yield capped -0.35% yesterday and has the eyes set on -"0.29/0.30% next. In the US, we’re looking at 1.57%. Day-to-day gyrations in EUR/USD are tricky recently but it seems that the bottoming out process is ongoing. We don’t expect sterling to stage a huge comeback in the run-up to an uncertain BoE meeting next week. That said, EUR/GBP’s upside potential within the downward sloping trend channel remains limited with 0.863/5 as resistance.

News headlines

The National Bank of Poland continued its monetary tightening cycle yesterday with a 50 bps rate hike from 1.25% to 1.75%, taking the policy rate above the pre-pandemic 1.5% mark. The MPC remains committed to take further action to help reducing inflation towards target. Economic conditions are expected to remains favourable in coming quarters though negative risks come from the uncertain impact of the pandemic as well as from supply-side constraints and high energy commodity prices. Polish inflation (7.7% Y/Y) is now at risk of running above the NBP’s inflation target (2.5% +-1%) over the policy horizon. Apart from the “transitory” items, the economic recovery added to price increases driven by a marked increase in average wages. NBP governor Glapinski will hold a press conference later today at 3 pm CET. The Polish zloty lost slightly ground after the (discounted) decision while some also expected a bigger rate hike. EUR/PLN rose from 4.59 to 4.62. The NBP continues referring to the potential use of FX interventions depending on market conditions.

The Brazilian central bank lifted its policy rate by 150 bps from 7.75% to 9.25% and anticipates a third straight 150 bps move in February. The BCB is on the most aggressive tightening path in the world, with the key Selic rate already 725 bps higher than in March (0.5%). It deems it appropriate to advance tightening significantly into restrictive territory. Inflation hit 10.67% Y/Y in October with tomorrow’s November data expected to show another acceleration. The BCB advances its inflation (expectations) crusade even if the economy went into recession in Q3. The Brazilian real enjoyed the backing of the BCB with USD/BRL diving from 5.63 to 5.53.

Technical analysis

The RSI is above level 50.

The Stochastics left the overbought zone and headed downwards to level 50.

Most likely scenario – SELL

Target prices: 1,782.67 1,779.19

Alternative scenario – BUY

Target prices: 1,789.86 1,792.66

Key levels

Support 1,782.67 1,779.19

Resistance 1,789.86 1,792.66

The British pound and FTSE 100 futures declined on Thursday morning as concerns about the UK economy remained. The main challenge is that the number of Covid-19 cases in the UK has been rising in the past few days. Most of the new cases are of the Delta and Omicron variants. Therefore, there are concerns that Boris Johnson will announce the new Plan B directives today. These directives will ask more companies to let more people work from home. The government would also impose vaccine passports and mask mandates. As a result, in a report, analysts at Goldman Sachs said that the BOE will be patient in the upcoming meeting.

The Canadian dollar was little changed after the latest Bank of Canada interest rate decision. The bank, which is led by Tiff Macklem, decided to leave interest rates unchanged at 0.25% as officials watched the impact of the Omicron variant. The statement said that the economy was doing well although risks like the variant and the devastating floods in British Columbia could have a negative impact. Still, analysts at ING believe that the bank is on course for about 4 rate hikes in 2022. They attributed this to the fact that inflation is rising and that the economy is doing well.

The economic calendar will have some key events today. In the morning session, Germany will publish its latest trade numbers. Analysts expect that the country’s trade surplus widened to about 13.4 billion euros in November. These numbers will come a day after Olaf Scholz became the country’s chancellor. In Switzerland, the State Secretariat of Economic Affairs (SECO) will publish its economic forecast. The previous estimate showed that the economy will expand by more than 3.4% this year. In the United States, the government will publish the latest initial jobless claims numbers. The data will come a day after numbers showed that the great resignation was going on.

USDCAD

The USDCAD was little changed after the latest BOC interest rate decision. It is trading at 1.2638, which is significantly lower than this month’s high of 1.2845. The pair has formed a cup and handle pattern and is along with the 25-day and 50-day moving averages. This decline is part of the handle section. Therefore, with the BOC done, the pair will likely resume the bullish trend.

EURUSD

The EURUSD pair made a bullish breakout on Wednesday after Scholz became chancellor. It is trading at 1.1345, which is higher than yesterday’s low of 1.1268. On the four-hour chart, the pair is slightly below the 38.2% Fibonacci retracement level. The Relative Strength Index and the Stochastic Oscillator are also pointing higher. Therefore, the pair will likely keep rising as bulls target the 50% retracement level at 1.1455.

GBPUSD

The GBPUSD pair declined after media reported on Plan B. The pair is trading at 1.3235, which is slightly above this week’s low of 1.3165. On the four-hour chart, the bearish trend is being supported by the 25-day moving averages. The Relative Strength Index (RSI) is along with the neutral level of 43 while the MACD is below the neutral level. Therefore, the pair will likely bounce back today since the Plan B news has already been priced in.

EUR/USD

Current level - 1.1334

During the early hours of today`s trading, the bulls eased off their pressure just below the resistance at 1.1366. If the bears prevail, we may witness a corrective move towards the support at 1.1300. If the support in question fails to withstand the bearish pressure, the sell-off should deepen towards the next support at 1.1260. In an alternative scenario, in which the bulls overcome the critical resistance at 1.1366, the rally should resume and the pair will most likely target the resistance at 1.1460. A spike in volatility is likely during the announcement of the economic data for the initial jobless claims for the U.S. (today; 13:30 GMT).

USD/JPY

Current level - 113.75

The currency pair tested the resistance at 113.80, but could not stay above this level. At the time of writing this analysis, the USD/JPY is trying to violate the mentioned level, but only a confirmed breach here would pave the way for the pair towards the next important resistance at 114.50. However, if the bears manage to resist the bullish pressure, then the most likely scenario would be for a move towards the support at 113.00.

GBP/USD

Current level - 1.3196

The support zone at 1.3200 managed to deflect the bearish attack a couple of times and the expectations for today’s trading session are for the bulls to try to take control and lead the pair towards a test of the resistance at 1.3300. On the other hand, if the mentioned support is successfully breached, this would lead to new losses for the GBP/USD and would strengthen the negative expectations of the market participants. Better-than-expected data on the initial jobless claims for the U.S., which will be published today at 13:30 GMT, may allow the bears to overcome this critical resistance.

Daily Pivots: (S1) 1.1290; (P) 1.1322; (R1) 1.1378; More...

Range trading continues in EUR/USD and intraday bias remains neutral first. On the upside, firm break of 1.1382 resistance should confirm short term bottoming at 1.1186. Intraday bias will be turned back to the upside for 55 day EMA (now at 1.1469). On the downside, break of 1.1185 will resume larger fall from 1.2348.

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) 1.3153; (P) 1.3207; (R1) 1.3248; More...

Focus stays on 1.3164 medium term fibonacci level in GBP/USD. Sustained break there will carry larger bearish implication, and target 161.8% projection of 1.4248 to 1.3570 from 1.3833 at 1.2736. On the upside, though, break of 1.3351 support turned resistance will indicate short term bottoming, and turn bias back to the upside for 1.3512 resistance next.

In the bigger picture, immediate focus is now 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, ahead rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493.