<ul><li>Prior -2.9%</li><li>PPI +27.1% vs +27.5% y/y expected</li><li>Prior +30.8%</li></ul><p style=““ class=“text-align-justify“>The drop in producer prices in November was largely to do with the energy sector (-2.2%) with intermediate goods (-0.4%) also showing a marginal decline. Elsewhere, the prices for durable consumer goods (+0.2%), capital goods (+0.3%) and non-durable consumer goods (+0.6%) all moved higher. If you exclude energy, prices for the total industry actually increased by 0.1%.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Composite PMI 49.0 vs 49.0 prelim</li></ul><p style=““ class=“text-align-justify“>Little change to the initial figures as the UK services sector flatlining more or less with overall business activity marginally lower in the final month of last year. The good news is that price pressures are lower but they do remain high from a historical perspective. S&P Global notes that:</p><p style=““ class=“text-align-justify“>“UK service providers ended the year with another downturn in new orders as strong inflationary pressures and worries about the economic outlook sapped demand. Overall levels of business activity fell only fractionally, despite an exceptionally challenging business environment and spending cutbacks due to cost of living difficulties. </p><p style=““ class=“text-align-justify“>“Stalling recruitment and lower backlogs of work added to signs that service sector companies are now experiencing fewer capacity pressures. Business optimism has recovered from the lows seen in the wake of last September’s ‚mini Budget‘, but many firms are braced for a sustained period of subdued demand in 2023. </p><p style=““ class=“text-align-justify“>“Around 40% of the survey panel expect a rise in business activity over the next 12 months, while 16% forecast a decline. Survey respondents commented on squeezed disposable incomes, elevated recession risks and a housing market downturn as key factors likely to constrain demand in the year ahead. Although service providers widely noted concerns about global economic headwinds and stubbornly high <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a>, there were also many reports citing positivity about factors within their control, including forthcoming product launches, expansion into new markets and planned business investment.“</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Prior +0.9%</li><li>Market index 184.5 vs 212.5 prior</li><li>Purchase index 160.2 vs 182.5 prior</li><li>Refinance index 310.9 vs 371.4 prior</li><li>30-year mortgage rate 6.58% vs 6.34%</li></ul>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>That is the second time in a matter of weeks that the firm has upgraded its assessment on the Chinese economy. This time arguing that while an estimated 40% jump of Covid infections will have impacted China’s growth in Q4 last year, the post-reopening recovery phase has shifted forward by roughly three months at least.</p><p style=““ class=“text-align-justify“>“The earlier recovery storyline leads to an upward revision to our 2023 full-year growth forecast to 4.4% (previously: 4.3%).“</p><p style=““ class=“text-align-justify“>It’s not so much about the number in the projection but there is growing sentiment across broader markets that China is very well positioned for a stronger and positive outlook this year.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>The dot plots revealed that the Fed was seeing a more hawkish outlook for interest rates and it will be interesting to see what is it in the meeting minutes to reveal such sentiment. Especially when we are seeing inflation pressures cool off, not just in the US but also in Europe now. That said, we are still of course a long way from the desired 2% target – it is best to be reminded of that as well.</p><p style=““ class=“text-align-justify“>Besides that, it will be interesting to take a look at what policymakers are feeling about labour market conditions and the economy. And will there be any murmurs from certain quarters that they are worried about potentially overtightening policy? That will be one that risk trades will definitely be scrutinising later today.</p><p style=““ class=“text-align-justify“>The Fed minutes will be released later at 1900 GMT.</p>

This article was written by Justin Low at www.forexlive.com.

<p class=“MsoNormal“>As the Fed came out more
hawkish than expected, the market sold off on higher risks of
overtightening and a worse than expected recession, bringing the Russell 2000 index into focus.</p><p class=“MsoNormal“>Bear Market Headwinds for Broader Market, Russell 2000</p><p class=“MsoNormal“>These are two of the
worst possible things for the stock market and should result in a
continuation of the bear market. The <a target=“_blank“ href=“https://www.forexlive.com/news/china-takes-the-final-step-to-embrace-living-with-covid-20221227/“ target=“_blank“ rel=“follow“>China
reopening news</a> during the Christmas holidays can have two
implications:</p><p class=“MsoListParagraphCxSpFirst“>·
It may help with global growth and reduce the
chances of a hard landing.</p><p class=“MsoListParagraphCxSpLast“>·
Increase inflationary pressures.</p><p class=“MsoNormal“>Both the options though, lead
to the Fed possibly being forced to go higher than their expected terminal rate,
which brings us back to the original risks: overtightening and deep recession.</p><p class=“MsoNormal“>RUSSELL
2000 Technical Analysis</p><p class=“MsoNormal“>In the
daily chart above, we can see how the Russell 2000 price, after falling off a cliff out of
the FOMC meeting, pulled back to the nearest swing low <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> area at 1788-1798. </p><p class=“MsoNormal“>That looks
like a strong barrier as we saw several tests without successful breaks. If the buyers manage to breach
that level, the next possible upside target may be in the 1880-1900 region. If
the price fails though, the October low at 1642 will be the clear target.</p><p class=“MsoNormal“>In the 1-hour chart above, we
can see more closely the current rangebound price action with a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> near the 1800 handle and a
support at 1730. Ideally, you would want to stay out of such a market and
wait for a clear breakout before deciding what to do next. </p><p class=“MsoNormal“>Nevertheless,
one can try to play the Russell 2000 range selling at <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> and buying at <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> until the game stops.</p><p class=“MsoNormal“>Drilling down to the 15 minutes
chart, we can see that there’s a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> turned <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> at the moment (orange line). This level should define
where the price may be headed next. In the first scenario, the price may
retest the level and run to the upside testing again the resistance. In the
second scenario, the price breaks down and falls to the support.</p>

This article was written by ForexLive at www.forexlive.com.

<p style=““ class=“text-align-justify“>Not quite the case in its entirety with oil being down by nearly 2% on the day, but it applies to almost everything else in broader markets. Equities are higher with European stocks leading the way, helped out by softer German and French inflation numbers this week. US futures are also slightly higher, so the overall market mood today is keeping steadier.</p><p style=““ class=“text-align-justify“>Meanwhile, bonds are also continuing their good form as a result with 10-year Treasury yields down to 3.70% from the open at around 3.83% yesterday. In Europe, 10-year German bund yields are down to 2.31% and that is a far cry from the peak at the end of last week at 2.56%.</p><p style=““ class=“text-align-justify“>As for the dollar, it is down across the board with some of the losses outpacing the gains from yesterday among major currencies. EUR/USD is up 0.8% to 1.0630 with GBP/USD up 0.9% to 1.2070 and pushing past its 200-day moving average, seen at 1.2027. USD/JPY is also being pinned lower by 0.5% to 130.30 levels after running into another test of 130.00 at the start of the session.</p><p style=““ class=“text-align-justify“>But the standout performer is the aussie, which is up by over 2% against the dollar with buyers pushing for a technical break as outlined earlier <a target=“_blank“ href=“https://www.forexlive.com/news/audusd-up-over-2-as-dollar-fumbles-after-yesterdays-hot-start-20230104/“ target=“_blank“ rel=“follow“>here</a>.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Is the 1.0700 mark just one step too far for EUR/USD buyers? Well, they seem poised at first on the break above the 200-day moving average (blue line) heading into December and then there was that break above the key trendline resistance (white line) since May 2021. It looked optimistic but today’s price action is a major blow for buyers, if the chart is anything to go by.</p><p style=““ class=“text-align-justify“>The pair is down 1.3% and looks set for its biggest daily drop since 23 September last year. The move today owes much to a broad bid in the dollar, which is seen gaining over 1% against almost all other major currencies as well.</p><p style=““ class=“text-align-justify“>It’s the new year and flows are the story in European trading today.</p><p style=““ class=“text-align-justify“>From a technical perspective though, the drop back below the broken trendline resistance is something to note as sellers also regain near-term control of the pair. It was a quick drop earlier in the session below both the 100 and 200-hour moving averages, seen at 1.0650 and 1.0637 respectively.</p><p style=““ class=“text-align-justify“>As such, sellers are in near-term control now and are seeking a further downside push to vindicate their agenda.</p><p style=““ class=“text-align-justify“>If we do see a daily hold below the broken trendline support noted above, and also below the 1.0500 mark, that will pave the way for a further drop towards the 200-day moving average next potentially – seen at 1.0319 currently.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>For large parts of 2022, the theme in markets was to buy the dollar, sell everything else. And as we got closer towards year-end and the increasing likelihood of a Fed pivot, it was the other way around as the tables turned.</p><p style=““ class=“text-align-justify“>But to kick start the new year, stocks and bonds are bid today but that is somehow translating to a higher dollar as flows win out instead of the prevailing narrative that we have been so accustomed to last year. Here’s a snapshot of broader markets:</p><ul><li>Eurostoxx +1.4%</li><li>Germany DAX +1.3%</li><li>France CAC 40 +1.2%</li><li>UK FTSE +2.0%</li><li>S&P 500 futures +0.9%</li><li>Nasdaq futures +0.9%</li><li>Dow futures +0.8%</li><li>10-year Treasury yields down 8.7 bps to 3.745%</li><li>10-year German bond yields down 8.2 bps to 2.357%</li><li>10-year Italy bond yields down 10.5 bps to 4.447%</li></ul><p>On any other day in the final two months of last year, this would’ve been a more risk on sort of day. But not today, as the dollar and yen are running rampant across the board with the greenback notably picking up a strong bid in European morning trade.</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/dollar-catches-a-bid-to-start-the-session-20230103/“ target=“_blank“ rel=“follow“>Dollar catches a bid to start the session</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/usdjpy-turns-positive-on-the-day-now-20230103/“ target=“_blank“ rel=“follow“>USD/JPY turns positive on the day now</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/gbpusd-under-pressure-of-cracking-lower-as-dollar-sees-strong-bid-on-the-day-20230103/“ target=“_blank“ rel=“follow“>GBP/USD under pressure of cracking lower as dollar sees strong bid on the day</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/audusd-stumbles-lower-as-dollar-takes-charge-to-start-the-new-year-20230103/“ target=“_blank“ rel=“follow“>AUD/USD stumbles lower as dollar takes charge to start the new year</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/nzdusd-down-to-fresh-five-week-low-as-dollar-stays-on-a-tear-today-20230103/“ target=“_blank“ rel=“follow“>NZD/USD down to fresh five-week low as dollar stays on a tear today</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/audjpy-on-track-to-revisit-key-support-level-to-start-the-new-year-20230103/“ target=“_blank“ rel=“follow“>AUD/JPY on track to revisit key support level to start the new year</a></li></ul>

This article was written by Justin Low at www.forexlive.com.

<p class=“MsoNormal“>Bitcoin
Market picture</p><p class=“MsoNormal“>
Bitcoin
has declined slightly over the past 24 hours – the bulls have still not decided
to go on the offensive. Perhaps it is because of an overhang of selling orders
from struggling miners.</p><p class=“MsoNormal“>The first cryptocurrency
is trading near $16.7K to start the day on Tuesday, having retreated from its
50-day moving average but maintaining a positive bias towards the upside within
the trend of several trading days. US exchanges return to action today to
increase liquidity, including in cryptocurrencies.</p><p class=“MsoNormal“>Traders
should be prepared that there may be attempts to form new market trends from
the new year. And it could be a decisive move upward or another sell-off after
a lull.</p><p class=“MsoNormal“>Regarding
seasonality, January is considered a neutral month for BTC. Over the past 12
years, Bitcoin has ended with growth on six occasions. The
average growth over the last 12 years has been 22%, while the average decline
has been 17%.</p><p class=“MsoNormal“>In the first
case, BTC could end January at around $20,100. Second, it could finish at about
$13,700, updating November’s lows. Meanwhile, in the last eight years, bitcoin
has declined in January on six occasions, giving buyers of the first
cryptocurrency little chance.</p><p class=“MsoNormal“>
Bitcoin News background</p><p class=“MsoNormal“>
The
popular YouTube blogger Coin Bureau believes that bitcoin still needs to bottom
out. In his opinion, we should expect BTC to drop to $10,000 during the first
three months of 2023.</p><p class=“MsoNormal“>Negative
sentiment in the crypto market will dominate until spring 2023, said the crypto
fund QCP Capital.</p><p class=“MsoNormal“>The Italian
parliament passed a bill to tax cryptocurrency traders. Traders will now pay
26% on profits made from digital trading assets. </p><p class=“MsoNormal“>On the other
side of the coin, Britain is introducing tax breaks for foreigners trading
through local brokers to make London a crypto trading hub, as it is now with
currencies and metals.

</p><p class=“MsoNormal“>This
article was written by <a target=“_blank“ href=“https://www.fxpro.com/“ target=“_blank“ rel=“follow“>FxPro</a>’s Senior
Market Analyst Alex Kuptsikevich.</p>

This article was written by FxPro FXPro at www.forexlive.com.