Olivia

A volatile week awaits FX traders, featuring the first Bank of Japan decision of the year. It’s a close call whether policymakers will adjust their yield strategy once again, although even if they don’t, it’s probably only a matter of time. There’s also a deluge of data releases from the major economies. 

Daily Currency Update The Australian dollar is stronger this morning when valued against the Greenback. The Australian Dollar hit a fresh six-month high against the US Dollar on Friday, albeit Thursday’s US data showed that inflation continued to grind lower. Therefore, the AUD/USD pair is trading at 0.6973 at the time of typing. Better-than-expected Consumer Price Index (CPI) reading last week augmented speculations for further tightening by the Reserve Bank of Australia (RBA), bolstering the AUD/USD to fresh multi-month highs. However, the futures market shifted on the release of US CPI data as traders expect rates to peak at around 3.73%, from 4% last week. Another factor that underpinned the AUD was China’s easing restrictions on coal imports. The increasing need to secure energy supplies after easing COVID-19 restrictions has pushed China to gradually resume Australian coal imports and urge domestic miners to boost their already record out. The lifting of the unofficial ban on Australian coal imports, which were halted in 2020 in a fit of Chinese pique over questions on COVID’s origins, is the clearest sign yet of the renewed ties between them. Looking ahead this week and the World Economic Forum in Davos, Switzerland, kicks off this… Read More »AUD/USD trades above 69 US cents

Summary The 64.6 reading for consumer sentiment in January marks the top print in the past year. Relief on the inflation front and wage growth are lifting spirits, but still-sour buying conditions suggest the good vibes in this report may not translate into a spending surge. Source: University of Michigan and Wells Fargo Economics Sentiment Handily Exceeds Expectations, Still Historically Low The soft-landing camp will find plenty to like in today's preliminary read of consumer sentiment from the University of Michigan. The 64.6 reading for January, while low by historical standards, is still the highest reading in the past year and marks the biggest monthly pick-up since August. The outturn was more than three points above the rosiest forecast of the more than 50 economists surveyed by Bloomberg. Consumers may not feel awesome about their finances, but they are undoubtedly less worried than they were when gas prices were north of $4/gallon and wage growth wasn't keeping up with inflation. Current assessments of personal finances surged 16% to its highest reading in eight months thanks to higher incomes and easing inflation…and a bit of a bounce in the stock market certainly did not hurt either. The euphoria did not extend… Read More »More relief than swagger in sentiment surge

USD/JPY The USDJPY keeps firm negative tone and dips to new lowest levels in over seven months on Friday, in extension of strong acceleration on Thursday, when the pair lost 2.3% of its value, in the biggest daily drop since Dec 20. The dollar was deflated by growing expectations that the Fed would continue slow the pace of its rate hikes, following further easing of US inflation. Also, Japanese yen received fresh support from talks that the Bank of Japan would soon start modifying its monetary policy, which is still unchanged, despite the other central banks already strongly tightened its monetary policies. The pair is on track for the biggest weekly loss since late November and weekly close below psychological 130 support for the first time since June 2. Bearish daily studies add to negative near-term outlook, as bears eye initial target at 127.58 (Fibo 61.8% of 112.53/151.94, break of which would generate fresh bearish signal for extension of steep downtrend from 151.94 (2022 peak, the highest in nearly 33 years) towards target at 124.66 (20MMA). Broken 130 support reverted to solid barrier, along with 55WMA (131.12), marking significant resistance zone which should limit corrective upticks (as daily studies are… Read More »USD/JPY outlook: Larger downtrend to resume after taking out key supports

EUR/JPY The cross extends steep fall into second straight day, losing 1.3% until early US session on Friday, following 1.6% drop on Thursday, as yen rose sharply on weaker dollar and speculations that BoJ is about to start revisions of its ultra-loose monetary policy. Strong bearish acceleration broke through pivotal support at 140.00 (psychological) and 139.12 (Fibo 61.8% of 133.39/148.40 rally), retracing the most of 137.38/142.85 corrective leg and signaling that larger bears are tightening grip for possible continuation after limited corrective phase. Formation of 10/200DMA death-cross contributes to negative outlook, as bearish momentum is strengthening on daily chart and RSI and Stochastic indicators are heading south. Firm break of 137.33/38 pivots (Sep 26/Jan 3 lows) would signal continuation of the downtrend from 148.40 (2022 high). Upticks under broken 140 support, reverted to solid resistance, should offer better selling opportunities. Res: 139.12; 140.00; 140.37; 140.68. Sup: 137.91; 137.38; 136.93; 135.51.

In today's live stream, Coach covered the Cable setup and the Divergences in Euro and Aussie. He updated Precious metal and the progress of the forecasted Platinum High.

Outlook: Today we get import/export prices and consumer confidence, with a couple more Feds to speak. Consumer confidence may have been trumped by yesterday’s inflation seeming tamer.   Everyone is satisfied that the inflation data came in as forecast, but it will take only a short while for critics to start complaining the numbers should have been lower and what’s wrong with economists, anyway? The Cleveland Fed has 5.87% y/y for Dec core CPI but the forecast was for 5.7%. The Cleveland Fed must be biased. So is the Atlanta Fed, whose sticky-price core is 6.6%. Let’s all use the q/q annualized, because that appears so much better! Q4 CPI annualized is a mere 1.6%, better than 2% in Q3. The core version is only 3.2% from 6% in Q3. Core services were up but core goods prices fell by 4.8% in this version. Housing is on the way down, too, so after leaving it out entirely this time, let’s put it back next time. Therefore, the Fed will definitely be cutting rates before year-end and maybe even in Q3!   This is normal exaggeration and standard undue extrapolation. Just because it’s normal doesn’t mean it’s right. Granted, the Fed… Read More »Everyone is satisfied that the inflation data came in as forecast – Critics to start complaining soon

In the first Live from the Vault of 2023, Andrew Maguire reports on Russia’s Sberbank issuing its first gold-based blockchain asset in a game-changing manoeuvre that might instigate further de-dollarization of commodity trading. The precious metals expert provides an in-depth commentary on the LBMA’s recent presentation on physical silver, which has indeliberately exposed some of the market's price-setting machinations.

S&P 500 didn‘t like CPI coming in line with expectations, and it was indeed„ buy the rumor sell the news“ reaction, followed by cutting into 4,010 on confirming bond and dollar price action. No fresh fuel though making for a larger reaction. And today we have some telling bank earnings, facilitating the approach to 3,955 – and University of Michigan consumer confidence data which wouldn‘t prove any huge disappointment. Just around the expected figure, making for an uneventful session Friday, with the only two daily questions being whether the buyers can reconquer 3,980, and whether the sellers can push below 3,955 closer to 3,910 or at least midpoint. Remember, the Fed is hawkish and will remain hawkish, and the rally is running on borrowed time. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock. So, make sure you‘re signed up for the free newsletter and that you have my Twitter profile open with notifications on so as… Read More »Hawks and surprises

The final day of the week has seen US banks kick off earnings season, with no nasty surprises so far, says Chris Beauchamp, chief market analyst at online trading platform IG. Stocks push on to the weekend with modest gains “It has been a solid week overall for risk assets. Stocks got the inflation reading they wanted, putting them in a forgiving mood for the start of earnings season. Some better GDP figures from the UK and Germany added to the cheerier atmosphere on Friday, and while equities might look a bit overextended in the short-term, they do seem poised for a better start to the year than many had feared.”   FTSE 100 closes in on 7900 “It was too much to hope that the FTSE 100 might find another burst of energy and take out the 7900 level today, but an almost straight-line move since the beginning of the year has certainly helped put the index on top. So far the Christmas trading statements have been broadly encouraging, and with recession fears capped for the time being the index’s blend of global companies seems to offer a promising mix for investors looking for a home where tech stocks do not feature… Read More »Investors head to the weekend in bullish mood