<p class=“MsoNormal“>UPCOMING
EVENTS:</p><p class=“MsoNormal“>Tuesday: Fed
Chair Powell.</p><p class=“MsoNormal“>Thursday: US
Jobless Claims, US CPI.</p><p class=“MsoNormal“>Last Friday
was incredible. Not because of another good <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-non-farm-payrolls-223k-vs-200k-expected-20230106/“ target=“_blank“ rel=“follow“>NFP
report</a>, but because the <a target=“_blank“ href=“https://www.forexlive.com/news/ism-december-us-services-496-vs-550-expected-20230106/“ rel=“follow“>ISM
Services PMI</a> showed a huge dive into contractionary territory. </p><p class=“MsoNormal“>The labour
market, which is a lagging indicator, remains tight and that will keep the Fed
uncomfortable in easing monetary conditions. Remember that they see <a target=“_blank“ href=“https://www.forexlive.com/centralbank/fomc-dot-plot-and-central-tendencies-from-dec-2022-meeting-eoy-2023-48-20221214/“ target=“_blank“ rel=“follow“>4.6%
unemployment this year keeping rates at 5%</a>. </p><p class=“MsoNormal“>But if we
look at leading indicators, the Fed may very well overtighten and act too late
when unemployment starts to shoot up fast. </p><p class=“MsoNormal“>The market
took the miss in average hourly earnings and the big miss in ISM Services PMI
as good news, but I think the reaction is wrong. </p><p class=“MsoNormal“>There’s this
hope among participants that the recession will be mild or short, which makes a
deep recession an out of consensus call and something that is not priced in. That’s
where we are going in my opinion. </p><p class=“MsoNormal“>If inflation
indeed falls but the Fed keeps at it, which is what they will most likely do
based on comments from the officials and their focus on the lagging labour
market, then real rates, which is the ultimate form of tightening, will go up
and stay there when there will be a need for them to fall. </p><p class=“MsoNormal“>Historically,
the burst of asset bubbles precedes a deflationary period. For this reason, the
next thing the Fed may be fighting with is deflation. </p><p class=“MsoNormal“>Looking
ahead the Fed will hike by 25 bps at the next meeting barring any upside surprise
in the CPI report. </p><p class=“MsoNormal“>Given the
recent data, I think the USD dump out of those reports was a wrong reaction. The
market seems to be trading on the mild recession hopes at the moment. Technically,
the price action doesn’t look healthy for an upside continuation as there’s
clearly a loss of momentum.</p><p class=“MsoNormal“>Looking at
the other markets, my highest conviction is in bonds. I strongly feel that
we are about to see a strong bull market in bonds. </p><p class=“MsoNormal“>Fighting the
Fed is usually a bad idea, but at tops and bottoms, it can be done and the bond
market in my opinion will do that. The market expects rate cuts by the end
of 2023, I think rate cuts will be bigger than the market currently expects.
</p><p class=“MsoNormal“>Tuesday: Fed Chair
Powell speaks in Sweden and after the recent economic data, the market will
want to hear what the Fed Chair has to say. I don’t expect him to be on the
dovish side. He may acknowledge improvements on the inflation side but complain
about the labour market. So, all in all, I expect him to basically reaffirm
his last stance. </p><p class=“MsoNormal“>Thursday: As I
mentioned last week, I expect the labour market data now to be more important
for the market than the inflation data. We saw this new development last
week as well when the <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-adp-employment-235k-vs-150k-expected-20230105/“ target=“_blank“ rel=“follow“>ADP</a>
and <a target=“_blank“ href=“https://www.forexlive.com/news/us-initial-jobless-claims-204k-vs-225k-estimate-20230105/“ target=“_blank“ rel=“follow“>Jobless
Claims</a> reports moved the market more than they used to last year.
</p><p class=“MsoNormal“>Initial
Jobless Claims are expected to come at 220K and Continuing Claims at 1708K. </p><p class=“MsoNormal“>The Headline
CPI Y/Y is expected to fall to 6.5% from the prior 7.1% and the M/M reading to
remain unchanged at 0.1%. The Core CPI Y/Y is expected to fall to 5.7% from the
prior 6% and the M/M figure to tick up to 0.3% from the prior 0.2%. </p><p class=“MsoNormal“>If the data
comes out as expected or misses, we can be sure the Fed hikes by 25 bps at the
next meeting. A beat would make the market uncertain on the magnitude of the
next hike with a possible split between 25 bps and 50 bps. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>

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

<p class=“MsoNormal“>Last week the <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-non-farm-payrolls-223k-vs-200k-expected-20230106/“ target=“_blank“ rel=“follow“>NFP
report</a> showed once again that the labour market is tight and resilient, impacting the S&P500.
What caught the market’s attention though was the data on Average Hourly
Earning (i.e. wages). </p><p class=“MsoNormal“>They missed expectations and the
prior numbers were revised downwards. The market interpreted that as a
goldilocks scenario: strong labour market without wage inflation. </p><p class=“MsoNormal“>What followed was totally
unexpected. The <a target=“_blank“ href=“https://www.forexlive.com/news/ism-december-us-services-496-vs-550-expected-20230106/“ target=“_blank“ rel=“follow“>ISM
Services PMI</a> dived into contractionary territory for the first
time since 2 and a half years. This is a leading indicator for the Services
sector, which is about 80% of the US economy. The market rallied even more on
hopes that the Fed would stop rate hikes very soon and start cutting rates
earlier. </p><p class=“MsoNormal“>The market may be underestimating
the Fed’s resolve in keeping conditions tight for longer. </p><p class=“MsoNormal“>In fact, Fed speakers doubled
down on their intention of keeping rates higher for longer after the reports as
their focus is more on the labour market now and they want to see unemployment picking
up before having the confidence in easing monetary conditions. </p><p class=“MsoNormal“>If that doesn’t happen (which is
unlikely), they will probably keep at it until they see the CPI/PCE Y/Y near
their 2% target. In that case though, it would be too late.</p><p class=“MsoNormal“>S&P500 Technical Analysis</p><p class=“MsoCaption“>Daily chart of the S&P500.</p><p class=“MsoNormal“>On the daily chart above, we can
that the price came back to the old <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> in the 3920-3940 area that now
acts as <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a>. If the price manages to break
that zone, buyers will be in control and target the blue <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a> or even a breakout higher. </p><p class=“MsoNormal“>If the price gets rejected from
that zone, sellers will regain control and target at least the support at 3800
if not even lower to the October low at 3506.</p><p class=“MsoNormal“>Zooming in to the 1-hour chart,
we can see the rangebound market of the past few weeks. The <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> is in the 3790-3810 area and the
<a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>resistance</a> is in the 3920-3940 area. We can also see more clearly
the two possible scenarios: </p><p class=“MsoListParagraphCxSpFirst“>·
Break above and run to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“>trendline</a> in the 4000 price zone.</p><p class=“MsoListParagraphCxSpLast“>·
Fail and fall back to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> in the 3800 price zone. </p><p class=“MsoCaption“>On the 5-minutes chart, we can see that the buying
momentum out of the two economic reports is waning as depicted by the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>divergence</a>
with the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a>.
This may give a higher probability for the 2nd scenario to play out
as the price may not have enough strength to break up.</p>

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

<p style=““ class=“text-align-justify“>The dollar was weaker across the board coming into European trading but higher bond yields helped to underpin USD/JPY to push higher at the start of the session, with the pair moving up from 131.65 to a high of 132.65 before easing slightly in the past 15 minutes or so. In the bigger picture, the pair is coming off a push lower on Friday after testing the late December highs near 134.50 – after having bounced off 130.00 last week:</p><p style=““ class=“text-align-justify“>In a sense, one can argue that price action is consolidating in between the levels highlighted as buyers and sellers continue to do battle. On a day when the dollar seems to be running lower across the board, USD/JPY is bucking the trend so that tells us that the playbook isn’t so straightforward.</p><p style=““ class=“text-align-justify“>The bond market remains a key driver as well and 10-year Treasury yields are up 2.6 bps to 3.597% on the day. Be mindful that Japanese markets are closed today and will resume trading tomorrow with a keen focus on 10-year Japanese government bond yields as well, after having tested the BOJ’s limit at the end of last week <a target=“_blank“ href=“https://www.forexlive.com/news/boj-being-tested-once-again-20230106/amp/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>Going back to USD/JPY, here is a look at the near-term chart:</p><p style=““ class=“text-align-justify“>Sellers managed to seize near-term control on a break below the 100-hour moving average (red line) in early trading today but buyers have turned it around to switch the near-term bias to being more bullish again in European trading. That comes after a break back above both the 100 and 200-hour (blue line) moving averages.</p><p style=““ class=“text-align-justify“>The state of flux in the near-term control highlights that price action is still rather unsettled and that is arguably exemplified by the consolidation between 130.00 and 134.50 (you can even call it 135.00) for the time being.</p><p style=““ class=“text-align-justify“>As the pair continues to toss and turn, eventually we’ll see it fall off on one side and that will make for a good trending move to catch. And we might not have to wait too long for a trigger with the US CPI data coming up on Thursday.</p>

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

<ul><li>Prior 6.5%</li></ul><p style=““ class=“text-align-justify“>Euro area unemployment keeps steady in November, suggesting that labour market conditions are still fairly solid despite rising risks of a recession.</p>

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

<ul><li>Prior -21.0</li></ul><p style=““ class=“text-align-justify“>Euro area investor morale rises for a third straight month, moving to its highest level since June last year. That said, the negative reading continues to reflect a rather challenging and poor economic outlook for the most part. Sentix notes that:</p><p style=““ class=“text-align-justify“>“January data indicates a further improvement but there is virtually no change in the assessment of the current situation, with only the expectations values signalling a greater easing of the situation.“</p>

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

<p>There are a lot of transitions that are going on from a fundamental and technical perspective..

In this weekend video, Greg Michalowski of Forexlive, talks about the transitions that are occurring in the economy, politics and in the markets in his weekend Forex technical report.

Set yourself up to understand the dynamics in play and how you might benefit in your trading this week in this state of transition. </p>

This article was written by Greg Michalowski at www.forexlive.com.

<p>Turkey’s state pipeline operator Botas issued a statement on Saturday. Says that a fault on the Iranian network side had decreased the volume of gas piped to Turkey as of January 1. </p><p>Turkish authorities have requested Iran fix the issue as quickly as feasible.</p><p> Iran is the second-largest gas supplier to Turkey after Russia.</p><p>Weirdly, back in January of 2022, i.e this time last year, a leak halted Iranian exports of gas to Turkey also. Turkey cut power supply to the industrial sector that time. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p>Information posted to the People’s Bank of China website over the weekend reported it increased its holdings of gold by 30 tonnes in December.</p><ul><li> this boosts the country’s stash of gold to 2,010 tonnes</li><li>it follows November’s buying of 32 tonnes</li></ul><p>The PBOC’s previously reported inflow of gold was in September of 2019 and, before that, October 2016. The renewed bout of large purchasing is being speculated as a response to heightened geopolitical risk, and perhaps more to come. </p><p>In other info the PBOC reported the country’s foreign exchange reserves at the end of December increased by around $11 billion from end-November and now total $3.12 trillion.</p>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p>Futures trading 101</p><p dir=“ltr“>Taking advantage of short-term price swings, within intraday day trading of „scalping“, in the financial markets through the practice of day trading futures is a common approach to generate a profit. However, it is also a high-risk endeavor that calls for a comprehensive grasp of the markets as well as the construction of a plan with great care. If you are new to trading futures on a daily basis, the following actions are the ones you should take initially to get started:</p><ol><li>Get some futures day trading education: Before you start day trading futures, it is essential to have a solid grasp of how the futures markets function. Educating yourself will help you get a head start. This involves becoming knowledgeable about the various futures contracts available, the function of margin, and the ability to interpret futures quotations and charts. In addition to this, you need to educate yourself about the potential dangers of day trading as well as the tactics that are typically implemented by profitable traders.</li><li>You will need to create an account with a brokerage company that specializes in futures trading in order to participate in futures trading. To do this, you will need to choose a brokerage. Before settling on a brokerage, you should be sure to do your homework, investigate your alternatives, and assess the various offerings in terms of their costs, platforms, and other features.</li><li>Create a futures trading strategy: Having a trading plan in place is one of the most important components of effective day trading. It should include your goals, tactics for risk management, and the exact futures contracts that you will trade in. Your strategy should also include a set of rules that dictate when you should join and exit trades, as well as how you should manage risk and determine the size of your positions. An important note about what timeframe to use: The 1-min and 5-min are popular ones. Some traders use range bars, for example 4 tick bars. I suggest to start with the 5-min candlesticks.</li><li>Practice futures trading with ‘paper trading’, AKA a demo account: This is the most important part of this entire article, and your process in starting with futures trading. The vast majority of brokerage firms will provide you with a free demo account so that you may become familiar with trading without putting your own money at risk. Before you start trading with real money, you should take advantage of this fantastic chance to put your trading strategy to the test and gain a feel for the market.<p dir=“ltr“>You can also test out the absolutely awesome and simple paper trading of TradingView, as I show in the video below:</p><p dir=“ltr“>Now, some experienced day and swing traders claim: Paper trading doesn’t cut it, since when you go live, your psychology is challenged at a whole new level, and practicing without real money can never achieve that. While this is true, still, there is a massive learning curve to go through, even before this mental part. What is your trading strategy? Where is your ‘edge’? What is the typical reward vs risk ratio you go for, and how the heck do you even set a stop loss and take profit target? What about setting that critical DAILY MAX LOSS limit? And many other things that you can learn while trading with play money.</p></li><li>Begin with a modest trading budget: This is probably the most important part when you go “live”. begin with a little amount of capital and gradually grow your trading size as you acquire expertise and get more familiar with the markets. This will assist you reduce the risk you take and keep you from making costly blunders in the beginning.</li></ol><p dir=“ltr“>If you follow these steps, you may put yourself in a position to be successful in the futures markets and get your career as a day trader off to a good start. In order to be successful in day trading over the long term, you need to ensure that you pay close attention to both your education and your risk management.</p><p dir=“ltr“>Trading futures at your own risk and visit <a target=“_blank“ href=“https://www.forexlive.com/technical-analysis“>ForexLive.com technical analysis</a> to see some charting examples.</p>

This article was written by Itai Levitan at www.forexlive.com.

<p>Week Ahead January 9-14th:</p><p>MON: Swiss Unemployment (Dec), German Industrial Output (Nov), EZ Sentix (Jan), Unemployment (Nov), Chinese Exports/Imports (Dec)TUE: EIA STEO; Norwegian CPI (Dec), US NFIB (Dec), Chinese M2 & New Yuan Loans (Dec)WED: Australian CPI (Nov)THU: Australian Trade Balance (Nov), US CPI (Dec), IJC (w/e 2nd Jan)FRI: ECB TLTRO Repayment Amount Publication; UK GDP (Nov), Swedish CPIF (Dec), EZ Trade Balance (Nov), Industrial Production (Nov), US University of Michigan Prelim. (Jan), German Wholesale Price Index (Dec), Canadian Housing Starts (Dec)</p><p>Note: Previews are listed in day-orderChinese CPI (Thu): There are currently no expectations for the December Chinese inflation data release. To recap the prior report, CPI Y/Y rose 1.6% in November from the 2.1% pace in October, with prices of food printing at 3.7%, 3.3ppts lower than October, according to Global Times (GT). A bulk of the consumer inflation was fuelled by food prices in the month – with prices of pork soaring 34.4%. “According to a research report issued by the China International Capital Corporation (CICC), the tightened supply of live pigs has been ameliorated in November amid Chinese authorities‘ scaled-up policy adjustment”, reported GT. China set a consumer inflation target of around 3% for 2022. PPI meanwhile fell 1.3% in November, largely due to base effects. Using the latest Chinese Caixin PMI data as a proxy for December, the release suggests “Input costs faced by Chinese firms rose at the slowest rate since September and only marginally. Prices charged were meanwhile stable, as discounting at manufacturers was offset by price hikes at services firms.” From a broader policy perspective, Caixin’s Chief Economist warned – “Under pressure from shrinking demand, weakening expectations and a supply shock, the annual Central Economic Work Conference stated that the foundation for an economic recovery is not solid. Policymakers have made it clear that priority must be given to the recovery and expansion of domestic consumption.”US CPI (Thu): The consensus looks for headline CPI to print 0.1% M/M in December, matching the prior rate, while the annual measure is expected to fall to 6.7% Y/Y from 7.1%. Credit Suisse explains that goods prices continue to face headwinds as supply chains and demand conditions ease. Services inflation will continue to be supported by shelter prices, which CS sees peaking in one-or-two quarters before falling into year-end. A decline in gasoline prices will offset the upside in food inflation, the bank believes. Meanwhile, core CPI is likely to have risen 0.3% M/M, analysts think, picking up a touch from the prior 0.2%; though the annual rate of core inflation is seen easing slightly to 5.9% Y/Y from 6.0%. „A report in-line with expectations would be reassuring for the Fed as it considers slowing – and eventually pausing – the hiking cycle early this year,“ the bank writes. NOTE: on Monday, the NY Fed will release its monthly gauge of consumer inflation expectations, while the University of Michigan’s inflation expectations components, released Friday, will also receive attention. As seen in other data, traders are attentive to inflation updates in many forms given that the Fed wants to see substantial progress in bringing price pressures back down to target before it changes its tone on inflation, and begins refocussing on the deteriorating growth outlook.BoK Policy Announcement (Fri): Analysts at SocGen expect the BoK to lift interest rates by 25bps on Friday, taking its key rate to 3.50%, which SocGen believes will mark the end of its rate hiking cycle. „We have reduced our terminal policy rate forecast from 3.75% to 3.50%,“ it writes, „the data continue to indicate weak economic activity and peaking inflation, and concerns surrounding financial stability have persisted due to high corporate leverage and housing market weakness, which would be bearish for the growth outlook.“ Elsewhere, SocGen argues that a decline in the USDKRW exchange rate eases the pressure on South Korea’s central bank to track the Fed’s tightening cycle, and thinks the BoK will follow the ‚majority view‘ of the Policy Board members presented in November by setting its terminal rate at 3.50%.Chinese Trade (Fri): There are currently no expectations for the December trade data that encapsulates the final month of a year plagued with various domestic COVID measures, tighter overseas monetary policy amid high inflation, and fears of recession. From a domestic perspective, the zero-COVID policy began to unwind and become more targeted at the start of December, with China responding to a weakening virus, although cases continued to rise. Using the Chinese Caixin PMI as a proxy, the release suggested – “the latest reduction in sales was the fastest seen for three months, with companies citing relatively weak demand conditions amid the ongoing pandemic. Foreign demand for Chinese manufactured goods also fell, and at a quicker pace than in November. Lower amounts of export work was often blamed on sluggish global economic conditions and the pandemic.”, although some firms indicated a relative improvement vs November.UK GDP (Fri): Consensus looks for a 0.3% M/M contraction in November vs. the 0.5% expansion in October. Growth in October was boosted by the favourable M/M comparison vs. September, which was impacted by the extra bank holiday for the Queen’s funeral. Pantheon Macroeconomics noted at the time that “the level of GDP in October still was 0.1% below its January 2020 level, and 0.4% below the artificial peak in May 2022”. Ahead of the upcoming release, analysts at Investec (which holds an above consensus view) suggest that GDP may have been relatively flat in November on account of “the reversal from November onwards of the National Insurance hike that took effect in April 2022, which left post-tax paycheques somewhat higher than in October”. That said, analysts caution that “the narrower manufacturing measure of output may have seen some renewed declines, judging by the subdued level of the output component in the PMI survey”. Investec suggests that GDP in Q4 most likely fell by a marginal 0.1%, however, a deep downturn is likely this year. From a policy perspective, a 25bps hike in February is priced at 39% with a 50bps move at 61%. Inflation is still very much front of mind for policymakers, however, a soft growth outturn could prompt additional members on the MPC to either join Tenreyro and Dhingra in the unchanged camp or scale back their vote to a 25bps move vs. the 50bps in December.US Corporate Earnings Season (Fri): It will be a quiet start to the earnings season, and although almost 150 US companies will report in the week of January 9th, only a handful are in the S&P 500. However, six of these companies are large financials (BAC, BK, BLK, C, JPM, WFC), while healthcare giant UNH will also report — all on Friday. For the earnings season more widely, analysts expect S&P 500 companies will report a decline in earnings of 1.6% in Q4, according to Refinitiv, and ‚earnings recession‘ will be a theme that the analyst community focuses on. Other themes likely to be prevalent in this seasons‘ updates are margin compression due to higher inflation and lower international earnings due to the USD’s relative strength against other global peers. Additionally, analysts say that corporate guidance for Q1 may be more informative for the outlook than the Q4 numbers alone, which may help to inform the corporate view on the debate around the extent to which the US will fall into recession, and how long any potential recession could last. Rathbone’s strategists have said that the new year will be filled with old concerns, including the war in Ukraine, unpredictable demand for energy, and the continuation of rate hikes, meaning there will be no quick return to normal. It added that earnings season will be crucial since the forecast in the US was still relatively buoyant, „which means there is room for disappointment if the recession turns out to be deeper.“</p><p>This article originally appeared on <a target=“_blank“ href=“https://newsquawk.com/blog/2802-week-ahead-january-9th-13th-highlights-include-us-chinese-cpi-chinese-trade-uk-gdp-and-us-earnings-season&utm_source=forexlive&utm_medium=research&utm_campaign=partner-post&utm_content=week-ahead“>Newsquawk</a></p>

This article was written by Newsquawk Analysis at www.forexlive.com.