US futures are now down near the lows for the day, with S&P 500 futures falling by 0.4% ahead of US trading. This comes as Treasury yields are keeping steadier, with 10-year yields up 1.7 bps to 3.989% on the day. The drop comes as the big banks are releasing earnings, adding to the post-CPI push and pull play out across markets.

All of this is keeping the dollar a touch firmer as well now with EUR/USD down 0.2% to 1.0948 and GBP/USD down 0.2% as well to 1.2730 on the day. USD/JPY did push lower to 144.90 earlier in the session but is now back to flat levels around 145.23 currently.

The dollar’s advance is not a uniform one though, as gold is up to session highs at around $2,045 – up 0.8% on the day – and looking to push past key near-term resistance as highlighted here. Meanwhile, tensions in the Middle East continue to fuel the rally in oil with WTI crude up over 4% to near $75 at the moment.

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

This is yet again another heads up to the upcoming UK labour market report that will be released next week. This has been an ongoing thing since October already as seen here. As noted at the time, ONS says that the data will feature „a new series using additional data sources to produce adjusted levels and rates for employment, unemployment and inactivity“.

To add to the headline above, ONS says that a fuller release of the UK labour market statistics should come in February.

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

USD

• The Fed left interest rates unchanged as
  expected at the last meeting with a shift in the statement that indicated the
  end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t
  push back against the strong dovish pricing and even said that they are focused
  on not making the mistake of holding rates high for too long.
• The latest US CPI
  slightly beat expectations but analysts expect the Core PCE to print at 0.2%
  M/M again following the CPI data.
• The labour market continues to soften although Initial Claims keep on
  hovering around cycle lows while Continuing Claims got stuck at a higher level.
• The latest ISM Manufacturing
  PMI
  beat expectations, while the ISM Services PMI missed
  by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

AUD

• The
  RBA left interest rates unchanged as expected at the last meeting with
  the central bank maintaining the usual data dependent language.
• The
  recent Monthly CPI report missed expectations across
  the board which is another welcome development for the RBA.
• The
  latest labour market report beat forecasts across the
  board although the unemployment rate rose more than expected.
• The
  wage price index surprised to the upside as wage
  growth in Australia remains strong.
• The
  Australian PMIs improved recently but remain in
  contraction.
• The
  market expects the RBA to start cutting rates in Q3 2024.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD continues
to consolidate at a key support zone
around the 0.6670 level where we can also find the 61.8% Fibonacci retracement level
for confluence. The
buyers are likely to keep piling in here with a defined risk below the support
to position for a rally into the 0.69 handle. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
0.65 handle.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the recent
price action has been rangebound as the market remains uncertain where to go
next given the mixed economic data. If the price breaks above the minor trendline we can
expect the buyers to increase the bullish bets into the 0.69 handle while a
break below the support will likely trigger a selloff into the 0.65 level.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with no clear level where to lean onto except
the support zone and the minor trendline. The best strategy is generally to sit
out and wait for a breakout supported by a fundamental catalyst, although one
can also “play the range” by buying at support and selling at resistance.

Upcoming Events

Today the only notable event on the agenda is the US
PPI data.

This article was written by FL Contributors at www.forexlive.com.

This is related to the quarterly economic outlook report due this month, with the news yesterday here: BOJ reportedly considers lowering price outlook for fiscal year 2024 to middle 2% range

The sources cited in this report say that the BOJ is likely to cut its core inflation forecast for the fiscal year 2024 (currently 2.8%) amid the recent decline in oil prices. That fits with the linked story from above yesterday. However, policymakers are not likely to make any major changes to their „core core“ inflation forecast – expected to stick around 1.9% for both fiscal year 2024 and 2025.

One of the sources said that „the broad uptrend in inflation and wages remains intact“, with another stating that „consumption is holding up and there’s growing conviction that wage hikes will continue, and even broaden, this year“.

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

In the latest outlook report for October last year, the BOJ noted the projection for prices for the fiscal year 2024 to be at around 2.7% to 3.1%. So, to have it be brought lower back to around the 2.5% mark is not exactly a good show of confidence that they are seeing inflation to be more sticky in the year ahead.

This all brings us back to this question here: Can the BOJ beat the inflation clock?

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

USD

• The Fed left interest rates unchanged as expected at the last meeting with a shift in
  the statement that indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long.
• The latest US PCE missed expectations across the board with
  the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
• The NFP report beat
  expectations although there was more weakness under the hood.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

EUR

• The ECB left interest rates unchanged as
  expected at the last meeting maintaining the usual data dependent language.
• President Lagarde highlighted
  once again that the risks to the economy are skewed to the downside and that
  they did not discuss rate cuts, which was a pushback against the aggressive
  market’s rate cut pricing.
• The recent Eurozone CPI missed
  expectations with the disinflationary process remaining intact.
• The labour market remains historically
  tight with the unemployment rate hovering at cycle lows.
• The Eurozone PMIs missed
  expectations across the board with both the Manufacturing and Services sectors
  falling further into contraction.
• The ECB members continue to repeat that they are
  done with the tightening cycle and they are now debating when to start cutting
  rates.
• The market expects the ECB to start cutting rates in
  Q2 2024.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD recently
bounced on the key trendline around
the 1.09 handle where we had also the 61.8% Fibonacci retracement level
for confluence. This is
where the buyers stepped in with a defined risk below the trendline to position
for a rally into new highs. The sellers, on the other hand, will need the price
to break below the trendline to invalidate the bullish setup and position for a
drop into the 1.07 handle.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair got
stuck in a consolidation between the 1.09 support and the
1.10 resistance. The market might be waiting for the US CPI data before
deciding where to go next. The current setup though, gives us two possible
scenarios:

• A break to the upside should lead to a rally into a
  new high.
• A break to the downside is likely to trigger a
  selloff into the 1.07 handle.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the pair bouncing around. There’s nothing
to do here other than waiting for the US CPI report and the trading setups to
guide the way.

Upcoming Events

Today we get the latest
US CPI report and the US Jobless Claims figures, while tomorrow we conclude the
week with the US PPI data.

This article was written by FL Contributors at www.forexlive.com.

Yields are lower and stocks are slightly higher but the dollar is finding itself in a steadier spot so far on the session. It was slightly softer earlier in Asia but now, we are seeing dollar pairs keep little changed with most trading flattish. That being said, the ranges for the day leave a lot to be desired. For example, EUR/USD is only stuck within a 28 pips range or so.

The aussie and kiwi are maintaining a light advance but off earlier highs, and the ranges are also relatively narrow against the dollar. In other words, it’s all still to play for in the trading day ahead.

The main focus is on the US CPI data release, so don’t expect any fireworks before we get to that. This will make the next few hours a rather inert one for European traders.

In the aftermath of the release, USD/JPY might hold some interest after yesterday’s break above the 145.00 mark. We’ll see if the pair can hold a break above that on the inflation numbers with key resistance then seen at the 50.0 Fib retracement level of the swing lower from November to December, seen at 146.07.

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

Yesterday, the S&P 500 extended the gains as
the market continues to trade into the CPI release today probably expecting good
inflation figures. This raises the risk of a bigger selloff in case the data
surprises to the upside given that we should also see Treasury yields rising
and the aggressive rate cuts expectations getting trimmed. At the same time, we
will see the latest Jobless Claims figures and that will also be something to
factor in as strong numbers might double down on a hot CPI report. The
best-case scenario for the S&P 500 is probably benign inflation data and
not too weak Jobless Claims.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500
eventually bounced on the swing level around the 4700 level where we had also
the red 21 moving average for confluence. The
price is now approaching the all-time high and we might see it breaking it
today with the key economic data releases on the agenda. The sellers are likely
to step in around the all-time high with a defined risk above it to position
for a drop back into the 4700 level.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can notice that
we will likely see the price diverging with
the MACD right
at the all-time high. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. This is another bearish confluence for the
sellers and should give them a bit more conviction, although the data might
invalidate the setup. The buyers, on the other hand, will likely increase the
bullish bets on a break of the all-time high.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and we can see that we have a minor trendline
defining the current bullish momentum. If the price spikes to the upside and
then breaks below the trendline, we can expect the sellers to increase the
bearish bets into the 4700 support. The
buyers, on the other hand, will likely lean on the trendline and the 21 moving
average to position for another rally.

This article was written by FL Contributors at www.forexlive.com.

The lower bond yields today is helping to see the dollar keep more sluggish to start European trading. At the same time, equities are also keeping slightly higher on the day. However, it’s tough to read much into it when everything could still change after we get to the US CPI data later.

That is still the key risk event for markets today as highlighted here. The bond market will be the main spot to watch as it will have reverberations to broader markets. For now, yields are nudging lower but it’s too early to make any calls that it will keep that way before the day ends. That being said, it will be a tall order to continue the price action from last week – especially up against a market that will hang on to anything to keep the disinflation narrative running.

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

GBP

• The BoE left interest rates unchanged as expected at the last meeting
  with no dovish language as they reaffirmed that they will keep rates high for
  sufficiently long to return to the 2% target.
• Governor Bailey pushed back against rate cuts
  expectations as he said that they cannot state if interest rates have
  peaked.
• The latest employment report missed forecasts with wage growth
  coming in much lower than expected and job losses in November.
• The UK CPI missed expectations across the board, which is
  another welcome development for the BoE.
• The UK PMIs showed the Manufacturing sector falling
  further into contraction while the Services sector continues to expand.
• The latest UK Retail Sales missed expectations across the
  board by a big margin as consumer spending remains weak.
• The market expects the BoE to start
  cutting rates in Q2 2024

JPY

• The BoJ kept its monetary policy unchanged at the last meeting with interest
  rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference
  cap.
• Governor Ueda repeated once again that they won’t
  hesitate to take easing measures if needed and that they are not foreseeing
  sustainable price increases unless wage growth picks up.
• The latest Japanese CPIshowed that inflationary pressures
  are easing although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell further into contraction but
  the Services PMI ticked higher remaining in expansion.
• The latest Japanese wage data missed expectations by a big margin
  and as a reminder the BoJ is focusing on wage growth to decide whether to tweak
  its monetary policy.
• The Tokyo CPI, which is seen as leading indicator
  for National CPI, eased further but the Core-Core measure remains stuck at
  cycle highs.
• The market expects the BoJ to hike
  rates in Q2 2024.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY is now
at a key resistance around
the 184.45 level. This is where we can expect the sellers to step in with a
defined risk above the level to position for a drop into the 178.00 support.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into new highs.

GBPJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more clearly the
range between the 178.00 support and the 184.45 resistance. The buyers will
also need to be careful as we might get a fakeout, which could be confirmed if
the price after the breakout falls and breaks below the most recent higher low
around the 182.80 level.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the JPY losing ground since the miss in
the wage data. It looks more and more likely that the sellers can count only on
rate cuts from the BoE as the BoJ is unlikely to do much with lower inflation
and low wage growth. We can see that we have also a minor trendline that
is supporting the current uptrend. If we see a fakeout and the price breaks
below the trendline, the sellers are likely to pile in again targeting a break
below the 182.80 swing low.

Upcoming Events

Tomorrow we get the US CPI report and the US Jobless
Claims figures, while on Friday we conclude the week with the UK GDP and the US
PPI data.

This article was written by FL Contributors at www.forexlive.com.