Notes from a slow year-end morning

By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank 

The last PCE print for the US was perfect. Core PCE, the Federal Reserve's (Fed) favourite gauge of inflation, printed 0.1% advance on a monthly basis – it was softer than expected, core PCE fell to 3.2% on a yearly basis – it was also softer than expected, and core PCE fell to 1.9% on a 6-month basis, and that's below the Fed's 2% inflation target.  

Normally, you wouldn't necessarily cheer a slowdown in 6-month inflation but because investors are increasingly impatient to see the Fed cut its interest rates, all metrics are good to justify the end of the Fed's policy tightening campaign. So here we are, cheering the fact that the 6-month core PCE fell below the Fed's 2% target in November. The US 2-year yield is preparing to test the 4.30% to the downside, the 10-year yield makes itself comfy below the 4% mark – and even the 3.90% this morning, and the stocks joyfully extend their ral

Tension Beetween Ukraine And Russia Definetely Shaped News In Recent Days

USDCAD, EURJPY, CADJPY, AUDJPY and other pairs highlighted in today's analysis by Jason Sen

Jason Sen Jason Sen 10.12.2021 11:29
Video analysis: AUDJPY shorts at 8155/75 worked perfectly with a high for the day here & a dip to 8090 EURJPY shorts at strong resistance at 128.80/129.00 worked perfectly with a high for the day here & a 100 pip profit on the slide to 128.00/127.90 for profit taking. In fact we saw a low for the day here. CADJPY reversed to strong support at 8910/8890 with a low here as I write this morning. Try longs with stop below 8870. USDCAD longs at 1.2645/35 worked on the bounce to targets of 1.2665 & 1.2690/1.2700. Now we have shorts at 1.2715/25. EURUSD we were short again at resistance at 1.1350/70 yesterday with a potential 70 pp profit on the slide to 1.1280. GBPUSD second chance to buy in to longs at 1.3170/50 yesterday, stop below 1.3120. GBPNZD broke first support at 1.9500/1.9480 targeting 1.9425/15 & second support at 1.9380/60. A low for the day here with longs already offered up to 100 pips profit. AUDUSD level of 7140/20 now acting as support to hit the next target of 7170/80. NZDUSD shorts at 6800/10 work on the slide to 6780 for only a small potential profit yesterday. USDJPY tested strong resistance at 113.60/70 this week but over ran to 113.90 before reversing. GBPCAD beat strong resistance at 1.6745/55 to hit the next target of 1.6815/20. EURGBP first support at 8500/95, second support at 8478/74. To subscribe to this report please visit or email No representation or warranty is made as to the accuracy or completeness of this information and opinions expressed may be subject to change without notice. Estimates and projections set forth herein are based on assumptions that may not be correct or otherwise realised. All reports and information are designed for information purposes only and neither the information contained herein nor any opinion expressed is deemed to constitute an offer or invitation to make an offer, to buy or sell any security or any option, futures or other related derivatives.
GBPUSD Chart - Green Candles On The Right Hand Side, USDCAD Moved Down A Little

GBPUSD Chart - Green Candles On The Right Hand Side, USDCAD Moved Down A Little

John Benjamin John Benjamin 21.02.2022 08:53
GBPUSD tests resistance The sterling edged higher after January’s retail sales beat expectations. The recent pause has been an opportunity for the bulls to accumulate. A break above 1.3640 would signal solid buying after previous failed attempts. The daily resistance at 1.3750 would be the next hurdle. Its breach could trigger a broader reversal in the weeks to come. 1.3560 is the immediate support. And 1.3490 at the lower end of the horizontal consolidation is the second line of defense in case the pair needs to attract more support. USDCAD awaits breakout The Canadian dollar tanked after disappointing retail sales in December. The US counterpart is still struggling below the supply zone around 1.2800. A close above this daily resistance could propel the pair to last December’s high at 1.2950, a prerequisite for a bullish continuation in the medium-term. The current sideways action is a sign of indecision. 1.2640 is the lower boundary of the recent consolidation range. A bearish breakout would bring the greenback to a previous low at 1.2560. EURJPY struggles for support The Japanese yen rallies amid growing risk aversion across the board. The euro continues to shed gains from the surge earlier this month. A fall below 131.90 triggered profit-taking, and the latest rally came out to be a dead cat bounce after it was capped by this support-turned-resistance. A break below 130.40 (which sits over the 30-day moving average) shows fragility in market sentiment and would cause another round of sell-off. 129.20 at the base of the bullish impetus would be the next support.
Gold, Crude Oil And Forex Pairs - EURUSD, CADJPY, EURJPY - Jason Sen's Analysis Has Them All

Gold, Crude Oil And Forex Pairs - EURUSD, CADJPY, EURJPY - Jason Sen's Analysis Has Them All

Jason Sen Jason Sen 14.02.2022 11:21
USDJPY double top risk increases with a mildly negative candle on the weekly chart. Yen benefitting from safe haven status as war concerns increase. EURJPY had collapsed almost 300 pips at one stage on Friday from Thursday's high, in the flight to the safe haven Yen. The pair remains in a 1 year sideways trend with no other pattern to rely on. CADJPY remains very volatile in the 5 month sideways trend, making it difficult to hold a trade for a more than a few hours. Certainly cannot hold a trade over night. Update daily at 06:30 GMT Today's Analysis. USDJPY now has huge double top risk with a high for the day at the January high. If you did try a short, we broke first support at 115.70/60 to target 115.30/20 with losses as far as 115.00. On the open, holding support at 115.28/25 allows a recovery to resistance at 115.65/70. A break above 115.75 can target 116.00/10 before a retest of 116.20/30. For scalpers we have support at 115.30/20 & 114.93/88. Risking 20 pips to try to scalp a 30-40 pip profit is probably the best strategy I can suggest in these volatile conditions. Further losses however target 114.58/53 with strong support at 114.30/20. EURJPY levels for scalpers in the large, longer term sideways trend are: 131.20/30 & 131.95/132.05, 132.55/65 & 133.05/15. On the downside look out for some support at 130.70/60 & what should be strong support at 130.15/05. Longs need stops below 129.90. CADJPY should have support at 9040/30 & resistance at 9100/9110. In the middle we have a minor level at 9065/70 so I would scalp these levels if the opportunity arises. A break above 9120 can retest last week's high at 9160/70. A break below 9020 targets 8990/80, perhaps as far as 8930/20. To subscribe to this report please visit or email No representation or warranty is made as to the accuracy or completeness of this information and opinions expressed may be subject to change without notice. Estimates and projections set forth herein are based on assumptions that may not be correct or otherwise realised. All reports and information are designed for information purposes only and neither the information contained herein nor any opinion expressed is deemed to constitute an offer or invitation to make an offer, to buy or sell any security or any option, futures or other related derivatives.
Forex Pairs Analysis: EURJPY, EURUSD And GBPUSD

Forex Pairs Analysis: EURJPY, EURUSD And GBPUSD

Jason Sen Jason Sen 09.03.2022 14:56
EURJPY holding the longer term 50% Fibonacci at 124.30/25 so I was wrong not to buy here! The pair beat minor resistance at 125.60/70 for the next target & strong resistance at 126.40/50. However the strongest resistance today is at 126.90/127.10. Shorts need stops above 127.50. Holding strong resistance at 126.40/50 this morning targets 15.70/60. If we continue lower look for 125.00 before a retest of the longer term 50% Fibonacci at 124.30/25. EURUSD meets strong resistance at 1.0975/95. Shorts need stops above 1.1015. A break higher meets very strong resistance at 1.1070/90. Shorts need stops above 1.1110. Holding below 1.0910 keeps the pressure on for 1.0860/50 before a retest of important 5 year trend line support at 1.0820/00. HOWEVER WE ALSO HAVE 37 YEAR TREND LINE SUPPORT AT 107.50/00. YES YOU READ THAT RIGHT - 37 YEARS, DATING BACK TO 1985!!! MOST OF YOU WERE PROBABLY NOT EVEN BORN. (2 YEARS LATER I STARTED TRADING!!) IF THIS LEVEL WERE TO BREAK IT WOULD ONLY BE THE START OF THE EURUSD COLLAPSE. INITIALLY WE TARGET 104.000/103.50 THEN 102.00/101.70. IF THIS LEVEL BREAKS WE ARE LIKELY TO FALL EVEN FASTER THAN WE HAVE OVER THE PAST MONTH. GBPUSD best support revised a little lower to 1.3150/20 (from the weekly chart). Longs need stops below 1.3090. A sustained break lower is a very significant longer term sell signal. Initially we target 1.300 then 1.3010/00 & 1.2980/60. Longs at 1.3150/20 target 1.3175/85 then first resistance at 1.3220/30. We should struggle to beat this level here initially, but shorts may be too risky. If we continue higher look for strong resistance at 1.3300/20. To subscribe to this report please visit or email No representation or warranty is made as to the accuracy or completeness of this information and opinions expressed may be subject to change without notice. Estimates and projections set forth herein are based on assumptions that may not be correct or otherwise realised. All reports and information are designed for information purposes only and neither the information contained herein nor any opinion expressed is deemed to constitute an offer or invitation to make an offer, to buy or sell any security or any option, futures or other related derivatives.
DAX (GER 40), FTSE (UK100) And Forex Pairs: AUDJPY, EURJPY Analysis [VIDEO]

DAX (GER 40), FTSE (UK100) And Forex Pairs: AUDJPY, EURJPY Analysis [VIDEO]

Jason Sen Jason Sen 01.04.2022 09:54
AUDJPY lower as expected to test strong Fibonacci support at 9100/9080. Longs need stops below 9060. A break lower is a sell signal targeting 9000/8990 then support at 9010/8990. Our longs at 9100/9080 target 9145 & resistance at 9190/9200 for profit taking. Further gains are less likely but should target 9260/65 & perhaps as far as 9300/9320. If we unexpectedly continue higher however look for 9350/55 before a retest of what should be strong resistance at 9400/16. A break above 9430 is a buy signal. Dax finally tests support at 14350/300 for some profit taking on our shorts with low for the day exactly as predicted - longs could still be risky - if you try, stop below 14200. A break lower is the next sell signal targeting 13950/850. Minor resistance at 14540/580 but above 15610 can target strong resistance at 14750/850. Shorts need stops above 14950. FTSE outlook is more negative now. We could target first support at 7435/25 but longs here are probably risky. Best support at 7365/45. Longs need stops below 7325. Resistance at yesterday's high of 7530/50. Shorts need stops above 7570. A break higher (& weekly close above for confirmation) is a buy signal in to next week. EURJPY holding between first resistance at 135.60/50 & first support at 134.50/30, with a low for the day yesterday as predicted. Maybe we can trade this range before the NFP number today. Longs need stops below 134.10. A break lower targets 133.50/40. Shorts at 135.60/50 stop above 136.80. A break higher targets 136.25/35. Further gains today can allow a retest of this week's high at 137.40/52. A break higher can target 137.90/99.
Fluctuations Of Forex Pairs! US Dollar's Strength Against Japanese Yen Performance (USD/JPY), Jason Sen Comments On Euro To Japanese Yen (EUR/JPY) And NZD/JPY Forex Rate

Fluctuations Of Forex Pairs! US Dollar's Strength Against Japanese Yen Performance (USD/JPY), Jason Sen Comments On Euro To Japanese Yen (EUR/JPY) And NZD/JPY Forex Rate

Jason Sen Jason Sen 25.04.2022 10:11
USDJPY running out of steam in severely overbought conditions as predicted but there is no sell signal yet so I cannot suggest shorts. A break above 129.50 however targets 129.90/95 then 130.25/35, perhaps as far as 130.75/85. First support again at 127.80/70. Expect strong support at 127.10/126.90. Longs need stops below 126.70. A break lower can target 126.00. EURJPY no sell signal yet despite overbought conditions but less than positive candles for the last 3 days probably signal a consolidation ahead. Having held the next target of 139.95/99 perfectly, if we do continue higher look for 140.40/50 & 140.85/95. Minor support at 138.70/50 but below 138.30 can target 137.70/50. ON further losses look for 137.20/10 with best support at 136.50/30 this week. Longs need stops below 136.10. Read next (By Jason Sen): Can (XAUUSD) Gold Price Plunge To $1800!? Silver Price (XAGUSD) To Decrease As Well? | FXMAG.COM NZDJPY holding below 8540 is a sell signal for today targeting 8500 & perhaps as far as strong support at 8450/30. Longs need stops below 8410. First resistance at 8545/65. Shorts need stops above 8485. EURUSD holds 37 YEAR TREND LINE SUPPORT AT 1.0760/20. Longs need stops below 1.0670. Obviously there is nothing more important than this level this week. Again we must beat 1.0840/20 to target 1.0920/40. A break above 1.0960 is a buy signal targeting 1.1030/50. USDCAD messy as we trade sideways for 9 months. We are back above the February lows & the sideways 100 & 200 day moving averages. Further gains test the strongest resistance for this week at 500 day & 100 week moving average at 1.2775/85. Shorts need stops above 1.2800. A break higher should be a medium term buy signal. Read next (By Jason Sen): Euro To US Dollar (EUR To USD): That's An Amazing USD Performance, Will USDCAD (Canadian Dollar) Stay Close? USDJPY (Japanese Yen) Beats Records! | FXMAG.COM First support at 1.2660/40. Longs need stops below 1.2620 GBPCAD support at the April low of 1.6293/81 held again. Strong resistance at 1.6400/20. Shorts need stops above 1.6450. A break higher is a buy signal initially targeting 1.6530/50. A break below 1.6265 is a sell signal. Look for 1.6190/80. Please email me if you need this report updated or Whatsapp: +66971910019 – To subscribe to this report please visit or email
Forex News: EURJPY, LH setting up sellers stacking candles?

Forex News: EURJPY, LH setting up sellers stacking candles?

8 eightcap 8 eightcap 03.05.2022 10:52
Today’s focus is on the EURJPY, and for now, it’s from the sell-side. That might sound a bit strange based on the amazing buying we have been seeing in recent weeks but like everything, nothing lasts forever. Please note that we’re not calling it a trend change, but in the short term, some signs have started to stack up on the seller side. The first sign we can see is the break of the medium-term to the long-term trend. After that break, we saw a short steep counter that is typical of counter-rallies after a break lower. Currently, we can see a build-up of indecision that has formed an LH after the trend break. From 137.50 we can see plenty of supply from sellers halting any new attempt by buyers. These are, for now, all pointing to a possible push lower by sellers, but they have a few things to do before we can start thinking confirmed. First, we need to see minor support beaten to see a resumption of seller control. We would then look lower at 135.28 support and 134.60 support if that happens. If sellers can move below both of those levels, we could have a new downtrend on our hands. We have put in the forming downtrend abut we would like to see price remain inside that trend if it moved back to the support areas. If we see buyers maintain minor support and push to or through the new downtrend line, we would start thinking possible fail, and we would then move back to the drawing board with new focus on a possible retest of the April high if new HLs and HHs are formed. The BOJ and the Jen will also be a focus as they drove the recent rally, and it was primarily policy-driven. Any updates from the BOJ that resume JPY weakness could also be a factor in candling out the current seller price action. EURJPY D1 Chart The post Forex News: EURJPY, LH setting up sellers stacking candles? appeared first on Eightcap.
The US Dollar (USD) Index May Have Created A Potential Resistance

Bearish Outlook For The EUR/USD Currency Pair, Euro & GBP Are Only Two Currencies Dominated By The US Dollar’s Strength (EUR/GBP, USD/JPY, EUR/JPY)

Rebecca Duthie Rebecca Duthie 06.07.2022 15:06
Summary: G20 summit and Fed meeting minutes. Both the Euro and the GBP have remained under pressure from the incredibly strong US Dollar. Cost-of-living-squeeze in Japan. Read next: US Dollar Hitting 19-year Highs (EUR/USD, GBP/USD), Russia Cuts Off Gas Taps (EUR/GBP), GBP/AUD Currency Pair & RBA Policy Decision  USD Could strengthen further in the coming days The market is reflecting mixed signals for this currency pair. The market outlook for the US Dollar seems bullish going forward into the coming days as the Federal reserve minutes are released and the G20 summit. If the Fed minutes reveal a hawkish attitude that surpasses market expectations, the US Dollar could be pushed even higher and could increase the greenback’s rising yield advantage against G10 and emerging market counterparts. EUR/USD Price Chart GBP & Euro Under pressure The market is reflecting bullish signals for this currency pair. Both the Euro and the GBP have remained under pressure from the incredibly strong US Dollar, the negatives for the Euro are well-known across the markets and could likely be exacerbated by two events in July. For the pound sterling, politics is at the forefront of talking in the media, however, from a traders perspective, the pound has been optimistic in terms of being affected by the current difficult situation. It seems that this is the beginning of the end for Prime Minister Boris Johnson, although the current backdrop that plagues the Pound remains unaltered. This has been evidenced by this morning’s soft construction PMI data, while comments made by BoE Chief Economist Pill were not exactly in favour of a larger hike in the Bank rate. EUR/GBP Price Chart USD dominating JPY The market is reflecting bullish signals for this currency pair. Inflation is currently showing signs of becoming more politically based in Japan in the wake of the continuing cost-of-living squeeze. Whilst the market awaits FOMC meeting minutes which could give the US Dollar more support, the rising cost of living in Japan continues to squeeze domestic households' income ahead of Japan's upper house election on Sunday. USD/JPY Price Chart EUR/JPY currency pair The market is reflecting mixed signals for this currency pair. The EUR/JPY currency pair remains at lofty level, however, the trend is being questioned. EUR/JPY Price Chart Sources:,,
The Commodities Feed: China's 2023 growth target underwhelms markets

Will Bank Of Japan Remain Committed To Its Easy Policy?

Saxo Bank Saxo Bank 20.09.2022 12:11
Summary:  More trouble may be brewing for the Japanese yen if the Fed stays hawkish this week. But a Bank of Japan pivot is still unlikely as wage inflation remains muted. The only other way for the Japanese authorities to defend the yen would be a direct intervention. However, a coordinated intervention remains unlikely and a unilateral intervention rarely has a long-lasting impact. We discuss how one could ride this in the direction of possible intervention, or on the reverse. While the key focus is on the FOMC meeting this week, let’s not forget that we also have other global central banks racing to tighten policy to get the inflation runaway train under control. Still, the Bank of Japan continues to buck the global trend, remaining committed to its yield curve control policy and keeping the 10-year yields capped at 0.25%. This has meant a widening divergence to US yields, where the 10-year has reached 11-year highs at 3.50%. This has weighed on the Japanese yen, which is now close to its 24-year lows. A hawkish FOMC this week could further push up US yields, and in turn cause more pain for the yen. The weakness in the yen is starting to hurt consumer and businesses, even as inflation in Japan remains very low compared to elsewhere. Japan’s August CPI touched the 3% mark, much higher than the BOJ’s 2% target. However, the Bank of Japan remains committed to achieving wage inflation, and is unlikely to remove accommodation just yet. The most hawkish signal we could get from the BOJ this week could be removing the dovish guidance. One of the key statements from their last meeting that we will be watching is: “[The Bank] will not hesitate to take additional easing measures if necessary; it also expects short- and long-term policy interest rates to remain at their present or lower levels.” But if we assume that the BOJ will not be ready to make any changes to their monetary policy stance or communication, there is further room for weakness in the yen. This is still possible, especially with the Fed nearing “peak hawkishness” and markets pricing in terminal rate close to 4.5%. Once the US yields peak and the US dollar tops out, pressure on the yen will ease. A sustained reversal in the Japanese yen will have to wait for a significant deterioration in the US economy, if Bank of Japan remains committed to its easy policy. But that’s unlikely to happen just yet, suggesting some more room for a weaker yen. And that will increase the possibility of intervention by the Japanese authorities. With verbal intervention to defend the yen having minimal impact, the BOJ reportedly conducted a foreign exchange check last week. This move usually involves the central bank “inquiring about trends in the foreign exchange market” and is usually seen as a precursor for a formal intervention. While direct intervention is becoming more likely, it is unlikely to be effective if done unilaterally. Direct interventions are only effective if they are done as a coordinated effort with other countries. At this juncture, when all global central banks are fighting to bring inflation under control and protect their currencies from the wrath of the US dollar, it is unlikely they would agree to an intervention to support the yen, which would in turn weaken their own currencies. That brings us two options to ride a unilateral intervention, if one was to happen: Ride the direction of the intervention, which would mean taking a position expecting the yen to strengthen. (See charts 1 and 2 below)   Ride the reversal of the intervention, which would mean entering a position just after the intervention announcement (See chart 3 below). Usually, a large chunk of the move will happen in the first 30-60 minutes of the announcement, but the previous rounds of intervention from Japanese authorities were repeated in Tokyo, London and New York hours. If you expect the move to be somewhat reversed in the days/weeks that follow, you could position for yen weakness at that point. In any case, it is worth highlighting that volatility is high and will likely pick up further if intervention happens. It might be a good idea to use stops on your positions, although liquidity conditions in fast markets do bring the risk of discontinuous pricing and slippage relative to stop levels. Source:
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The Situation Of The EUR/JPY Pair Is Quite Good | The Danmarks Nationalbank (DN) Will Follow The European Central Bank (ECB)

ING Economics ING Economics 15.10.2022 08:01
EUR/JPY Current spot: 141.16 • EUR/JPY has been holding up quite well despite the global bear market in risk assets. Our bias would be that EUR/JPY struggles to sustain a break above 145 in an environment where central banks are actively looking to slow aggregate demand. • For the European Central Bank, we are looking for a 75bp hike in October, perhaps 50bp in December and another 25bp in 1Q23. The ECB will also have to think about quantitative tightening in its Asset Purchase Programme portfolio, which may create problems for the eurozone’s peripheral bond markets. • Typically, the Japanese have been more interventionist than the eurozone and on that basis – and given the forthcoming eurozone recession - EUR/JPY risks look skewed lower the next six months. EUR/GBP Current spot: 0.8763 • Sterling has been driven by the fiscal credibility story. And it is interesting to note that the 10-year Gilt-Bund spread is struggling to narrow inside 200bp again – suggesting credibility is hard won and easily lost. • The Chancellor’s U-turn on the upper income tax bracket does little to assuage fiscal concerns. It only saves around £2bn compared to what could be £200bn of Gilt supply in FY23/24. Instead, the Chancellor will somehow need to find spending cuts or more likely tax increases – U-turn on energy windfall tax? • Clearly this is a challenging picture and combined with a difficult global environment, sterling risks remain skewed lower. EUR/NOK Current spot: 10.35 • Norway’s krone has dropped by more than 6% this past month, with its low-liquidity character leaving it highly exposed to the rocky risk environment. • A decisive turn in the krone will need to wait for a recovery in risk assets, which may only occur in the new year. The OPEC+ output cuts may suggest a slightly better outlook for oil currencies (in the crosses) into year-end, but not enough to trigger a NOK recovery at this stage. • Norges Bank should stick to the rate hikes it signalled at its latest meeting: 50bp in November, 25bp in December. There is some room for a hawkish surprise, but FX implications are small. EUR/SEK Current spot: 10.95 • Riksbank Governor Stefan Ingves recently said the Bank must keep a comfortable distance to the ECB with rate hikes, not least because the Bank is explicitly seeking a stronger krona. • In practice, rate hikes may still prove largely ineffective to strengthen the krona given the challenging risk environment. Slowing the pace of FX reserve-related SEK selling could actually do more to help SEK, but the central bank has signalled reluctance here. • There is an elevated risk that EUR/SEK breaks above 11.00 before the end of the year as the energy crisis deepens and risk assets remain pressured. We look for a gradual 2023 recovery in SEK, but the timing remains highly uncertain. EUR/DKK Current spot: 7.4383 • For the first time in 2022, Danmarks Nationalbank jumped back into the currency market, selling DKK 23bn to weaken Denmark’s krone in September. This is half the size of the last FX intervention (47bn in December 2021). • For now, it looks like DN will stick to replicating the size of ECB rate increases and intervening to support EUR/DKK. However, we expect more EUR weakness into the winter and this may start to cast doubt over the sustainability of FX intervention. • We still see a non-negligible risk that DN hikes rates by less than the ECB (10bp would be a start) in one of the coming meetings. This risk is likely higher if the ECB sticks to large hikes. This article is a part of a report by ING Economics available here. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Warnings From Japanese Officials About The Intervention Kept Investors Aside

TeleTrade Comments TeleTrade Comments 19.10.2022 09:18
EUR/JPY has pursued consolidation ahead of possible BOJ intervention. Japan officials have warned risks of deflation due to global demand shock. According to a Reuters poll, the ECB is set to announce a 75 bps rate next week. The EUR/JPY pair is hanging around 147.00 after a mild correction from a fresh seven-year high at 147.25. The asset is expected to pursue a rangebound structure as investors are awaiting fresh developments on the Bank of Japan (BOJ)’s intervention plans in the currency market to support yen against speculative forex moves. Continuous warnings from Japan’s officials of potential intervention have kept investors on the sidelines as the supportive move for Japan will trigger volatility in the yen-linked FX pair. Chatters over possible BOJ’s intervention heated after the Japanese yen fell to its record lows near 150.00 against the dollar in the past 32 years. On Wednesday, Japan’s Finance Minister Shunichi Suzuki, and BOJ’s Governor Haruhiko Kuroda crossed wires, citing that Japan's economy is vulnerable to external demand shock, which could tip it back to deflation. This clears the fact that the concept of policy tightening is far from thought. This week, Japan’s Consumer Price Index (CPI) data will remain in the spotlight. As per the projections, the headline CPI could move to 3.1% vs. the prior release of 3.0%. While the core CPI could accelerate to 2% against the former print of 1.6%. On the Eurozone front, the odds for a bigger rate hike by the European Central Bank (ECB) are skyrocketing. A Reuters poll on ECB’s rate hike extent states that ECB President Christine Lagarde will step up the interest rates by 75 basis points (bps) on October 27. As the European Harmonized Index of Consumer Prices (HICP) is trading at 5x than the targeted rate of 2%, efficiency in policy tightening is highly required.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Forecast For Movement Of The Euro To Japanese Yen (EUR/JPY) Pair

InstaForex Analysis InstaForex Analysis 31.10.2022 08:30
The EUR/JPY pair failed to make a new higher high and now is trading at 147.17 below 147.67 today's high. It is moving sideways in the short term, that's why we have to wait for a fresh trading signal before taking action. Fundamentally, the Japanese economic data came in mixed. Retail Sales rose by 4.5% versus the 4.0% expected, Prelim Industrial Production registered a 1.6% drop compared to the 0.8% drop estimated, the Consumer Confidence dropped from 30.8 points to 29.9 points far below 31.0 forecasts, while Housing Starts registered a 1.0% growth less versus 2.6% expected. Later, German Retail Sales may report a 0.5% drop, Euro-zone CPi Flash Estimate may register a 9.9% growth, Core CPI Flash Estimate could increase by 4.8%, while the Prelim Flash GDP is expected to register a 0.1% growth. EUR/JPY Trading In The Red! As you can see on the H1 chart, the rate failed to test and retest the uptrend line signaling upside pressure. It's trapped between 145.63 and 147.72 levels. The bias remains bullish as long as it stays above the uptrend line. Now, it is almost reaching the 147.72 former high. This level stands as resistance. 148.40 is seen as resistance as well. After its strong rally post the BOJ, we cannot exclude a temporary retreat. EUR/JPY Forecast! The EUR/JPY could continue to move sideways as long as the 147.72 resistance remains intact. Coming back to test and retest the uptrend line could announce a new bullish momentum. A new buying opportunity could appear if the rate makes a new higher high, a valid breakout through 148.40 activates further growth.   Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more:
The Markets Still Hope That The Fed May Consider Softer Decision

The Markets Still Hope That The Fed May Consider Softer Decision

InstaForex Analysis InstaForex Analysis 31.10.2022 09:52
The coming week will be unusually rich in economic statistics and various events that will have a significant impact on the markets. A number of important economic data will be released this week, where the values of production indicators both in Europe, China and the USA will play a significant role. The numbers of indexes of business activity in the manufacturing sectors will have to indicate what impact the processes of raising interest rates have on national economies, of course, here we mean the countries of the so-called West. The decline in indicators will demonstrate a steady trend towards recession in the Western countries with the expected result - continued increase in interest rates by central banks and, as a result, continued pressure on demand in the stock markets and the dollar. Also, new data on consumer inflation in the euro area will be published today, which, as predicted, will again show its increase in annual terms from 9.9% to 10.2%. If the reports do not disappoint, then the growth of inflation in the euro area will again bring to life the topic of further continuation of the aggressive increase in European Central Bank interest rates, however, which we strongly doubt, since there are noticeable discrepancies between the words of the central bank's representatives and real actions. This allows us to believe that the euro is unlikely to receive significant support in the near future. Monetary policy meetings of the Reserve Bank of Australia and the Bank of England will be held this week. Interest rates are expected to rise by 0.25% in Australia and by 0.75% in Britain, which, in our opinion, is unlikely to noticeably change the positioning of the Australian dollar and sterling against the US currency if the Federal Reserve, following the meeting on Tuesday, makes it clear that the growth rate rates at 0.75% can be maintained until the start of the new year. Only a softening of the US central bank's position regarding the prospective aggressive continuation of raising rates can significantly change the situation on the markets and lead to a global reversal in the stock markets and a weakening of the dollar. And the icing on the cake will be the release on Wednesday and Friday of new data from the US labor market. If they show the preservation of a high rate of creation of new jobs, this may allow the Fed to continue actively raising rates, which will become a new basis for the dollar's growth. What can we expect in the markets today? We believe that trading in Europe, according to the dynamics of futures for stock indices, will start in the red, but a lot will depend on the positioning of American investors. If trading in the United States starts positive, this may put pressure on the dollar and support its local weakening, as the markets still hope that the Fed at the November meeting may consider reducing the rate growth rate in the near future. Forecast of the day: EURUSD The pair is trading in a very tight range of 0.9925-0.9970. If the eurozone inflation report turns out to be lower than expected or in line with the forecast, the pair may break out of this range and fall to 0.9820, at the same time, if inflation shows more growth, this will cause an expectation of a continuation of the ECB's aggressive rate hike and may cause the pair to rise to 1.0080. EURJPY The pair is moving in the range of 14550-147.65. A strong increase in inflation in the euro area may trigger the likelihood of continued aggressive rate hikes by the ECB, which will support the euro against the yen. In this case, a rise above 147.65 could lead to a rise of the pair to 148.65.       Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more:
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Strength To The Downside Bias Of The EUR/USD Pair Is The Strongest Bearish

TeleTrade Comments TeleTrade Comments 02.11.2022 09:18
EUR/JPY breaks five-week-old support line during three-day downtrend. MACD prints the biggest bearish signal in a month. A daily closing below September’s peak becomes necessary for the buyers to leave the table. EUR/JPY drops half a percent as the bears keep reins around 145.80, down for the third consecutive day to early Wednesday morning in Europe. The cross-currency pair’s latest weakness could be linked to the seller’s ability to conquer an upward-sloping support line from September 26, now resistance around 146.15. Also adding strength to the downside bias is the strongest bearish MACD signal since October 03. That said, the EUR/JPY pair’s further downside needs to provide a daily closing below September’s peak of 145.63 to keep the sellers hopeful. Also acting as a downside filter is the 21-DMA level surrounding 145.15. In a case where the quote remains bearish below 145.15, the odds of its south-run towards 144.10-00 area comprising tops marked since October 20 can’t be ruled out. Alternatively, recovery moves need a daily close beyond the support-turned-resistance line around 146.15. Even so, a descending trend line from October 21, close to 147.50 by the press time, will act as the last defense of the bears. Should the EUR/JPY prices remain firmer past 147.50, the previous monthly high of 148.40 and the upper line of a 3.5-month-old bullish channel, around 149.10, will be in focus. EUR/JPY: Daily chart Trend: Further downside expected
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

G10 Forex Market in 2023 To Be Characterised By More Volatility

ING Economics ING Economics 20.11.2022 11:30
After an 18-month bull trend in the dollar, the FX outlook has become less clear. Further position adjustment could prompt a little more short-term dollar weakness, but we do not believe the conditions are in place for a major dollar bear trend just yet. Instead, we expect FX markets in 2023 to be characterised by less trend and more volatility. Source: Shutterstock G10: Less trend, more volatility The final quarter of 2022 has seen a breakdown in the otherwise orderly dollar bull trend – a trend which had been worth 5% per quarter over the first nine months of the year. That dollar rally had largely been driven by a Federal Reserve wanting to take policy into restrictive territory – a trend only exacerbated by the war in Ukraine. For all the current discussions about peak dollar and peak macro pessimism, we think it is still worth examining whether the conditions will be in place to deliver an orderly dollar bear trend in 2023. We think not and here are three reasons why: Driving the dollar bull trend since summer 2021 has been a Fed at first abandoning Average Inflation Targeting and then trying to get ahead of the inflation surge. A call on a benign dollar decline in 2023 requires the Fed to be taking a back seat. That seems unlikely. The stark message from both the Fed’s Jackson Hole symposium and the IMF autumn meetings was that central banks should avoid relaxing too early in their inflation battle – a move which would deliver the pain of recession without any of the sustained gains on inflation. We suspect it will be too early for the Fed to sound relaxed at its 14 December meeting and March 2023 may be the first opportunity for a decisive turn in Fed rhetoric. While a softer Fed profile may be a necessary condition for a turn in the dollar, a sufficient condition requires a global economic environment attractive enough to draw funds out of the dollar. 2023 global growth forecasts are still being cut – dragged lower especially by recession in Europe. ING forecasts merchandise world trade growth below 2% in 2023 – not a particularly attractive story for the trade-sensitive currencies in Europe and emerging markets. A liquidity premium will be required of non-dollar currencies. 2023 will be a year when central banks are initially still hiking into a recession and shrinking balance sheets. The Fed will reduce its balance sheet by a further $1.1tn in 2023 and the European Central Bank will be looking at quantitative tightening, too. Lower excess reserves will tighten liquidity conditions still further and raise FX volatility levels. Again, the bar not to invest in dollar deposits remains high – especially when those dollar deposits start to pay 5% and the dollar retains its crown as the most liquid currency on the planet. What do these trends mean for G10 FX markets? This probably means that the dollar can bounce around near the highs rather than embark on a clean bear trend in 2023. If the dollar is to turn substantially lower, we would favour the defensive currencies such as the Japanese yen and Swiss franc outperforming. Here, the positive correlation between bonds and equity markets may well break down via the bond market rallying on the back of a US recession and easier Fed policy. ING forecasts US 10-year Treasury yields ending 2023 at 2.75% - USD/JPY could be trading at 130 under that scenario.  Recession in Europe means that EUR/USD could be trading in a 0.95-1.05 range for most of the year, where fears of another energy crisis in the winter of 2023 and uncertainty in Ukraine will hold the euro back. Sterling should also stay fragile as the new government attempts to restore fiscal credibility with Austerity 2.0. We cannot see sterling being rewarded much more on austerity and suspect that GBP/USD struggles to hold gains over 1.20.  Elsewhere in Europe, some differentiation could emerge between the Scandinavian currencies. The Swedish krona may struggle to enter a sustained uptrend next year given its elevated exposure to the eurozone’s growth story, while the Norwegian krone could benefit from its attractive commodity exposure. However, NOK is an illiquid and more volatile currency, and would therefore face a bigger downside in a risk-off scenario. As shown in the chart below, commodity currencies look undervalued versus the dollar on a fundamental basis. However, a stabilisation in risk sentiment is a necessary condition to close the misvaluation gap. For the Australian and New Zealand dollars, an improvement in China’s medium-term outlook is also essential, so the Canadian dollar may emerge as a more attractive pro-cyclical bet given low exposure to the economic woes of Europe and China. Another factor to consider is the depth of the forthcoming house price contraction. We think central banks will increasingly take this into consideration and will try to avert an uncontrolled fall in the housing sector. However, this is potentially a very sizeable downside risk, especially for the currencies of commodity-exporting countries, which generally display the most overvalued property markets in the G10. To conclude, we think FX trends will become less clear in 2023 and volatility will continue to rise. FX option volatility may seem expensive relative to historical levels, but not at all when compared to the volatility FX pairs are actually delivering. We suspect risk management through FX options may become even more popular in 2023.   Valuation, volatility and liquidity in G10 Source: ING, Refinitiv EUR/USD: Dollar bromance will take some breaking   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/USD 1.035 Bearish 0.98 0.95 0.98 1.00 1.00 Bullish leap of faith is too dangerous: We are bearish on EUR/USD into the end of the first quarter of 2023. Key factors which have driven EUR/USD lower this year will remain largely in place. The softish US October CPI print may give the Fed some pause for thought, but should not be enough to derail it from some further tightening – taking the policy rate close to 5.00% in the first quarter of 2023. Another key factor for EUR/USD this year has been energy. Here, our team sees prices for both natural gas and oil rising from current levels through 2023. A difficult 2023 European winter for energy may well restrain the EUR/USD recovery later in the year, continuing to depress the eurozone’s traditionally large current account surplus.   Necessary but not sufficient: Tighter Fed policy has been at the forefront of this year’s dollar rally and a shift in the Fed tone (more likely in March 2023 than December 2022) will be necessary to see the short end of the US yield curve soften appreciably and the dollar weaken. But the sufficient condition for a EUR/USD turnaround is the state of affairs amongst trading partners. Are they attractive enough to draw funds away from USD cash deposits potentially paying 5%? That is a high bar and why we would favour the EUR/USD 2023 recovery being very modest, rather than the ‘V’ shape some are talking about. ECB will blink first: The case for a central bank pivot is stronger for the ECB than the Fed. The German economy looks set to contract 1.5% next year and at its 15 December meeting, the ECB may well use its 2025 forecast round to show inflation back on target. We see the ECB tightening cycle stalling at 2.25% in February versus the near 3% currently priced by the market for 2023. This all assumes a seamless ECB introduction of quantitative tightening and one that does not upset peripheral bond markets. Add in global merchandise trade barely growing above 1% next year (recall how the 2017-19 trade wars weighed on the euro) plus the risk of tighter liquidity spilling into financial stability – all suggest the market’s bromance with the dollar will continue for a while yet.  USD/JPY: 1Q23 will be a crucial quarter   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/JPY 140.00 Bearish 145.00 145.00 140.00 135.00 130.00 Clash of the titans: The stark divergence in monetary policy between the Fed and the Bank of Japan has been the primary driver of this year’s 15%+ rally in USD/JPY. In 2023, investors may question whether the BoJ is ready to tighten. The default view is that the perma-dovish BoJ Governor, Haruhiko Kuroda, will not be moved. However, the end of Governor Kuroda’s term on 8 April 2023 will no doubt lead to frenzied speculation on his replacement and whether a less dovish candidate emerges. Interest rate markets are starting to price a change – e.g. the BoJ’s 10-year target sovereign yield of 0.25% is priced at 0.50% in six months’ time. March 2023 will be especially volatile: The first quarter of 2023 will also see huge focus on the Japanese wage round, where a rise in wages is a prerequisite for the BoJ to tighten policy. Japanese politicians have been encouraging business leaders to raise wages, while at the same time, the government has been quite aggressive with fiscal stimulus to offset the cost-of-living shock. This period will also see the Fed release its dot plots (22 March), which may be the first real chance for the Fed to acknowledge a turn in the inflation profile. As such, this period (March/April) could see a big reversal lower in USD/JPY. FX Intervention slows the move: Most agree that USD/JPY is higher for good reasons (including the energy crisis) and that Japanese FX intervention can only slow, not reverse the move. The Japanese have already spent around $70bn in FX intervention between the 146 and 151 region in USD/JPY and will likely be called into further action based on our view of a stronger dollar over coming months. FX reserves are not limitless, of course, but Japan’s large stockpile of $1.1tn means that this campaign can continue for several more months. The purpose here is to buy time before the Fed cycle turns. Unless we end up with 6%+ policy rates in the US next year, we would expect USD/JPY to be ending 2023 nearer 130. GBP/USD: Running repairs   Spot Year ahead bias4Q221Q232Q233Q234Q23 GBP/USD 1.19 Mildly Bearish 1.10 1.07 1.11 1.14 1.14 Fiscal rescue plan: After September’s government-inflicted flash crash, GBP/USD is now recovering on the expectation of more credible UK fiscal plans and the softer dollar. As above, we doubt 2023 will prove the year of a benign dollar decline. And the risk is that the Fed keeps rates at elevated levels for longer. Given sterling’s large current account deficit and its transition to high beta on the external environment, we think it is too early to be expecting a sustained recovery here. Instead, we favour a return to the 1.10 area into year-end as the government introduces Austerity 2.0 and the Bank of England cycle is repriced lower. Tighter fiscal/looser monetary mix: At its meeting in early November, the BoE pushed back against the market pricing of the rate cycle – arguing that hikes close to 5% would see the UK economy contract 5%. Our call is that the BoE terminal rate will be closer to the 3.75% area than the 4.50% that the market prices today. As the BoE assesses the degree of tightening needed to curtail inflation, the government is discussing ways to fill around a £60bn hole in the budget. The plan will be revealed on 17 November, probably in a roughly 50:50 split between tax hikes and real terms spending cuts. We look for the UK economy to contract every quarter in 2023 – making it a very difficult environment for sterling. Sterling suffers from liquidity outages: This year’s BIS triennial FX survey saw sterling retain its position as the fourth most traded currency pair. Despite this, sterling does occasionally suffer from flash crashes. We think liquidity will be at a premium in 2023 and that a Fed taking real rates even higher as economies head into recession is a dangerous combination for sterling – where financial services make up a large section of the economy. GBP/USD realised volatility is now back to levels seen during Brexit and our market call for 2023 is that these types of levels will become more, not less, common. EUR/JPY: A turn in the cycle   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/JPY 144.50 Bearish 142.00 138.00 137.00 135.00 130.00 Downside risks into 1Q23: EUR/JPY has defied typical relationships with risk assets by gently rallying all year even as both bond and equity benchmarks sold off 20%. Driving that JPY underperformance has probably been BoJ policy and USD/JPY’s strong relationship with US 10-year yields. Both the eurozone and Japan have been hit by the energy shock, where external surpluses have quickly dwindled. As above, we tend to think there are downside risks to EUR/JPY in the first quarter of 2023 as speculation mounts over BoJ Kuroda's successor as well as the ECB potentially calling time on their tightening cycle at the February meeting. US10yr can drag EUR/JPY to 130 in 2H23: A large part of the JPY underperformance during 2022 has been driven by developments in the US bond market. USD/JPY consistently shows the most positive correlation to US 10-year Treasury yields of any of the G10 FX pairs – and far higher than EUR/USD. Consistent with ING’s view on the Fed cutting rates in the third quarter of 2023, our debt strategy team sees US 10-year yields starting to edge lower in the second quarter of 2023, and then falling 100bp in the second half of 2023. In theory, this should heavily pressure EUR/JPY into the end of the year. Financial stability risks increase: Lower growth and tighter liquidity conditions – at least through the early part of 2023 – increase the prospect of financial stability risks. Recall the Fed will be shrinking its balance sheet by $1.1tn in 2023 even as liquidity and bid-offer spreads continue to create difficult market conditions. The yen lost its shine as a safe-haven currency in 2022, but we suspect relative to the euro, some of that shine can be regained in a softer US rate environment. The EUR/JPY cycle should also turn if the ECB calls time on its tightening cycle at the 2 February meeting. EUR/GBP: Listless in London   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/GBP 0.87 Neutral 0.89 0.89 0.88 0.88 0.88 In the same macro boat: Both the eurozone and UK economies have been hit hard by the war in Ukraine and the surge in energy prices. Both saw sharp terms of trade declines into August and then a sharp reversal as natural gas prices dipped into the warm winter. There is not a substantial amount of difference between our German and UK quarterly growth profiles for 2023 – both contracting every quarter of the year. Perhaps one could argue that the UK is more exposed to higher mortgage rates given the shorter duration of fixed-rate mortgages in the UK. This could all make for a trendless EUR/GBP environment. Energy price guarantees could differentiate: One important determinant for UK growth in 2023 will be how the new government handles the Energy Price Guarantee. Former UK Prime Minister, Liz Truss, offered a two-year programme – subsequently cut back to six months after the UK fiscal crisis. How the UK consumer copes with having to pay market prices for energy will be key to the UK story in 2023 as well as how the EU as a whole copes with similar challenges. Currently, it seems that the ECB is concerned that the fiscal programmes in Europe are too generous and not particularly targeted – adding to the inflation challenge.    Political wild cards: To pick out a few political wild cards, the first is a re-run of the Scottish independence referendum. The Scottish National Party (SNP) has picked 19 October 2023 as the date – although such an exercise would likely have to be approved by the UK parliament. Currently, the SNP is pursuing an action through the Supreme Court to see whether London can indeed still veto the referendum. In Europe, the focus will probably be on the fiscal path taken by the new right-wing Meloni government and also the reform of the Stability and Growth Pact. Budgets submitted in late 2023 could become an issue were the rules to be tightened again.   EUR/CHF: Swiss National Bank to guide it lower   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/CHF 0.98 Bearish 0.95 0.93 0.90 0.90 0.92 Does the SNB want a stronger Swiss franc?: The Swiss National Bank this year said it made a conscious decision to allow nominal Swiss franc appreciation in light of the inflation environment. The three-month policy rate has been raised 125bp to 0.50% and the SNB says it wants to keep the real exchange rate stable. With inflation running at 3% in Switzerland versus 10% in its largest trading partner, the eurozone, the SNB in theory should be happy with something like 5-7% per annum nominal appreciation in the Swiss franc. That certainly was the story into the end of September but does not quite explain the Swiss franc's weakness over the last six weeks. Two-sided intervention: When hiking rates earlier this year the SNB also said it would be engaging in two-sided FX intervention. Ever since the start of the financial crisis in 2008, the SNB has been more familiar as a seller of the Swiss franc – including its 1.20 floor in 2011-2015. Now its strategy is changing and we read that as an objective to potentially manage the Swiss franc stronger in line with its ambitions to tighten monetary conditions. Earlier this year, we estimated that the SNB could possibly drive EUR/CHF to the 0.90 area in summer 2023 based on expected inflation differentials and the need for a stable real exchange rate. The risk environment should favour the franc: Central banks are communicating that they need to tighten rates into recession and remove the excess liquidity poured out during a series of monetary bailouts. Tighter monetary and financial conditions typically spell stormy waters for risk assets. With its still sizable current account surplus (worth 8% of GDP in the second quarter of 2022) the Swiss franc should perform well during this stage of the global economic cycle. Closer to home, the European economic cycle and the ECB discussing quantitative tightening into early 2023 will prove a challenge to peripheral eurozone debt markets and likely reinforce the franc as a eurozone hedge. EUR/NOK: Not for the faint of heart   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/NOK 10.33 Bearish 10.30 10.15 9.95 9.70 9.60 Risk sentiment remains key: The krone is not a currency for the faint of heart. It is the least liquid currency in the G10 space, making it considerably exposed to negative shifts in global risk sentiment and equity market turmoil. It is, at this stage, way too early to call for a turn in equities, and a hawkish Fed into the new year may actually mean more pain for risk assets, at least in the near term. A recovery in global sentiment should offer support to NOK in the second half of next year, but restoring market confidence in a very high-beta currency is no easy feat. Norges Bank policy: The krone’s underperformance in 2022 was exacerbated by Norges Bank effectively sterilising oil and gas profits via a large increase in daily NOK sales. In November, FX daily sales have been scaled back from NOK4.3bn to NOK3.7bn, and we think there could be some interest by NB to further ease the pressure on the currency via smaller FX sales. With recent dovish hints suggesting that the NB hiking cycle may peak at 3.0% (with most of the country on variable mortgage rates, many more rate hikes could be difficult to tolerate), allowing a stronger currency to do some inflation-fighting sounds reasonable.  Energy prices: If indeed markets enjoy a calmer environment in 2023 and NB favours a stronger currency, then NOK is left with considerable room to benefit from a still strong energy market picture for Norway. There is probably an optimal range for oil and – above all – gas prices to trade at elevated levels but not such high levels that would significantly hit risk sentiment. For TTF, this could be somewhere around 150-200 €/MWh. This a plausible forecast for next year, but the margin for error can be very large. We see EUR/NOK at 10.50 in the fourth quarter of 2023, but NOK hiccups along the way are highly likely. EUR/SEK: Eurozone exposure a drag on SEK   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/SEK 10.80 Neutral 10.85 10.70 10.60 10.40 10.50 Riksbank’s policy: The Riksbank delivered more than one hawkish surprise in 2022, including a 100bp rate hike. This appeared to be part of a front-loading operation where lifting the krona was seen as a welcome side effect. In practice, and like in many other instances in the G10, the high volatility environment meant that short-term rate differentials played a negligible role in FX. So, despite a wide EUR-SEK negative rate differential throughout 2022, SEK was unable to draw any real benefit. That differential has now evaporated, but we expect 125bp of tightening (rates at 3.0%) in Sweden versus 75bp in the eurozone, which could suggest some EUR/SEK downside room in a more stable market environment. Also, a slowdown in FX purchases by the RB, now that reserves are back to the 1H19 levels, should remove some of the pressure on SEK. European picture: Sweden is a very open economy with more than half of its exports heading to other EU countries. Our expectations are that 2023 will see a rather pronounced eurozone recession and that the energy crisis will extend into the end of next year. Barring a prolonged period of low energy prices (and essentially an improvement in the geopolitical picture) in Europe, we doubt SEK will be able to enter a sustainable appreciation trend in 2023 as sentiment in the eurozone should remain depressed. Valuation: We are not fans of the euro in 2023, which means that our EUR-crosses forecasts reflect the weaker EUR profile. We see some room for EUR/SEK to move lower throughout the year – also considering that we estimate the pair to be around 9.0% overvalued. However, the high risk of a prolonged energy crisis in the eurozone means that SEK is significantly less attractive than other pro-cyclical currencies next year. Incidentally, SEK is highly correlated to the US tech stock market, which looks particularly vulnerable at the moment. A return to 10.00 or below would likely require a significant improvement in European sentiment. USD/CAD: Loonie is an attractive pro-cyclical bet   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/CAD 1.33 Bearish 1.34 1.32 1.30 1.26 1.24 Commodities and external factors: Our commodities team expects Brent to average slightly above $100/bbl next year, and Western Canadian Select around $85/bbl. Along with our expectations for higher gas prices, the overall commodity picture should prove rather supportive for the Canadian dollar in 2023. In our base-case scenario, where global risk sentiment gradually recovers but two major risk-off forces – Ukraine/Europe and China – remain, CAD would be in an advantageous position, since Canada has much more limited direct exposure to China and Europe compared to other commodity-exporting economies.  Domestic economy: If the US proves to be a relative 'safe-haven' in the global recession, therefore withstanding the downturn better than other major economies like the eurozone, this should offer a shield to Canada’s economy, which is heavily reliant on exports to the US. There is probably one major concern for the domestic economy: house prices. Canada is among the most vulnerable housing markets in the world, with price-to-income ratios around 9x in many cities (compared to 5-6x in the US). Whether we’ll see a sizeable but controlled descent or a fully-fledged housing crash will depend on the Bank of Canada and the depth of the recession. Monetary policy and valuation: It does appear that the BoC has started to consider domestic warning signals (probably, also house prices), and recently shifted to a more moderate pace of tightening. Markets are currently expecting rates to peak around 4.25/4.50% in Canada, and we tend to agree. Barring a rapid acceleration in the unemployment rate, a housing crash should be averted. It is also likely that the BoC will start cutting before the Fed in 2023. All in all, accepting the downside risks stemming from the housing market and/or a further deterioration in risk sentiment, we see room for a descent in USD/CAD to the 1.25 level towards the end of 2023. In our BEER model, CAD is around 20% undervalued in real terms. AUD/USD: Riding Beijing’s roller coaster   Spot Year ahead bias4Q221Q232Q233Q234Q23 AUD/USD 0.68 Mildly Bullish 0.66 0.66 0.68 0.69 0.70 Exposure to China: The Australian dollar is a high-beta currency, and the direction of global risk sentiment will be the key driver next year. We think that a gradual recovery in sentiment will be accompanied by a still challenging energy picture, which may force investors to choose which pro-cyclical currencies to bet on. When it comes to AUD, the China factor will remain very central, as Australia has the most China-dependent export machine in the G10. Our economics team’s baseline scenario is that the real estate crisis will be the main drag on growth in China and while retail should recover on looser Covid rules, slowing global demand should hit exports. One positive development: the new Australian government is seeking a more friendly relationship with Beijing, paving the way for the removal of export curbs next year. Commodities and growth: Iron ore remains Australia’s main export (estimated at $130bn in 2022), and it is a very sensitive commodity to China's real estate sector. Our commodities team thinks a return to $100+ levels is unlikely given the worsening Chinese demand picture, but still forecasts prices to average $90/t in 2023. The second and third largest exports are oil and natural gas ($100bn combined). Here, we see clearly more upside room for prices, especially on the natural gas side. On balance, we expect the commodity picture for Australia to be rather constructive next year, which could offer a buffer to the Australian economy during the downturn. Growth in 2022 should have topped the 4% mark, but that will be much harder to achieve in 2023. The combination of higher rates, reset mortgages, a slowing housing market and possibly softening labour market should bring growth back closer to 3%. This would still be an extremely strong outcome against the backdrop of global weakness.   Monetary policy and valuation: The Reserve Bank of Australia has been one of the 'pioneers' of the dovish pivot, and a return to 50bp increases seems unlikely, as the Bank is probably monitoring the rather overvalued housing market, and the inflation picture is less concerning than in the US or in Europe. Most Australian households have short-term fixed mortgage rates, and we could see a deterioration in disposable income (especially at the start of the year). We think the RBA will be careful to avert an excessively sharp housing contraction, and we expect rates to peak at 3.60% (well below the Fed and the Reserve Bank of New Zealand) and cuts from 3Q23. This would mean a less attractive carry – and less upside risk in an optimistic scenario for global sentiment; but also less damage to the economy, which may play in AUD’s favour in our baseline scenario. Valuation highly favours AUD, as the positive terms of trade shock means that AUD/USD is 20% undervalued in real terms, according to our behavioural equilibrium exchange rate (BEER) model. We have a moderately upward-sloping profile for the pair in 2023, but high sensitivity to risk sentiment and China suggests downside risks remain high. NZD/USD: Dodging the housing bullet   Spot Year ahead bias4Q221Q232Q233Q234Q23 NZD/USD 0.62 Mildly Bullish 0.60 0.60 0.62 0.63 0.64 Monetary policy: The Reserve Bank of New Zealand has given very few reasons to believe it is approaching a dovish pivot. Markets are currently expecting the Bank to hike well into 2023, and take rates to around 5.0%. While inflation (7.2% year-on-year) and job market tightness (unemployment at 3.3%) both remained elevated in the third quarter, there are growing concerns about the rapid downturn in the New Zealand property market, which in our view will trigger either an earlier-than-expected end to the tightening cycle or a faster pace of rate cuts in 2023. Housing troubles: The RBNZ recently published its financial stability report, where it showed relatively limited concern about households’ ability to withstand the forthcoming downturn in house prices. In its August 2022 forecasts, the RBNZ estimated that the YoY contraction in house prices will reach 11.6% in the first quarter of 2023. However, that implied an Official Cash Rate at 4.0%, so only 50bp of extra tightening from now, which seems too conservative now. House prices have fallen 7.5% from their first quarter 2022 peak so far, but the trend may well accelerate, especially given a hawkish RBNZ and the risk of slowing global demand hitting the very open New Zealand economy. External drivers and valuation: Even assuming a constructive domestic picture in the housing market and an attractive yield for the currency in 2023, external factors will determine how much NZD can draw any benefit. As for AUD, risk sentiment and China are the two central themes. The New Zealand dollar is more exposed to risk sentiment (as it is less liquid and higher-yielding) than AUD, but probably less exposed to China’s story. In particular, the real estate troubles in China may well hit Australia via the iron ore channel, while NZ exports (primarily dairy products) are much more linked to China’s Covid restrictions, which look likely to be gradually scaled back. In our base case, the two currencies should largely move in tandem next year. The real NZD/USD rate is 15% undervalued, according to our BEER model. EUR/DKK: Tricky mix of intervention and rates   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/DKK 7.44 Neutral 7.44 7.44 7.44 7.44 7.45 Central bank policy: Danmarks Nationalbank delivered FX intervention worth DKK45bn in September and October to defend the EUR/DKK peg. On 27 October, it opted for a smaller rate hike (60bp) compared to the ECB (75bp), which briefly sent EUR/DKK close to the 7.4460 February highs before rapidly falling back to 7.4380/90. We think it will be a busy year ahead for the central bank, as we expect very limited idiosyncratic EUR strength and potentially more pressure on EUR/DKK. Having now exited negative rate territory, DN has much more room to adjust the policy rate for a wider rate differential with the ECB if needed. However, with inflation running above 10% in Denmark, DN may prefer FX intervention over dovish monetary policy to support the peg. We have recently revised our EUR/DKK forecast, and expect a return to 7.4600 only in 2024. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Cross Currency Pair Is In Bearish Trend

TeleTrade Comments TeleTrade Comments 21.12.2022 09:33
EUR/JPY prints mild gains around the lowest levels in three months. 200-DMA probes bears but downbeat oscillators, key support break signal further downside. Early December swing low guards immediate recovery moves. EUR/JPY bears take a breather at a three-month low, picking up bids to 140.30 heading into Wednesday’s European session. In doing so, the cross-currency pair seesaws around the 200-DMA to pare the biggest daily slump since June 2016. Even so, bearish MACD signals, an absence of oversold RSI and sustained trading below the previous key support line from March 2022, now resistance around 141.85, keep the EUR/JPY bears hopeful. That said, the sellers need a daily closing below the 38.2% Fibonacci retracement level of March-October upside, close to 139.25, to retake control. Following that, September’s bottom surrounding 137.35 and 50% Fibonacci retracement near 136.40 could challenge the EUR/JPY bears before highlighting the golden ratio, namely the 61.8% Fibonacci retracement level at 133.55, will be in focus. Should the EUR/JPY prices remain bearish past 133.55, May’s bottom of 132.66 could act as the last defense of the bulls. Alternatively, recovery moves need to cross the December 02 low of 140.75 to convince short-term buyers. In that case, the support-turned-resistance trend line from March, near 141.85, could gain the bull’s attention. It’s worth noting that the EUR/JPY pair’s run-up beyond 141.85 could aim for the top marked in June and the monthly peak, respectively near 144.25 and 146.75. EUR/JPY: Daily chart Trend: Bearish
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair's Investors Got Cautionary Ahead Of The Release Of The German HICP

TeleTrade Comments TeleTrade Comments 02.01.2023 08:56
EUR/JPY is likely to drop further to near 139.00 as investors are cautious about Euro ahead of German inflation. Rising wage growth is infusing fresh blood into the Eurozone inflation. The BOJ has raised inflation targets substantially for CY2023 and 2024. The EUR/JPY pair dropped to the psychological support of 140.00 as investors got cautionary ahead of the release of the German Harmonized Index of Consumer Prices (HICP), which will release on Tuesday. The cross dropped sharply late Friday as investors poured funds into the Japanese Yen led by the bond-buying program from the Bank of Japan (BOJ) last week. The Euro is likely to witness a power-pack action after the release of the German HICP. As per the projections, the inflation indicator is seen higher at 11.8% vs. the former release of 11.3%. Lately, European Central Bank (ECB) President Christine Lagarde cited the rising wage rate as responsible for the continuous escalation of inflationary pressures. ECB President cited that the central bank must prevent this from adding to already high inflation, as reported by Reuters. Meanwhile, analysts at Natixis believe that “In the Eurozone, the real long-term interest rate is well below potential growth, and the mortgage rate is lower than nominal wage growth; monetary policy is therefore completely expansionary.” Apart from the German Inflation data, investors will also focus on German Unemployment data. The Unemployment Change (Dec) is expected to escalate to 27K against the former release of 17K. While the jobless rate might trim to 5.5% from the former release of 5.6%. On the Tokyo front, the higher inflation forecast by the Bank of Japan (BOJ) is supporting the Japanese Yen bulls. Nikkei reported that the BOJ is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024. While the core Consumer Price Index (CPI) is seen rising around 3% in fiscal 2022, between 1.6% and 2% in fiscal 2023, and nearly 2% in fiscal 2024
The British Pound Is Showing Signs Of Exhaustion Of The Bullish Force

FX: The US Dollar And Sterling (GBP) Starting Off The Year In Worst Shape

Saxo Bank Saxo Bank 02.01.2023 14:08
Summary:  The year is starting off with the US dollar on its back foot even as US treasury yields rose into year end as the market continues to believe that we are nearing the end of the Fed rate hike cycle, with easing to follow, while the ECB has grown increasingly hawkish and the Bank of Japan is seen further adjusting its policy mix under new leadership from early Q2. Will the first key data of 2023 on Friday play well with the market’s strong convictions? Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy Team FX Trading focus: USD stumbles into the New Year, with sterling also on its back foot. The JPY has risen to the top of the heap on the anticipation of a further shift in BoJ policy after Governor Kuroda’s exit in early April. Even with US yields backing up into year – particularly at the longer end of the curve – the market continues to express view is that the Fed is set for peak policy rates at the March or May FOMC meeting, followed by eventual cuts as soon as Q4. This has been the case for some time, with the only new information available in the last days of 2022 a particularly strong US Consumer Confidence reading for December that is rather out of synch with an anticipated dip into recession in the US. End-of-quarter and end-of-year flows may have been behind the surge in treasury yields and the weakening of the greenback, so we will need at least this week for a sense of how things are shaping up, and the most interesting test of the market’s conviction would be another batch of stronger than expected jobs and especially earnings data and another strong ISM Services print this Friday. Another important factor for the US dollar in the opening weeks to a couple of months of this year is the debt ceiling fight and how much brinksmanship the weak GOP majority in the US House is willing to engage in. As the ceiling approaches, the US Treasury runs down its general account with the Fed, currently at $400+ billion and capable of being run down to $100 billion or less, which is a net boost to USD liquidity. Once the ceiling is inevitably raised, with or without concessions from the Biden administration, the opposite effect swings into gear as the Treasury then builds its account again, sucking liquidity out of the market. EUR and especially JPY strength. The drivers (and some of the irony) of sharp JPY strength are discussed with the look at the USDJPY chart below. The driver of a strong euro into year-end was ECB President Lagarde finally getting religion on the inflation fight here very late in the cycle. The strongest evidence of how the market sees a divergence in the Fed vs. ECB forward is in something like the far forward 3-month short-term-interest rate contracts, which suggest that by the end of 2024, the Fed policy rate will be little more than 50 basis points above the ECB’s policy rate, at something like 3.50% for the Fed and just under 3.00% for the ECB. This has narrowed from well over 100 basis points in early November and something like 180 basis points early in 2022. A factor tempering the upside euro potential is concern that the ECB won’t be able to deliver as much as it would like for the market to believe it is capable of without triggering an ugly new aggravation of peripheral spreads as a weak economy like Italy’s can’t fund itself at 3% without QE. Italian Prime Minister Meloni has already http:been out complaining against the ECB’s communication style and the ESM. Read next: The First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM Chart: USDJPY USDJPY tanked into year-end, nearing the recent cycle lows even as US long treasury yields climbed into year-end. For most of 2022, long US yields were a very reliable coincident indicator, but the market has its sights next year on the decelerating Fed hikes that it eventually sees turning into rate cuts, while the Bank of Japan is seen further tinkering with its policy in the direction of tightening, particularly once Governor Kuroda’s replacement is found after his early April exit. Ironically, the anticipation of a BoJ shift is resulting in enormous QE to enforce the current regime. When yields were on the rise last year and the US 10-year yield first hit the current level of 3.85% in late September, the USDJPY rate was near 145.00. From here, the current USDJPY trajectory can only find support from a follow through from the BoJ in the direction of tightening (incrementalism remains a risk there) and a world that is diving into a classic disinflationary recession, with the Fed continuing to get marked lower. The challenge for this assumption would be a far stronger than expected global economy, with resilient US activity for another couple of quarters and inflation and a fresh surge in energy prices. Source: Saxo Group Overnight, we got a miserable official Non-manufacturing PMI for December from China as the end of Zero Covid early last month is likely reaching peak impact now and through the next few weeks, followed by a likely strong resurgence in Chinese demand. How the Chinese policy and its economy shapes up on the other side of the early Lunar New Year holiday (January 23) will be an important factor in how 2023 shapes up. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar and sterling starting off the year in worst shape. The latter may be a durable theme this year as the Bank of England is set for QT – a tricky proposition for a twin deficit country that will have to find buyers of its paper outside of the country. Elsewhere, the outsized JPY strength is the most prominent development as this year gets under way. It looks excessive relative to the recent rise in global bond yields. CAD is paying for the Bank of Canada’s dovishness, but oil is a bit resurgent. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Note that the “ATR heat” is fading to light orange (second quintile of last 1000 observations) for about half of the pairs tracked here as volatility has eased in recent weeks. Will be watching USD and JPY pair status over the coming week or two for developments, which are often important on calendar year rolls, as emphasized for EURUSD in my most recent FX Update. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights US Markets Closed 0145 – China Dec. Caixin Manufacturing PMI Source: FX Update: USD stumbles into the New Year. | Saxo Group (
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Is Expected Limited Upside Movement

TeleTrade Comments TeleTrade Comments 06.02.2023 09:49
EUR/JPY buyers keep the reins at five-week high despite recent struggle to overcome 100-DMA. Bullish MACD signals, sustained rebound from multi-day-old horizontal support keeps buyers hopeful. Convergence of previous support line from March, descending resistance line from late October appears crucial resistance. EUR/JPY grinds higher past 142.00 as bulls struggle to cross the 100-DMA heading into Monday’s European session. In doing so, the cross-currency pair justifies the bullish MACD signals, as well as a clear bounce off a horizontal support line, stretched from late September 2022, to lure the pair buyers. However, the 100-DMA challenges the EUR/JPY upside around the 143.00 threshold. In the case where the EUR/JPY prices remain firmer past 143.00, a convergence of an 11-month-old previous support line and a downward-sloping resistance line from late October 2022, around 145.00, could challenge the pair’s further upside. It’s worth noting that the EUR/JPY run-up beyond 145.00 won’t hesitate to challenge the late 2022 peak surrounding 148.40 while aiming for the 150.00 psychological magnet. On the flip side, pullback moves may initially aim for the 140.00 round figure before testing the 38.2% Fibonacci retracement of the pair’s March-October 2022 upside, near 139.23. Following that, the aforementioned horizontal support line comprising lows marked since late September 2022, near 137.35-30, will be in focus. Even if the EUR/JPY bears conquer the 137.30 support, the 61.8% Fibonacci retracement level near 133.55 can act as the last defense of the buyers. EUR/JPY: Daily chart Trend: Limited upside expected
Fed Chair Powell Signals Cautious Approach to Monetary Policy, Suggests Rates to Remain Elevated

Currency Pair Analysis: NZDJPY, CADJPY, EURJPY, GBPCAD, EURUSD, GBPUSD. Short Opportunities and Target Levels

Jason Sen Jason Sen 29.05.2023 13:41
NZDJPY resistance at 8555/75. Shorts need stops above 8590.  Targets: 8520, 8480.      CADJPY continues higher as expected but I have not managed to get us in to a long. I should have had us buying on a break above 102.90 so I will use this as a support today. Longs at 102.90/70, stop below 102.50.          EURJPY we unfortunately missed buying at first support at 149.75-65 by only 3 pips.  GBPCAD stuck in a 2 week range but longs at support at 167.60/40 worked last week on the bounce to my target of 168.55. Try longs again at support at 167.60/40 - stop below 167.10.   Targets: 168.20, 168.55, 168.80.Resistance at 1.6880/1.6900. Shorts need stops above 1.6920. Targets: 1.6845, 1.6820.    EURUSD collapsed as predicted on Sunday last week & finally hit my target & Fibonacci support at Fibonacci 1.0730/20, although we over ran to 1.0700. On Friday as predicted we did recover a little to my first target of target  1.0750/60 with a high for the day exactly here.  No buy signal yet but a break above 1.0750/60 tests strong resistance at 1.0790/1.0810. I would try a short here with stop above 1.0830. Longs at 1.0730/10 could be risky but if you try, stop below 1.0695.  A break below 1.0695 this week should be a sell signal & can target 1.0630, then 1.0600, perhaps as far as 1.0570.       GBPUSD bounced from just above good support at 1.2290/80 in severely oversold conditions which was as expected. The pair beat minor resistance at 1.2360/70 but a short position at 1.2390/1.2400 worked perfectly with a high for the day exactly here & a nice tumble to my targets of 1.2340 & 1.2320. A low for the day exactly here in fact.  Could hardly have been more accurate on the levels for GBPUSD last week. Again shorts at 1.2390/1.2400 should stop loss above 1.2420. Targets: 1.2340 & 1.2320. I am not going to suggest a long as I think there is a good chance we will continue lower this week. Watch for a break below the 100 day moving average at 1.2290/80 to trigger further losses despite severely oversold conditions.
Rising Chances of a Sharp Repricing in Hungarian Markets

Hawkish ECB Raises Rates Amidst Slowing Eurozone Growth and Surging Inflation Forecasts

Ipek Ozkardeskaya Ipek Ozkardeskaya 16.06.2023 09:34
It was mostly a good day for the global markets, except for Europe, which saw the European Central Bank (ECB) expectedly raise interest rates by 25bp, but unexpectedly raised inflation forecast, as well.   European policymakers now expect core inflation to average past the 5% mark, while in March projection this forecast was only at around 4.6%. This could sound a bit counterintuitive, because we have been seeing slower inflation and slower activity across the Eurozone countries, with the latest growth numbers even pointing at a mild recession. Yet the strength of the jobs market, and the stickiness of services and housing prices keep ECB officials alert and prepared for a further rate hike in July... and maybe another one in September.       Euro rallies  At the wake of the ECB meeting, the implied probability of a July hike jumped from 50% to 80%, sending the EURUSD rallying. The pair rallied well past its 50-DMA and hit 1.0950, and is up by more than 3% since the beginning of this month. The medium-term outlook remains bullish for the EURUSD due to divergence between a decidedly hawkish ECB, and exhausting Federal Reserve (Fed). The next bullish target stands at 1.12.  The US dollar sank below its 50-DMA, impacted by softening retail sales, rising jobless claims, slowing industrial production and perhaps by a broadly stronger euro following the ECB's higher inflation forecasts, as well.   Elsewhere, rally in EURJPY gained momentum above the 150 mark, as the Bank of Japan (BoJ) decided to do nothing about its abnormally low interest rates today, which seem even more anomalous when you think that the rest of the major central banks are either hiking, or say they will hike. The dollar yen is back above the 140 mark, as traders see little reason to buy the yen when the BoJ outlook remains blurred. Note that some investors expected at least a wider YCC policy to 1% mark, but the BoJ didn't even bother to make a change on that front.       Japanese stocks overbought near 33-year highs  Good news is, Japanese stocks benefit from softer yen and ample BoJ policy, and consolidate gains near 33-year highs. The overbought market conditions, and the idea that Japan will, one day in our lifetime, normalize rates could lead to some profit taking, but it's also true that companies in geopolitically sensitive sectors like defense and semiconductors have been major drivers of the rally this year, and there is no reason for that appetite to change when the geopolitical landscape remains this tense. The former US Secretary of State just said he believes that a conflict between China and Taiwan is likely if tensions continue their current course.   By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank    
FX Daily: Yen Bulls on Alert as Focus Shifts to US Payrolls and BoJ Speculation

"Rising Stars: Dutch Maintenance Contractors Emerge as M&A Favorites for Private Equity Firms

ING Economics ING Economics 12.12.2023 13:59
Elsewhere...  The nice jump in the Japanese yen pulled the dollar index lower yesterday. Of course, the EURJPY, GBPJPY and AUDJPY all made a similar move. The US bonds, on the other hand, were little changed yesterday – for once – as traders sat on their hands ahead of this week's much-awaited US jobs data, while technology stocks were on fire yesterday. Alphabet jumped more than 5% after Google released Gemini – the largest and most capable AI model it has ever built, and AMD jumped nearly 10% after the company unveiled a chip that will run AI software faster than rival products. But rival Nvidia was little hit by the news, as its chips gained 2.40% yesterday. The AI demand is big enough for everyone to benefit amply from it.   Today, all eyes are on the US jobs data.  According to a consensus of analyst estimates on Bloomberg, the US economy may have added 180'000 new nonfarm jobs in November, the pay may have risen slightly faster on a monthly basis, and the unemployment rate is seen steady at 3.9%. The fact that the data released earlier this week hinted at a clear loosening in the US jobs market makes many investors think that today's official data will also follow the loosening trend. If the data is soft enough, the rally in the US bonds could continue and the US 10-year yields could have a taste of the 4% psychological mark, while a stronger-than-expected figure could help scale back the dovish Federal Reserve (Fed) expectations but could hardly bring the hawks back to the market before next week's FOMC decision.      
All Eyes on US Inflation: Impact on Rate Expectations and Market Sentiment

Year-End Reflections: Markets Cheer Softening Inflation, Diverging Central Bank Policies, and the Oil Conundrum

ING Economics ING Economics 27.12.2023 15:18
Notes from a slow year-end morning By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  The last PCE print for the US was perfect. Core PCE, the Federal Reserve's (Fed) favourite gauge of inflation, printed 0.1% advance on a monthly basis – it was softer than expected, core PCE fell to 3.2% on a yearly basis – it was also softer than expected, and core PCE fell to 1.9% on a 6-month basis, and that's below the Fed's 2% inflation target.   Normally, you wouldn't necessarily cheer a slowdown in 6-month inflation but because investors are increasingly impatient to see the Fed cut its interest rates, all metrics are good to justify the end of the Fed's policy tightening campaign. So here we are, cheering the fact that the 6-month core PCE fell below the Fed's 2% target in November. The US 2-year yield is preparing to test the 4.30% to the downside, the 10-year yield makes itself comfy below the 4% mark – and even the 3.90% this morning, and the stocks joyfully extend their rally. The S&P500 closed last week a few points below a ytd high, Nasdaq100 and Dow Jones consolidated near ATH levels and the US dollar looks miserable. The dollar index is at the lowest level since summer and about to step into the February to August bearish trend.   There is not much data left to go before this year ends. We have a light economic calendar for the week, and the trading volumes will be thin due to the end-end holiday.   Morning notes from a slow morning  Major central banks reined in on inflation in 2023 – the inflation numbers are surprisingly, and significantly lower than the expectations. Remember, we though – at the start of the year - that the end of China's zero-Covid measures was the biggest risk to inflation. Well, we simply have been served the exact opposite: China's inability to rebound, and inability to generate inflation simply helped getting the rest of us out of inflation. China did not contribute to inflation but to disinflation instead.  The Fed sounds significantly more dovish than its European peers – even though inflation in Europe and Britain have come significantly down, and their sputtering economies would justify softer monetary policies, whereas the US economy remains uncomfortably strong. Released last Friday, the US durables goods orders jumped 5.4% in November! The diverging speed between the US and the European economies makes the policy divergence between the dovish Fed and the hawkish European central banks look suspicious. Yes, the EURUSD will certainly end this year above that 1.10 mark, nonetheless, the upside potential will likely remain limited.   Elsewhere, everyone I talk to is short USDJPY, or short EURJPY, or GBPJPY. But the bullish sentiment in the yen makes the yen stronger and a stronger yen will help inflation ease in Japan, and slow inflation will allow the Bank of Japan (BoJ) to remain relaxed about normalizing policy. And indeed, released this morning, the BoJ core inflation fell more than expected to 2.7%. Bingo! Therefore, it looks like the USDJPY's downside potential may be coming to a point of exhaustion near the 140 – in the absence of fresh news.   In energy, oil is having such a hard time this year. The barrel of American crude couldn't break the $74pb resistance and there is now a death cross formation on a daily chart. Yet the oil bulls have all the reasons on earth to push this rally further: the tensions in Suez Canal are mounting, the war in the Middle East gets uglier, Iran looks increasingly involved in the conflict, OPEC restricts production, and central banks are preparing to cut rates. But interestingly, none has been enough to strengthen the back of the bulls. Failure to clear the $74/75 resistance will eventually weaken the trend and send the price of a barrel below $70pb. If that's the case, there will be even more reason to be confident about a series of rate cuts next year.  

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