• GBP/JPY pulled back under 156.00 on Friday, though the bullish trend since January remains in play.
• The pair will be focused on risk appetite, comments from BoE’s Bailey and UK GDP figures next week.

Despite a modest rally in the US equity space that would normally have a positive impact on GBP/JPY, the pair pulled back on Friday, slipping back under and the 156.00 level, though finding support above 155.50. The pair still trades a decent amount above its pre-hawkish BoE surprise levels of under 155.50, however, and looks set to close out the week about 1.0% higher despite Friday’s 0.3% pullback from weekly highs in the 156.50 area.

Looking at the pair from a technical perspective, the bullish trend that has dominated since January 24 remains in play and, if anything, Friday’s pullback is just a reversion to this trend. Near-term technical momentum this continues to point higher and bulls will be hoping that risk appetite steadies at the start of next week and facilitates a recovery back towards this week’s highs in the 156.50 area and perhaps the 18 January highs just under 157.00 beyond that.

Fundamentally speaking, central bank divergence perhaps also favours further GBP/JPY upside, with BoJ governor Haruhiko Kuroda flexing his dovish credentials on Friday in stark contrast to the inflation concerned BoE that lifted rates for a second successive meeting this week. On which note, BoE Governor Andrew Bailey will be speaking next Wednesday ahead of the release of UK Q4 GDP and December activity figures on Friday. The data calendar in Japan contains a smattering of tier two releases that are unlikely to impact JPY.

• The S&P 500 reversed an early session dip to 4450 to trade above 4500, up more nearly 1.0%.
• Investors were digesting strong earnings from Amazon one day after the Facebook horror show and a strong US jobs report.

Trade was choppy towards the start of the US session as investors weighed up the implications of the latest much stronger than expected US labour market earnings on the outlook for Fed policy and interest rates. The S&P 500 was at one point trading as much as 0.5% lower as it slipped back to test the 4450 level, but has since seen an 70 point rally to trade in the 4520 area, now nearly 1.0% higher on the day. The index, despite reversing back sharply from near 4600 highs on Wednesday in wake of ugly earnings from Meta Platforms, looks set to close out the week about 2.3% higher.

Supporting sentiment on the final trading day of the week was a more than 15.0% rally in Amazon’s share price post-earnings which spurred a broader recovery in the Tech sector. Amazon will raise the price of its US Prime subscription to offset higher costs, the company announced in its latest earnings release. The S&P 500 GICS Consumer Discretionary index to which Amazon belongs rallied nearly 5.0%, while the big tech-dominated Information Technology and Communication Services indices also rose around 1.0% each. Strong earnings from Snapchat and Pinterest sent their shares a respective more than 60% and 12% higher each, adding to the broad tech sector tailwinds.

Coming up next week, earnings will remain in focus, though most of the mega-cap stocks have now reported. Otherwise, focus will remain on the macro picture, with US Consumer Price Inflation data scheduled for release on Wednesday. The Fed has explicitly said that any “worsening” of the inflation problem could see them act more aggressively, so any upside surprise is likely to see markets pricing in an increased likelihood that the bank hikes rates by 50bps in March.

• The AUD/JPY downward break at 82.00 exerts selling pressure on the pair.
• Dampened market sentiment mood exacerbated demand for the safe-haven JPY.
• A tweezers-top near the weekly tops looms and paves the way towards 80.00.

The AUD/JPY slides for the second time in the week, and from a technical perspective, it is forming a tweezers-top candle chart pattern, retreating from weekly tops around 82.27 to the 81.50s region. At the time of writing is trading at 81.55.

AUD/JPY Price Forecast: Technical outlook

AUD/JPY daily chart, shows that Friday’s price action in the Asian session seesawed around the daily pivot point and February 3 daily high, at 81.89 and 82.27, respectively. However, during the European session, dampened market mood conditions spurred a drop towards  81.32 for a 90-pip fall, stabilizing around the S1 daily pivot at 81.51.

That said, the AUD/JPY remains neutral-bearish biased. Friday’s price action witnessed a downward break of the 50-day moving average (DMA) at 81.58. In the event of a daily close below of it, that will confirm the tweezers-top, which could fuel another leg-down before confirming a bottom.

The AUD/JPY first support would be the February 1 low at 80.89. A downward break would expose the confluence of a bottom-trendline of a bullish-flag and the January 28 daily low at 80.36, followed by the psychological 80.00 barrier.

• EUR/JPY hit its highest levels since early November on Friday, rallying above January’s 131.60 highs to hit 132.00.
• Post-hawkish ECB euro momentum continued for a second day whilst the BoJ governor reiterated the bank’s ultra-loose stance.

EUR/JPY rallied above its early January highs in the 131.60s to hit the 132.00 level for the first time since early November on Friday, as post-hawkish ECB euro momentum continued for a second day. The pair, up a further 0.4% on Friday, has now surged about 2.0% since Wednesday’s close underneath 129.50. Even more impressive is the pair’s on-the-week gains, which currently stand at just under 2.8%, putting the pair on course for its best weekly gain since June 2020. EUR/JPY rallied at the start of the week in tandem with equities (which at the time were performing strongly), and also as the pair found support at a long-term uptrend that has supported the price action going all the way back to November 2020.

Some described the ECB’s hawkish shift on Thursday, where Christine Lagarde admitted the bank had become more concerned about the inflation outlook and refused to repeat her previous statement that a 2022 rate hike is unlikely, as a “pivotal” moment. That certainly seems to have been the case for EUR/JPY, with many traders now predicting the pair will test its H2 2021 highs around 133.50 in the coming weeks. Underscoring the widening ECB/BoJ policy differential that many expect will be a source of support for the pair in the coming quarters was typically dovish commentary from BoJ governor Haruhiko Kuroda during Friday’s Asia Pacific session.

Kuroda reiterated that the BoJ must maintain ultra-loose monetary policy as, compared to the likes of the US and Europe, inflation in Japan remains subdued due to delayed post-pandemic recovery and the public’s sticky deflationary mindset. “In Japan, nominal wages haven't risen much” Kuroda told the Japanese parliament in a testimony. “It's hard to see inflation sustainably reach our 2% target unless wages rise in tandem with prices”. Next week will likely be fairly quiet for EUR/JPY, with focus more on the Fed and broader risk appetite, amid a smattering of tier two Eurozone and Japanese data releases.

• The GBP/USD slides despite the BoE’s hikes rates, courtesy of Bailey’s“dovish” comments.
• US Treasury yields shoot through the roof after a positive US employment report.
• GBP/USD is neutral biased, but a leg-down is on the cards, as a bearish engulfing candle pattern looms.

The British pound extended its losses after the Bank of England’s (BoE) hiked 25 basis points, but dovish comments of BoE’s Bailey in the press conference sent the GBP/USD retreating from weekly tops. At the time of writing is trading at 1.3542.

In the meantime, a better than expected US employment report send US Treasury yields higher, led by 2s and 10s, rising between twelve and ten basis points, sitting at 1.318% and 1.92%, respectively. That underpins the greenback, which pares some of its earlier losses, up 0.07% in the day, clings to 95.44.

GBP/USD Price Forecast: Technical outlook

On Friday, during the overnight session, the GBP/USD plunged under 1.3600 for fundamental reasons, dropping more than 100-pips, but the downward move was capped at the 100-day moving average (DMA). However, it forms a bearish-engulfing candle, suggesting a leg-down is on the cards, before consolidating.

The GBP/USD’s first support level to challenge will be the confluence of the 100-DMA and the 38.2% Fibo retracement, around the 1.3507-20 range. A breach of the latter might send the pair dipping towards the confluence of the 50-DMA and the 50% Fibo retracement around 1.3433-55, followed by the 61.8% Fibonacci retracement at 1.3381.

• On Friday, the NZD/USD slides close to 1% during the day.
• Market sentiment is mixed, weighing on the AUD and boosting the greenback.
• January’s Nonfarm Payrolls report crushed the 150K expectations, US T-bond yields skyrocketed.

The New Zealand dollar plummets 80-pips in the North American session marches firmly towards 0.6600. At the time of writing is trading at 0.6605. European bourses closed in the red, depicting a mixed market mood. Across the pond, US equity indices fluctuate between gainers and losers, while in the FX complex, risk-sensitive currencies like the antipodeans, with the NZD down close to 1%. 

It is worth noting that the US 10-year Treasury yield sits at 1.914%, retreated from 1.936%, a level not seen since December 2019, up to eight basis points in the day, underpinning the greenback, which sits at 95.41, up 0.04%.

Nonfarm Payrolls jumped above estimations, the NZD/USD tanks

In the early morning in the New York session, the US Nonfarm Payrolls for January showed that the US economy created 467K jobs, smashing the 150K, foreseen per reported by the Bureau of Labor Statistics (BLS). Since Wednesday, White House economic advisers and Philadelphia’s Fed President Harker warned that January’s employment report was expected to be bad, courtesy of a dismal ADP Private Employment report, which showed that companies slashed more than 300K jobs.

The US employment report showed that Average Hourly earnings rose by 5.7%, exerting further pressure on the Fed, as higher wages equals elevated inflation. Furthermore, the Unemployment Rate touched 4.0%, a tenth more elevated than the 3.9% estimated.

Next week, the New Zealand docket will feature Business NZ PMI, Electronic Retail Card Spending, and Business Inflation Expectations for Q1. On the US front, NZD/USD traders look forward to taking cues from the Balance Trade for December, unveiling on Tuesday, followed by the Consumer Price Index (CPI) on Thursday for January, and finally the University of Michigan Consumer Sentiment for February.

NZD/USD Price Forecast: Technical outlook

From a technical analysis perspective, the NZD/USD pair is downward biased. The NZD/USD daily moving averages (DMAs) persist above the spot price, in a bearish order, with a downward slope, signaling that the downtrend could accelerate In the near term. Friday’s price action appears to be forming a two-candle pattern, a bearish-engulfing candle, suggesting the pair might fall towards the YTD low.

That said, the NZD/USD first support would be 0.6600. A daily close under the figure would expose the January 28, daily high previous resistance-turned-support at 0.6588, followed by the YTD low at 0.6529.

• EUR/USD’s rally stalled in wake of a strong US labour market report, though the pair remained well supported above 1.1400.
• The pair currently trades around 1.1450, up from sub-1.1420 post-NFP data lows but unable to breach last week’s 1.1480 highs.
• EUR/USD remains on course to end the week about 2.8% higher, its best performance since March 2020.

Strong US labour market data on Friday took some of the wind out of EUR/USD’s sails and, though not enough to trigger a lasting reversal back towards 1.1400, has at least prevented the pair from breaching January’s highs in the 1.1480s. Indeed, though the pair has recovered back from its sub-1.1420 post-NFP data session lows, it has been unable to recoup back to pre-data levels above 1.1460.

In the context of a sharp spike higher in yields across the US curve as bond markets price in a higher likelihood of more aggressive Fed tightening and a higher terminal rate, a slowdown in EUR/USD’s rally on Friday makes sense. At current levels in the 1.1450s, the pair still trades higher by about 0.2% on the day. On the week, the pair looks set to gain about 2.8%, its best performance since March 2020.

Some might find the eagerness with which EUR/USD bulls bought the post-NFP data dip back towards the 1.1400 level surprising. Others might argue that it demonstrates the strength of the shift in the market's view on the euro in wake of Thursday’s hawkish ECB meeting. Recall that ECB President Christine Lagarde on Thursday acknowledged rising Eurozone inflation risks and refused to repeat a prior statement that rate hikes in 2022 were unlikely. Market participants took this to mean that, for the first time, the ECB was admitting that hikes this year are a possibility, a “pivotal” shift according to some.

Eurozone money markets jumped to price in as much as 50bps worth of rate hikes by the end of December (from closer to 20bps before). Whilst this might be a stretch, the fact that the ECB is clearly tilted towards rate hikes in 2022 (the first time in a decade) is quite something. Whilst the shift in stance from the ECB might not be enough to result in a lasting EUR/USD rally, say, beyond resistance between current levels and the 1.1500 mark, it makes a return back below 1.1200 less likely. After all, the divergence between Fed and ECB policy is now likely to be not nearly as much as some had previously thought.

• Nonfarm Payrolls came better than foreseen by analysts, despite being talked down by the White House.
• Silver edges higher 0.18%, following the US Dollar footsteps.
• XAG/USD failure to reclaim an upslope trendline exerts downward pressure on the white metal.

Silver (XAG/USD) trims Thursday’s losses as the North American session progresses. At the time of writing, XAG/USD is trading at $22.43, advances 0.18%. The market sentiment is mixed, with European bourses trading in the red meanwhile, US stock indices are in the green post-US employment report.

In the meantime, the US 10-year T-bond yield, which correlates negatively with silver, advances ten basis points, up to 1.932%, underpins the greenback. The US Dollar Index, a measurement of the buck’s value against a basket of six rivals, edges up 0.18%, sitting above 95.59. 

Nonfarm Payrolls rose above 450K, smashing expectations

Before Wall Street opened, the US Nonfarm Payrolls for January came at 467K more than the 150K, as the Bureau of Labor Statistics (BLS) revealed on Friday. During the week, White House economic advisers and Philadelphia’s Fed President Harker down talked about January’s employment report, which was expected worse than estimates, per the impact of the

Dissecting the NFP report, Average Hourly earnings rose by 5.7%, exerting further pressure on the Fed, as higher wages equals elevated inflation. Furthermore, the Unemployment Rate touched 4.0%, a tenth higher than the 3.9% estimated.

XAG/USD Price Forecast: Technical outlook

On Friday’s overnight session for North American traders, XAG/USD seesawed around the $22.40-64, $0.24 range. However, volatility picked up once American traders got to their desks and the US employment report hit the wires. The XAG/USD knee-jerk reaction sent silver towards February 3 daily low around $22.00, followed by a jump, towards $22.50, near the close of Thursday. 

That said, XAG/USD is downward biased. Failure to reclaim above an upslope trendline previous support-turned-resistance exerts downward pressure on the non-yielding metal. XAG/USD’s first support would be January 28 daily low at $22.18. A breach of it would expose the January 7 low at $21.94, followed by December 15 cycle low at $21.42.

• USD/CAD rose to fresh weekly highs near 1.2800, 100 pips up from earlier lows on Friday.
• The catalyst for the bullish move was weak Canada/strong US labour market data.

USD/CAD got a double whammy of bullish impetus on Friday in the form of much stronger than expected US labour market data (USD bullish) and much weaker than forecast Canadian labour market data (CAD bearish). USD/CAD lurched to fresh weekly highs near 1.2800, a more than 100 pip or roughly 0.7% intra-day rally from earlier session lows in the 1.2660s. The pair appeared to run out of bullish momentum as it approached the 1.2800 level, with sellers coming in ahead of last week’s highs and a melt-up in crude oil prices helping to give the loonie a floor. WTI is up more than $2.0 on the day and at one point hit $93.00, fresh seven-year intra-day highs.

In light of the latest US and Canadian employment data for January, USD/CAD traders will now be reassessing their Fed/BoC calls for the coming months. Friday’s US jobs data, which saw a massive headline NFP beat, hot wage growth and a jump in labour force participation, has been interpreted as raising the risk of a 50bps move in March. Meanwhile, market commentators remarked that they did not think the latest Canadian numbers would deter the BoC from hiking by 25bps in March, given that the latest job losses relate to Omicron lockdowns and are expected to quickly come back.

Nonetheless, the latest data does highlight some economic divergence between the US and Canada and raises the risk that the Fed outpaces the BoC when it comes to monetary tightening this year, a fact that could offer USD/CAD long-term support. Next week, the main focus for USD/CAD trades will be on US Consumer Price Inflation data on Wednesday that may offer markets further reason to bet on a 50bps March hike from the Fed. Otherwise, Fed and BoC speak will be key themes to watch.

The May 29 presidential election in Colombia represents a risk to the Colombian peso, according to analysts at CIBC. They forecast USD/COP at 4200 by the end of the first quarter and at 4100 by mid-year. 

Key Quotes: 

“Banrep increased the overnight rate by 100 bps to 4.00%, against market consensus and our forecast for a 75bps increase. Banrep left the door open for similar rate increases in the short term as inflationary pressures remained in place and both core and headline inflation are above target.”

“We expect Banrep to increase the overnight rate by another 100bps in March and we revised our terminal rate forecast for Q3 to 7.50% (previously 7.25%).”

“Looking at USD/COP, although we recognize that the global supply shock and recent upside surprises to headline inflation suggest a front-loading of the tightening cycle, current political dynamics should prevent a sustained appreciation of the COP for most of H1.”

“The 2022 legislative and presidential election cycle is marked by a clear move to the left in the region, while locally, the protests at the end of 2019 and in early 2021 have supported the increase in popularity of leftist candidates (…) current local and regional trends suggest a much greater representation of the left in the next four years, adding another layer of risk ahead of the May 29 presidential election.”

“We anticipate USD/COP moves that are similar to, if not greater than, those experienced in Chile and Peru in 2021, bringing USD/COP above its historical highs before the end of Q1. Hence, we maintain our long.”

The official employment report showed better-than-expected numbers in January. Nonfarm payrolls increased by 467K despite the headwinds posed by record-high COVID cases in January, said analysts at Wells Fargo. They explain employment growth was broad-based across most industries, and upward revisions to the previous two months suggest that recent momentum in hiring remains very strong. They expected the FOMC to raise rates in March.

Key Quotes: 

“The labor market’s recovery easily leapt over the hurdle thrown up by the Omicron wave in January. Nonfarm payrolls bested even the top end of expectations, rising by 467K. The net 709K revision to the prior two months' gains was also impressive. However, some of that can be attributed to the payroll benchmark revisions incorporated in today's report, which showed the jobs recovery progressing more slowly during the spring and early summer than previously reported and faster more recently.”

“This morning's employment report was likely music to the ears of FOMC officials. Solid employment gains despite the Omicron variant's emergence give Fed officials more evidence that the U.S. economy is getting better at dealing with the bumps in the road from the pandemic. Additionally, surging wage growth and rebounding labor force participation likely reassure the more dovish monetary policymakers that the recent hawkish pivot from the Federal Reserve was the correct call.”

“Perhaps the February employment report to be released on March 4 will show some payback, but we believe it would take nothing short of a complete collapse to derail the Fed's near-term tightening plans at this point. The first federal funds rate hike since 2018 appears to be a lock for March.”
 

Data released on Friday, showed the Canadian economy lost 200K jobs in January, more than expected. Analysts at CIBC point out most of the decline came from industries affected by tightening health restrictions and the numbers should not alter the plans of the Bank of Canada (BoC) of raising rates next month. 

Key Quotes: 

“The Canadian labour market failed to produce a positive surprise for the first time in a long time, with the 200K decline in jobs during January actually weaker than the consensus had expected (-110K). However, there was a good excuse, as most of the decline could be explained by job losses in services industries most impacted by tightening health restrictions at the start of the year. Because of that, today's report shouldn't alter expectations for a strong rebound upon reopening and also shouldn't deter the Bank of Canada from raising interest rates next month.”

“The sharp decline in hours worked tallies with our expectation that monthly GDP likely saw a drop of close to 1% to start the year, setting the quarter up for a flat reading. That would be in contrast to the trend stateside, where fewer restrictions meant that employment and overall economic growth appear to have gotten off to a faster start. However, given the sector and provincial composition of today's employment decline in Canada, we remain confident that jobs will return as restrictions continue to be lifted. We suspect that the Bank of Canada will feel the same way, and proceed with a rate hike in early March despite today's weak figures.”
 

• Mexican peso tumbles versus US dollar after the NFP.
• In a few hours, USD/MXN erased weekly losses and climbed back above the 20.70 area.
• Next week events include the Bank of Mexico meeting.

The USD/MXN jumped to 20.78 after the release of a better-than-expected NFP report. The greenback soared after the numbers, also supported by higher US yields.

US figures on Friday triggered a rally of the US dollar across the board, that pushed USD/MXN sharply to the upside, erasing weekly losses. The recovery of the Mexican peso came to an end. A decline back under 20.70 should put the pair back into the 20.70/20.50 range.

After a busy week, with key US employment data, now the attention turns to Banxico that next week will have its board meeting. Also in Mexico CPI numbers will be released.

“We expect Banxico to hike by 25bp. This meeting has a relatively high degree of uncertainty surrounding it, thanks to the new structure of the Banxico board, as the new Governor presides over her first meeting. We believe there is not insignificant risk that Banxico could once again hike by 50bp, as it would be justified by inflation dynamics”, said analysts at TD Securities.

What the central bank says could have an influence on the Mexican peso. Although its performance is likely to be driven by risk sentiment across financial markets.

“Although we maintain our call for a much higher USD/MXN for the rest of the year, the risks associated with other regional currencies during the first half of 2022 should favour the peso in the short term, keeping USD/MXN within the 20.30-21.00 range”, explained analysts at CIBC.  

Analysts at MUFG Bank point out that higher yields across the Eurozone will help reverse the downward pressure on EUR/CHF. They see have a trade idea of a long position with a target at 1.0850, an entry-level 1.0550, and a stop loss at 1.0300. 

Key Quotes:

“We are recommending a long EUR/CHF trade idea. The trade idea is to take advantage of the hawkish repricing of ECB rate hike expectations. The ECB’s hawkish policy shift is an important bullish pivot point for the EUR. We do not expect the SNB to quickly follow the ECB by speeding up their own tightening plans. The ECB policy shift has already helped EUR/CHF to rebound further above last month’s low of 1.0300. Nevertheless, we still believe there is scope for EUR/CHF to keep moving higher in the near-term.”

“EUR/CHF is still trading well below levels from just over a year ago when it was trading above the 1.1000- level. The recent sharp move higher in euro-zone yields is not yet fully reflected in a higher EUR/CHF rate.”

“We remain optimistic as well that a diplomatic solution will be found for the stand-off between the Ukraine and Russia. The main risks to our bullish view are: i) higher yields trigger a bigger correction lower for risk assets and boost safe have demand for the CHF, and ii) Russia invades the Ukraine triggering a sharp move higher for the CHF as it would be viewed as a negative shock for European economies.”

Markets are expecting too much tightening from the South African Reserve Bank (SARB) warn analysts at CIBC. They see the USD/ZAR at 15.75 by the end of the first quarter and at 16.00 by mid-year.  

Key Quotes: 

“The South African Reserve Bank has followed the November hike with a second 25bp move, taking rates to 4.0%. After beginning the process of unwinding pandemic-inspired policy easing at their previous meeting, it seems that the central bank remains biased towards a slow and progressive data-dependent tightening cycle. After witnessing CPI threaten the top of the 3-6% CPI target range in December, we expect a potential overshoot in early 2022.”

“The rates trajectory is set to remain data-dependent. Therefore, if the central bank is correct in assuming that prices will be back in line with the mid-point of the CPI target range in two years, 4.5%, this would suggest that the market is overly aggressive in terms of pricing in 100bp of tightening in H1 this year.”

“Although the SARB may have hiked at consecutive meetings, we do not expect another move until the May meeting. The ZAR has proved a top performer versus the USD and EUR over the last two months.”

“The ZAR is an emerging market currency that is partly sheltered from the impact of Fed hikes due to elevated nominal yields. However, market recognition of too much tightening being discounted, impacting real rates, suggests that the recent rapid accumulation of ZAR real money speculative positions risks correcting. As a result, we look for USD/ZAR to trade back towards 16.00 into mid-year.”

• WTI hit fresh seven-year highs at $93.00/barrel in recent trade as the recent melt-up accelerated.
• WTI is on course to post a seventh successive weekly gain during which time it has rallied over 30%.

Oil bulls put their foot on the accelerator on Friday, driving prices to fresh seven-year highs and leaving major crude benchmarks on course to post a seventh successive week of gains, with trading conditions increasingly resembling that of a “melt-up”. Front-month WTI futures surged nearly $3.0 on the session easily surpassing resistance in the mid-$91.00s and even hit the $93.00 level. That takes WTI’s weekly gains to close to $6.0 (nearly 7.0%) and the seven-week run of gains to more than 30% (recall WTI was trading around $70/barrel in mid-December).

Familiar themes were cited as behind the ongoing upside in oil prices; the winter storm that recently hit the US and sent temperatures plummeting, geopolitical tensions between Ukraine, Nato and Russia. A few analysts highlighted concerns that the US storm might impact US shale output in the Permian Basin. Market commentators also highlighted fresh evidence of OPEC+ struggles to lift output/exports; recent data showed Iraqi output in January was well below it allowed quota under the existing OPEC+ pact and Kazakhstan reportedly wants to keep more of its output at home to lower domestic prices and ease civil tensions.

“It may just be a matter of time until we're closing in on triple figures” remarked one analyst at OANDA. Commerzbank on Friday upped its Q1 2022 oil price forecast to $90/barrel from $80 before. However, Citi cautioned that the oil market may soon revert back into surplus, perhaps as soon as next quarter and recommended selling the Brent crude future for December delivery on the anticipation of crude oil build later in the year.

European Central Bank governing council member said on Friday that it would be logical for the ECB to hike its key interest rate at latest by next year, in an interview with Helingin Sanomat. The ECB will ensure that the inflation rate remains moderate in the medium-term, he added. 

Market Reaction

The euro has not reacted to the latest comments from ECB's Rehn, with the market very much already expecting a few ECB rate hike by the end of 2022 in wake of Thursday's hawkish ECB meeting. 

Gold is likely to remain inversely correlated with the benchmark 10-year US T-bond yield next week as investors will await the US January Consumer Price Index (CPI) data, which could impact the market odds of a 50 basis points (bps) Fed rate hike in March, FXStreet’s Eren Sengezer reports.

Next week's US CPI data could trigger a big reaction in XAU/USD

“On Thursday, the US Bureau of Labor Statistics will release CPI data. On a yearly basis, the CPI is forecast to rise to 7.2% from 7% in December. A stronger-than-expected reading could ramp up the probability of a 50 bps hike in March and weigh on XAU/USD.”

“In case the price stays above $1,805 (200-day SMA) and starts using this level as support, the next target on the upside is located at $1,820 (20-day SMA, Fibonacci 38.2% retracement of December-February uptrend) before $1,830 (Fibonacci 23.6% retracement).”

“In case $1,805 is confirmed as resistance, gold needs to make a daily close below $1,800 (100-day SMA, Fibonacci 61.8% retracement) to convince bears. In that case, $1,780 (static level) aligns as the next support.”

• US January’s Nonfarm Payrolls report crushed expectations to rise 467K vs. 150K.
• The Australian dollar edges lower during the North American session, down 1.02%.
• AUD/USD failure at the 50-DMA sent the pair tumbling under 0.7100 emphasizing its downward bias.

The AUD/USD snaps four days of gains losing on a better than expected US jobs report. At the time of writing, the AUD/USD is trading at 0.7066. A risk off-market mood keeps investors moving towards safe-haven assets, like the USD and the JPY.

In the meantime, the US Dollar Index, a gauge of the greenback’s value versus a basket of six peers, advances 0.24%, sitting at 95.59, underpinned by surging US T-bond yield, led by the 2-year up ten basis points, at 1.2998%.

US Nonfarm Payrolls surprise to the upside

In the meantime, the US Bureau of Labor Statistics (BLS) revealed the Nonfarm Payrolls reports for January, which added 467K employments, larger than the 150K estimated by analysts. During the week, White House economic advisers and Philadelphia’s Fed President Harker down talked about January’s employment report, which was expected worse than estimates, per the impact of the Covid-19 Omicron strain. 

Digging deeper, the Unemployment Rate increased to 4.0%, a tenth higher but, the highlight was Average Hourly Earnings, which rose to 5.7% vs. 5.2% foreseen, which puts the Fed under pressure to hike rates more than the 25 bps priced in for the March meeting.

On the Australian dollar side, the Reserve Bank of Australia (RBA) Statement of Monetary Policy emphasized that the board is “prepared to be patient” and will monitor factors that could affect the Australian inflation outlook. The central bank reiterated that ending the QE program does not suggest a rate hike in the future. 

AUD/USD Price Forecast: Technical outlook

The AUD/USD is downward biased, per location of the daily moving averages (DMAs), which reside above the spot price. Furthermore, the AUD/USD failure at the 50-DMA opened the door for further losses, sending the pair tumbling under 0.7100. The AUD/USD first support would be 0.7100. A breach of the latter would expose January 28 daily low at 0.6967, followed by a downslope support trendline around 0.6930-45.

Revived discussion around the Fed's starting point for tightening is set to leave EUR/USD under the 1.15 level. A move below 1.14 should renew modest downside pressure but dips should be shallow, according to economists at TD Securities. 

Material downside has been reduced

“With still some risk of accelerated tightening by the Fed, we think EUR/USD a break above 1.15 may be harder to achieve.” 

“We think we will need to get through the early stages of Fed lift-off, potentially receive more clarity on terminal rate pricing before EUR can really take off.”

“For now, a move sub-1.14 would be significant from a tactical point of view, but we are mindful that dips could be shallow.”

• Canadian Ivey PMI rose to 50.7 in January from 45.0 in December. 
• The loonie did not see any reaction to the latest data. 

Canadian Ivey PMI rose to 50.7 in January from 45.0 in December, the latest survey from the Richard Ivey School of Business revealed. As with other PMI indicators, a result above 50 is generally associated with MoM growth in economic activity. Thus, Canada's Ivey PMI suggests business conditions in the country rose ever so slightly back into expansionary territory in January, as the economy started to tentatively recover from the rapid recent spread of the Omicron Covid-19 variant.

Market Reaction

The loonie did not react to the data. 

• US dollar strengthens after a better-than-expected NFP.
• USD/JPY erases weekly losses with the latest rally.

The USD/JPY jumped from 114.90 to 115.38 following the release of the US employment report that showed better-than-expected numbers. The pair hit the highest level since Monday and it is holding above 115.00, with the bullish momentum intact.

After the ADP report and other labor indicators, the 150K increase in payrolls faced downside risk. The numbers came in the other way with a positive surprise. The number below consensus was the unemployment rate, which rose from 3.9% to 4%, but it was due to an increase in the labor participation from 61.9% to 62.2%.

“The Omicron wave has depressed economic activity, and this was meant to translate into weak hiring. It hasn't. 467k jobs created and massive upward revisions suggest a fundamentally very strong economy. With companies desperate to hire and the biggest issue being the lack of suitable staff, wages are rising sharply, and the Fed will respond”, says analysts from ING.

The numbers triggered a rally of the US dollar across the board and a sharp increase in US yields that weakened the Japanese yen. The US 10-year yield climbed to 1.91%, the highest since January 2020 and the 30-year reach 2.20%.

The post NFP rally put the USD/JPY on its way to the second daily gain in a row. The next resistance could be seen at 115.45, before last week highs at 115.65/70. Now the 115.00 zone has become the immediate support, followed by 114.78.  

Technical levels

• Spot gold fell back to the $1800 level in recent trade after stronger than expected US labour market data.
• The strong NFP number, hot wage growth and rise in participation rate spurred a fresh build-up of Fed tightening bets.

Spot gold (XAU/USD) prices lurched back to the $1800 level in recent trade in wake of the latest much stronger than anticipated US labour market figures for January. Prior to the data, the precious metal had been trading closer to $1815 and with tentative on the day gains. Now, XAU/USD trades about 0.3% lower on the session as it undulates either side of the $1800 mark. Bears will be eyeing a test of Thursday’s post-hawkish BoE/ECB lows in the $1788 area, a break below which could open the door to an extension of technical selling that could push spot gold prices back towards weekly lows in the $1780 area.

The strong US labour market report saw a blowout headline NFP gain and hot wage growth, as well as the estimate as to the size of the US labour force increase by about 1.5M, spurring a surge in Fed tightening bets. Unsurprisingly, this sent US yields and the buck higher in a kneejerk response, weighing on the XAU/USD, which has a strong negative correlation to both. US money markets have upped their bets that the Fed hikes rates by 50bps in March to an implied 23% (from 14.3% on Thursday). Higher interest rates dim the appeal of non-yielding precious metals.

As gold traders assess this week in its entirety, hawkishness/central bank tightening will be top of mind, following hawkish surprises from the BoE and ECB on Thursday and now in wake of the latest US jobs report. A shift towards higher interest rates/more hawkish central banks is not typically an environment that bodes well for gold in the long-term, so the precious metal may struggle to find dip-buyers in the $1800 area. Attention now shifts to next week’s US Consumer Price Inflation data which, if hotter than expected, may also spur a fresh build-up of Fed tightening bets next week, suggesting further downside risks for XAU/USD.

GBP/USD failed to close above 1.36. Cable is now at risk of suffering substantial losses toward 1.34 and even 1.32, economists at Scotiabank report.

Resistance after 1.36 is seen at 1.3615/25

“Failure to firmly break past 1.36 leaves the GBP at risk of losses toward 1.34 initially and potentially 1.32 in relatively short order.”

“Intermediate support ahead of the 1.35 figure zone is ~1.3525 and the 50-day MA of 1.3512.”

“Resistance after 1.36 is 1.3615/25 and the mid-figure area.”

• USD/TRY keeps the consolidation well in place on Friday.
• Turkey’s CPI approached the 50% YoY in January.
• Focus is now on the CBRT event later in the month.

The Turkish lira depreciates once again and motivates USD/TRY to clinch the fourth consecutive session with gains, this time revisiting the 13.60 region on Friday.

USD/TRY up post-CPI, attention shifts to the CBRT

USD/TRY advances since Tuesday, although it remains well entrenched into the 13.00-14.00 range well in place since the beginning of the new year.

The lira came under pressure once again after inflation figures released on Thursday showed consumer prices rose at an annualized 48,69% in January and 11.10% from a month earlier. In addition, Producer Prices rose 10.45% inter-month and 93.53% vs. January 2021.

In the meantime, the pair should keep the side-lined mood unchanged in the near term ahead of the monetary policy meeting by the Turkish central bank (CBRT) on February 17.

Despite finmin N.Nebati already envisaged inflation around 50% later in the year, it seems that scenario could materialize much sooner than anticipated, which should morph into extra pressure for both the domestic currency and the government in the form of actions to finally start tackling the issue.

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. While skepticism keeps running high over the effectiveness of the ongoing scheme to promote the de-dollarization of the economy – thus supporting the inflows into the lira -  the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are a sure recipe to keep the domestic currency under pressure for the time being.

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.17% at 13.5389 and a drop below 13.2657 (55-day SMA) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).

EUR/USD strengthened sharply through 1.14 yesterday and is making further ground today. Economists at Scotiabank expect the euro to race higher towards the 1.15 level on a break above 1.1480/85.

The main challenge for EUR/USD is now 1.1480/85

“Yesterday’s close above the 100-day MA (today support at 1.1429, followed by the figure) and gains above its downtrend from last June act as highlights in the EUR’s bullish drive off of the low 1.11s just last Friday.”

“The main challenge for the EUR is now 1.1480/85 where it peaked in March (followed by a sharp decline under 1.12). A break past these levels opens up a test of 1.15 followed by the mid-figure area (38.2% Fib of Jun-Jan move at 1.1558) as resistance.”

While the Bank of England (BoE) raised rates for the second consecutive month by 0.25 points as expected, the decision was much more finely balanced than expected with four MPC members voting for a larger 0.50 rate hike. With most G10 central banks either hiking or shifting to a more hawkish stance (ECB), the scope for GBP strength is limited, in the view of economists at MUFG Bank.

UK rate market had moved to price in too many rate hikes

“The updated inflation forecasts showed that inflation is set to fall sharply below target to 1.6% in three years time based on market rates. The inflation forecasts were based on market rates showing the policy rate rising up towards 1.4% in 2023. We believe the sharp undershoot of inflation relative to target in 3yrs time will help contain rates and limit the potential for GBP strength.”

“We do not envisage GBP breaking sustainably to the upside on the back of this MPC announcement. Any gain from the current spot rate toward the 1.4000 level versus the US dollar is unlikely to be sustained while the increased hawkishness of the ECB with high anticipation ahead of the ECB meeting on 10th March means a low in EUR/GBP just below 0.8300 may now have been established for the coming months.”

• GBP/USD added to its heavy intraday losses and refreshed daily low in reaction to stellar NFP report.
• The US economy added 467K new jobs, while Average Hourly Earnings posted a strong MoM growth.
• The risk-off mood further benefitted the safe-haven greenback and contributed to the intraday slide.

The GBP/USD pair continued losing ground through the early European session and dived to the key 1.3500 psychological mark following the release of the US employment report.

As investors digested the hawkish Bank of England, the GBP/USD pair witnessed some profit-taking slide on Friday and snapped five days of the winning streak to a two-week high. The intraday selling picked up pace after the headline NFP print smashed market expectations and showed that the US economy added 467K jobs in January.

Adding to this, the previous month's reading was also revised sharply higher from 199K reported earlier to 501K. Moreover, Average Hourly Earnings posted a strong 0.7% MoM and 5.7% YoY growth, which helped offset an unexpected uptick in the US unemployment rate and provided a much-needed respite to the US dollar bulls.

Apart from this, the prevalent risk-off mood – as depicted by a generally weaker trading sentiment around the equity markets – prompted aggressive short-covering around the safe-haven buck. This, in turn, was seen as a key factor behind the GBP/USD pair's latest leg of a sudden fall over the past hour or so.

Technical levels to watch

• EUR/USD eases some ground following fresh tops past 1.1480.
• US Non-farm Payrolls rose by just 467K jobs in January.
• The unemployment rate ticked higher to 4.0%.

The buying interest around the single currency remains well and sound at the end of the week and pushes EUR/USD back to the mid-1.1400s in the wake of US NFP.

EUR/USD retreats from YTD tops

EUR/USD keeps the positive stance on Friday after the US economy created 467K jobs during January, bettering expectations for a gain of 150K jobs. The December's reading was revised to 510K (from 199K).

Further data showed the jobless rate rose to 4.0% and the critical Average Hourly Earnings – a proxy for inflation via wages – rose 0.7% MoM and expanded 5.7% over the last twelve months. Another key gauge, the Participation Rate, improved to 62.2%.

EUR/USD levels to watch

So far, spot is gaining 0.05% at 1.1440 and faces the next up barrier at 1.1483 (2022 high Feb.4) followed by 1.1500 (200-week SMA) and finally 1.1676 (200-day SMA). On the other hand, a break below 1.1308 (55-day SMA) would target 1.1121 (2022 low Jan.28) en route to 1.1100 (round level).

• Canada lost over 200K jobs in January, much more than expected and the unemployment rate jumped to 6.5% from 6.0%. 
• USD/CAD lurched higher amid loonie weakness and USD strength post-strong US labour market data. 

The Canadian economy lost 200.1K jobs in January, well below the median economist forecast that the economy would have shed 117.5K jobs on the month, according to the latest release from Statistics Canada released on Friday. The January drop in employment comes after 78.6K jobs were gained in December 2021 (revised up from 5.4K). The headline drop was driven by an 82.7K drop in full-time employment and a 117.4K drop in part-time employment. The unemployment rate, meanwhile, jumped to 6.5% in January from 6.0% in December, larger than the expected rise to 6.2%. 

Market Reaction

The combination of much weaker than expected Canadian labour market numbers combined with much stronger than expected US labour market figures has seen USD/CAD lurch higher. The pair is currently trading in the 1.2760s, up from near-1.2720 in pre-data trade and now up about 0.7% on the day. USD/CAD bulls will now be eyeing a test of last week's highs just shy of the 1.2800 level on bets that the latest labour market figures will have hawkish implications for Fed policy versus dovish implications for BoC policy.  

• The US economy added 467K jobs in January, well above the 150K forecast, while wage growth was hotter than expected. 
• The dollar saw kneejerk strength, US yields rose and US equities fell in pre-market trade as markets upped Fed tightening bets. 

Nonfarm Payrolls (NFP) rose by 467K in January versus the median forecast for a 150K rise, data published by the US Bureau of Labor Statistics showed on Friday. That marked a slight deceleration from December's pace of job gains when 503K jobs were added (revised up from 199K). The massive headline beat on expectations was driven by a 444K rise in private nonfarm payrolls (versus the expected 150K gain). Manufacturing payrolls saw a slightly smaller than expected gain of 13K versus the 25K forecast. 

Average Hourly Earnings rose at a stronger MoM pace of 0.7% in January, above the expected 0.5% MoM gain and faster than December's 0.5% MoM gain, which had been revised lower from 0.6%. That helped push the YoY rate of Average Hourly Earnings growth to 5.7% from 5.0% in December (which had been upwardly revised from 4.7%). That was well above the expected  YoY rate of 5.2%. 

The unemployment rate unexpectedly rose a tad to 4.0% from 3.9% in December, against expectations for it to remain unchanged. But the U6 Underemployment Rate continued to decline, dropping to 7.1% in January from 7.3% in December. Meanwhile, the participation rate jumped to 62.2% from 61.9% in December, taking it to within 1.2% of its pre-pandemic levels.  

Market Reaction

The much stronger than expected headline job gain, combined with unexpectedly high wage growth and still very robust labour market slack figures has seen the US dollar jump higher in recent trade. The DXY, which was trading around the 95.30 mark prior to the data, has lept to session highs above the 95.50 level, though still trades down about 1.7% on the week and remains on course for its worst week since March 2020. 

In terms of other asset classes; US bond yields have surged across the curve in anticipation that strong wage growth and better than expected labour market outcomes will encourage the Fed to tighten monetary policy more aggressively this year. The US 2-year jumped 7bps on the data to fresh post-pandemic highs around 1.28%, the 5-year lept roughly 8bps on the data to also hit fresh post-pandemic highs around 1.75% and is now eyeing late 2019 highs just under 1.80%. The 10-year also jumped about 8bps on the data and is now flirting with the 1.90% level and last month's post-pandemic highs. The 30-year saw a slightly less convincing bounce of about 6bps, meaning the 5s 30s spread fell to fresh post-pandemic lows near 20bps.

US stocks, meanwhile, took a hit in pre-market trade as the hot labour market data pumped Fed tightening fears. S&P 500 futures dipped towards 4450 from around 4480 prior to the data and now trade more than 1.5% lower on the day. The post-strong Amazon earnings upside seen during Asia Pacific trade now seems firmly in the rear-view mirror.  

The government has just announced that it will appoint Jens Stoltenberg as the new Governor of Norges Bank. Economists at Nordea do not see this appointment having an effect on Norges Bank’s monetary policy due to two key reasons.

Jens Stoltenberg not to make an impact on Norges Bank’s monetary policy

“Monetary policy is decided by Norges Bank’s Monetary Policy and Financial Stability Committee consisting of the Governor and four more members. Norges Bank’s committee is a collegial committee. This means that the committee takes decisions by consensus and that members collectively stand behind the final decision.”

“Monetary policy decisions are based on the recommendation and analyses provided by Norges Bank’s Monetary Policy Department, which is staffed by professional civil servants. The Monetary Policy and Financial Stability Committee usually follow the advice given by the professional staff.”

• NZD/USD has been ebbing lower amid pre-NFP profit-taking though remains within recent intraday ranges and up on the week.
• The pair currently trades in the 0.6630 area, with technicians eyeing 0.6530 support and 0.6700 resistance.

Pre-US jobs data nerves has seen NZD/USD pare some its recent gains this Friday, with the pair dipping back under the 0.6650 level in recent trade and currently trading lower by about 0.4% on the session. Profit-taking in the run-up to the release of the January US labour market report has seen the pair slide back from earlier weekly highs in the 0.6680s to current levels around 0.6630, though some dip-buying is offering some support ahead of Thursday’s 0.6610 lows. On the week, the kiwi still trades with gains of about 1.4% versus the buck, though things are likely to be choppy post-US jobs data release and a close at current levels seems unlikely.

Regarding the upcoming US data; the latest report from the US Bureau of Labour Statistics is expected to reveal a slowdown in the pace of US job creation last month as the rapid spread of the Omicron Covid-19 variant disrupted normal labour market churn. That could manifest itself in a negative headline non-farm payroll employment change number. FX market participants will also be paying close attention to measures of labour market slack and wage growth, as the Fed worries that labour market tightness and resultant wage growth presents upside risks to near-term inflation.

Indeed, the US dollar will be choppy on the Average Hourly Earning component of the upcoming report. An upside surprise could send NZD/USD lower as traders price in a more aggressive Fed hiking cycle, while a downside surprise could send the pair higher. To the downside, traders should keep an eye on support in the form of last week’s lows in the 0.6530s, while to the upside, resistance in the form of this week’s highs in the 0.6680s and the 2021 lows at 0.6700 should be noted.

European Central Bank Governing Council member and Bank of France head Francois Villeroy de Galhau noted on Friday that while the direction of Eurozone monetary policy is clear, one shouldn't rush to conclusions about timing. Reffering to Thursday's monetary policy decision, Villeroy said that the ECB retains full optionality on the decision that will be made in March and in the following quarters. We will stick to our sequencing,  he added, noting that QE tapering will come first ahead of rate lift-off. 

Market Reaction

The euro has not seen any reaction to Villeroy's latest remarks.

• USD/CHF gained strong traction on Friday, though the move up lacked any obvious catalyst.
• A softer risk tone could benefit the safe-haven CHF and cap gains amid the USD selling bias.
• The focus remains on the release of the closely-watched US monthly jobs data, or NFP report.

The USD/CHF pair added to its intraday gains and shot back closer to the overnight swing high, around the 0.9235 region heading into the North American session.

The pair caught some fresh bids on the last day of the week and might now be looking to build on the overnight bounce from the weekly low. The strong intraday move up, however, lacked any obvious fundamental catalyst and could be attributed to some repositioning trade ahead of the key US NFP report. This, in turn, warrants some caution before placing aggressive bullish bets around the USD/CHF pair amid the prevalent US dollar selling bias.

The USD languished near a two-and-half-week low touched earlier this Friday and was pressured by the post-ECB strength in the shared currency. Apart from this, retreating US Treasury bond yields turned out to be another factor that undermined the greenback. Conversely, a generally weaker tone around the equity markets should benefit the Swiss franc's safe-haven status and further contribute to keeping a lid on any meaningful upside for the USD/CHF pair.

The market focus will remain glued to the closely-watched US monthly employment report, which is expected to show that the economy added 150K jobs in January. Given Wednesday's awful ADP report on private-sector employment, there is a considerable risk of a negative surprise from the official figures. This would be enough to exert additional pressure on the already weaker greenback and attract fresh selling around the USD/CHF pair.

Technical levels to watch

Bank of England Chief Economist and Monetary Policy Committee member Huw Pill said on Friday that we should not anticipate rate hikes will be aggressive in the medium-term, according to Reuters.  

Market Reaction

There has not been any notable reaction to the latest cautious comments from Pill, with GBP/USD continuing to consolidate in the mid-1.3500s as US labour market data is eyed and EUR/GBP continuing to trade close to six-week highs in the 0.8450 area.

Canadian employment details overview

Statistics Canada is scheduled to publish the monthly jobs report for January later this Friday at 13:30 GMT. The Canadian economy is expected to have lost 117.5K new jobs during the reported month as against a growth of 54.7K reported in December. Adding to this, the unemployment rate is anticipated to rise from 5.9% to 6.2% in January and the Participation Rate is likely to remain unchanged at 65.3%.

Analysts at NBF offered a brief preview and explained: “We are calling for a -175K print that could lead to a 3-tick increase of the unemployment rate to 6.3%, assuming the participation rate fell back to 64.9%. With the health situation already improving, we expect January’s losses to be quickly erased.”

How could the data affect USD/CAD?

Ahead of the key release, a fresh bout of a short-covering move pushed the USD/CAD pair to a four-day high, around the 1.2735 region. That said, a weaker tone around the US dollar should hold back traders from placing aggressive bets and cap gains amid bullish crude oil prices, which tend to underpin the commodity-linked loonie.

Meanwhile, the data is likely to be overshadowed by the simultaneous release of the US monthly jobs report (NFP), suggesting that any immediate market reaction is more likely to be short-lived. Nevertheless, any significant divergence from the expected readings would influence the Canadian dollar and infuse some volatility around the major.

From a technical perspective, any subsequent move up might confront some resistance near the 1.2765 region. Some follow-through buying should allow bulls to make a fresh attempt to conquer the 1.2800 round-figure mark. This is closely followed by the January swing high, around the 1.2815 region, which if cleared decisively should pave the way for a further near-term appreciating move.

On the flip side, the 1.2700 mark now seems to protect the immediate downside. Failure to defend the mentioned support would make the USD/CAD pair vulnerable to retest the weekly low, around mid-1.2600s. A convincing break below would expose the very important 200-day SMA, currently around the 1.2515 region, and the key 1.2500 psychological mark.

Key Notes

  •   Canadian Jobs Preview: Forecasts from five major banks, Omicron to tame employment growth

  •   USD/CAD retakes 1.2700, bullish oil prices might cap gains ahead of US/Canadian jobs data

  •   USD/CAD Analysis: Traders seem non-committed ahead of US/Canadian jobs data

About the Employment Change

The employment Change released by Statistics Canada is a measure of the change in the number of employed people in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending which stimulates economic growth. Therefore, a high reading is seen as positive, or bullish for the CAD, while a low reading is seen as negative or bearish.

About the Unemployment Rate

The Unemployment Rate released by Statistics Canada is the number of unemployed workers divided by the total civilian labour force. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labour market. As a result, a rise leads to weaken the Canadian economy. Normally, a decrease of the figure is seen as positive (or bullish) for the CAD, while an increase is seen as negative or bearish.

• Spot silver is stable in the $22.50 area ahead of the January US jobs report.
• Any upside wage growth surprise risks triggered a hawkish repricing of Fed tightening expectations, which could send XAG/USD towards $22.00.

Spot silver (XAG/USD) prices were stable close to the $22.50 per troy ounce level on Friday in the run-up to the release of the US January jobs report at 11330GMT. Since yesterday’s volatile price action, which saw XAG/USD lurch lower towards $22.00 before rebounding sharply, trade has calmed in typical pre-US jobs report fashion, as traders refrain from placing big bets. Fed officials have emphasised this week that the timing and pace of tightening this year is data-dependent, and that measures of wage growth are a key metric they are keeping an eye on. That suggests that any sizeable upside surprise in the upcoming Average Hourly Earnings growth data (which are released as part of the jobs report) could see a hawkish repricing of Fed tightening expectations.

After Thursday’s hawkish BoE/ECB due sent global developed market bond yields lurching higher, strong wage growth numbers could put further upwards pressure on yields, creating downside risks for precious metals. Higher yields increase the opportunity cost of holding non-yielding assets like silver. In this scenario, weekly lows at $22.00 will come into focus, with any bearish break opening the door to a run lower towards the 2021 double bottom at $21.50. In an environment where three of the world’s most important central banks (Fed, ECB, BoE) are all clearly moving towards a removal of stimulus/tightening of financial conditions, the long-term bullish case for silver is weakened.

US monthly jobs report overview

Friday's US economic docket highlights the release of the closely-watched US monthly jobs data. The popularly known NFP report is scheduled for release at 13:30 GMT and is expected to show that the economy added 150K new jobs in January, down from the previous month's disappointing reading of 199K. The unemployment rate is expected to hold steady at 3.9%. Given Wednesday's awful US ADP report on private-sector employment, market participants are bracing for a negative surprise from the official figures.

As Joseph Trevisani, Senior Analyst at FXStreet, explains: “The January job signs are poor. Though the correlation between ADP and NFP is not impressive when private payroll losses are combined with the labor market indicators, the odds of a negative month rise considerably.”

Analysts at Citibank were more pessimistic and explained: “We expect a soft 70K increase in January Nonfarm Payrolls, although with substantial two-sided risks due to the greater than usual uncertainty surrounding worker shortages related to the spread of the Omicron variant. That said, we expect a clearer continued downward trend in the unemployment rate to emerge in coming months.”

How could the data affect EUR/USD?

Heading into the key release, the EUR/USD pair added to the overnight hawkish ECB-inspired strong gains and shot back closer to the January swing high, around the 1.1475-1.1480 region. The momentum was further sponsored by modest US dollar weakness. A disappointing NPF print would be enough to exert additional pressure on the already weaker greenback and set the stage for a further near-term appreciating move for the major. Conversely, a stronger reading might provide some respite to the USD bulls, though any immediate market reaction is likely to be short-lived amid diminishing odds for a 50 bps Fed rate hike in March. This, in turn, suggests that the path of least resistance for the pair is to the upside.

Meanwhile, Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the major: “The 20-period SMA on the four-hour chart is about to make a bullish cross above the 200-period SMA, which could be taken as a sign that buyers remain in control of EUR/USD's action. The Relative Strength ındex (RSI) indicator on the same chart, however, is holding above 70, suggesting that the pair might need to make a technical correction before stretching higher.”

Eren also outlined important technical levels to trade the EUR/USD pair: “On the upside, 1.1480 (static level) aligns as the first resistance before 1.1500 (psychological level) and 1.1550 (static level). Supports are located at 1.1400 (psychological level), 1.1360 (static level) and 1.1320 (200-period SMA, 100-period SMA).”

Key Notes

  •  Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

  •  ADP Employment Change and NFP: Omicron or ominous?

  •  EUR/USD Forecast: Euro rally could lose momentum on US jobs report

About the US monthly jobs report

The nonfarm payrolls released by the US Department of Labor presents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure.

• EUR/USD pushes higher and targets the 2022 peaks near 1.1480.
• The 200-week SMA at 1.1500 comes next on the upside.

EUR/USD keeps the rally well and sound and already trades closer to the YTD tops past 1.1480 on Friday.

The ongoing strength is now poised to extend further considering the recent price action. Against that, the YTD top at 1.1482 (January 14) emerges as the next target closely followed by the 200-week SMA at 1.1500. Between 1.1500 and 1.1600 there are no resistance levels of note, leaving the October 2021 top at 1.1692 as a potential longer-term target.

The recent breakout of the 5-month resistance line, today near 1.1415, leaves extra gains well on the cards. In the longer run, the negative outlook is seen unchanged below the key 200-day SMA at 1.1676.

EUR/USD daily chart

• DXY moves further south and clinches fresh lows near 95.10.
• Further down emerges the 5-month support line near 95.00.

DXY comes under extra downside pressure and approaches the 95.00 zone at the end of the week.

While the index flirts with the 100-day SMA at 95.18, a breach of this level should expose the 5-month support line around 95.00. The loss of the latter opens the taps for extra weakness to, initially, the 2022 lows near 94.60 (January 14).

In the near term, the 5-month line near 95.00 is expected to hold the downside for the time being. Looking at the broader picture, the longer-term positive stance in the dollar remains unchanged above the 200-day SMA at 93.48.

DXY daily chart

• EUR/JPY extends Thursday’s sharp uptick to the 132.00 area.
• Next on the upside comes the October 2021 tops near 133.50.

EUR/JPY rose sharply on Thursday following the ECB gathering, taking out some key barrier on its way up and meeting some resistance in the 132.00 neighbourhood on Friday.

In light of the recent price action, further recovery in the cross should be in the pipeline. Against this, further upside initially targets 132.53 (high November 4) followed by 132.91 (high October 29) and finally the October 2021 peak at 133.48 (October 20).

In the near term, extra upside looks likely above the 3-month support line, today near 130.90. In the longer run, and while above the 200-day SMA at 130.45, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

"We expect further modest tightening in the coming months if things play out as we expect," Bank of England Chief Economist Huw Pill said on Friday, as reported by Reuters.

Additional takeaways

"We are trying to avoid the emergence of second-round effects from energy shocks."

"We have to be cautious about communicating where the neutral rate is."

"Key to see our assumption that we don't see persistence in wage and cost developments."

"If we see developments not consistent with that assumption then we would have to consider further action."

"Inflation could fall below target depending on energy markets."

"As recovery progresses, we are looking for normalisation and inflation returning to target."

Market reaction

The British pound remained under modest selling pressure following these comments. As of writing, the GBP/USD pair was down 0.33% on a daily basis at 1.3552.

EUR/GBP has surged higher after holding key long-term support at 0.8281/17. A close above 0.8424 today would not only see a base established but also a large bullish “reversal week”, clearing the path to see further gains, economists at Credit Suisse report.

Close above 0.8424 to establish a base and a bullish “reversal week”

“The ggressive rally from key long-term support at 0.8281/17 after the ECB leaves not only a base threatening but also a potential bullish ‘reversal week’. A close above 0.8424 today is needed to confirm, which we would then look to provide the platform for a more sustained recovery. We would then see resistance next at 0.8465/74, then what we expect to be tougher resistance at the 200-day average at 0.8512/16, with a cap expected here at first.” 

“The ‘measured base objective’ is seen at 0.8563.”

“Support is seen at 0.8419 initially, then 0.8404, with 0.8362 ideally holding to see an immediate upside bias maintained.”

EUR/JPY has surged above its downtrend from last October but more importantly its January highs. Analysts at Credit Suisse look for strength to extend to the top of the eight-month downtrend channel from June last year at 132.92/99.

Support moves to 130.50

“Resistance is seen next at the 78.6% retracement of the Q4 2021 fall at 132.18. Whilst this should be allowed to cap at first, a break in due course should see strength extend to 132.58 next ahead of what we expect to be tougher resistance at the top of the eight-month downtrend channel from June last year at 132.92/99. We expect this to then remain a tougher barrier.” 

“Support is seen a t 131.44 initially, then 131.21 ahead of the back of the broken uptrend at 130.92. An immediate upside bias though should be maintained whilst above the overnight low and 200-day average at 130.50.”

A dramatic session for EUR/USD has seen the market surge sharply higher post the European Central Bank (ECB). A close above key price resistance at 1.1483/95 would mark a more important base, allowing further gains, economists at Credit Suisse report.

EUR/USD to see a more important base established above 1.1483/95

“A weekly close above key resistance at the January and March 2020 highs at 1.1483/95 would be seen to complete a base to provide the platform for a more sustained move higher. We would then see resistance next at 1.1513/24, then the 38.2% retracement of the 2021/2022 fall at 1.1558.” 

“Whilst we would look for a fresh cap at 1.1558, certainly at first, a break in due course can see strength extend to test what we would look to be tougher resistance from its falling 200-day average, now seen at 1.1678.” 

“Support is seen at 1.1445 initially, with an immediate upside bias seen whilst above 1.1414. Below can see a pullback to 1.1376/71, then 1.1331, but with a break below 1.1268/66 needed to see the risk turn lower again.”

• Retail Sales in the euro area fell sharply in December.
• EUR/USD stays in the positive territory near 1.1460.

Retail Sales in the euro area fell by 3% on a monthly basis in December, the data published by Eurostat showed on Friday. This print missed the market expectation for a decrease of 0.5%. In the EU, Retail Sales contracted by 2.8%. 

"In December 2021 compared with December 2020, the calendar-adjusted retail sales index increased by 2.0% in the euro area and by 2.6% in the EU," the publication further read. "The annual average level of retail trade for the year 2021, compared with 2020, increased by 5.0% in the euro area and by 5.5% in the EU."

Market reaction

These figures don't seem to be having a noticeable impact on the shared currency's performance against its rivals. As of writing, the EUR/USD pair was up 0.2% on the day at 1.1460.

• GBP/USD witnessed some selling on Friday and snapped five days of the winning streak.
• A more hawkish BoE decision should act as a tailwind for sterling and limit the downside.
• Investors also seemed reluctant to place aggressive bets ahead of the key US jobs data.

The GBP/USD pair remained on the defensive through the first half of the European session and was last seen hovering near the lower end of its daily trading range, around the 1.3570 region.

Having struggled to find acceptance above the 1.3600 mark, the GBP/USD pair witnessed some selling on Friday and for now, seems to have snapped five successive days of the winning streak. The downtick could be solely attributed to some profit-taking following a strong runup to a two-week high, around the 1.3625-1.3630 area touched after the Bank of England decision on Thursday.

It is worth recalling that the BoE hiked its benchmark interest rate by 25 bps to 0.50%. This marked the first back-to-back raises since 2004 and was backed by a more hawkish vote distribution, which showed that four out of nine MPC members backed an aggressive 50 bps increase in borrowing costs. This, in turn, should underpin sterling and limit losses for the GBP/USD pair.

On the other hand, the US dollar languished near a two-and-half-week low touched earlier this Friday, though some follow-through uptick in the US Treasury bond yields extended some support. The USD price dynamics, however, did little to provide any meaningful impetus to the GBP/USD pair. Moreover, investors seemed reluctant ahead of the release of the US NFP report.

The closely-watched monthly jobs data, due later during the early North American session, is expected to show that the US economy added 150K jobs in January, down from 199K in the previous month. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the GBP/USD pair, allowing traders to grab some short-term opportunities.

Technical levels to watch

• EUR/USD extends the rally to the 1.1470 region.
• Yields of the German 10y Bund record tops near the 0.20% level.
• Markets’ attention will be on the release of US Nonfarm Payrolls.

The buying pressure around the European currency remains well and sound and now lifts EUR/USD to fresh 3-week highs near 1.1470 on Friday.

EUR/USD bolstered by ECB, now looks to US NFP

EUR/USD advances for the sixth consecutive session for the first time since late-August/early-September 2021 and already trades at shouting distance from the YTD peaks in the 1.1480/85 band (January 14).

The renewed selling pressure around the greenback coupled with the surprising hawkish tilt at the ECB on Thursday lent extra wings to the pair’s weekly bounce, which already surpasses the 3% since 2022 lows recorded on January 28 near 1.1120.

In the wake of the ECB event and pari passu with the strong upside in the pair, yields of the key 10y German Bund advanced to new highs around 0.20%, an area last traded in February 2019.

In the domestic docket, German Factory Orders expanded 2.8% MoM in December and the Construction PMI improved to 54.4 in January. In the broader Euroland, Retail Sales for the month of December come next.

Across the pond, all the attention will be on the publication of the Nonfarm Payrolls and the Unemployment Rate for the month of January.

What to look for around EUR

EUR/USD extends the optimism for yet another session on Friday and approaches the 2022 high, always bolstered by the prevailing risk-on sentiment, which was in turn boosted by the hawkish message from the ECB event on Thursday. Rising speculation of a potential ECB lift-off in September/December continues to underpin the solid upside momentum in the pair, which remains also propped up by higher yields in the German money markets.

Key events in the euro area this week: EMU Retail Sales (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.20% at 1.1457 and faces the next up barrier at 1.1482 (2022 high Jan.14) followed by 1.1500 (200-week SMA) and finally 1.1676 (200-day SMA). On the other hand, a break below 1.1308 (55-day SMA) would target 1.1121 (2022 low Jan.28) en route to 1.1100 (round level).

• USD/CAD gained some positive traction for the second successive day on Friday.
• The uptick lacked any fundamental catalyst and could fizzle out rather quickly.
• The market focus will remain glued to the key US/Canadian employment details.

The USD/CAD pair added to its intraday gains and shot back above the 1.2700 round-figure mark during the early part of the European session.

The pair attracted some buying for the second successive day on Friday, with bulls now looking to build on the overnight bounce from the vicinity of mid-1.2600, or weekly low. Some follow-through uptick in the US Treasury bond yields, along with the cautious market mood extended some support to the safe-haven US dollar. This, in turn, was seen as a key factor that acted as a tailwind for the USD/CAD pair.

Apart from this, the uptick could also be attributed to some repositioning trade ahead of the key monthly jobs report from the US and Canada, due later during the early North American session. That said, the prevalent strong bullish sentiment surrounding crude oil prices could underpin the commodity-linked loonie and cap gains for the USD/CAD pair. This, in turn, warrants some caution for aggressive bullish traders.

Crude oil prices remained well supported by worries about tight global supplies and geopolitical tensions. Moreover, a massive winter storm across central and northeast United States disrupted oil production in the Permian Basin. This was seen as another factor that pushed the commodity to a fresh seven-year high, which should benefit the Canadian dollar and keep a lid on any meaningful positive move for the USD/CAD pair.

The market focus will remain glued to the US NFP report, which is expected to show that the economy added 150K jobs in January as against the 199K reported in the previous month. Traders might further take cues from Canadian employment details. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair and allow traders to grab some short-term opportunities.

Technical levels to watch

• DXY extends the weekly leg lower to the 95.15/10 band.
• US yields trade on a mixed tone at the end of the week.
• January Nonfarm Payrolls next of relevance in the docket.

The greenback alternates gains with losses in the lower end of the weekly range around 95.30 when gauged by the US Dollar Index (DXY).

US Dollar Index now focuses on data

The index trades without a clear direction at the end of the week and threatens to challenge the key support at the 95.00 yardstick amidst mixed US yields and the prevailing sentiment favouring the risk complex.

It is worth recalling that the greenback accelerated losses to the low-95.00s in past hours in response to the unexpected hawkish message from Chairwoman Lagarde at the ECB event on Thursday. Indeed, the central bank now sees the probability of tightening its monetary conditions (via rate hikes) later in the year (September? December?) vs. previous forecasts that were suggesting this scenario in late 2023.

In the meantime, the dollar is expected to keep the cautious note unchanged ahead of the key Nonfarm Payrolls figures and the Unemployment Rate due later in the NA session. Consensus expects the economy to have added “just” 150K jobs in December, weighed by the impact of the omicron variant.

What to look for around USD

The dollar sank to the vicinity of the 95.00 support at the end of the week, as market participants seem to be still digesting the more aggressive message from the ECB at the Thursday’s gathering. Some reasons behind the strong correction in the buck seen as of late can be found in the improved mood in the risk-associated universe and dormant US yields (despite navigating the upper end of the recent range). However, the constructive outlook for the greenback is expected to remain unchanged in the longer run underpinned by higher yields, persistent elevated inflation, supportive Fedspeak and the solid pace of the US economic recovery.

Key events in the US this week:) Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Fed’s rate path this year. US-China trade conflict under the Biden administration. Debt ceiling issues. Escalating geopolitical effervescence vs. Russia and China.

US Dollar Index relevant levels

Now, the index is losing 0.04% at 95.31 and a break above 96.08 (55-day SMA) would open the door to 97.44 (2022 high Jan.28) and finally 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 95.13 (weekly low Feb.4) seconded by 95.00 (round level) and then 94.62 (2022 low Jan.14).

EUR/USD has registered its largest one-day gain in more than a year. Ahead of the January jobs report from the US, the pair is staying relatively quiet as investors want to see at what pace wages have grown before betting on further dollar weakness, FXStreet’s Eren Sengezer reports.

Euro rally could lose momentum on US jobs report

“A negative NFP print should cause the dollar to continue to weaken against its rivals. In case the NFP comes in higher than expected, market participants will pay close attention to the wage inflation data. Strong growth in wages could help the greenback find some demand and limit EUR/USD's upside ahead of the weekend.”

“On the upside, 1.1480 (static level) aligns as the first resistance before 1.1500 (psychological level) and 1.1550 (static level).”

“Supports are located at 1.1400 (psychological level), 1.1360 (static level) and 1.1320 (200-period SMA, 100-period SMA).”

See – NFP Preview: Forecasts from nine major banks, employment to soften due to Omicron

USD/BRL has pulled back after struggling at the upper band of its range since 2020 near 5.75/5.80. Economists at Société Générale note the risk of a dip to the August 2021 low at 5.11 if the 5.22 support is eroded.

5.22 is next support  

“Failure to hold 5.22 can lead the pair lower towards August 2021 low of 5.11.” 

“The 200-DMA at 5.39 is first resistance.”

“Former president Lula called for predictable economic policies, bolstering the appeal of the BRL.”

With inflation in Japan showing no signs of approaching the Bank of Japan (BoJ) 2% target, the central bank will remain a policy laggard, weighing on the yen, economists at CIBC Capital Markets report.

Contained inflation below target precludes BoJ policy tightening

“The publication of the BoJ statement of monetary opinions from the January meeting underlines that several BoJ officials want to push back against market speculation that it's prepared to shift towards policy normalization later this year.”

“As BoJ Governor Kuroda continues to detail that Japan remains very far from reaching the 2.0% CPI target, it seems that the bank remains comfortable with a weakening JPY bias.”

The benchmark 10-year US Treasury bond yield holds above 1.8% after rising 3% on Thursday. Economists at Société Générale expect 10Y UST to reach 1.97% with scope for the 2.13% mark.

Break below 1.65% to denote a deeper down move

“Neckline at 1.65% should be an important support.”

“10Y UST is likely to extend its rise towards November 2019 levels of 1.97% with possibility to reach projections of 2.13%.”

“Only a break below 1.65% would denote a deeper down move.”

• AUD/USD witnessed some selling on Friday after RBA minutes indicated a patient approach.
• The cautious mood also contributed to driving flows away from the perceived riskier aussie.
• Rising US bond yields extended some support to the USD, which added to the selling bias.
• The market focus remains glued to Friday’s release of the closely-watched US NFP report.

The AUD/USD pair drifted lower through the early part of the European session and dropped to a three-day low, around the 0.7100 mark in the last hour.

Following an early uptick to the 0.7150 area, the AUD/USD pair witnessed some selling on the last day of the week and extended the overnight modest pullback from over a one-week high. The Reserve bank of Australia, in the Statement on Monetary Policy (SoMP) released this Friday, said that the board is prepared to be patient amid significant uncertainties surrounding the inflation outlook. This, along with the cautious market mood, undermined the perceived riskier aussie.

On the other hand, the US dollar dropped to a two-and-half-week low and was pressured by an extension of the post-ECB rally in the shared currency. That said, some follow-through uptick in the US Treasury bond yields helped limit any further losses for the greenback. This was seen as another factor that exerted additional downward pressure on the AUD/USD pair, though any further downfall seems limited as market participants await the release of the US monthly jobs data.

The popularly known NFP report, due later during the early North American session, is expected to show that the US economy added 150K jobs in January, down from the 199K reported in the previous month. Even a slight disappointment would be enough to weigh on the already weaker USD and lend some support to the AUD/USD pair. Nevertheless, the pair remains on track to post strong weekly gains and reverse a major part of last week's losses to the lowest level since June 2020.

Technical levels to watch

The euro has continued to strengthen extending its advance following Thursday’s European Central Bank (ECB) policy update. Economists at MUFG BANK believe that the euro’s bullish momentum is set to continue, allowing the EUR/USD to test the 200-day moving average (DMA) at 1.1678.

Bearish EUR trend set to end

“The ECB’s signal that it is considering raising rates later this year is a game-changing development for financial markets. It helps to explain the big market reaction which we believe has further to run in the coming weeks/months.” 

“A break above the January high at close to 1.1500 should see EUR/USD extend its rebound towards the 200-DMA at 1.1678 and similarly for EUR/GBP up towards 0.8516.”

The US Dollar Index (DXY) has sharply reversed from the peak of 97.45. On Thursday, DXY lost nearly 0.7% and stays within a touching distance of 95.00. Economists at Société Générale highlight the risk of seen a slump to the 93.30 mark.

Low of January at 94.50/94.30 is first support

“Daily MACD is attempting an entry within negative territory which denotes further downside is not ruled out.” 

“Low of January at 94.50/94.30 is first support.”

“Failure to reclaim graphical levels of 96.50 could indicate return towards the upper limit of its base at 93.30.”

A hawkish Bank of England raised rates and there is surely more to come, according to economists at ING. They now expect further rate rises in March and May, which should underpin the pound.

Hawkish BoE set to give more support

“The BoE hiked interest rates by 25bp yesterday, starting the reduction of its balance sheet, in line with expectations. More crucially, four out of nine MPC members voted for a 50bp increase, which sent a strong signal of endorsement to the market’s pricing for five more rate hikes this year.”

“We now expect rates to be raised again in March and May. While market pricing on tightening appears a bit too hawkish, this may not be challenged until later in the year, which should leave the pound able to withstand any appreciating pressures in the dollar and the euro.” 

“A continuation of the soft dollar environment today could see cable test the 1.3750 January highs, while EUR/GBP could stabilise around 0.8400 now after a short-lived move yesterday to the 0.8300 mark.”

EUR/USD rose more than 100 pips on Thursday, after the European Central Bank (ECB) was decidedly hawkish, and was last seen trading at its highest level since mid-January near 1.1450. Economists at OCBC Bank expect the pair to extend its grind higher to test the year-high at 1.1483.

Upside extension

“The surprisingly hawkish ECB was the clear impetus for the outsized gains in the EUR. However, whether this is a head fake or a medium-term change in the ECB’s stance remains to be seen. For this to be a sustained pivot in terms of the EUR’s trajectory, we need the ECB to continue with hawkish follow-ups.” 

“For now, momentum is on the EUR’s side, and the pair will target the year-high at 1.1483.” 

“Support at 1.1380/00 for now.”

Statistics Canada will publish the Canadian January labour market data at 13:30 GMT and as we get closer to the release time, here are forecasts from economists and researchers at five major banks regarding the upcoming employment data. The Unemployment Rate in Canada is forecast to rise to 6.2% in January from 5.9% in December with the Net Change in Employment declining by more than 100K in that period.

RBC Economics 

“Canadian labour market data for January is expected to weaken substantially. We’re eyeing a 75K drop in employment and an uptick in the unemployment rate to 6.4% after COVID-19 restrictions prompted business closures in large parts of the country.”

NBF

“We are calling for a -175K print that could lead to a 3-tick increase of the unemployment rate to 6.3%, assuming the participation rate fell back to 64.9%. With the health situation already improving, we expect January’s losses to be quickly erased.”

CIBC

“We expect a 130K decline in employment and a temporary rise in the unemployment rate to 6.3%. As long as the majority of these job losses are described as on temporary layoff and concentrated in service industries, there should be little implication for Bank of Canada liftoff come the time of the March meeting.”

TDS

“We expect a significant headwind and forecast a 150K pullback in total employment, consistent with the sharp drop in mobility indicators. We look for services to drive the pullback in January, with job losses concentrated across accommodation/food services, retail trade, recreation, and education. Job losses should drive the unemployment rate to 6.4% in January, alongside a pullback in labour force participation. This deterioration should be short-lived, however, with the labour market expected to bounce back in Feb/Mar.”

Citibank

“Citi: -120K, median: -100K, prior: 78.6K, Unemployment Rate – Citi: 6.4%, median: 6.2%, prior: 6.0%, Average Hourly Wages Permanent Employees – Citi: 1.9%, prior: 2.7%. After two months of much stronger than expected employment gains, We expect a decline in employment. Job losses though should be tied to Omicron and the decline is likely to be very temporary.”

Economists at Westpac expect the yellow metal to decline towards $1,675/oz while Brent Crude Oil is set to suffer a deeper fall to the $70/bbl level.  

Crude and base metal prices to hold around current levels at least to midyear

“Crude and base metals have a slightly different profile to the bulks as we see significant a lift in supply for bulk commodities in early 2022 leading to a quicker correction in iron ore and coal prices while we expect crude and base metal prices to hold around current levels at least to midyear. For iron ore, this will mean a correction from $140/t to$75/t, thermal coal to ease from$234/t to $125/t and met coal to moderate from$398/t to$205/t.”

“The base metals index is forecast to correct from 240 to 204, crude oil (Brent) to fall from $90/bbl to $70/bbl while gold will fall by less from $1,797/oz to $1,675/oz.”

• EUR/GBP gained strong traction for the second successive day and shot to a multi-week high.
• The euro capitalized on the hawkish ECB-inspired gains and remained supportive of the move.
• The fundamental backdrop favours bulls and supports prospects for additional near-term gains.

The EUR/GBP cross continued scaling higher through the early European session and shot to a five-week high, around the 0.8440 region in the last hour.

The cross built on the previous day's post-ECB strong recovery move from sub-0.8300 levels, or a fresh two-year low and gained traction for the second successive day on Friday. The ECB President Christine Lagarde acknowledged mounting inflation risks and did not repeat the previous guidance that a rate hike this year was extremely unlikely. This, in turn, was seen as a key factor behind the shared currency's relative outperformance and prompted some follow-through short-covering around the EUR/GBP cross.

On the other hand, the British pound, so far, has failed to capitalize on more hawkish Bank of England policy decision-inspired gains and consolidated in range on the last day of the week. This was seen as another factor that provided an additional boost to the EUR/GBP cross. It is worth recalling that the BoE, as was widely expected, raised the benchmark interest rate by 25 bps. The vote distribution, however, showed that four out of nine MPC members backed a more aggressive 50 bps increase in borrowing costs.

Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and supports prospects for a further near-term appreciating move. Market participants now look forward to the release of the UK Construction PMI and the Eurozone Retail Sales for a fresh impetus. Later during the early North American session, the US NFP report might infuse some volatility in the markets and produce some trading opportunities around the EUR/GBP cross.

Technical levels to watch

The US Bureau of Labor Statistics (BLS) will release the January jobs report on Friday, February 4 at 13:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of nine major banks regarding the upcoming employment data. 

The US economy is expected to have added 150K jobs in January, down from 199K reported in the previous month. The unemployment rate is foreseen to hold steady at 3.9% and Average Hourly Wages are anticipated to rise 0.5% MoM, 5.2% YoY during the reported month.

Danske Bank

“We expect the jobs report will show jobs growth around the current level of 200K. Employment growth is unlikely to pick up pace until more people return back to the labour force.”

RBC Economics

“US payroll employment in January is expected to rise another 150K and the unemployment rate to edge down to 3.8%. The spread of the Omicron variant is not expected to have a significant impact on employment, but could lower hours worked with rapid spread meaning large numbers of workers were likely off sick.”

ING

“The January jobs report is likely to be weak, with a payrolls gain of just 100K expected. The risks are likely to be to the downside given the sharp drop-off in activity and higher-than-expected jobless claims since the Omicron wave hit. Admittedly there are more than 10 million job vacancies right now, but consumer and business caution has been heightened by the latest pandemic developments and hiring is set to have slowed. Nonetheless, we remain hopeful that with covid case numbers now falling in many states, we will start to see consumers re-engage with the economy. That should pave the way for much stronger activity and job readings in February and March.”

SocGen

“We expect a modest NFP gain of 155K. The unemployment rate, which has been falling quickly in recent months, should stabilize in January at 3.9%. We expect the Omicron issue to be a short-term, temporary event, but the January evidence should capture this downside.” 

NBF

“Payrolls could have dropped 250K in the month. The household survey is expected to show a similar decline, a development which could still leave the unemployment rate unchanged at 3.9%, assuming the participation rate fell two ticks to 61.7%.”

CIBC

“With activity in service sectors infected by Omicron in January, causing jobless claims to rise, hiring likely slowed to a 102K pace. Most of the impact from Omicron will be on display in a reduction in hours worked in sectors that experienced tighter restrictions and consumer caution, along with worker absenteeism related to infections. As a result, the unemployment rate likely ticked up to 4.0%, while wage growth could have remained hot at 0.5% as job gains were tilted towards higher-paying sectors. We’re below the consensus, which could weigh on the greenback and bond yields.” 

Deutsche Bank

“We are expecting NFP to have grown by a relatively subdued +150K in January (in line with consensus), with the unemployment rate remaining at a post-pandemic low of 3.9%. Clearly, Omicron will impact this data, so it'll be tough to get a clear read through but Fed Chair Powell has already said that his personal view is that labour market conditions were consistent with maximum employment, “in the sense of the highest level of employment that is consistent with price stability’.”

TDS

“Payrolls likely plunged in January, but only because of temporary Omicron fallout; if anything, we see downside risk to our -200K estimate. Several Fed officials have already made clear that they will discount weak data as temporary. Also, we see upside risk on average hourly earnings, with an already strong trend likely to be added to by temporary Omicron effects relating to the composition of payrolls and the length of the workweek. Our 0.6% MoM estimate for hourly earnings implies 5.3% YoY, up from 4.7% YoY in December.”

Citibank

“We expect a soft 70K increase in January Nonfarm Payrolls, although with substantial two sided risks due to the greater than usual uncertainty surrounding worker shortages related to the spread of the Omicron variant. That said, we expect a clearer continued downward trend in the unemployment rate to emerge in coming months.”

"There are reasons to think gas prices will come down, they tend to revert to historical levels," Bank of England (BOE) Governor Andrew Bailey noted on Friday, per Reuters.

Additional takeaways

"What we must do is prevent things getting worse on prices."

"We need to see restraint on wages."

"Without restraint on wages, inflation will get out of control."

"I am not saying don't give your staff a pay rise, this is about the size of it."

"We are seeing more wage pressure in the economy."

Market reaction

GBP/USD edged slightly lower on these comments and was last seen losing 0.07% on a daily basis at 1.3586.

Economists at ING think that the post-FOMC 1.11-1.13 range in EUR/USD has now given way to a 1.13-1.15 range, which may hold into the March ECB meeting.

Less downside risks, but upside room remains limited in the longer-term

“With the ECB dropping its forward guidance and markets heavily speculating on 2022 tightening, EUR/USD may find consolidation within the 1.13-1.15 range in the run-up to the pivotal 10 March ECB meeting.” 

“We continue to see some moderate downside risk for EUR/USD for the remainder of the year, although we acknowledge that sub-1.10 levels now look too extreme, and instead favour a flatter profile around 1.12-1.13 into year-end.”

Having lost ground vs. the EUR from November into early January the SEK appears to have found its feet in recent sessions in the approach to the February Riksbank meeting. Economists at Rabobank expect the EUR/SEK pair to move back lower to the 10.30 mark over the next month.

Riksbank may want to allow itself more flexibility on policy

“The news that some covid restrictions will be scrapped from next week is encouraging. That said, as in the Eurozone, significant signs of wage inflation are absent. Even so, the Riksbank may have to take a left out of Lagarde’s book and admit that inflation is likely to remain elevated for longer than previously expected, even if it is likely to fall back later in the year.” 

“We expect EUR/SEK to edge back to the 10.30 area on a one-month view.”

The European Central Bank (ECB) delivered an array of hawkish comments and left the door open to change course as early as the March meeting. Economists at Nordea continue to think that rate hikes are not this year’s business, supporting a lower EUR/USD, but the market clearly disagrees.

Early rate hikes on the table

“The ECB now sees inflation risks to the upside, is unanimously concerned about such risks and opened the door for even earlier rate hikes.”

“We still think the ECB will proceed rather cautiously and it will take time for the picture on wage growth to become clearer and continue to find rate hikes as early as this year less likely.”

“The inflation outlook is very uncertain, which was also illustrated by the ECB wanting to leave all doors open.”

“Looking beyond near-term volatility, we do expect long bond yields to creep further up, see more widening potential for bond spreads and expect EUR/USD to still head lower, as we continue to see more room for the Fed to surprise hawkishly this year compared to the ECB.”

• USD/CHF edged higher for the second successive day, though lacked follow-through buying.
• The cautious market mood benefitted the safe-haven CHF and capped gains amid softer USD.
• An uptick in the US bond yields helped limit losses for the USD and the pair ahead of the NFP.

The USD/CHF pair retreated a few pips from the daily swing high and was last seen trading with only modest intraday gains, around the 0.9200 round-figure mark.

Following the previous day's turnaround from the 0.9235 area, the USD/CHF pair gained some positive traction for the second successive day on Friday, though the uptick lacked bullish conviction. The US dollar languished near a two-and-half-week low and was pressured by the post-ECB rally in the shared currency. Apart from this, the cautious market mood benefitted the safe-haven Swiss franc and kept a lid on any meaningful upside for the major.

That said, some follow-through uptick in the US Treasury bond yields helped limit any deeper losses for the greenback and acted as a tailwind for the USD/CHF pair. Investors also seemed reluctant to place aggressive bets and preferred to wait for the release of the closely-watched US monthly employment details, due later during the early North American session. The data will influence the USD price dynamics and provide a fresh impetus to the USD/CHF pair.

The headline NFP print is expected to show that the US economy added 150K jobs in January, down from the 199K reported in the previous month. . Several labour market indicators, including the awful ADP report on Wednesday, have been suggesting trouble in the US labour market at the start of 2022. This, in turn, points to a considerable risk of a negative surprise, which should exert pressure on the already weaker USD and prompt fresh selling around the USD/CHF pair.

Hence, it will be prudent to wait for a strong follow-through buying before confirming that the recent sharp pullback from the vicinity of mid-0.9300s, over a two-month high has run its course. On the flip side, the very important 200-day SMA, currently around the 0.9165 region, should act as a pivotal point, which if broken decisively will be seen as a fresh trigger for bearish traders. This, in turn, will set the stage for a further near-term depreciating move.

Technical levels to watch

• Factory Orders in Germany rose at a stronger pace than expected in December.
• EUR/USD continues to trade in the positive territory above 1.1450.

The data published by Destatis showed on Friday that Factory Orders in Germany expanded by 2.8% on a monthly basis in December. This print came in better than the market expectation for an increase of 0.5%.

On a yearly basis, Factory Orders rose by 5.5%, compared to analysts' estimate of 2%.

Market reaction

These figures don't seem to be having a significant impact on the shared currency's performance against its major rivals. As of writing, the EUR/USD pair was up 0.15% on a daily basis at 1.1456.

• USD/INR stays on road to first weekly loss in three, indecisive on the day.
• India CBIC expects heavy revenue loss due to fuel excise cut, New Delhi’s covid woes ease.
• Downbeat USD keeps sellers hopeful but firmer oil prices, yields favor bulls.
• US jobs report, risk catalysts are important for fresh impulse.

USD/INR remains sidelined around 74.70 after snapping a two-day rebound the previous day. In doing so, the Indian rupee (INR) pair struggles to justify mixed concerns at home and abroad during the cautious mood ahead of the key US employment data for January.

On the negative side, upbeat stock futures and the six-day downtrend of the US Dollar Index (DXY) keep USD/INR sellers hopeful. Also weighing on the pair prices are grim concerns over the US Nonfarm Payrolls due to the downbeat ADP Employment Change figures.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Furthermore, recently improving covid conditions in India adds to the bearish bias for the USD/INR prices. As per the latest statistics, India reports 149,394 new covid cases versus 172,433 reported the previous day. On the same line could be the escalating concerns over the Reserve Bank of India’s (RBI) rate hike.

Alternatively, growing inflation fears across the board and recently hawkish central bank play underpin the US Treasury yields, which in turn challenge USD/INR sellers. Additionally, the multi-year high of oil prices and the Asian nation’s latest fuel excise cut keep USD/INR buyers hopeful.

Recently, the Chairman of India’s Central Board of Indirect Taxes and Customs (CBIC) said to NewsRise that the tax body estimates the government will lose about 600 billion rupees in annual revenue next fiscal year starting Apr. 1 following past excise duty cut on auto fuel.

Amid these plays, USD/INR traders await US jobs report while keeping the weekly loss intact. Also important to watch are the headlines over Russia-Ukraine tussles as the same propel oil prices of late.

Technical analysis

Although failures to cross the 75.00 threshold keep USD/INR sellers hopeful, an ascending support line from January 12 and the 200-DMA, respectively around 74.55 and 74.28, restricts the short-term downside of the Indian rupee pair. Adding to the upside filters is January’s swing high surrounding 75.35.

Gold fell sharply on Thursday but managed to rebound above $1,800. As FXStreet’s Haresh Menghani notes, XAU/USD bulls await sustained move beyond the $1,810/12 area.

NFP in focus

“The US economy is expected to have added 150K jobs in January. Several labour market indicators have been suggesting trouble in the US labour market at the start of 2022. This, in turn, points to a considerable risk of a negative surprise, which should exert pressure on the already weaker USD and lift gold prices.”

“It will be prudent to wait for some follow-through buying beyond the weekly high, around the $1,810-$1,812 resistance zone, before positioning for any further gains. Gold could then aim to test the $1,830-$1,832 zone before extending the momentum towards the January monthly swing high, around the $1,854 region.”

“Any meaningful dip below the $1,800 mark might continue to find decent support near the $1,790 area ahead of the $1,782-$1,780 region. Failure to defend the mentioned support levels would make gold vulnerable to slide further towards the $1,768-67 horizontal support.”

Here is what you need to know on Friday, February 4:

The euro registered impressive gains against its major rivals on Thursday on European Central Bank (ECB) President Christine Lagarde's hawkish comments. The shared currency is staying relatively quiet early Friday as investors await the US January Nonfarm Payrolls (NFP) data. Ahead of the US jobs report, December Retail Sales will be featured in the European economic docket. Later in the day, the January Unemployment Rate data from Canada could have a significant impact on the loonie's market valuation.

In January, NFP is expected to rise by 150,000 following December's disappointing increase of 199,000. Market participants will also keep a close eye on the wage inflation reading, which is presented as the change in the Average Hourly Earnings. The US Dollar Index lost nearly 0.7% on Thursday and stays within a touching distance of 95.00. 

Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher.

The ECB left its policy settings unchanged as expected following its February policy meeting. When asked about the market pricing of rate hikes, Lagarde refrained from rejecting the possibility of a rate increase in 2022 and provided a boost to the euro. Lagarde also said that inflation in the euro area was seen staying high for longer than expected. 

EUR/USD rose more than 100 pips on Thursday and was last seen trading at its highest level since mid-January near 1.1450.

On Thursday, the Bank of England (BOE) announced that it hiked its policy rate by 25 basis points to 0.5%. The policy statement revealed that four members of the MPC voted for a 50 basis points rate hike and the British pound gathered strength with the initial reaction. During the press conference, however, BOE Governor Bailey sounded very cautious on the economic outlook and didn't allow the GBP to preserve its bullish momentum.

GBP/USD ended up posting small daily gains on Thursday but stays in the negative territory below 1.3600 heading into the European session on Friday.

USD/CAD continues to trade in a relatively tight range below 1.2700. The Unemployment Rate in Canada is forecast to rise to 6.2% in January from 5.9% in December with the Net Change in Employment declining by more than 100K in that period.

Gold fell sharply on surging US Treasury bond yields on Thursday but managed to rebound above $1,800. The benchmark 10-year US Treasury bond yield holds above 1.8% after rising 3% on Thursday.

US January Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises.

Despite the negative shift witnessed in market sentiment on Thursday, Bitcoin rose modestly and continues to trade in the positive territory near  $38,000 early Friday. Ethereum is up more than 3% on the day, testing $2,800.

• USD/JPY was seen consolidating in a range through the first half of the trading on Friday.
• The cautious mood benefitted the safe-haven JPY and capped gains amid weaker USD.
• Rising US bond yields helped limit losses for the USD and extended support to the pair.
• Investors also seemed reluctant to place aggressive bets ahead of the key US jobs data.

The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses, around the 115.00 psychological mark heading into the European session.

The pair struggled to capitalize on the previous day's strong move up and witnessed subdued/range-bound price action through the first half of the trading on the last day of the week. The overnight rout in US technology shares weighed on investors' sentiment and benefitted the safe-haven Japanese yen. This, in turn, was seen as a key factor that acted as a headwind for the USD/JPY pair amid a softer tone surrounding the US dollar.

The greenback dropped to a two-and-half-week low amid a more hawkish European Central Bank (ECB)-inspired rally in the shared currency. The downside, however, remains cushioned on the back of some follow-through uptick in the US Treasury bond yields, which extended some support to the USD/JPY pair. Investors also seemed reluctant to place aggressive bets ahead of Friday's release of the closely-watched US monthly jobs data.

The popularly known NFP report, due later during the early North American session, is expected to show that the US economy added 150K jobs in January as against the 199K reported in the previous month. Wednesday's awful ADP report suggested trouble in the US labour market at the start of 2022. Hence, there is a considerable risk of a negative surprise from the official figures, which should be enough to exert fresh pressure on the greenback.

From a technical perspective, the intraday price move might still be categorized as a consolidation phase following the overnight strong rally of around 70 pips. The fundamental backdrop, however, warrants caution for aggressive bullish traders. Hence, it will prudent to wait for some follow-through buying before positioning for any further gains.

Technical levels to watch

• Gold struggles to keep intraday gains around weekly top.
• Market sentiment dwindles as yields weigh on US dollar but gain in stock futures favor cautious optimism.
• US ADP hints at NFP disappointment but a positive surprise will be enough to recall gold sellers.

Gold (XAU/USD) buyers take a breather around weekly high ahead of the key US jobs report as European traders brace for Friday’s bell.

The yellow metal eases from intraday top to $1,806, paring daily gains to 0.06%, by the press time. Even so, the bullion remains firmer on a weekly basis while consolidating the previous week’s losses, the biggest since late November.

While downbeat US dollar and inflation fears could be cited as the key reason behind the XAU/USD’s previous upside, the pre-NFP caution seems to test the gold buyers of late. That said, geopolitical fears emanating from Russia add to the bearish bias over the traditional risk-safety.

European Central Bank (ECB) and the Bank of England (BOE) portrayed a hawkish play the previous day, highlighting inflation as the key challenge.

However, mixed comments from Richmond Fed President Thomas Barkin seem to have stopped the US dollar from cheering the risk-off mood. “The US Federal Reserve needs to begin raising interest rates but it is too soon to say how far or fast that process will need to go to bring inflation under control,” said Fed’s Barkin per Reuters. On the same line were indecisive US economics as the ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened the previous day.

Elsewhere, Russia warned the West to not escalate tensions and the same seems to have underpinned the upside moves in gold prices.

It should be noted, however, that an impressive performance of stock futures, mainly due to Amazon’s upbeat results, is likely supporting the daily uptick in gold prices.

Amid these plays, the US 10-year Treasury yields rose 1.8 basis points (bps) to 1.845%, bracing for the first weekly gain in three while S&P 500 Futures rise 1.14% around 4,520.

Looking forward, the negative surprise from the US ADP Employment Change for January, to -301K versus +207K forecast, keep gold traders on the edge ahead of the US Nonfarm Payrolls (NFP), expected 150K versus 199K prior. Should the US jobs report portray a positive outcome than widely feared, gold prices may pare the weekly gains.

Read: US January Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

Gold retreats towards the weekly support line while extending pullback from the 200-SMA. Also portraying seller’s dominance is the receding bullish bias of MACD and sluggish RSI.

Furthermore, the 50-SMA cuts the 200-SMA for the downside, in what is known as the Bear Cross chart pattern, suggesting additional weakness of the precious metal.

That said, gold sellers may initially aim for the horizontal area comprising January’s low, around $1,783-81.

However, bears will gain extra strength on breaking 78.6% Fibonacci retracement (Fibo.) of December-January upside, near $1,773.

Alternatively, the 50-SMA around $1,808 guards immediate recovery moves of gold ahead of the 200-SMA near $1,812.

Following that, the support-turned-resistance line from December 15, near $1,818, will defend bears. It’s worth noting that the gold buyers will gain a conviction on crossing the 23.6% Fibonacci retracement level of $1,831.

Gold: Four-hour chart

Trend: Further weakness expected

Traders scaled back their open interest positions in natural gas futures markets by more than 5K contracts on Thursday, as per preliminary readings from CME Group. In the same line, volume extended the choppy activity seen as of late and shrank sharply by nearly 366K contracts.

Natural Gas capped by $5.60/MMBtu

Prices of natural gas plummeted on Thursday, reversing at the same time the previous acute uptick. The move was in tandem with shrinking open interest and volume, which removes strength from the prospect of a deeper correction in the very near term. In the meantime, recent peaks in the $5.60 region now emerge as the next resistance of note in case bulls resume the uptrend.

• USD/TRY grinds higher around intraday top, battles monthly resistance line.
• Sustained trading beyond 100-SMA, gradually rising RSI favor buyers.
• Sellers need validation from two-week-old horizontal support for the ruling.

USD/TRY seesaws around monthly resistance line, close to $13.55-60 heading into Friday’s European session.

That said, the Turkish lira (TRY) pair’s successful trading above the 100-SMA joins a gradually rising RSI line to suggest that buyers’ slow run towards the victory.

However, a clear upside break of $13.60 becomes necessary for them to challenge January’s peak surrounding $13.94.

Should the USD/TRY prices rally beyond $13.94, the $14.00 and December 21 peak of $14.14 will be in focus.

Alternatively, pullback moves may initially aim for the 100-SMA level of $13.49, a break of which will direct the quote towards the short-term horizontal support near $13.25.

During the USD/TRY weakness past $13.25, the January 12 low near $13.16 may offer an intermediate halt to the south-run targeting the $13.00 threshold.

USD/TRY: Four-hour chart

Trend: Further recovery expected

Open interest in crude oil futures markets increased for the second session in a row on Thursday, this time by around 26.5K contracts according to flash data from CME Group. Volume followed suit and went up for the third session in a row, now by around 73.6K contracts.

WTI: Green light for a test of $100.00?

Prices of the WTI closed above the $90.00 mark per barrel for the first time since 2014 on Thursday. The moderate advance was on the back of rising open interest and volume, indicative that further gains remain in the pipeline and with the immediate target at the psychological triple-digit mark in the near term.

• Asian equities trade mixed as upbeat stock futures fail to reject bears amid hawkish central bank actions, inflation fears.
• ECB, BOE roiled equities before Amazon recalled buyers.
• Eight-year high oil prices join pre-NFP caution to test the bulls amid absence of China.
• RBA SoMP fails to propel Aussie equities, Japan’s Nikkei struggle to keep recent gains.

Asia-Pacific traders struggle to foot amid early Friday, despite firmer stock futures, as markets await US Nonfarm Payrolls (NFP).

Thursday’s hawkish central bank actions magnified inflation concerns and drowned Wall Street, as well as equities in Europe and the UK. However, the Amazon earnings beat lifted US stock futures and triggered a relief rally afterward. Even so, the pre-NFP caution and absence of major data/events during Asia kept the risk appetite weaker.

While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan copies S&P 500 Futures with 1.20% intraday gains. On the same line was Japan’s Nikkei 225, up 0.70% heading into Friday’s European session. It’s worth noting that Japan’s Finance Minister (FinMin) Shunichi Suzuki warned over the nation’s fiscal position while BOJ Governor raised concerns over inflation and helped the bulls to keep reins.

Elsewhere, Hong Kong’s Hang Seng marked a positive start to the trading week after the Lunar New Year holidays whereas equities in Australia and New Zealand remain downbeat amid inflation fears. That said, the Reserve Bank of Australia’s (RBA) quarterly Statement of Monetary Policy (SoMP) repeated the recent communication from Australia’s central bank, firstly via Rate Statement and then by Governor Philip Lowe, while rejecting the need for immediate rate hikes even as the inflation figures are strong.

Moving on, India’s BSE Sensex struggle for clear direction as heavyweights print losses whereas South Korea’s KOSPI remains on the positive side after printing the biggest daily jump in a year.

On a broader front, the US 10-year Treasury yields rose 1.8 basis points (bps) to 1.845%, bracing for the first weekly gain in three while S&P 500 Futures rise 1.14% around 4,520. Further, the WTI crude oil prices refresh eight-year high while inching closer to the $90.00 levels at the latest.

Looking forward, US Nonfarm Payrolls (NFP), expected 150K versus 199K prior, will be crucial to watch for further market direction.

Read: US Treasury bond yields stay firmer, stock futures gain too ahead of NFP

Considering advanced figures from CME Group for gold futures markets, open interest dropped for yet another session on Thursday, this time by around 2.3K contracts. Volume, instead, reversed the recent weakness and increased by nearly 50K contracts.

Gold keeps gyrating around $1,800

Thursday’s small downtick in prices of gold was in tandem with shrinking open interest, ruling out a deeper pullback at least in the very near term. That said, the precious metal could now extend the consolidation around the $1,800 mark per ounce troy, while decent support emerges in the $1,780 zone so far.

• AUD/USD eases from intraday high but braces for biggest weekly gains in two months.
• Receding bullish bias of MACD, immediate resistance line tests bulls.
• 200-SMA adds to the upside filters, sellers need validation from 50-SMA.

AUD/USD struggles to extend recent gains, retreats from daily tops around 0.7150 heading into European session on Friday.

Even so, the risk barometer pair remains on the way to post the biggest weekly run-up since early December 2021.

A downward sloping trend line from January 23 restricts immediate AUD/USD upside around 0.7155 as the MACD line eases inside the bullish territory, suggesting the buyer’s easing strength.

However, the 50-SMA level near 0.7095 puts a floor under the prices ahead of 23.6% Fibonacci retracement (Fibo.) of January 13-28 downside, near 0.7048.

Meanwhile, the quote’s weakness past 0.7048 will take a stop around the 0.7000 psychological magnet before directing the quote towards January’s bottom of 0.6966.

Alternatively, a clear upside break of 0.7155 hurdle will aim for the 61.8% Fibo. level near 0.7180. Though, the AUD/USD bulls will need validation from the 200-SMA level surrounding 0.7185-90, to keep reins afterward.

Overall, AUD/USD may witness a pullback but the bears require caution before taking fresh entries.

AUD/USD: Four-hour chart

Trend: Pullback expected

• GBP/USD retreats from intraday high, stays firmer for the sixth consecutive day around fortnight top.
• Fears of UK PM Johnson’s sacking, German official’s warning to Britain and Northern Ireland’s halt to Brexit checks probe bulls.
• BOE announced 0.25% rate hike to battle inflation, US data came in mixed.
• DXY renews 13-day low, despite firmer yields as downbeat ADP raised expectation of sour NFP, Fedspeak also weigh on greenback.

GBP/USD struggles to cheer US dollar weakness around a two-week top near 1.3600 ahead of Friday’s London open. That said, the cable pair eases from an intraday high of 1.3615 but stays positive on a day for the sixth time by the press time.

Having witnessed a stellar show of the Bank of England’s (BOE) rate hike, GBP/USD bulls face challenges from the UK politics and Brexit concerns as markets prepare for the monthly US jobs report. Also challenging the cable pair buyers is the bumpy technical road to the north.

“Cabinet Ministers believe there is ‘50/50’ chance that Boris Johnson will be forced out of office after four of his most senior aides quit Downing Street and his Chancellor publicly rebuked him,” said the Times while conveying political hardships for UK PM Johnson during early Friday morning in Asia.

It’s worth noting that UK Chancellor Rishi Sunak was cited as rebuking PM Johnson due to his claims that Labour Party Leader Sir Keir Starmer was responsible for not prosecuting the pedophile Jimmy Savile.

Elsewhere, Northern Ireland’s halt to the checks on goods coming into the province’s ports as required under the Brexit agreement portray an escalation in the grave issue. On the same line were comments from Franziska Brantner, parliamentary state secretary in Germany's Economic Ministry, “Britain should respect post-Brexit trade rules or else face consequences,” said the German Diplomat per Reuters.

In the US, ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened the previous day. Following the data, Richmond Federal Reserve President Thomas Barkin said, “The US Federal Reserve needs to begin raising interest rates but it is too soon to say how far or fast that process will need to go to bring inflation under control.”

Against this backdrop, the US 10-year Treasury yields rose 1.8 basis points (bps) to 1.845%, bracing for the first weekly gain in three. Further, S&P 500 Futures rise 1.14% around 4,520 whereas stocks in the Asia-Pacific region are mixed of late.

Looking forward, GBP/USD traders will keep their eyes on the Brexit and political updates for intermediate clues ahead of the US employment data for January.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

GBP/USD justifies the clear upside break of the 50% Fibonacci retracement (Fibo.) of the July-December 2021 downside, as well as sustained trading beyond the 100-DMA. Also keeping the GBP/USD buyers hopeful is the firmer RSI line, not overbought, together with the MACD line that teases bulls.

That said, the quote is up for further advances towards a descending resistance line from July, close to 1.3635, as an immediate hurdle.

Alternatively, pullback moves will initially aim for the 50% Fibo. and 100-DMA, surrounding 1.3570 and 1.3510, before declining towards the latest swing low, also comprising the 23.6% Fibonacci retracement, around 1.3350.

• EUR/USD takes the bids to refresh three-week top during the six-day uptrend.
• ECB’s Lagarde showcased bullish bias, propelled rate hike concerns in 2022.
• Fed’s Barkin marks indecision over pace, length of rate hike process, US data came in mixed.
• DXY ignores firmer yields as markets fear downbeat NFP, Eurozone Retail Sales eyes as well.

EUR/USD braces for the biggest weekly gains since March 2020 with eyes on the US monthly employment data during early Friday. That said, the major currency pair refreshes a three-week high to 1.1470, up 0.35% intraday, while heading into the European session.

The quote cheers the market’s favor for ex-USD currencies, mostly the Euro and the British Pound (GBP), after the previous day’s central bank actions. Adding to the bullish impulse are the fears of downbeat US Nonfarm Payrolls (NFP), as well as mixed Fedspeak.

On Thursday, the European Central Bank (ECB) matched wide market forecasts to keep the monetary policy unchanged. However, President Christine Lagarde’s refrain to rule out the rate hike in 2022 worked as quite a hawkish shift from her December statement. On the same line was the comment stating, “Compared with our expectations in December, risks to the inflation outlook are tilted to the upside, particularly in the near term.”

Elsewhere, the US data continued to flash mixed signals ahead of the key jobs report and keep traders on the edge. US ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened the previous day.

Also, Reuters came out with the news quoting a Fed policymaker to defend the equity buyers, also backed by tech giants. “The US Federal Reserve needs to begin raising interest rates but it is too soon to say how far or fast that process will need to go to bring inflation under control, Richmond Federal Reserve President Thomas Barkin said Thursday,” per Reuters.

It should be noted that the strongest bullish bias of the options market, as per the one-month risk reversal (RR) on EUR/USD, is a measure of the spread between the call and put prices, since May 2020 also keeps the pair buyers hopeful.

Amid these plays, the US 10-year Treasury yields rose 1.8 basis points (bps) to 1.845%, bracing for the first weekly gain in three. Further, S&P 500 Futures rise 1.14% around 4,520 whereas stocks in the Asia-Pacific region are mixed of late.

Moving on, EUR/USD traders may initially react to the Eurozone Retail Sales for December, expected 5.1% YoY versus 7.8% prior, for intermediate clues ahead of the key US jobs report. Considering the downbeat forecasts for the headline US Nonfarm Payrolls (NFP), expected 150K versus 199K prior, coupled with the negative surprise from the US ADP Employment Change for January, to -301K versus +207K forecast, EUR/USD buyers remain hopeful.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

EUR/USD bulls approach the key resistance around 1.1485-90, comprising tops marked since November 11, 2021. Given the bullish MACD signals and successful trading beyond the 100-DMA level of 1.1430, the major currency pair is likely to extend the upside momentum towards 1.1500. However, October 2021 low near 1.1525 will act as an extra test for the buyers.

• Gold seesaws around weekly tops after Thursday’s central bank actions renewed bullish bias.
• US dollar needs positive surprise from NFP to justify firmer yields, risk catalysts are important too.
• US January Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Gold (XAU/USD) returns to the buyer’s plate, after a brief disappearance, as upbeat equities join the US dollar south-run to keep the yellow metal above $1,800. Also contributing to the metal’s bullish bias is the rush towards risk-safety amid inflation fears, flagged recently by the ECB and the BOE.

In doing so, the precious metal consolidates the previous week’s losses, the heaviest weekly fall since November, with eyes on the US jobs report for January. Also important are the geopolitical fears surrounding Russia as Moscow warns the West to not escalate tensions.

Read: Gold ended January glued to $1,800. will it ever detach?

Gold Price: Key levels to watch

The Technical Confluences Detector shows that the gold price floats around a powerful resistance near $1,809, the intersection of the previous day’s high and Fibonacci 38.2% of the weekly and monthly ranges.

Should the bulls manage to conquer the stated resistance, SMA10 one-day and the first resistance on the daily Pivot Points will test the upside momentum around $1,812.

During the quote’s upside past $1,812, the second resistance on the daily Pivot Points and 161.8% Fibonacci retracement on one-day, around $1,823, will act as an intermediate halt before highlighting the last defense for the bears surrounding $1,826 that includes Fibonacci 61.8% of the weekly and monthly moves.

Alternatively, the immediate downside cushion is seen at the $1,807 level that comprises 200-DMA and SMA10 on 4H.

Following that, 100-DMA and Fibonacci 61.8% one-day will challenge the bears around $1,801.

However, major attention is given to the $1,797 level comprising Fibonacci 23.6% of the weekly and monthly trading performance.

To sum up, gold buyers keep reins but a clear upside break of $1,809 becomes necessary for further ruling.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• WTI edges higher around the levels last seen during October 2014.
• DXY refreshes 13-day low even as yields remain firmer, stock futures print gains.
• Russia blames NATO, West for escalating tensions, OPEC+ supply increase doubted.
• All eyes on US NFP, geopolitical headlines for fresh impulse.

WTI crude oil bulls achieved another landmark by fueling the commodity moves to the new multi-year high of $89.76, recently taking rounds to $89.60 during the early Friday morning in Europe.

In doing so, the black gold braces for the seventh consecutive weekly gain while poking the October 2014 levels, flagging the biggest run-up since October.

Behind the moves is the downbeat performance of the US dollar and fears of supply outage due to the geopolitical tension surrounding Russia and Ukraine. Also favoring the oil bulls are the doubt over the OPEC+ group’s latest verdict to add 400,000 barrels per day (bpd) in oil output. It’s worth noting that the Organization of the Petroleum Exporting Countries and allies led by Russia is known as OPEC+.

That said, the US Dollar Index (DXY) drop to the fresh low since January 18 during the six-day downtrend around 95.15. The greenback got widely hit as market players took a major interest in the Euro and the British Pound (GBP) after the recently hawkish monetary policy announcements from the ECB and the BOE.

On the same line was Reuters’ news saying, “Russia's President Vladimir Putin has blamed NATO and the West for increased tensions, even as he has moved thousands of troops near to Ukraine's border.” The news also highlights the OPEC+ group’s struggle to meet existing targets despite pressure from top consumers to raise production more quickly.

It’s worth noting, however, that the market’s pre-NFP mood seems to challenge the oil buyers, as yields and stock futures portray a mixed picture.

Given the downbeat forecasts for the headline US Nonfarm Payrolls, expected 150K versus 199K prior, coupled with the negative surprise from US ADP Employment Change for January, to -301K versus +207K forecast, oil buyers remain hopeful.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

Unless declining back below October 2021 high near $85.00, WTI crude oil prices are likely to rise towards an ascending resistance line from March 2021, around $91.50 at the latest.

• NZD/USD bulls all in at the 50% mean reversion mark, eyes o 0.67 the figure. 
• NFP is going to be a key eve and volatility could see NZD/USD elevated. 

As per the prior analysis, NZD/USD bulls keep on keeping on, eyes on 61.8% golden ratio around NFP, the kiwi remains in flight ahead of the Nonfarm Payrolls and is taking on a 50% mean reversion level in Asia. 

NZD/USD prior analysis

NZD/USD weekly chart, prior analysis

''A 50% mean reversion of the weekly bearish leg of its own M-formation aligns with the daily target in the low 0.67 area.''

NZD/USD Thursday New York session

The price was toying with the 50% mean reversion mark in New York. It was stated that a daily bullish close would underpin the bullish bias for a run to the 61.8% golden ratio,(0.6700), potentially to be achieved around the NFP event before the week is out. 

We did not get a close above the 50%, but a 4-hour close would be equally as positive ahead of the NFP event, as per below. 

Meanwhile, it is worth noting that a daily-W, as illustrated o the chart above, could be forming which makes the 0.6660's a potentially important supporting area. 

NZD/USD H4 chart

• GBP/JPY seesaws around two-week top, portrays nine-day uptrend.
• Key resistance, overbought RSI conditions hint at pullback moves.
• 200-SMA, two-week-old support line offers a tough nut to crack for sellers.

GBP/JPY struggles to extend the previous eight-day uptrend, retreating from an intraday high to 156.30 during Friday’s Asian session.

In doing so, the cross-currency pair justifies the overbought RSI conditions as a downward sloping trend line from January 05 challenges the bulls around 156.30.35.

It should be noted, however, that a pullback will initially aim for the 61.8% Fibonacci retracement level of January’s downturn, around 155.90.

However, a convergence of the 200-DMA and a three-week-long rising trend line, near 155.20, will challenge the GBP/JPY bears afterward.

On the contrary, an upside clearance of the 156.35 hurdle will GBP/JPY prices towards January 18 swing high near 156.90 and then to the 157.00 threshold.

In a case where GBP/JPY buyers manage to keep reins past 157.00, multiple hurdles around 157.40-50 will be crucial for a watch.

GBP/JPY: Four-hour chart

Trend: Further weakness expected

One-month risk reversal (RR) on EUR/USD, a measure of the spread between the call and put prices, braces for the biggest weekly print since May 2020, around +0.550 at the latest per data source Reuters. 

The big jump in options market catalysts could be well linked to the five-day uptrend in the daily RR, to 0.013 by the press time.

In addition to the options market signals, the European Central Bank’s (ECB) hidden acceptance for the sooner rate hikes and signals for a policy change, without giving many details though, also seem to underpin the EUR/USD bulls.

That said, the EUR/USD pair prices print a six-day uptrend to refresh the highest levels since January 14, up 0.20% around 1.1453 at the latest.

Moving on, EUR/USD pair traders will pay attention to Eurozone Retail Sales for December, expected 5.1% versus 7.8% prior, for intermediate clues ahead of the key US jobs report.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Reuters reports that the Bank of Japan Governor Haruhiko Kuroda on Friday reiterated the central bank's resolve to keep monetary policy ultra-loose to support the economy's recovery from the COVID-19 pandemic.

"In Japan, nominal wages haven't risen much. It's hard to see inflation sustainably reach our 2% target unless wages rise in tandem with prices," Kuroda told parliament.

There has been no reaction to the comments. 

Instead, the markets are fixated on the US Nonfarm Payrolls event today which is not expected to be beneficial to the greenback.

• US dollar is at the mercy of US Nonfarm Payrolls, 94.60's and 95.80's eyed

However, analysts at TD Securities argued that ''several Fed officials have already made clear that they will discount weak data as temporary. Also, we see upside risk on average hourly earnings, with an already strong trend likely to be added to by temporary Omicron effects relating to the composition of payrolls and the length of the workweek. Our 0.6% MoM estimate for hourly earnings implies 5.3% YoY, up from 4.7% YoY in December.''

• US 10-year Treasury yields snap two-week downtrend, firmer around 1.85%.
• S&P 500 Futures rise over 1.0%, Asia-Pacific markets remain lackluster.
• Pre-NFP caution joins Russia-linked headlines, inflation fears to propel yields.
• Equities seem to brace for a downtick in NFP considering ADP disappointment.

Market sentiment remains mixed as traders brace for the headline US Nonfarm Payrolls during Friday’s Asian session. The yields are up and Asia-Pacific equities drift lower but the stock futures print nice gains by the press time.

The US 10-year Treasury yields rise 1.5 basis points (bps) to 1.842%, bracing for the first weekly gain in three. Further, S&P 500 Futures rise 1.0% around 4,510 whereas stocks in the Asia-Pacific region are mostly weak, except for South Korea’s KOSPI, at the latest.

That said, the key bond coupons rally the most in a week the previous day on central bank actions and mixed US data, not to forget the escalating geopolitical tension. However, comments from Richmond Fed President Thomas Barkin seem to have challenged the bond bears.

On Thursday, the BOE raised benchmark interest rates by 0.25% whereas the ECB refrained from rejecting sooner rate hikes and rather signaled a major policy change brewing, without giving many details though.

US data continues to flash mixed signals ahead of the key jobs report and keep traders on the edge. US ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened the previous day.

Following the data release, Reuters came out with the news quoting a Fed policymaker to defend the equity buyers, also backed by tech giants. “The US Federal Reserve needs to begin raising interest rates but it is too soon to say how far or fast that process will need to go to bring inflation under control, Richmond Federal Reserve President Thomas Barkin said Thursday,” per Reuters.

Moving on, updates relating to the Russia-Ukraine tussles and inflation headlines may entertain market players before the monthly employment data from the US and Canada. Should the headline US Nonfarm Payrolls (NFP) offer a positive surprise, the market’s optimism may recall USD bulls who have been absent all the week.

Read: NFP preview & why EUR beat GBP 4-fold post ECB/BOE

• USD is in the hands of the bears in anticipation of poor NFP outcomes. 
• The bears have 95 the figure in their sights and 94.63, Jan. swing low below there. 
• 95.80 is the bulls target on a bullish surprise from NFP. 

The dollar index (DXY) fell heavily on Thursday to an over two-week low as central banks play catch-up with the Federal Reserve while, at the same time, Fed officials have dialled back uber hawkish rhetoric. 

The euro, by far, the largest component of the index, making up 57.6% of the DXY basket,  jumped against the dollar after comments from Europea Central Bank president Christine Lagarde fuelled expectations of faster monetary policy tightening.

When she was questioned over whether the ECB was "very unlikely" to raise rates this year, Lagarde said it would assess conditions very carefully and be "data-dependent". This leaves March as a key meeting where the ECB could signal an even more hawkish stance. Eurozone money markets are currently pricing an 80% chance of a 10 bps hike in June and an almost 100% chance of 40 bps of hikes by year-end, from a 90% chance of 30 bps hikes before Lagarde's press conference.

Meanwhile,  the Bank of England raised interest rates to 0.5% and nearly half its policymakers wanted a more significant increase to contain rampant price pressures. This too has weighed the DXY down. GBP makes up 11.9% of the index. However, besides the hawkishness at central banks, the US dollar has come unstuck this week from the Fed-bid.

The combination of less hawkish remarks at the start of the week from a chorus of Fed officials, weaker jobs data and a slide in ISM services from the prior month are pulling the DXY lower. Risk appetite has also come crawling back into global markets. DXY fell below 96 DXY on Thursday as a consequence.

NFP in focus

The focus will now be on Friday's Nonfarm Payroll. Payrolls likely plunged in January, but only because of temporary Omicron fallout due to the vast number of people calling in sick early last month. This would be expected to be reflected in the data.

Analysts at TD Securities argued that ''several Fed officials have already made clear that they will discount weak data as temporary. Also, we see upside risk on average hourly earnings, with an already strong trend likely to be added to by temporary Omicron effects relating to the composition of payrolls and the length of the workweek. Our 0.6% MoM estimate for hourly earnings implies 5.3% YoY, up from 4.7% YoY in December.''

The Federal Reserve is expected to look through any near term weakness in the labour market, and subsequently will hike in March regardless of tomorrow's jobs data outcome, as analysts at Brown Brothers Harriman explained. ''If labour market weakness persists for a couple of months beyond this, then the Fed will rethink its likely rate path.''

Analysts at Morgan Stanley is forecasting a 215,000 loss of jobs, a substantial downward revision to its previous forecast in what would be the first decline in the monthly US jobs report since December 2020. A Reuters survey shows economists expect 150,000 jobs were created in January

US dollar technical analysis

From a daily perspective, the slide is heavy ad there are little signs, so far, of a bottom. 95.10 could be targeted in the coming sessions, 95 the figure guards 94.63 as the Jan. swing low. 

The 15-min chart is also bearish while below 96.40/60.

On the other hand, on a surprise in the NFP report, then the hawkish sentiment will bounce back into vouge and likely propel a downtrodden USD dollar sharply higher towards 95.80

• AUD/JPY retreats from intraday high after RBA SoMP, stays mildly bid above 50-DMA.
• RBA SoMP cited policymakers’ cautious optimism despite strong inflation.
• A convergence of 100-DMA, 200-DMA becomes a tough nut to crack for bulls.

AUD/JPY eases to 82.10, consolidating weekly gains as bulls turn cautious at a fortnight high after the Reserve Bank of Australia’s (RBA) quarterly Statement of Monetary Policy (SoMP). Even so, AUD/JPY remains up 0.20% intraday while bracing for the first weekly gain in five.

RBA SoMP rejects the need for immediate rate hikes even as the inflation figures are strong. “We will not raise interest rates until inflation is consistently in the target range,” said the bank per the statement.

Read: RBA SoMP: RBA is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve

However, an impending bullish cross by the MACD line and the quote’s sustained trading above 50-DMA level of 81.94 keeps AUD/JPY buyers hopeful.

Even if the AUD/JPY prices drop below 81.94, the 23.6% Fibonacci retracement (Fibo.) of October-December 2021 downside, around 80.55, becomes strong support to watch during the pair’s further weakness.

On the contrary, a successful break of the immediate monthly resistance line, at 82.20 by the press time, will challenge a confluence of the 100-DMA and 200-DMA, also comprising the 50% Fibo. level around 82.50.

Should AUD/JPY bulls manage to cross the 82.50 hurdle, they become capable to challenge January’s high of 84.30. Though, the 61.8% Fibonacci retracement level near 83.40 may offer an intermediate halt during the rise.

AUD/JPY: Daily chart

Trend: Further upside expected

• AUD/USD pays a little heed to quarterly RBA statement, dribbles around weekly top.
• RBA SoMP said that the board is prepared to be patient, cited uncertainties surrounding inflation outlook.
• Yields stay firmer, stock futures rise amid escalating geopolitical concerns and pre-NFP lull.

AUD/USD flirts with daily tops surrounding 0.7150 following the Reserve Bank of Australia’s (RBA) quarterly Statement of Monetary Policy (SoMP). The Aussie pair refreshed weekly top the previous day before reversing from 0.7168 but is gaining 0.20% intraday by the press time of Friday’s Asian session.

RBA SoMP repeated the recent communication from Australia’s central bank, firstly via Rate Statement and then by Governor Philip Lowe, while rejecting the need for immediate rate hikes even as the inflation figures are strong. “We will not raise interest rates until inflation is consistently in the target range,” said the bank per the statement.

Read: RBA SoMP: RBA is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve

It’s worth noting that mixed concern in the market and pre-NFP caution also challenges the AUD/USD traders of late, following the volatile day due to the central bank actions and mixed US data.

On the positive side are the recently easing Aussie covid numbers and South Australia’s (SA) easing of activity restrictions. Also helping the AUD/USD prices could be the downbeat performance of the US Dollar Index (DXY) and around 1.0% daily gain of the S&P 500 Futures.

Alternatively, firmer US Treasury yields and geopolitical concerns surrounding Russia-Ukraine, as well as global inflation fears, seem to challenge the AUD/USD buyers.

Moving on, the Aussie pair traders may witness a lackluster day ahead of the US jobs report for January as markets turn cautious due to the negative surprise from US ADP Employment Change for January, to -301K versus +207K forecast.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

AUD/USD battles a fortnight-old resistance line near 0.7150 amid receding bullish bias of MACD, suggesting further grinds 50-SMA and 200-SMA on the four-hour (4H) chart, respectively around 0.7095 and 0.7185.

The RBA Monetary Policy Statement (SoMP) has been released by the Reserve bank of Australia with key notes outlined as follows:

SoMP, key notes

• Says board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.
• Says progress towards the bank's goals has been material, but significant uncertainties surround the inflation outlook.
• Says  Australia has been affected by these global inflationary pressures, but to a lesser extent than some other advanced economies.
• Says upstream cost pressures in housing construction and durable goods are expected to push underlying inflation higher in the near term, but moderate over time.
• Says if realised, staff inflation forecasts imply that the bank's policy goals would be achieved sooner than previously envisaged.
• RBA sees sees jobless rate 3.75% in year to June 2024;
• - uncertainties over labour supply as borders reopen.
• Sees trimmed mean inflation 2.75% in year to June 2024;
• - significant uncertainties surround inflation outlook.
• Sees GDP growth 2% in year to June 2024;
• - progress toward bank's goals has been `material'
• Sees wage growth 3.25% in year to June 2024;
• - pickup in aggregate wages growth likely to be only gradual.

AUD/USD update

AUD/USD Price Analysis: Bulls stay in charge but face a wall of daily resistance

The price is consolidated at this juncture and there needs to be a break of H4 structure, one way or the other, before a trend would be offering trader's an opportunity.

About the SoMP

The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negatvie (or bearish).

• USD/JPY extends previous day’s gains to consolidate weekly losses, refreshes intraday high of late.
• Japan FinMin Suzuki cites country’s severe fiscal position, Tokyo tightens activity restrictions as covid infections refresh record top.
• Hawkish central banks propelled US government bond yields ahead of the key jobs report.

USD/JPY takes the bids to refresh daily high around 115.05 while paring the weekly losses as Tokyo opens for Friday’s trading.

In doing so, the yen pair takes clues from the US Treasury yields and downbeat economic, as well as covid, conditions, at home. That said, the quote rose the most in a week the previous day after the key central banks announced hawkish bias amid inflation fears.

Recently, Japan’s Finance Minister (FinMin) Shunichi Suzuki crossed wires while saying, “Japan's underlying fiscal position has become severe.” The policymaker also mentioned that he is not considering reviewing future sales tax rates at present.

On a different page, Tokyo is under immense pressure to announce a coronavirus-led emergency as Japan, unfortunately, registered above 1,00,000 daily infections for the first time. “Tokyo unveiled on Thursday a set of new benchmarks in considering requesting a COVID-19 state of emergency, such as if the rate of hospital bed occupancy secured for patients with serious symptoms has reached a threshold of 30 to 40 percent,” said Kyodo news.

On Thursday, the BOE raised benchmark interest rates by 0.25% whereas the ECB refrained from rejecting sooner rate hikes and rather signaled a major policy change brewing, without giving many details though. The central banks’ actions propel the US Treasury yields the most in a week, also drowning the equities. It’s worth observing that the US 10-year Treasury yields rise 1.5 basis points (bps) t o1.84% at the latest whereas the S&P 500 Futures rise 1.0% despite Wall Street’s losses.

Other than the central banks, rising geopolitical tensions over Russia-Ukraine also propel US Treasury yields and the USD/JPY prices. Kyodo News recently reported that Japan mulls sending gas to Europe amid Ukraine tensions.

Talking about data, US ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened, which in turn kept the trades on their toe ahead of the key US Nonfarm Payrolls (NFP) for January.

Looking forward, USD/JPY traders will keep their eyes on the US employment details for fresh impulse.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

A successful bounce off the 50-DMA level hints at the USD/JPY upside towards the monthly resistance line near 115.55.

• USD/CAD fades the previous day’s bounce from weekly low.
• A confluence of 100-DMA, 50% Fibonacci retracement restrict short-term downside.
• Steady RSI, bullish MACD signals keep buyers hopeful.
• Previous support line, 50-DMA guards nearby advances ahead of January’s top.

USD/CAD remains pressured around 1.2680 during Friday’s Asian session, following the previous day’s U-turn from 50-DMA.  

Thursday’s pullback also marked the quote’s inability to cross the previous support line from January 19, around 1.2715.

However, a convergence of the 100-DMA and 50% Fibonacci retracement (Fibo.) of October-December 2021 upside, near 1.2620, becomes the key support to watch during the quote’s further weakness. That said, firmer RSI and MACD signals are in favor of buyers.

Hence, USD/CAD prices are likely to have a limited horizon to move during the key jobs report, between 1.2715 and 1.2620.

Should the quote drops below 1.2620, the mid-January peak near 1.2570 may entertain USD/CAD bears before directing them to the yearly low of 1.2450.

On the contrary, an upside clearance of 1.2715 resistance will direct the quote towards January’s peak of 1.2813.

USD/CAD: Daily chart

Trend: Further upside expected

• EUR/USD volatility coming up in the NFP event.
• The single currency's parabolic rally could be met with a sharp correction.

As per the prior analysis, EUR/USD Price Analysis: Bulls take on a critical hourly resistance in New York trade, the single currency moved in on the initial targets and has run with it. 

EUR/USD, weekly chart, prior analysis

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At the start of the week, the M-formation was highlighted as an upside risk which has played out and beyond neckline as follows:

We now head into the US Nonfarm Payrolls as the next likely catalyst following Thursday's hawkish twist at the European central bank and the following illustrates the landscape from a lower time frame perspective. 

EUR/USD H4 chart

The price action is parabolic and it would be expected to be followed by a sharp decline in value. The 4-hour 50% mean reversion level is compelling for the confluence it has with prior resistance near the 1.1360's. The NFP event could be the catalyst for a shift through the imbalance of Thursday's with volatility expected in and around the event.