Новини ринків

A research note from Patrick Artus of Natixis Research is out on Monday, highlighting how the lack of productivity gains for the Eurozone could be a result of structural weakness, rather than the oft-touted cyclical factors.

Eurozone productivity struggles: lack of meaningful technology investment to blame, not hiring trends

• AUD/USD oscillates in a narrow trading band around 0.6719 on Tuesday.
• The markets have priced in a 50% possibility of a rate cut in the March meeting.
• Australian Retail Sales for November are projected to rise 1.2% versus -0.2% prior.

The AUD/USD pair consolidates above the 0.6700 mark during the early Asian session on Tuesday. The speculation that the Federal Reserve (Fed) may not cut their policy rate as quickly as previously expected lends some support to the US Dollar (USD) and weighs on the pair. Investors await the US Consumer Price Index (CPI) data later this week for the near-term catalysts. At press time, AUD/USD is trading at 0.6719, gaining 0.01% on the day.

The US core Consumer Price Index (CPI) is expected to rise 0.2% MoM in December, although energy price volatility poses downside risks. The headline CPI figures for December are estimated to show an increase of 0.2% MoM and 3.2%, respectively.

The Fed Chair Powell recently highlighted inflation progress throughout 2023, fueling speculation that the FOMC may shortly consider cutting interest rates. On Monday, Fed Governor Michelle Bowman said that she now sees US monetary policy as sufficiently restrictive and signaled her willingness to support eventual interest-rate cuts as inflation eases. Expectations for an early rate cut from the FOMC are high with the market pricing in a 50% odds of a March rate cut, according to the CME Group.

On the Aussie front, the Australian Retail Sales for November will be due later on Tuesday. The figure is projected to rise 1.2% from a 0.2% drop in the previous reading. The report could influence the Reserve Bank of Australia (RBA) to maintain interest rates high for longer.

• EUR/JPY slips amid a risk-on mood, as it remains below the Ichimoku Cloud
• Further downside is seen below the Tenkan and Kijun Sen levels as the pair aims toward 156.00.
• The EUR/JPY could shift bullish if buyers reclaim 159.00.

The EUR/JPY begins the week on a lower note, posting losses of 0.17% on Monday amid a risk-on impulse. The cross-currency pair's upward move was quickly rejected at a multi-month support trendline turned resistance, opening the door for a pullback. Therefore, the pair is trading at 157.92 as Tuesday’s Asian session begins, almost flat.

The cross-pair base shifted bearish after diving below the Ichimoku Cloud (Kumo). That along with the cross of the Tenkan-Sen below the Kijun-Sen, has kept the EUR/JPY capped below the 159.00 figure. If sellers would like to extend the downtrend, they must drag prices below the Tenkan-Sen at 157.03, followed by the Kijun-Sen at 156.48, as the pair extends its losses toward 156.00.

On the other hand, if the EUR/JPY reverses its course and achieves a daily close above 158.50, that could open the door for a test of 159.00. On further strength, the pair would aim towards the bottom of the Kumo at 159.30, ahead of challenging 160.00.

EUR/JPY Price Action – Daily Chart

EUR/JPY Technical Levels

• AUD/JPY drops 0.20%, hovering near Ichimoku Cloud top, as improved market sentiment doesn't dent JPY's appeal.
• Technical setup shows a range-bound trend with immediate resistance at 97.00 and 97.39 swing high.
• Potential downside risks include breach of 96.71 (Tenkan-Sen), targeting Kijun-Sen at 95.82 and 96.00 level.

The AUD/JPY registered modest losses of around 0.20% on Monday despite market sentiment shifting positively, usually a headwind for the safe-haven status of the Japanese Yen (JPY). Consequently, the cross-pair is trading at 96.80, after hitting a daily high of 97.27.

From a technical perspective, the AUD/JPY is range-bound though slightly tilted to the upside, with the pair hovering near the top of the Ichimoku Cloud (Kumo), and above the Tenkan-Sen and the Kijun-Sen. Nevertheless, a breach of the former at around 96.71, could pave the way for challenging the latter just below the 96.00 figure, at 95.82.

Given the backdrop, the AUD/JPY first resistance level is the 97.00 figure. Followed by the January 5 swing high at around 97.39. if buyers step in and push the prices above that level, up next would be the December 27 high at 97.59, followed by the 98.00 mark.

AUD/JPY Price Action – Daily Chart

AUD/JPY Technical Levels

The Federal Reserve (Fed) Governor Bowman is speaking at the South Carolina Bankers Association 2024 Community Bankers Conference

Key quotes

Market reaction

The US Dollar Index (DXY) is trading lower on the day at 102.28, as of writing.

• The Euro rose in early Monday trading on rising market sentiment.
• Eurozone economic data managed to mostly beat already-low expectations.
• EU unemployment on the docket for Tuesday.

The EUR/USD climbed on Monday, falling just short of 1.0980 before sliding back into 1.0950 in a consolidation pattern that is becoming familiar in the early stages of 2024.

Eurozone Retail Sales for the year through November declined less than expected, falling 1.1% versus the forecast 1.5% decline, compared to October’s YoY figure of -0.8% (revised upwards from -1.2%).

The Eurozone Sentix Investor Confidence index for January rebounded from -16.8 to -15.8, while the Eurozone Consumer Confidence survey index unexpectedly rose from -15.1 to -15.0, versus the market forecast for a steady hold at -15.1.

Eurozone Retail Sales for November also slid exactly as much as investors were expecting, printing at -0.3% compared to October’s print of 0.4% (revised upwards from 0.1%).

Tuesday will see an update on the Eurozone Unemployment Rate for November, which is forecast to hold steady at 6.5%, while broader markets will be focused on Thursday’s upcoming US Consumer Price Index (CPI) inflation print.

Thursday’s US Consumer Price Index (CPI) inflation print is expected to show slight declines in the near-term core figures, but annualized headline inflation continues to prove sticky, with the CPI for the year through December forecast to tick upwards slightly from 3.1% to 3.2%. Core YoY CPI, meanwhile, is forecast to slip from 4% to 3.8%, and December’s MoM Core CPI is expected to hold steady at 0.3%.

Markets will be looking for signs that inflation will continue to ease, with some investor hopefuls looking for an increasing pace in the reduction of price growth, in order to push the Federal Reserve (Fed) into the next rate cutting cycle sooner rather than later.

EUR/USD Technical Outlook

The EUR/USD rose into 1.0980 on Monday, falling just short of the near-term level and sliding back towards 1.0950 as the pair struggles in near-term consolidation. Intraday action continues to get capped under the 200-hour Simple Moving Average (SMA) near the 1.1000 major handle.

A bullish crossover of the 50-day and 200-day SMAs near 1.0850 is building out a technical floor beneath daily candlesticks, and the near-term ceiling is parked at December’s swing high just shy of 1.1150.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels

• EUR/GBP hovers at 0.8590, experiencing a 0.17% loss as bears gain ground.
• The bulls managed to push the cross to 0.8620 earlier in the session but failed to hold the momentum.
• Indicators from the daily chart project bearish sentiment.
• The four-hour chart reinforces bearish bias with RSI nearing oversold territory.

In Monday's session, the EUR/GBP trades at 0.8589, down by 0.17%. The daily chart conveys a bearish outlook, with bears progressively gaining ground. This downbeat vibe is more apparent in the four-hour chart, where indicators are deep in negative territory.

The negative slope and territory of the Relative Strength Index (RSI) reflect that sellers dominate the current chart. This bearish trend is further reinforced by the cross's position, which is lodged below the key Simple Moving Averages (SMAs) - 20, 100, and 200-day, a clear indication that there is a significant hurdle for potential buyers as the bears have taken the reins. Furthermore, the rising red bars of the Moving Average Convergence Divergence (MACD) insinuate an ongoing bearish momentum, symbolizing a negative outlook for the bulls.

Zooming into the four-hour chart, the bearish dominance is strikingly clear. The RSI is approaching oversold levels, which often indicates an overwhelming amount of selling activity but is often followed by an upward correction. Concurrently, the rising red bars of the four-hour Moving Average Convergence Divergence (MACD) reiterates the strength of the selling momentum.

EUR/GBP technical levels

EUR/GBP daily chart

While the greenback survives just above the 102.00 region, the risk-associated complex appears to have regained its smile at the beginning of a week dominated by the upcoming release of US inflation figures measured by the CPI.

Here is what you need to know on Tuesday, January 9:

The US Dollar Index (DXY) started the week with modest losses just above the 102.00 barrier amidst investors’ preference for risk-linked assets and a corrective decline in US yields across the board.

US stocks accelerated the upside and appeared on track to challenge the record high seen earlier in the month amidst the weaker dollar and a firm appetite for the risk complex.

EUR/USD left behind Friday’s inconclusive price action and printed decent gains to the 1.0980 zone, where some initial resistance turned up. Bolstering the daily uptick in the pair emerged a tepid improvement in the Investor Confidence tracked by the Sentix Index as well as better-than-expected Retail Sales readings in the euro bloc.

GBP/USD maintained the bullish bias for the fourth session in a row, regaining the 1.2700 barrier and beyond, helped by the positive risk-on sentiment.

Declining US yields and the corrective knee-jerk in the greenback favoured the daily pullback in USD/JPY to the 143.60 region, although it reclaimed the 144.00 hurdle towards the end of the NA session.

AUD/USD added to Friday’s small recovery and navigated a volatile session, eventually regaining the 0.6700 level despite the generalized bearish performance in the commodity space.

USD/CAD could not sustain an early move just past 1.3400 the figure on Monday, eventually retreating to the mid-1.3300s against the backdrop of an incipient consolidative theme.

Gold retreated to three-week lows near $2015 per troy ounce amidst traders’ repricing of the likelihood that the Fed might extend its restrictive stance for longer, particularly in response to the December NFP prints. In the same line, Silver set aside two straight sessions of losses and revisited the area below the $23.00 mark.

• USD/JPY's 0.33% decline influenced by falling US bond yields and a weaker USD, as market anticipates US inflation report.
• Technical analysis shows bearish trend under Kijun-Sen and Ichimoku Cloud, suggesting potential further declines.
• Immediate supports at 144.00 and 143.00, while a break above 145.00 could signal an upward shift in momentum.

The USD/JPY begins the week on the back foot with the major sliding 0.33%, weighed by falling US Treasury bond yields and a soft US Dollar (USD). The lack of a catalyst on Monday keeps traders focused on the main event of the week, which is the inflation report in the US. At the time of writing, the pair is exchanging hands at 144.11.

From a technical standpoint, the daily chart suggests the pair is bearishly biased, even though it briefly tested a September 11 swing low of 145.89, though buyers were quickly rejected at that level, achieving a daily close at around 144.59 last Friday.

The USD/JPY had remained downward pressured, below the Kijun-Sen and the Ichimoku Cloud (Kumo), suggesting that the downtrend remains in place. That, along with the Chikou Span remaining in bearish territory, would keep sellers hopeful of lowering prices.

The major’s first support is seen at 144.00, followed by the Tenkan-Sen level at 143.11, ahead of the 143.00 mark. Once cleared, up next would be the 142.00 mark, followed by the December 28 swing low of 140.25.

On the other hand, if buyers lift the USD/JPY above 145.00, that will pave the way for further upside.

USD/JPY Price Action – Daily Chart

USD/JPY Technical Levels

• WTI's sharp decline triggered by Saudi price cuts to Asian markets, amidst increased oil production by some OPEC members.
• Geopolitical tensions in the Middle East initially boosted oil prices, but escalating supply eases concerns.
• US diplomatic efforts intensify in the Middle East, as conflict impacts global shipping and oil market sentiments.

West Texas Intermediate (WTI) slid more than 4% on Monday as Saudi Arabia implemented price cuts, while the Organization of Petroleum Exporting Countries (OPEC) offset supply concerns amid geopolitical tension in the Middle East. At the time of writing, the US Crude Oil benchmark exchanges hands at $72.21 per barrel, a loss of 4.63%.

US Oil benchmark dropped to $70.16 on Middle East conflict concerns

Since the beginning of the year, WTI’s rose by 2% amid risks of an escalation in the Middle East conflict between Israel and Hamas. Attacks by Yemen’s Houthis on ships in the Red Sea underpinned Oil prices.

Oil prices dived by rising supply as Crude output production increased in some countries led by Angola, offsetting continuing cuts by Saudi Arabia and other members of the OPEC. Therefore, that sparked Saudi Arabia’s price cut to Asian customers to its lowest level in 27 months, according to Reuters.

Meanwhile, the ongoing crisis in the Middle East gathered attention from the US Secretary of State Anthony Blinken, who held talks with Araba leaders on Monday to increase the efforts pushing for a diplomatic exit to the Gaza war from further spreading.

Nevertheless, the conflict is already weighing economically with rising shipping freight rates, as most ships avoid sailing through the Red Sea.

WTI Price Analysis: Technical outlook

Oil’s leg down on Monday pushed prices towards its daily low of $70.19, but sellers' failure to step in lifted Crude to the brisk of regaining $71.00, which could pave the way to test the 50-day moving averages (DMA) at $75.06. Once hurdled, the next stop would be the $76.00 figure, followed by the 200-DMA at $77.87.

• European equities saw gains to kick off the new trading week.
• Risk appetite recovering on the new week despite macro headwinds.
• German economy continues to lag in step with broader Eurozone economic conditions.

The German DAX led the charge in European equities on Monday, as investors bid up stocks and saw a healthy rebound in risk appetite after 2024 kicked things off with a retreat in market sentiment.

European economic figures on Monday were broadly better than expected as investor optimism carefully threads the needle on a positive outlook on data. Eurozone Retail Sales for the year through November declined less than expected, falling 1.1% versus the forecast 1.5% decline, compared to October’s YoY figure of -0.8% (revised upwards from -1.2%).

The Eurozone Sentix Investor Confidence index for January rebounded from -16.8 to -15.8, while the Eurozone Consumer Confidence survey index unexpectedly rose from -15.1 to -15.0, versus the market forecast for a steady hold at -15.1.

Eurozone Retail Sales for November also slid exactly as much as investors were expecting, printing at -0.3% compared to October’s print of 0.4% (revised upwards from 0.1%).

Structural economic issues continue to loom over the domestic German economy, with an aging population set to worsen an already-steep labor shortage, and the International Monetary Fund is projecting that Germany will be the only G7 country to see real economic decline in 2023.

Germany’s government budget for 2024 was rejected by Germany’s own top court last November, and Germany is scrambling to find a stopgap for a projected 17 billion Euro funding deficit for 2024.

Despite economic concerns swirling around the Eurozone’s single largest economy, European investors found reasons to buy on Monday, sending the German DAX higher by 122 points to close at €16,716.47, gaining nearly three-quarters of a percent. France’s CAC 40 index also closed up at €7,450, climbing 0.4% and gaining almost 30 points.

The Eurostoxx 600 major index also climbed around 0.4% to close up 1.8 points at €478.18. The London FTSE equity index climbed a little under five points to close at £7,694.20, a scant 0.06% higher.

DAX Technical Outlook

The German DAX etched in a third straight gain on Monday, keeping the equity index on the high end after hitting an all-time high of €16,984.44 in December.

The DAX’s current bull run kicked off from a six-month low of €14,618.09, climbing over 16% bottom-to-top.

The DAX is trading into lofty chart territory well above the 200-day Simple Moving Average (SMA) near €15,800, and a bullish crossover by the 50-day SMA is accelerating technical support at the €16,000 major handle.

DAX Daily Chart

DAX Technical Outlook

• GBP/JPY trades at 183.75 with slight losses, stopping bulls after a 2% uptick in the previous three days.
• The bulls presented battled and trimmed losses, which took the cross below the 100-day SMA.
• The daily chart uncovers flat RSI and MACD, representing a halt in the buying momentum.
• The four-hour chart shows little change in overbought conditions.

In Monday's session, the GBP/JPY softened modestly to 183.75. Despite pulling back slightly after a vigorous surge of more than 2% over recent days, the bulls seem to be catching their breath. Neutral to bullish on the daily chart, yet nearing overbought territory in the four-hour chart, the pair remains poised for additional corrections.

According to the technical indicators on the daily chart, the landscape appears somewhat idyllic for the bulls in the long term. The Moving Average Convergence Divergence (MACD) is fairly flat with green bars, indicating a neutral sentiment but with a slight bullish bias. Meanwhile, the Relative Strength Index (RSI) settles in the positive territory, preserving a tight line and suggesting a pause in recent buying momentum. Nonetheless, the pair remains well above the 20,100,200-day Simple Moving Averages (SMAs), implying that the bulls still maintain control in the wider perspective. This bullish dominance is further reinforced by the recent gains, with the pair having advanced more than 2% in the recent three days, thus indicating that buying momentum continues to hold sway over selling momentum.

Shifting to the shorter-term four-hour chart, the indicators paint a similar picture of bull's dominance, albeit with a hint of a possible slowdown. The Moving Average Convergence Divergence (MACD) portrays flat green bars, indicating a continuation of bullish sentiment, yet with a possible pause. The Relative Strength Index (RSI) remains flat within the positive territory, still near overbought conditions. Such positioning could suggest that the bulls are taking a breather, allowing for potential consolidation before the next leg upward. Thus, on a shorter time frame, the prevailing buying momentum appears to be taking a slight recess, providing a chance for sell-side action to develop, but the broader bullish bias remains intact.

GBP/JPY technical levels

GBP/JPY daily chart

Atlanta Federal Reserve (Fed) President Raphael Bostic gave some talking points about the 2024 economic outlook while attending the Atlanta Rotary Club on Monday.

Atlanta Fed President Bostic will be taking a regular seat as a voting member on the Federal Open Market Committee (FOMC) in 2024 when seats change hands at the Fed's first meeting of 2024 on January 30-31.

An alternate voting member during the 2023 Fed year, Bostic will maintain a voting presence on the FOMC through 2024, and his perspective on market conditions will carry extra weight as a key policymaker as the Fed heads into the next rate cut cycle.

Highlights: 

• Inflation has declined more than initially expected, sees two quarter-point cuts by year-end 2024.
• Short-term inflation measures, specifically three-month to six-month horizons, will matter significantly more in 2024.
• Goods inflation has returned to pre-pandemic levels, but services inflation remains stickier, falling more slowly.
• Is comfortable with the current rate level.
• The immediate goal now is to avoid a meaningful rebound in inflation, Fed will need to pay close attention.
• Fed still needs to give tight policy time to work on cooling off inflation.
• Bostic says the US is on the path to 2% inflation, goal is to remain on that path.
• Headline job number growth has been strong, but caution is needed as recent strength focuses on a relatively small section of the overall economy.

Market reaction

Fed President Bostic's remarks saw a minor uptick in the US Dollar Index (DXY), rising to 102.30 to pare back Monday's early losses, while the S&P 500 equity index is holding onto near-term gains near $4,730 to kick off the new trading week.

• The XAG/USD is rallying during the American session towards the $23.20 level with a current 0.90% increase after bottoming at $22.80.
• Still, the metal holds onto mild losses on the day.
• USD struggles to maintain the previous week's bullish momentum as risks on flows resume.
• Investors await key CPI data on Thursday to place their bets on the Fed.

In Monday's trading session, the silver prices, represented by the XAG/USD pair, took a bullish turn, trading at a higher level of around $23.15. The rally originates from a combination of a weakening Dollar and descending yields, giving silver an advantageous footing at the start of the week.

In its final meeting of 2023, the Federal Reserve recognized a dip in inflation rates and affirmed that 2024 will be free of rate hikes. The Fed even suggested a 75bps easing, leading market speculations to factor in rate cuts for March and May. In that sense, markets now await the next set of data after last week’s strong labor reports, which were offset by the disappointing ISM PMI figures, keeping afloat the dovish rhetoric.

Market attention will shift to the release of the US December Consumer Price Index (CPI) data on Thursday. Projected figures indicate an increase to 3.2% YoY, a subtle rise from prior 3.1% rates. Nevertheless, the anticipated annualized core CPI registers a slight relaxation to 3.8% from November's 4%.

Currently, US bond yields are declining. The 2-year rate stands at 4.32%, while the 5 and 10-year yields are at 3.93% and 3.97%, respectively. These lower yields bolster the appeal of non-yielding metals as the opportunity cost of holding them decreases.

XAG/USD levels to watch

The daily chart indicates that the metal portrays a bearish sentiment, reflecting a dominant selling momentum. Based on the position of the Relative Strength Index (RSI), which is on a negative slope within the negative territory, a heightened selling pressure is evident. The negative bias is further amplified by the Moving Average Convergence Divergence (MACD), which presents flat red bars, indicating that sellers maintain the upper hand, although at a decreasing rate.

When observing the Simple Moving Averages (SMAs), the price's position below the 20, 100, and 200-day SMAs, further implies that bears retain control on a broader scale.

XAG/USD daily chart

• AUD/USD remains flat after early dip, with improved market mood and speculations on Fed rate cuts impacting the USD.
• Dallas Fed President's remarks on potential rate hike contrast with declining US inflation expectations in NY Fed survey.
• Investors eye upcoming speeches by Fed officials and key Australian economic indicators, including Building Permits and Retail Sales.

The AUD/USD turned flat during the mid-North American session on Monday after hitting a daily low of 0.6677, but an improvement in traders' appetite weakened the Greenback (USD). Additionally, speculations that the US Federal Reserve (Fed) would cut rates in 2024 remain shy, a headwind for the USD. At the time of writing, the pair trades at 0.6713, almost flat.

AUD/USD hovers at around 0.6710s as market sentiment and expectations of a dovish Fed, weighs on the US Dollar

Wall Street began the week on a positive note, except for the Dow Jones, dragged lower by Boeing’s 737 Max 9 issues that grounded airplanes worldwide. Investors seem confident they would ease monetary policy during the year despite Dallas Fed President Lorie Logan's comments not to rule out another rate hike, as financial conditions had eased. She added that the US central bank should consider slowing its asset runoff.

Data-wise, the US economic docket was scarce, as the New York (NY) Fed revealed in its Survey of Consumer Expectations, which witnessed households downward, revising inflation expectations for one year, to 3%, its lowest level since January 2021. Estimates for three and five years were lowered to 2.6% from 3% and 2.5% from 2.7%, both readings lower than November’s.

Ahead of the week, the US economic docket will feature a speech by the Atlanta Fed President Raphael Bostic at around 17:30 GMT. On the Australian front, the docket will feature Building Permits and Retail Sales, both data for November on its preliminary readings.

AUD/USD Price Analysis: Technical outlook

From a daily chart perspective, the AUD/USD is neutral to upward biased, but buyers need to reclaim the 0.6800 figure so they can threaten to challenge the December 28 high of 0.6871. Once cleared, the next stop would be the 0.6900 figure. Nevertheless, if sellers’ step in and drag prices below 0.6700, look for a fall toward the confluence of the 50 and 200-day moving averages (DMAs) at around 0.6599/72, followed by the November 6 high at around 0.6523.

• Pound Sterling sees a Monday surge as investors try to recover some confidence.
• UK Retail Sales figures due on Tuesday.
• US CPI inflation print to be the pivotal datapoint of the week.

The GBP/USD is bounding higher in a risk-on market session to kick off the new week as broad-market risk appetite steps up in the US market session, pushing the US Dollar (USD) down and giving the rest of the major currencies some breathing room. 

The Pound Sterling (GBP) climbed over the 1.2750 barrier against the Greenback, but a lack of meaningful UK economic data on the calendar this week leaves the Cable at the mercy of broad-market flows as markets gear up for another round of US inflation figures due on Thursday with the release of December’s US Consumer Price Index (CPI).

The UK’s BRC Like-For-Like Retail Sales for the year ended December will print early Tuesday, slated to release at exactly 00:01 GMT. BRC Retail Sales last came in at 2.6% YoY in November, and near-term figures are unlikely to recover much ground, down from 6.5% at the same time last year.

US CPI inflation to draw investor attention

Market focus will be squarely on US inflation figures this week as investors grapple with rate cut expectations from the Federal Reserve (Fed). The big question for 2024 is when, not if, the next rate cut cycle will begin, and traders will be looking for signs of deterioration in the US economic outlook with particular emphasis on hopes for continuing price growth declines. 

Thursday’s US Consumer Price Index (CPI) inflation print is expected to show slight declines in the near-term core figures, but annualized headline inflation continues to prove sticky, with the CPI for the year through December forecast to tick upwards slightly from 3.1% to 3.2%. Core YoY CPI, meanwhile, is forecast to slip from 4% to 3.8%, and December’s MoM Core CPI is expected to hold steady at 0.3%.

GBP/USD Technical Outlook

The GBP/USD has been plagued by rough chop in recent weeks as the Pound Sterling struggles to develop momentum in either direction against the US Dollar. Monday’s US session rally sparked by a risk-on selloff in the USD sees the Cable knocking into near-term technical resistance as frequent intraday turnarounds etch in a barrier from 1.2760 to 1.2780.

Daily candlesticks emphasis the GBP/USD’s drift, but long-term bids remain supported by a bullish crossover of the 50-day and 200-day Simple Moving Averages (SMA) near 1.2550.

The immediate technical ceiling rests at December’s peak bids near 1.2830.

GBP/USD Hourly Chart

GBP/USD Daily Chart

GBP/USD Technical Levels

• The DXY Index declines toward 102.15, challenging 20-day SMA.
• Lower US Treasury yields weigh on the Greenback.
• Investors eye Wednesday’s CPI data from the last month of 2023.

The US Dollar (USD) is currently trading at the 102.15 area, seeing losses due to bulls struggling to sustain the momentum gained last week. Monday’s calendar has nothing relevant to offer, and the focus is set on the Consumer Price Index (CPI) figures from December, due on Wednesday. 

In its last 2023 meeting, the Federal Reserve (Fed) mirrored a dovish stance, welcoming moderating inflation and projecting no rate hikes in 2024 alongside a forecasted 75 bps of easing. Current market expectations predict a March rate cut and another in May, hinging on December's CPI report. This dovish posture, coupled with anticipation of impending rate cuts, contributes to a weaker US dollar as lower interest rates decrease foreign investment appeal. 

Daily digest market movers: US dollar hesitates ahead of CPI 

• The US Dollar is struggling to hold last week's gains, which closed 1% up on Friday.
• Markets await key inflation data, which is expected to have picked up in the last month of 2023. The core measure is forecasted to be 3.8% YoY.
• US Treasury yields experienced a drop, with the 2-year yield at 4.32%, the 5-year yield at 3.94%, and the 10-year yield at 3.98%, adding pressure to the USD.
• According to the CME FedWatch Tool, the Federal Reserve's easing expectations also started to adjust last week. Five rate cuts are now priced in for 2024. Investors are pricing in a hold at the upcoming January meeting but anticipate higher chances of rate cuts in March and May. 

Technical Analysis: DXY bears step in as bulls continue weak showing

The indicators on the daily chart reflect a bearish outlook for the USD. The Relative Strength Index (RSI) is currently demonstrating a negative slope in negative territory, which is backed by the bearish sentiment indicated by the Simple Moving Averages (SMAs) and the Moving Average Convergence Divergence (MACD) indicator’s rising red bars.

The index's position above the 20-day SMA while below the 100 and 200-day SMAs indicates that buying pressure is losing momentum to selling pressure in the medium and long-term time frames. This is a signal that the bears are maintaining some dominance.

Support levels: 102.10,102.00,101.80.
Resistance levels: 102.30,102.50, 102.70.

• Canadian Dollar broadly turns lower amidst Crude Oil rout.
• Canada economic data docket is thin this week.
• Crude Oil tumbles once again in choppy trading as downside pressure mounts.

The Canadian Dollar (CAD) sees downside pressures across the major currencies board on Monday, getting pushed down the charts by a backsliding Crude Oil market to kick off the second week of 2024.

Canadian International Merchandise Trade Balance and Building Permits, both slated for release on Tuesday, represent the only data showings for the Canadian Dollar on this week’s economic calendar. Markets are still adjusting after last Friday’s US Nonfarm Payrolls (NFP) print saw heavy revisions to previous periods.

Weakening economic figures are the name of the game for data points from Canada, with Tuesday’s Canadian International Merchandise Trade Balance forecast to decline from 2.97 billion to 1.8 billion for November. Meanwhile, Canadian November Building Permits are likewise expected to slip from 2.3% to 2.0%.

Daily digest market movers: Canadian Dollar softens on despondent Crude Oil demand outlook

• Another slump in Crude Oil is dragging down the Canadian Dollar on waffling Middle East barrel prices.
• Saudi Arabia slashed the prices they charge to trading partners in Asia for Saudi crude as production cuts from the Organization of Petroleum Exporting Countries (OPEC) continue to get foiled by slumping barrel demand from key oil market drivers such as China.
• US Crude Oil production continues to pump at or near record levels near 13 million barrels per day.
• The legs continue to get kicked out from underneath broad market expectations of global undersupply that has yet to materialize despite months of production cuts.
• Last Friday’s US NFP goosed market expectations of Fed rate cuts after printing well above expectations, despite a steep downside revision to previous periods’ prints. A firm employment outlook in the US makes it less likely that the Federal Reserve (Fed) will get pushed into a rate cut cycle as soon as investors were initially hoping for.
• Key US data for this week lands on Thursday with another round of the US Consumer Price Index (CPI) inflation print.
• Headline annualized US CPI inflation is expected to tick up slightly from 3.1% to 3.2% for December.
   

Technical Analysis: Canadian Dollar slides to 3-week low on soft barrel bids, USD/CAD tests 1.3400

The Canadian Dollar (CAD) saw further downside on Monday, sending the Loonie lower against all of its major currency peers. At the time of writing, the Canadian Dollar is down eight-tenths of a percent against the Japanese Yen (JPY), six-tenths of a percent against the Swiss Franc (CHF), and around four-tenths of one percent against both the Pound Sterling (GBP) and the Euro (EUR).

Canadian Dollar losses against the US Dollar (USD) remain limited on Monday, but they are still in the red as the USD/CAD pair extended to test the 1.3400 handle. The Loonie has shed 1.75% against the Greenback bottom-to-top from late December’s bottom bids near 1.3177.

The US Dollar has closed up or mostly flat against the Canadian Dollar for seven consecutive trading days, and Monday is set to chalk in an eighth consecutive loser for the CAD.

A continued upswing in the USD/CAD is set for a challenge from the near-term technical ceiling from the 200-day Simple Moving Average (SMA) just below the 1.3500 major handle, while a downside run into the 1.3200 region will see the pair testing into five-month lows below 1.3175.

USD/CAD Hourly Chart

USD/CAD Daily Chart

• EUR/USD climbs 0.24%, buoyed by softer USD amid increasing speculation of an early Fed rate cut.
• Lower US inflation expectations revealed in New York Fed Survey, alongside Dallas Fed President's remarks, influence market sentiment.
• Eurozone retail sales show a decline, while German factory orders soften; Germany's trade surplus expands, supporting the Euro.

The Euro (EUR) advances against the US Dollar (USD) in early trading on Monday as the Greenback (USD) weakens, with no fundamental reason, except for traders increasing the odds for the first rate cut of the Federal Reserve by its March meeting. At the time of writing, the EUR/USD is trading at 1.0967, gaining 0.24% after hitting a daily low of 1.0922.

EUR/USD rises above 1.0960 boosted by upbeat German data

The US economic docket is light, though the New York Fed recently revealed its Survey of Consumer Expectations. According to Reuters, “Inflation one year from now is expected to be at 3%, the lowest reading since January 2021, versus a projection of 3.4% in November.” The same report showed estimates for three years are at 2.6%, from 3% in November, while price pressures for five years ahead stood at 2.5% lower than the previous reading of 2.7%.

Over the weekend, Dallas Fed President Lorie Logan said the Fed shouldn’t rule out another rate hike due to the recent easing in financial conditions. She added the US central bank should consider the slow the pace of its balance sheet reduction.

In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value versus a basket of six other currencies, dropped 0.30% and is at 102.10, a tailwind for the EUR/USD pair, which is accelerating its uptrend toward 1.1000.

Aside from this, in the European session, the Eurozone (EU) revealed that November Retail Sales plunged -0.3% MoM as expected but trailed October’s 0.4% increase. Annually based dived sharply from -0.8% to -1.1%, less than the -1.5% projected but worse than the previous release.

In the meantime, in Germany, Factory Orders were softer, while November’s Trade Balance showed a €20.4 billion surplus vs €17.7 billion the previous month, propelled by Exports jumping by 3.7% MoM, while Imports rose by 1.9% MoM. Both figures exceeded projections.

Ahed of the week, the economic docket will feature German Industrial Production and the Unemployment Rate in the Eurozone. On the US front, the release of its Trade Balance and Federal Reserve’s officials speaking led by Michael Barr.

EUR/USD Price Analysis: Technical outlook

The major is bullishly biased, though it faces solid resistance at a multi-month support trendline turned resistance around the 1.0970/80 area. A decisive break is needed so buyers can challenge the 1.1000 figure on its way to testing last month’s high of 1.1139. On the other hand, if the EUR/USD drops below the first support level seen at 1.0950, that would exacerbate a drop towards the 1.0900 figure. Further downside is seen at the 50-day moving average (DMA) at 1.0870.

The Federal Reserve Bank of New York's latest Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation dropped to its lowest level since January 2021 at 3% in December from 3.4% in November.

Key takeaways

"Expected inflation three years ahead at 2.6% in December vs 3% in November."

"Expected inflation five years ahead at 2.5% in December vs 2.7% in November."

"Median expected home price rise unchanged at 3% in December."

"Expected earnings, spending rises at lowest level since 2021."

"Households less pessimistic on credit access, financial situation."

Market reaction

The US Dollar (USD) stays under modest selling pressure following this report. At the time of press, the USD Index was down 0.3% on the day at 102.12.

EUR/USD rallied strongly into the end of last year. Economists at MUFG Bank analyze the world’s most popular currency pair outlook for 2024.

ECB to deliver 125 bps of rate cuts by the end of this year

• Mexican Peso soars as mixed economic data from the United States, undermined the Greenback.
• Mexico’s Consumer Confidence deteriorates as households are concerned about the future economic outlook.
• USD/MXN tumbles toward 16.80 as sellers eye 2023’s low of 16.62.

The Mexican Peso (MXN) post decent daily gains of 0.31% against the US Dollar (USD) following last week’s US employment report and a light economic docket in Mexico. The USD/MXN continues to trade at around 16.82, at multi-month lows.

On Monday, data showed Mexico’s Consumer Confidence deteriorated in December, according to the National Statistics Agency known as INEGI. Across the border, last Friday’s Nonfarm Payrolls report for December depicted the labor market is in better shape than estimated. Nevertheless, in the near term, hiring could begin to slow down as business activity reported by the Institute for Supply Management (ISM) showed the Manufacturing PMI stood in recessionary territory, while the Services PMI clung to 50.7, at the brisk of turning contractionary.

Daily digest market movers: Mexican Peso remains firm, extending its gains against the US Dollar

• Mexico’s Consumer Confidence in December dropped slightly from 47.3 to 46.8 as consumers became more worried about the future economic outlook amongst households. In regard to the country’s outlook, consumers expect an economic slowdown, tough current conditions, sales of durable goods are expected to take a hit, as the poll showed.
• Last week’s economic data in the US was mixed. Although the economy added 216K jobs, exceeding forecasts, usually, it’s the latest piece of data that feels the pain of monetary policy tightening. Contrarily, the ISM Manufacturing and Services PMI usually lead the economy, and even though the Services PMI stood at expansionary territory, it is slowing faster than expected.
• On Saturday, the President of the Dallas Federal Reserve Bank, Lorie Logan, said the Fed shouldn’t rule out another rate hike due to the recent easing in financial conditions. She added the US central bank should consider the slow the pace of its balance sheet reduction.
• The recent meeting minutes from Banxico (the Central Bank of Mexico) indicate that the institution might start considering the relaxation of its monetary policy, albeit cautiously. Four members of the Governing Council emphasized the importance of being prudent in both evaluating and communicating any decisions regarding rate reductions. Meanwhile, one member voiced the opinion that it might be time to start discussing potential rate cuts.
• Last Tuesday, Mexico’s S&P Global Manufacturing PMI for December came out at 52.0, below November’s 52.5, suggesting the economy is slowing down amid Banxico’s tightening cycle.
• On Wednesday, Business Confidence in Mexico improved to 54.6 from 54.0 in November, although it failed to underpin the Mexican Peso, which remained weak during the session.

Technical analysis: Mexican Peso buyers remain in charge as the USD/MXN drifts lower

The USD/MXN resumed its downtrend, and it’s accelerating its pace toward testing last year’s low of 16.62. A breach of the 16.80 area would expose the 16.69 August 28 swing low, followed by the 2023 low of 16.62.

On the flip side, if sentiment shifts bullish on the US Dollar, the exotic pair could reclaim the 17.00 figure, followed by the 17.05 mark. Once those two resistance levels are surpassed, up next would be 17.20, followed by the convergence of the 50, 100, and 200-day Simple Moving Averages (SMAs) at the 17.29/41 area.

Also read: Mexican Peso Price Annual Forecast: Which factor would impact most in 2024, economics or politics?

USD/MXN Price Action - Daily Chart

In the US, the December inflation figures will be released on Thursday. Economists at Commerzbank analyze how the CPI report could impact the Dollar.

Dollar will quickly be back in the penalty box on weak numbers

2023 marked the third consecutive year of outsized declines in the Japanese Yen (JPY). However, 2024 may be different for the currency, according to economists at HSBC.

A capitulation of short JPY speculative positions and lifers’ FX hedging could support the JPY

The USD is steady in broad terms to start the week. Economists at Scotiabank analyze Dollar’s outlook.

Jobs data dust settles

EUR/USD holds range around 1.0950. Economists at Scotiabank analyze the pair’s outlook.

Weekly techs lean bearish

GBP/USD holds flat range. Economists at Scotiabank analyze the pair’s outlook.

Cable retains some positive momentum above 1.26

USD/CAD pressures support at 1.3390/1.3400. Economists at Scotiabank analyze the pair’s outlook. 

Gains to extend above 1.3390/1.3400

• The US Dollar trades flat after a whipsaw move on Friday. 
• Traders will focus on US inflation numbers later this week. 
• The US Dollar Index steadies around 102.00, though technical rejection on Friday points to more downturn ahead.

The US Dollar (USD) trades broadly steady on Monday after suffering a wild ride on Friday, likely hurting intraday and short-term traders. The US Dollar Index (DXY) jumped significantly higher after a strong headline number in the US Jobs report, only to fully unwind that move and sink lower on the back of very poor Employment numbers in the Institute for Supply Management (ISM) Services PMI report. Adding to the swings caused by economic data releases, traders need to revalue the US Dollar taking into account increasing geopolitical tensions and mounting expectations of interest-rate cuts by the Federal Reserve (Fed). 

On the economic front, a calm Monday is ahead with only Consumer Credit data for November due. The focus on credit numbers, loans and defaults is likely to grow in the coming months as several banks signal they are seeing more payment delinquencies. For this week, the main event will be the US inflation numbers on Thursday. 

Daily digest Market Movers: Firing at all cylinders    

• German Factory Orders are nudging up a touch in November, heading from -3.7% to 0.3% against October. Estimate was for a jump of 1.1%. This made the US Dollar jump against the Euro to the session’s high (EUR/USD session’s low).
• Tensions are building up further in the Middle East after Israel claims it discovered Chinese weaponry in a Hamas depot. 
• China's biggest construction firm Evergrande sinks 17% in Hong Kong after reports that its Vice Chairman has been detained.
• Tit-for-tat between China and the US, with China sanctioning five US defence industry companies after a US arms sale to Taiwan. 
• Dallas Fed President Lorie Logan said that the Fed should begin discussing a slowdown in its balance sheet runoff. 
• The US Treasury is taking a stab at the markets by placing a 3-month and a 6-month bill at 15:30 GMT. 
• US Consumer Credit Change for November is due to come out at 20:00 GMT, with credit expected to jump from $5.13 billion to $9 billion. 
• Equity markets are in the red across the board at the start of this week. Dow Jones futures are leading the decline, down near 0.50%.
• The CME Group’s FedWatch Tool shows that markets are pricing in a 95.3% chance that the Federal Reserve will keep interest rates unchanged at its January 31 meeting. Around 4.7% expect the first cut already to take place. 
• The benchmark 10-year US Treasury Note trades has reclaimed back the area above 4% after the wild ride on Friday. 

US Dollar Index Technical Analysis: Geopolitics counterweights rate cuts

Bets on the US Dollar look split. On the one hand, traders place bets favoring the US Dollar due to increasing geopolitical tensions in the Middle East, with ongoing headlines over the Red Sea and Chinese weaponry found in Hamas storages by Israel. On the other side, traders see reasons for quick rate cuts by the Fed after the implosion of the ISM numbers last Friday. Expect geopolitics to take over control for now, as long as new headlines point to further heightened tensions. 

In the DXY US Dollar Index, the first level on the upside is 103.00, which falls nearly in line with the descending trend line from the top of October 3 and December 8. Once broken and closed above there, the 200-day Simple Moving Average (SMA) at 103.43 comes into play. The 104.00 level might be a bit too far off, with 103.93 (55-day SMA) coming in as the next resistance on the upside.   

To the downside, the rejection on the descending trendline is giving fuel to the Greenback bears for further downturn. The line in the sand here is 101.74, the floor which held halfway through December before breaking down in the last two weeks. In case the DXY snaps this level, expect to see a test at the low near 100.80.

The Euro has given back some recent gains. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes EUR/USD outlook.

There is a lot of bad news priced in to the current level

European Central Bank (ECB) Governing Council member Boris Vujcic said on Monday that he thinks the Eurozone will be able to avoid a recession, as reported by Bloomberg.

Vujcic noted that he also expects inflation to slow gradually, adding that they are not discussing rate cuts and they probably will not do so before summer. 

Market reaction

These comments failed to help the Euro find demand during the European trading hours. At the time of press, the EUR/USD pair was virtually unchanged on the day at 1.0950.

Economists at Société Générale analyze USD/ZAR technical outlook.

Short-term bounce towards 19.14 and October high of 19.50/19.64 on the cards

• WTI Oil falls to around $71 on Monday morning.
• Saudi Arabia is offering discounts across the globe for its Crude.
• The DXY US Dollar Index holds above 102.00 as traders await US inflation figures later this week. 

Oil declined to around $71 on Monday morning after prices tried and failed to pump back above $74 last week. Headlines this morning from Saudi Arabia are pushing down prices, with state-owned Oil company Aramco offering discounts on several regions, with biggest discounts for Asia for its Oil deliveries. Markets are pricing in these price cuts, though this could be positive for Oil prices in the longer run as cheaper supply could ramp up demand. India, for example,  is already reporting another surge in demand for Oil as the country’s economy is outperforming. 

Meanwhile, the US Dollar (USD) is paring back some losses it incurred in late December. The recovery comes on the back of the latest US jobs report, which points to a still buzzing job market, though the Institute for Supply Management numbers signalled a severe slowdown ahead. The Greenback is now getting torn between safe-haven flows on the back of rising tensions in the Middle East and the Red Sea, while the other camp is betting on swift rate cuts by the Fed to avoid a recession. With US Consumer Price Index (CPI) numbers this week, traders could possibly get reassurance whether rate cuts could be around the corner or not. 

Crude Oil (WTI) trades at $71.76 per barrel, and Brent Oil trades at $76.67 per barrel at the time of writing. 

Oil News and Market Movers: Aramco keeps firesale

• OPEC+ leader Saudi Arabia is offering substantial cuts in its official Oil prices to Asia and other regions. For Asia specifically, prices are lowered to the lowest level since 2021.
• In a spillover effect, Oil-related stocks are sliding lower, with the Oil stock Index down 2%, the most since December 4. Shell fell as much as 2.5%, becoming the biggest loser  in the Stoxx 600 Index.
• India sees a sharp ramp-up in demand for Oil products with the economy booming at a record pace. Diesel consumption is swelling by 5% compared to last year. 
• Rumours in OPEC+ are pointing to some more departures of a few countries from the bloc. Countries like Gabon, Equatorial Guinea and Congo are said to be  reevaluating their participation. 

Oil Technical Analysis: One step back, two steps forward

Oil prices are declining this Monday on the back of Saudi Arabia offering discounts across the board. Although the initial move in Oil prices, which is down, is granted, the medium term could result in quite the opposite. With nations like India and other emerging markets reconfirming a boom in economic activity, demand is set to expand, while frost in Europe could mean ample demand is also coming back online in the Oil market. 

On the upside, $74 is still holding importance, although the level has become very chopped up. Once back above this, $80 comes into the picture. Still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67 level could still come into play as the next support to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply. 

US WTI Crude Oil: Daily Chart

The Pound Sterling (GBP) was the second best performing G10 currency in 2023. EUR/GBP ended the year around 0.8670. Economists at Rabobank analyze the pair’s outlook.

Market consensus is expecting EUR/GBP to drift higher this year

The Indian Rupee (INR) registered modest gains vs. the US Dollar (USD) last week. Economists at Société Générale analyze USD/INR outlook.

No reason to fret over INR depreciation

Antje Praefcke, FX Analyst at Commerzbank, analyzes USD reaction to US labour market data.

The US labor market is still relatively robust

• Retail Sales in the Euro area decreased by 0.3% in November as forecast.
• EUR/USD trades modestly lower on the day below 1.0950.

Retail Sales in the Euro area declined by 0.3% on a monthly basis in November, Eurostat reported on Monday. This reading followed the 0.4% (revised from 0.1%) increase recorded in October and came in line with the market expectation.

Other data from the Euro area revealed that the Economic Sentiment Indicator improved to 96.4 in December from 93.8 in November, while the Business Climate Index worsened to -0.45 from -0.39.

Market reaction

These data don't seem to be having a noticeable impact on the Euro's valuation. At the time of press, EUR/USD was down 0.05% on the day at 1.0935.

• Investor sentiment in the Euro area improved modestly in January.
• EUR/USD trades in negative territory below 1.0950.

Sentix Investor Confidence Index for the Eurozone edged higher to -15.8 in January from -16.8 in December.

Commenting on the survey's findings, "this is unlikely to be a turnaround" for the Euro area, Sentix said in its publication. "This is partly due to Germany, whose economy is still in recession and therefore in crisis."

Market reaction

The Euro continues to weaken against its major rivals following this data. At the time of press, the EUR/USD pair was down 0.15% on a daily basis at 1.0925.

USD/JPY traded at the highest level since mid-December on Friday. Economists at Rabobank analyze the pair’s outlook.

The BoJ is unlikely to consider a rate hike before April

On Friday, EUR/USD ended the session virtually unchanged around 1.0950. The pair stays relatively calm early Monday. Economists at ING analyze the Euro’s outlook.  

Rally above 1.10 still not looking likely

• USD/MXN moves on a downward trajectory on hawkish Banxico.
• Bank of Mexico’s latest meeting minutes suggest maintaining rates at current levels for a certain period.
• US Dollar could face challenge on improved risk appetite after mixed US data.

USD/MXN hovers around 16.88 during the European session on Monday. The USD/MXN pair faced downward pressure following the release of the latest Bank of Mexico (Banxico) minutes on Thursday, indicating concerns about the inflationary scenario in the country. The minutes suggest a challenging environment, prompting the decision to maintain interest rates at their current levels for a certain period.

Additionally, the recent moderate data from Mexico could provide relief to Banxico by alleviating the pressure for an immediate interest rate reduction. Market participants are now eagerly anticipating next week's release of Consumer Confidence and Headline Inflation data for December.

The US Dollar Index (DXY) attempts to extend its gains for the second consecutive day. However, the Greenback faces a mild challenge due to the improved risk appetite following the mixed US economic data released on Friday. The positive note came from the Nonfarm Payrolls (NFP) report, showing an increase to 216K in December, surpassing both the previous figure of 173K and the market expectation of 170K.

Moreover, the Institute for Supply Management (ISM) reported a slowdown in the services sector for the same month, with the Services Purchasing Managers Index (PMI) falling below expectations.

The mixed signals from these economic indicators highlight the challenges in assessing the overall health of the economy. Traders are likely to keep a close eye on the upcoming Consumer Price Index (CPI) data on Thursday, seeking more clarity on the US economic scenario. Economic data releases can significantly impact market sentiment and influence trading decisions, making them crucial for market participants to monitor.

Last week, Federal Reserve (Fed) Bank of Dallas President K. Lorie Logan highlighted the importance of maintaining sufficiently tight financial conditions to mitigate the risk of inflation picking back up and potentially reversing progress. This perspective aligns with the cautious approach adopted by central banks in managing economic conditions.

However, it contrasts with the sentiment expressed by Richmond Fed President Thomas Barkin last week, who expressed confidence that the economy is on track for a soft landing and emphasized that rate hikes remain a consideration.

The Dollar is back around Friday’s open levels against most G10 currencies. Economists at ING analyze Greenback’s outlook.

Diverging data leaves Dollar without clear direction

FX option expiries for January 8 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

• 1.0875 400m
• 1.0950 645m
• 1.0975 406m

- USD/JPY: USD amounts        

• 144.50 510m

- AUD/USD: AUD amounts

• 0.6620 400m
• 0.6640 702m
• 0.6725 633m
• 0.6840 708m

- USD/CHF: USD amounts       

• 0.8550 448m

• Silver meets with a fresh supply on Monday and drifts back closer to a multi-week low.
• The technical setup favours bearish traders and supports prospects for deeper losses.
• A sustained move beyond the $23.50 confluence is needed to negate the negative bias.

Silver (XAG/USD) extends Friday's retracement slide from the mid-$23.00s and continues losing ground through the early part of the European session on the first day of a new week. The white metal currently trades just below the $23.00 round figure and remains well within the striking distance of a three-week trough touched last Thursday.

From a technical perspective, last week's sustained breakdown and a subsequent failure near the very important 200-day Simple Moving Average (SMA) favours bearish traders. Moreover, oscillators on the daily chart are holding in the negative territory and are still far from being in the oversold zone. This, in turn, suggests that the path of least resistance for the XAG/USD is to the downside and supports prospects for an extension of the recent downtrend witnessed over the past week or so.

That said, it will still be prudent to wait for some follow-through selling below the multi-week trough, around the $22.70 region, before positioning for any further losses. The XAG/USD might then accelerate the fall further towards the December monthly swing low, around the mid-$22.00s, en route to the next relevant support near the $22.25 region. The downward trajectory could get extended and drag the white metal towards testing sub-$22.00 levels, or the November monthly swing low.

On the flip side, any meaningful recovery attempt might continue to confront resistance near the $23.50 confluence, comprising the 200-day SMA and a multi-month-old ascending trend-line support breakpoint. A sustained strength beyond might trigger a short-covering rally and lift the XAG/USD to the $24.00 mark, with some intermediate hurdle near the $23.80 region. Some follow-through buying will suggest that the recent corrective decline from the $24.60 region has run its course.

Silver daily chart

Technical levels to watch

Gold prices fell in India on Monday, according to data from India's Multi Commodity Exchange (MCX).

Gold price stood at 62,100 Indian Rupees (INR) per 10 grams, down INR 295 compared with the INR 62,395 it costed on Friday.

As for futures contracts, Gold prices decreased to INR 62,231 per 10 gms from INR 62,611 per 10 gms.

Prices for Silver futures contracts decreased to INR 72,112 per kg from INR 72,389 per kg.

Global Market Movers: Comex Gold price is pressured by uncertainty over early Fed rate cuts

• Investors further scale back their expectations for an imminent shift in the Federal Reserve's policy stance following the release of a robust December monthly US jobs report on Friday.
• The US economy added 216K new jobs last week as compared to 170K expected, while the unemployment rate held steady at 3.7% vs. consensus estimates for an uptick to 3.8%.
• Adding to this, US Factory Orders surprised to the upside and grew more than expected in November, by 2.6%, after declining 3.4% in October (revised slightly up from -3.6%).
• Separately, the Institute for Supply Management (ISM) survey indicated that the US services sector, which accounts for more than two-thirds of the economy, slumped last month.
• The ISM's Non-Manufacturing Index dropped to 50.6 in December – the lowest reading since May – and the employment sub-component plunged to 43.3 – the lowest since July 2020.
• Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress.
• This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table.
• The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, which acts as a tailwind for the US Dollar and is seen undermining the Comex Gold price.
• The markets, however, are still pricing in a greater chance of the first interest rate cut by the Fed at the March meeting and a cumulative of five 25 basis points (bps) rate cuts for 2024.
• China's economic woes, along with an escalation of tensions in the Middle East, could lend some support to the safe-haven XAU/USD ahead of the US consumer inflation figures on Thursday.
• Lebanese militant group Hezbollah sent a barrage of rockets into northern Israel in what it called a “preliminary response” to the assassination of Hamas senior leader Saleh al-Arouri on Tuesday.
• The markets react little to an agreement between House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer on topline spending level, which breaks the deadlock to avoid a shutdown.

(An automation tool was used in creating this post.)

• USD/CAD gains ground as Crude oil prices decline.
• WTI price falls on Saudi’s price cuts and OPEC+ oil output increase.
• US Dollar remains silent amid improved risk appetite.

USD/CAD continues to gain ground for the second straight day, trading near 1.3380 during the European session on Monday. The Canadian Dollar (CAD) receives downward pressure against the US Dollar (USD) due to the decline in Crude oil prices.

West Texas Intermediate (WTI) price undergoes a retracement of its recent gains, trading lower near $73.00 per barrel, by the press time. The decline in Crude oil prices is attributed to a combination of factors, including price cuts by top exporter Saudi Arabia. Additionally, a rise in the Organization of the Petroleum Exporting Countries and its allies (OPEC+) oil output is contributing to the downward pressure on oil prices.

The US Dollar Index (DXY) remains silent near 102.40 with a negative bias, potentially influenced by the improved risk appetite after the mixed US economic data released on Friday.

US Nonfarm Payrolls (NFP) rose to 216K in December, showing improvement from the 173K reported in November and surpassing the market expectation of a rise to 170K. Additionally, Average Hourly Earnings (Year-over-Year) improved to 4.1% from the previous figure of 4.0%. The monthly index remained consistent at 0.4%, defying the expected decline of 0.3%. These positive developments reflect a robust performance in employment and wage growth, providing insights into the health of the US labor market.

In contrast to the positive developments in the job market, the Institute for Supply Management (ISM) reported a slowdown in the services sector for the same month. The Services Purchasing Managers Index (PMI) came in at 50.6, falling below the expected 52.6 and the previous figure of 52.7. This data indicates a deceleration in the services sector, raising considerations about the overall economic activity in that particular segment.

The mixed signals from different economic indicators underscore the complexity of assessing the overall health of the economy, and traders will likely eye the upcoming Consumer Price Index data on Thursday to gain more clarity on the US economic scenario.

EUR/GBP has moved down to the 0.86 level. Economists at ING analyze the pair’s outlook.

EUR/GBP can slip further this week

• NZD/USD consolidates as the US Dollar remains stable.
• A break above the nine-day EMA at 0.6261 could lead the pair to approach the 0.6300 psychological level.
• A breach below the psychological support of 0.6200 could push the pair to navigate the 38.2% Fibonacci retracement at 0.6167.

NZD/USD displays sideways movement amid a steady US Dollar (USD), trading higher around 0.6240 during the early European hours on Monday. The technical indicator, the 14-day Relative Strength Index (RSI), is positioned above the 50 level, signaling strong momentum. This suggests that the NZD/USD pair could gear up to test the major resistance at 0.6250, followed by the nine-day Exponential Moving Average (EMA) at 0.6261.

A breakthrough above the support region could lead the NZD/USD pair to explore the psychological region around 0.6300 level followed by the weekly high at 0.6329 and the major resistance at 0.6350 level.

On the downside, the GBP/USD pair could find immediate support at the psychological level of 0.6200. If this level is breached, the next level to watch is the 38.2% Fibonacci retracement at 0.6167. Further downside pressure could lead the pair to navigate toward the major support at 0.6150.

The technical analysis for the NZD/USD pair suggests a potential shift in sentiment. The placement of the Moving Average Convergence Divergence (MACD) line above the centerline, coupled with divergence below the signal line, indicates a possible move toward a bearish sentiment. Traders are likely exercising caution and closely monitoring the lagging indicator.

NZD/USD: Daily Chart:

Economists at Société Générale analyze Euro’s outlook for 2024.

Another lower cyclical EUR/USD peak?

• Factory Orders in Germany rose at a softer pace than expected in November.
• EUR/USD stays in daily range at around 1.0950.

Factory Orders in Germany rose by 0.3% on a monthly basis in November, the Bundesbank reported on Monday. This reading followed the 3.8% contraction recorded in October and came in below the market expectation for an increase of 1%. On a yearly basis, Factory Orders declined by 4.4%.

Other data from Germany revealed that Imports and Exports expanded by 1.9% and 3.7%, respectively, on a monthly basis.

Market reaction

These figures don't seem to be having a noticeable impact on the Euro's valuation in the European morning on Monday. At the time of press, EUR/USD was up 0.06% on the day at 1.0948.

• USD/CHF attracts some buyers around 0.8515 on the firmer USD.
• The upbeat US labor data on Friday weakens the Federal Reserve's (Fed) case for rate cuts.
• Traders await the Swiss Consumer Price Index for December, due on Monday.

The USD/CHF pair gains momentum during the early European trading hours on Monday. The recovery of the US Dollar (USD) and higher US Treasury bond yields lend some support to the pair. USD/CHF currently trades near 0.8515, up 0.13% on the day.

The better-than-expected US labor data on Friday weakens the Federal Reserve's (Fed) case for rate cuts. Traders are pricing in over 60% odds of rate cuts in the March meeting, according to the CME Fedwatch tool. On Friday, US Nonfarm Payrolls (NFP) grew by 216K jobs in December from 173K in November, exceeding the market consensus of 170K. Meanwhile, the Average Hourly Earnings rose 0.4% MoM, better than the estimated 0.3%, while the annual figure arrived at 4.1 YoY in December versus 4.0% prior, beating the expectation of 3.9%.

Investors will take cues from the Swiss Consumer Price Index for December, due later on Monday. The annual CPI is estimated to show an increase of 1.5% YoY from 1.4% in the previous reading, while the monthly CPI is projected to remain steady at -0.2% MoM.

The highlight of this week will be the US inflation data on Thursday. Market players project the headline Consumer Price Index (CPI) to show an increase of 3.2% YoY, while the Core CPI is estimated to ease from 4% to 3.8% YoY.

Here is what you need to know on Monday, January 8:

Investors seem to have adopted a cautious stance to start the new week. The US Dollar (USD) Index holds steady near 102.50 after snapping a three-week losing streak and US stock index futures trade in negative territory. The European economic docket will feature Retail Sales data for November on Monday, alongside consumer and business sentiment figures for December.

The USD gathered strength on Friday with the immediate reaction to December jobs data but the underlying details of the report made it difficult for the currency to carry its bullish momentum into the new week. Nonfarm Payrolls (NFP) rose by 216,000, surpassing the market expectation of 170,000 by a wide margin, and the Unemployment Rate held steady at 3.7%. However, the US Bureau of Labor Statistics announced downward revisions to November and October NFP readings, while the Labor Force Participation rate declined to 62.5% from 62.8% in December. The benchmark 10-year US Treasury bond yield stabilized above 4% after the labor market data and the USD Index gained 1% in the previous week.

Major equity indexes in Asia started the new week under bearish pressure. News of Chinese wealth manager Zhongzhi Enterprise Group filing for bankruptcy liquidation after failing to repay debt late Friday revived fears over the property sector crisis impacting the broader financial conditions. Hong Kong's Hang Seng Index fell over 2% and Shanghai Composite lost 1% on Monday.

After fluctuating wildly during the American trading hours on Friday, EUR/USD stabilized near 1.0950 and registered small losses for the week. The pair stays relatively calm early Monday and fluctuates at around weekly closing levels. 

GBP/USD closed the previous week virtually unchanged and went into a consolidation phase slightly above 1.2700 early Monday.

USD/JPY spiked to a multi-week high of 146.00 on Friday but erased its daily gains in the American trading hours. The pair stays on the back foot early Monday and trades in negative territory below 144.50. Tokyo Consumer Price Index (CPI) data for December will be released in the Asian session on Tuesday.

Gold slumped below $2,030 as US yields rallied with the immediate reaction to US jobs report on Friday. XAU/USD, however, regained its traction and closed the week near $2,050. Early Monday, the pair stays under bearish pressure and trades below $2,040.

• EUR/USD trades on a softer note amid the stronger USD. 
• The pair keeps the negative outlook unchanged below the key EMA; RSI indicator stands in bearish territory below the 50 midline.
• The critical resistance level will emerge at 1.0970; the 1.0890–1.0900 zone acts as an initial support level.

The EUR/USD pair loses ground around 1.0935 during the early European session on Monday. The downtick of the major pair is backed by a stronger US Dollar (USD) and higher US Treasury bond yields. The US labor data on Friday cast doubt on the Federal Reserve's (Fed) rate cut expectation. The US Nonfarm Payrolls (NFP) rose by 216,000 in December from 173,000 in November, better than the market expectation of 170,000.

According to the four-hour chart, the bearish outlook of EUR/USD remains intact as the major pair holds below the 50- and 100-hour Exponential Moving Averages (EMA). Additionally, the 14-day Relative Strength Index (RSI) stands in bearish territory below the 50 midline, indicating that the path of least resistance is to the downside. 

The key resistance level will emerge at 1.0970, portraying the confluence of the 50-hour EMA, the upper boundary of the Bollinger Band, and a high of January 4. The next upside barrier to watch is near a psychological round mark and a high of January 5 at 1.1000, followed by a high of January 2 at 1.1043 and a high of December 29 at 1.1080.

On the flip side, the 1.0890–1.0900 region acts as an initial support level for EUR/USD. The mentioned level is the lower limit of the Bollinger Band and a low of January 5. The additional downside filter to watch is a high of December 12 at 1.0828. Further south, the next downside stop is located near a low of December 13 at 1.0773.

EUR/USD four-hour chart

• GBP/USD tumbles to the psychological support amid a stable US Dollar.
• A break below the 14-day EMA at 1.2692 could push the pair to approach the major support at 1.2650.
• Traders would likely await the MACD to confirm the momentum before placing bets.

GBP/USD halts its three-day winning streak, trading around 1.2700 psychological level during the Asian session on Monday. The GBP/USD pair seems to face a critical juncture, with the possibility of a break below the psychological level. If this occurs, it could surpass the 14-day Exponential Moving Average (EMA) at 1.2692.

A breach below this support region might exert downward pressure on the GBP/USD pair, potentially leading it to navigate toward the major support at 1.2650. This level aligns with the 23.6% Fibonacci retracement at 1.2643, serving as a significant area to watch for potential price movements.

However, the technical indicator 14-day Relative Strength Index (RSI) is positioned above the 50 level indicating bullish momentum, suggesting an upward outlook for the GBP/USD pair.

Additionally, the technical analysis of the GBP/USD pair suggests an interesting situation with the Moving Average Convergence Divergence (MACD) indicator. The MACD line is positioned above the centerline, indicating potential bullish momentum. However, there is divergence below the signal line, suggesting a nuanced scenario. Investors might be exercising caution and awaiting confirmation from the MACD before making their bets.

On the upside, the 1.2750 level could act as the major barrier followed by the previous week’s high at 1.2771. A breach below the latter could support the GBP/USD pair to explore the region around the psychological level at 1.2800.

GBP/USD: Daily Chart

• WTI price faces challenges as Saudi has cut prices of its Arab Light Crude to Asia.
• OPEC+ oil output increased by 70,000 bpd to reach 27.88M bpd in December – Reuters Survey
• Iraq, Angola, and Nigeria reported an uptick in their export shipments of Crude oil.
• US Secretary of State Antony Blinken has warned that the Gaza conflict can spread across the region without peace efforts.

The West Texas Intermediate (WTI) price retraces its recent gains, trading lower near $73.00 per barrel during the Asian session on Monday. The decline in Crude oil prices is attributed to a combination of factors, including price cuts by top exporter Saudi Arabia.

Additionally, a rise in Organization of the Petroleum Exporting Countries and its allies (OPEC+) output, which increased by 70,000 barrels per day (bpd) in December to reach 27.88M bpd, according to a Reuters survey, is contributing to the downward pressure on oil prices.

The survey results indicate that the most significant increases, amounting to 60,000 barrels per day (bpd), came from Iraq and Angola in December. Furthermore, Nigeria also reported an uptick in the shipment of crude oil abroad during the same period. This rise in oil output is counteracting the ongoing production cuts by Saudi Arabia and other members of the OPEC+ alliance.

The survey findings highlight that Saudi Arabia has indeed lowered its production slightly, bringing it below 9M bpd. Furthermore, the country has extended a voluntary 1M bpd output cut. These deliberate measures are part of Saudi Arabia's efforts to influence global oil prices

Adding to the dynamics, Saudi Arabia announced on Sunday a reduction in the February Official Selling Price (OSP) of its flagship Arab Light crude to Asia, marking the lowest level in 27 months.

The Iran-backed Houthis escalated supply concerns last week by launching two anti-ship ballistic missiles at a container ship in the southern Red Sea en route to Israel. This provocative action adds to the geopolitical tensions in the region, particularly around maritime routes.

US Secretary of State Antony Blinken has issued a warning regarding the Gaza conflict, stating that without concerted peace efforts, the conflict has the potential to spread across the region.

• Gold price ticks lower on Monday following the post-NFP price action whipsaw.
• Elevated US bond yields act as a tailwind for the USD and exert pressure on the XAU/USD.
• A softer risk tone should help limit deeper losses as the focus shifts to the US inflation data.

Gold price (XAU/USD) staged a goodish intraday recovery of around $40 from over a two-week low touched in the aftermath of the better-than-expected monthly employment details on Friday, albeit lacked any follow-through. The momentum ran out of steam near the $2,064 region amid the uncertainty about the Federal Reserve's (Fed) rate-cut trajectory, which, in turn, held back traders from placing aggressive directional bets around the non-yielding yellow metal.

The incoming US economic data pointed to a still-resilient economy, which, along with hawkish remarks by Fed officials, dashed hopes for a more aggressive policy easing by the central bank. This remains supportive of elevated US Treasury bond yields, which act as a headwind for the US Dollar (USD) and exert downward pressure on the Gold price during the Asian session on Monday. That said, a softer risk tone might help limit losses for the safe-haven XAU/USD.

Concerns about a slow economic recovery in China, along with geopolitical risks, weigh on investors' sentiment, which is evident from a fresh leg down in the US equity futures. Traders might also prefer to wait for the release of the US consumer inflation figures on Thursday to confirm the next leg of a directional move for the Gold price. This makes it prudent to wait for strong follow-through buying before positioning for the resumption of a one-week-old downtrend.

Daily Digest Market Movers: Gold price is undermined by reduced bets for aggressive Fed rate cuts

• Investors further scale back their expectations for an imminent shift in the Federal Reserve's policy stance following the release of a robust December monthly US jobs report on Friday.
• The US economy added 216K new jobs last week as compared to 170K expected, while the unemployment rate held steady at 3.7% vs. consensus estimates for an uptick to 3.8%.
• Adding to this, US Factory Orders surprised to the upside and grew more than expected in November, by 2.6%, after declining 3.4% in October (revised slightly up from -3.6%).
• Separately, the Institute for Supply Management (ISM) survey indicated that the US services sector, which accounts for more than two-thirds of the economy, slumped last month.
• The ISM's Non-Manufacturing Index dropped to 50.6 in December – the lowest reading since May – and the employment sub-component plunged to 43.3 – the lowest since July 2020.
• Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress.
• This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table.
• The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, which acts as a tailwind for the US Dollar and is seen undermining the Gold price.
• The markets, however, are still pricing in a greater chance of the first interest rate cut by the Fed at the March meeting and a cumulative of five 25 basis points (bps) rate cuts for 2024.
• China's economic woes, along with an escalation of tensions in the Middle East, could lend some support to the safe-haven XAU/USD ahead of the US consumer inflation figures on Thursday.
• Lebanese militant group Hezbollah sent a barrage of rockets into northern Israel in what it called a “preliminary response” to the assassination of Hamas senior leader Saleh al-Arouri on Tuesday.
• The markets react little to an agreement between House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer on topline spending level, which breaks the deadlock to avoid a shutdown.

Technical Analysis: Gold price seems vulnerable, multi-week low around $2,024 area holds the key

From a technical perspective, any subsequent slide is likely to find some support near the $2,030 level ahead of Friday’s swing low, around the $2,024 area. Some follow-through selling will be seen as a fresh trigger for bearish traders and drag the Gold price to the 50-day Simple Moving Average (SMA), currently around the $2,012-2,011 area. This is followed by the $2,000 psychological mark, which if broken should pave the way for a further near-term depreciating move.

On the flip side, momentum beyond the $2,050 immediate hurdle might continue to confront stiff resistance near the $2,064-2,065 area ahead of the $2,077 zone. A sustained strength beyond the said hurdles might prompt a short-covering rally and allow the Gold price to aim back towards reclaiming the $2,100 round-figure mark. Some follow-through buying will negate any negative outlook and shift the near-term bias back in favour of bullish traders.

• GBP/USD snaps its winning streak as the US Dollar improves.
• The decline in the 2-year US yield puts pressure on the US Dollar.
• US NFP rose to 216K from 173K prior. While ISM Services PMI eased to 50.6 from the prior figure of 52.7.

GBP/USD halts its winning streak that began on Wednesday, trading around 1.2710 during the Asian session on Monday. However, the Pound Sterling (GBP) received upward support against the US Dollar (USD) on improved risk appetite after the mixed economic data from the United States (US).

The US Dollar Index (DXY) maintains a sideways movement near 102.40 with a negative bias, potentially influenced by the decline in the short-term yield on the 2-year US Treasury bond. The yield on the 2-year bond trades lower at 4.38%, by the press time.

The US Dollar experienced a volatile session on Friday, marked by fluctuations between gains and losses, driven by mixed economic data. On the positive side, the US Bureau of Labor Statistics reported a favorable development in the job market, with Nonfarm Payrolls (NFP) rising to 216K in December, surpassing both the previous figure of 173K and the market expectation of 170K.

However, the Institute for Supply Management (ISM) revealed a slowdown in the services sector for December, as the Services Purchasing Managers Index (PMI) came in at 50.6, below the expected 52.6 and the prior figure of 52.7.

Federal Reserve Bank of Richmond President Thomas Barkin expressed his views on the US labor market, stating that it is exhibiting a steady softening pattern and is unlikely to reaccelerate at this juncture. Barkin emphasized that the reacceleration of the labor market seems improbable at this point.

Lorie Logan, the president of the Federal Reserve Bank of Dallas, has weighed in on the monetary policy landscape, stating that a rate hike should not be dismissed considering the recent easing in financial conditions. Her emphasis on avoiding premature easing to prevent a potential stimulation of demand reflects the delicate balance central banks strive to maintain.

The recent upbeat economic indicators from the United Kingdom (UK) likely contributed to the British Pound's (GBP) positive performance. The UK Consumer Credit data revealed an improvement in individuals' borrowing in November. Furthermore, the S&P Global/CIPS Composite PMI for December exhibited positive signs, with an increase in Services PMI.

The GBP might face selling pressure due to a pessimistic economic outlook. Investors appear to anticipate challenging decisions for Bank of England (BoE) policymakers, who find themselves in a difficult position between the looming recession risks in the UK economy and persistently high underlying inflation.

The call for swift action is intensifying, as corporate executives in the UK are urging the Bank of England (BoE) to lower interest rates promptly. This appeal is seen as a crucial measure to provide much-needed support to the struggling economy. The Institute of Directors Economic Confidence Index survey has added weight to these concerns, highlighting a continued decline in optimism among British directors regarding the country's economic prospects.

Investors will observe the British Retail Consortium (BRC) Like-For-Like Retail Sales due on Tuesday and Manufacturing Production on Friday to gain fresh impetus on the UK’s economic landscape.

• USD/CAD attracts some buyers on Monday and is supported by a downtick in Crude Oil prices.
• Elevated US bond yields and a softer risk tone underpin the USD and further lend some support.
• The uncertainty over the Fed’s rate cut trajectory might hold back bulls from placing fresh bets.

The USD/CAD pair ticks higher during the Asian session on the first day of a new week, albeit lacks follow-through buying and remains confined in Friday's broader trading range. Spot prices currently trade just above mid-1.3300s and seem poised to prolong the recent goodish recovery move from a five-month low touched in December.

Crude Oil prices come under some renewed selling pressure in reaction to Saudi Arabia's decision to slash the official selling price (OSP) for February-loading Arab Light to Asia to the lowest level since November 2021. This, in turn, is seen as a key factor undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair. That said, an escalation in the Israel-Hamas conflict, along with continued disruptions in shipping activity in the Red Sea, should help limit any meaningful downside for the black liquid.

Apart from this, subdued US Dollar (USD) price action might hold back traders from placing aggressive bullish bets around the USD/CAD pair and cap the upside. A robust December US jobs report released on Friday, to a larger extent, was offset by the disappointing release of the ISM Non-Manufacturing PMI, which indicated that business activity in the services sector slumped to the lowest level since May. This raises the uncertainty over the Federal Reserve's (Fed) rate cuts trajectory and fails to provide any impetus to the USD.

Meanwhile, Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress. This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table. This remains supportive of elevated US Treasury bond yields, which, along with a fresh leg down in the US equity futures, should benefit the safe-haven buck.

The aforementioned fundamental backdrop seems tilted in favour of the USD/CAD bulls and supports prospects for further gains. Market participants, however, might prefer to wait on the sidelines and look to the latest US consumer inflation figures, due on Thursday before placing fresh directional bets. In the meantime, a scheduled speech by Atlanta Fed President Raphael Bostic, along with the US bond yields and the broader risk sentiment, might influence the USD. Apart from this, Oil price dynamics should provide some impetus to the major.

Technical levels to watch

• The Japanese Yen attracts some buyers and recovers a part of last week’s heavy losses.
• Diminishing odds for an end to BoJ’s negative rates regime in January should cap gains.
• Reduced bets for aggressive Fed easing underpin the USD and lend support to USD/JPY.

The Japanese Yen (JPY) ticks higher against its American counterpart on the first day of a new week, though remains well within the striking distance of over a three-week low touched on Friday. The deadly New Year's Day earthquake in Japan dashed hopes for an end to the Bank of Japan's (BoJ) negative rates regime at this January 22-23 meeting. This, along with a stable performance around the equity markets, might continue to undermine the safe-haven JPY amid a Japanese holiday in observance of Coming-of-Age Day.

The US Dollar (USD), on the other hand, is seen drawing support from diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed). That said, Friday's mixed macro data from the United States (US) holds back the USD bulls from placing fresh bets ahead of this week's release of the latest consumer inflation figures on Thursday. Nevertheless, the aforementioned fundamental backdrop assists the USD/JPY pair to preserve last week's strong gains and trade with a positive bias during the Asian session.

Daily Digest Market Movers: Japanese Yen seems vulnerable on fading hopes of a hawkish BoJ pivot

• The Japanese Yen declined over 2% last week and recorded its worst weekly performance since June 2022 amid fading hopes for an imminent shift in the Bank of Japan's policy shift later this month.
• A robust December US jobs report further raises uncertainty over the Federal Reserve's rate cuts trajectory, which underpinned the US Dollar and lifted the USD/JPY pair to a three-week high on Friday.
• The headline NFP print showed that the US economy added 216K new jobs last week as compared to 170K expected, while the unemployment rate held steady at 3.7% vs. an uptick to 3.8% anticipated.
• The upbeat data was offset by the Institute for Supply Management (ISM) survey, which indicated that the US services sector, which accounts for more than two-thirds of the economy, slumped last month.
• The ISM's Non-Manufacturing Index dropped to 50.6 in December – the lowest reading since May – and the employment sub-component plunged to 43.3 – the lowest since July 2020 – from 50.7 in November.
• Separately, US Factory Orders increased more than expected in November, by 2.6% after declining 3.4% in October, though did little to impress the USD bulls or provide any meaningful impetus.
• The data suggested that the world's largest economy showed pockets of weakness, though remained resilient overall, forcing investors to scale back bets for more aggressive easing by the Federal Reserve.
• Adding to this, Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress.
• This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table.
• The markets, however, are still pricing in a greater chance of the first interest rate cut by the Fed at the March policy meeting and a cumulative of five 25 basis points (bps) rate cuts for 2024.
• This is holding back the USD bulls from positioning for any further appreciating move and keeps a lid on the USD/JPY pair as the focus now shifts to the US consumer inflation figures on Thursday.
• An agreement on a topline spending level has been reached by House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer, breaking the deadlock to avoid a government shutdown.

Technical Analysis: USD/JPY retreats further from a multi-week high, trades below 38.2% Fibo. level

From a technical perspective, Friday's failure near the 50% Fibonacci retracement level of the November-December downfall warrants caution for bullish traders. Moreover, oscillators on the daily chart – though recovered from the bearish territory – are yet to confirm a positive bias. Hence, it will be prudent to wait for some follow-through buying beyond the multi-week high, around the 146.00 mark, before positioning for an extension of the USD/JPY pair's recent recovery from the 140.25 region, or a multi-month trough touched in December. The subsequent move up has the potential to lift spot prices beyond the 146.55 intermediate hurdle, towards reclaiming the 147.00 mark en route to the 147.40-147.45 confluence, comprising the 61.8% Fibo. level and the 100-day Simple Moving Average (SMA).

On the flip side, the 144.00 mark is likely to protect the immediate downside ahead of Friday's swing low, around the 143.80 region, and the 200-day SMA, currently pegged near the 143.25 zone. A convincing break below the latter might shift the near-term bias back in favour of bearish traders and make the USD/JPY pair vulnerable to test the next relevant support near the 142.35-142.30 horizontal zone before eventually dropping to the 142.00 round figure. The downward trajectory could get extended further towards the 141.75 support en route to the 141.00 mark and the multi-month low, around the 140.25 region.

• NZD/USD trades in positive territory for the second consecutive day above the mid-0.6200s on Monday.
• The US labor data on Friday helped weaken the case for rate cuts from the Federal Reserve (Fed).
• The stronger Chinese economic data last week has lifted the New Zealand Dollar (NZD).

The NZD/USD pair gains traction during the early Asian session on Monday. The uptick of the pair is bolstered by the softer US Dollar (USD) across the broad. The US inflation data, as measured by the Consumer Price Index (CPI) on Thursday, might offer hints about additional evidence of price pressures. At press time, NZD/USD is trading at 0.6256, gaining 0.19% on the day.

The upbeat US labor data on Friday helps weaken the case for rate cuts from the Federal Reserve (Fed). Traders have moved to bet on five or six rate cuts by the Fed over the course of the year. They are now pricing in a 75% odds of the first cut in March, having fully priced in such a move at the end of last year. US Nonfarm Payrolls (NFP) increased by 216,000 jobs in December from 173,000 in November, above the market consensus of 170,000, the US labor data showed on Friday.

Furthermore, the Unemployment Rate was unchanged at 3.7%. The Average Hourly Earnings climbed 0.4% MoM, better than 0.3% expected, while the annual figure came in at 4.1 YoY in December versus 4.0% in the previous reading, above the consensus of 3.9%.

On the Kiwi front, the stronger-than-expected Chinese economic data last week has boosted the China-proxy New Zealand Dollar (NZD) and acts as a tailwind for NZD/USD. Traders will take more cues from the Chinese data, due later this week. The December Chinese Producer Price Index (PPI) and Consumer Price Index (CPI) will be released on Friday. The upbeat data could provide more support for the Kiwi against the US Dollar.

Market players will focus on the New Zealand Building Permits on Tuesday ahead of the US CPI reports on Thursday. On Friday, the attention will shift to the Chinese CPI and PPI figures. Traders will take cues from these reports and find trading opportunities around the NZD/USD pair.

• Australian Dollar improves on subdued US Dollar.
• Australian Retail Sales is anticipated to increase by 1.2% against the previous decline of 0.2%.
• Chinese wealth manager Zhongzhi has filed for bankruptcy liquidation.
• US Nonfarm Payrolls rose to 216K from the previous figure of 173K.
• ISM Services PMI eased at 50.6 against the expected 52.6 and 52.7 prior.

The Australian Dollar (AUD) trades higher against the US Dollar (USD) on Monday, extending its gains after a volatile session on Friday. This was influenced by mixed economic data from the United States (US). Despite a robust US employment report, concerns linger over weaker business activity in the services sector, prompting investors to approach the economy's outlook with caution.

Australia's upcoming Retail Sales (MoM) data for November is due on Tuesday, expected to show a 1.2% increase from October's 0.2% decline, could influence the Reserve Bank of Australia (RBA) policymakers to maintain elevated interest rates for an extended period. However, the recent Judo Bank Purchasing Managers Index (PMI) data revealed a contraction in business activities in both services and manufacturing sectors, which might have underscored the vulnerability of the Australian Dollar.

Chinese wealth manager Zhongzhi Enterprise Group has filed for bankruptcy liquidation, facing a staggering $64 billion in liabilities. As a major player in China's $3 trillion shadow banking sector, its financial struggles could indicate contagion from the broader property debt crisis into the financial sector. This event will likely negatively impact the Aussie Dollar (AUD), given the close economic ties between China and Australia.

The US Dollar Index (DXY) moves sideways with a negative bias, possibly influenced by the decline in the short-term yield on the 2-year US Treasury bond. On Friday, the US Dollar lurched with fluctuations between gains and losses, which can be attributed to mixed US data.

US Bureau of Labor Statistics indicated a positive development in the job market. Nonfarm Payrolls rose to 216K in December, showing an improvement from the 173K reported in November. This figure surpassed the market expectation, which anticipated a rise of 170K. Furthermore, Average Hourly Earnings (YoY) improved to 4.1% from 4.0% prior. Meanwhile, the monthly index remained consistent at 0.4% against the expected decline of 0.3%.

The Institute for Supply Management (ISM) revealed the services sector slowed in December, as the Services Purchasing Managers Index (PMI) came in at 50.6 against the expected 52.6 and 52.7 prior. While the Services Employment Index reduced to 43.3 from the previous reading of 50.7.

The president of the Federal Reserve Bank of Dallas, Lorie Logan, provided insights on Saturday, suggesting that a rate hike should not be ruled out given the recent easing in financial conditions. She emphasized the importance of avoiding premature easing, which could stimulate demand. Maintaining sufficiently tight financial conditions is seen as crucial to managing the risk of inflation picking back up and potentially reversing progress.

Daily Digest Market Movers: Australian Dollar improves on subdued US Dollar

• Australia Judo Bank Services PMI reported a reading of 47.1, falling short of market expectations that it would remain consistent at 47.6. The Composite PMI decreased to 46.9 from the previous figure of 47.4.
• Australia’s Judo Bank Manufacturing PMI indicated a modest contraction in manufacturing activity, declining to 47.6 in December from the previous reading of 47.8.
• China Caixin Services PMI rose to 52.9 in December, exceeding the 51.6 expected and 51.5 prior.
• US ADP Employment Change added 164K new positions, surpassing the previous figure of 101K and the market expectation of 115K.
• US Initial Jobless Claims for the week ending on December 29 displayed positive signs for the labor market, decreasing to 202K from the previous 220K, beating the anticipated 216K.
• US S&P Global Composite PMI for December reported a minor dip in business activities, registering a reading of 50.9 compared to the market consensus of a steady 51.0.

Technical Analysis: Australian Dollar hovers below the major barrier at 0.6750

The Australian Dollar trades near 0.6730 on Monday, with a barrier at the nine-day Exponential Moving Average (EMA) at 0.6748 aligned with the major resistance at the 0.6750 level. A successful breakthrough above the latter could pave the way for the AUD/USD pair to challenge the psychological barrier at 0.6800. On the downside, the 23.6% Fibonacci retracement at 0.6725 acts as the immediate support followed by the psychological level at 0.6700. A break below the psychological level could push the AUD/USD pair to retest the major support at 0.6650 and the 38.2% Fibonacci retracement level at 0.6637.

AUD/USD: Daily Chart

On Monday, the People’s Bank of China (PBoC) sets the USD/CNY central rate for the trading session ahead at 7.1006 as compared to Friday's fix of 7.1029 and 7.1499 Reuters estimates.

• EUR/USD holds positive ground near 1.0948 despite the rebound of USD.
• US Nonfarm Payrolls (NFP) increased by 216,000 jobs in December from 173,000 in November.
• German Retail Sales for November came in worse than expected, falling to 2.4% YoY vs. a -0.1% drop prior.
• German Trade Balance and Eurozone Retail Sales for November are due later on Monday.

The EUR/USD pair attracts some buyers during the early Asian session on Monday. The major pair bounces off the multi-week lows of 1.0876 and hovers around 1.0948, up 0.09% on the day.

The Federal Reserve's (Fed) pivot is supported by a moderating of inflation but not necessarily by aggressive rate cuts. Investors will take more cues from the US inflation data on Thursday for additional evidence of price pressures. The market estimated the headline Consumer Price Index (CPI) to show an increase of 3.2% YoY, while the Core CPI is forecast to ease to 3.8% YoY.

The US labor data on Friday cast doubt on the expectations of the financial markets that the Fed would begin interest rate cuts in March. The Labor Department revealed on Friday that US Nonfarm Payrolls (NFP) increased by 216,000 jobs in December from 173,000 in November, above the market consensus of 170,000.

Investors will focus on the November Eurozone Retail Sales on Monday, which is projected to show -0.3% MoM versus 0.1% in October, while the annual rate is expected at -1.5% from -1.2% in October. Nonetheless, the downbeat German Retail Sales last week point to downside risks here.

On Friday, the German Retail Sales for November came in worse than expected, falling to 2.4% YoY from a 0.1% drop in the previous reading. The monthly figure arrived at -2.5% MoM versus 1.1% prior. Additionally, the Eurozone Harmonized Index of Consumer Prices for December grew 2.9% YoY from the previous reading of 2.4%, while the Core figure rose 3.4% YoY versus 3.6% prior. Both figures were weaker than the estimation.

Market participants will keep an eye on the German Trade Balance and Eurozone Retail Sales for November, due on Monday. Later this week, the US Consumer Price Index (CPI) will be released on Thursday, and the US Producer Price Index (PPI) for December will be due on Friday. These data could give a clear direction to the EUR/USD pair.

The Federal Reserve (Fed) Bank of Dallas President Lorie Logan said on Saturday that the central bank may need to continue raising its short-term policy rate to keep a recent decline in long-term bond yields from rekindling inflation.

Key quotes

Market reaction

The US Dollar Index (DXY) is trading lower on the day at 102.45, as of writing.