The yen strengthens against the dollar in the Asian session today after the PPI report adds more points for the BoJ to start optimizing monetary policy. Investors in Japan are also feeling the risk of a stimulus exit, pushing the Nikkei down more than -1%. Still, the yen is mixed overall for now. Aussie and Kiwi are the firmer ones so far. The dollar is the weakest, continuing last week’s decline while the European majors are also slightly on the soft side.

Technically, the Swiss franc is clearly lagging behind the greenback again during the rally. USD/CHF actually failed to break out of the range last week. Indeed, a focus for this week would be whether USD/CHF would break the 0.9407 resistance to signal a short-term bottoming out. If the dollar recovers, Swissy is an easier target for now.

In Asia, the Nikkei is down -1.16% at the time of writing. The Hong Kong HSI is up 0.73%. China Shanghai SSE is up 1.44%. The Singapore Strait Times is down -0.19%. The 10-year Japanese JGB yield is up 0.0005 to 0.512.

Bitcoin pressure resistance after regaining 20k

Bitcoin started the year strong, regaining 20,000 handles last week. The total market cap also surged above the $400 billion mark. The move followed broader risk appetite on expectations that the Fed is poised to further slow the pace of tightening. While it’s still early to call for a sustained turnaround, the worst seems to be behind us.

Technically, considering the bullish convergence conditions in the daily and weekly MACD, 15452 should be at least a medium-term bottom. The immediate focus is now on the 21460 resistance. A firm break there will confirm this case and see a further rise back towards the 25198 resistance.

However, to see a trend reversal, Bitcoin needs to break the 55-week EMA (now at 25677) in a fairly determined manner. Otherwise, only the range for a medium-term sideways trade is likely to be set. So 25,000 would be the next level to watch out for.

AUDCAD continues short-term rally and targets 0.96 next

While risk appetite is generally supportive of commodity currencies, Aussie has been outperforming others of late. The renewed acceleration in Australian consumer inflation, as shown in last week’s November monthly CPI data, suggests the RBA has little room for a pause for now. There is also optimism about China’s reopening and the resumption of coal purchases.

The AUDCAD opened the week with solid buying. development should confirm resumption of full advance from 0.8596 low. Short-term outlook remains bullish as long as 0.9142 support holds, even in the event of a pullback. The next target is a 61.8% forecast from 0.8596 to 0.9328 from 0.9142 to 0.9594.

During the move, AUDCAD should also clear the 0.9514 resistance to confirm the completion of the corrective 3-wave decline from 0.9991 (2021 high). That would set the stage for another rally to 0.9991 to resume the rise from 0.8058 (2020 low) in the medium term.

Japan’s PPI rose 10.2%y/y in December, the second-highest on record

Japan’s PPI rose 10.2% yoy in December, accelerating from 9.7% yoy and beating expectations of 9.5% yoy. The reading surpassed 10% for the second time in 2022, marking the second-largest rise on record after September’s 10.3% year-on-year rise.

For 2022, wholesale prices rose by an average of 9.7%, hitting a new record high since comparable data became available in 1981. It’s also twice as fast as in 2021, when a 4.6% increase was reported.

BoJ to mark the week with more inflation and retail data

The BoJ meeting will be the focus of the week. The majority of economists still do not expect any change in monetary policy. Nevertheless, there is some speculation about further optimizations in yield curve control, such as B. Raising the 10-year JGB yield cap to 0.75%. Finally, it is becoming increasingly likely that the BoJ will abandon YCC soon and set the stage for a rate hike later in the year. Even if the central bank does nothing, eyes will be on any news of the way forward.

Reports from the ECB’s December meeting are also being monitored to confirm the news that more rate hikes of 50 basis points are imminent at least in the February and March meetings. Regarding central bank activities, the Fed will also release the Beige Book economic report.

On the data front, US retail sales and PPI; Germany ZEW; Japan CPI; UK Employment, CPI and Retail Sales; Canada CPI and retail sales, Australia employment will be closely monitored. China will also release GDP and December data for Q4.

Here are some highlights of the week:

• Monday: Australia MI Inflation Gauge; Japan PPI, Machine Tool Orders; Canada Manufacturing Sales.
• Tuesday: Consumer Sentiment in Australia Westpac; China GDP, industrial production, retail sales, fixed asset investment; Japan Tertiary Industry Index; Germany CPI final, ZEW economic sentiment; employment in the UK; Canada CPI, Housing Starts; US Empire State Manufacturing.
• Wednesday: BoJ interest rate decision, Japanese machinery orders; UK CPI; Eurozone CPI final; Canada IPPI and RMPI; US Retail Sales, PPI, Industrial Production, Corporate Inventories, NAHB Housing Index, Fed Beige Book.
• Thursday: Trade Balance Japan; employment in Australia; Swiss PPI; ECB session accounts; Canada wholesale; US Philly Fed Survey, Jobless Claims, Building Permits and Housing Starts.
• Friday: New Zealand BusinessNZ Manufacturing; Japan CPI; UK Gfk Consumer Sentiment, Retail Sales; Germany PPI; Canada Retail; Selling Existing Homes in the USA.

Daily USD/JPY Outlook

Daily Pivots: (S1) 127.07; (P) 128.25; (R1) 129.04; More…

The intraday bias in USD/JPY remains on the downside at this point. Current drop from 1,151.93 underway for 61.8% forecast from 151.93 to 133.61 from 138.16 to 126.83. Break there will target the 121.43 Fibonacci level next. On the upside, minor resistance above 129.3 will neutralize the intraday bias first. But outlook remains bearish as long as resistance at 134.76 holds.

Overall, the firm break of the 55-week EMA (now at 131.59) increases the chances of a medium-term bearish reversal, but this is not confirmed yet. Strong support was seen around 61.8% retracement from 102.58 to 151.93 at 121.43 and 38.2% retracement from 38.2% retracement from 75.56 to 151.93 at 122.75 bring about a recovery. But first the 134.76 resistance needs to be broken to indicate a bottom formation. Else remains another decline in favor.

Update of economic indicators

Greenwich Mean Time	Ccy	events	Indeed	forecast	previous	Revised
11:50 p.m	JPY	PPI Y/Y Dec	10.20%	9.50%	9.30%	9.70%
00:00	EUR	TD Securities Inflation M/M Dec	0.20%		1.00%
06:00	JPY	Machine Tool Orders Y/Y Dec P			-7.70%
1:30 p.m	CAD	Manufacturing Sales M/M Nov		2.30%	2.80%
3:30 p.m	CAD	BoC Business Outlook Survey

The yen rally continues today on talks that the BoJ may adjust yield curve control again next week. It is also supported by the continued decline in benchmark US and European Treasury yields. Meanwhile, the dollar tries to fight back as US futures dip, reversing some of yesterday’s post-CPI gains. But overall, the greenback remains the second worst performer of the week, behind the Swiss franc and followed by the kiwi. Yen is the best followed by Euro and Aussie.

In Europe, the FTSE is up 0.41% at the time of writing. DAX is flat. CAC is up 0.21%. Germany’s 10-year yield is down -0.017 to 2.107. Previously, the Nikkei was down -1.25% in Asia. The Hong Kong HSI rose 1.04%. China Shanghai SSE rose 1.01%. The Singapore Strait Times rose 0.79%. The 10-year Japanese JGB yield rose 0.0067 to 0.512.

UK GDP grew 0.1% mom in November, avoiding a contraction

UK real GDP grew 0.1% mom in November, much better than expectations for a -0.3% mom contraction. Services grew 0.2% mom. Production fell by -0.2% mom. The construction was flat. Total monthly GDP is -0.3% below pre-pandemic levels.

In the three months to November, GDP fell -0.3% 3mo3mo. There was a -0.1% decline in services, a -1.4% fall in manufacturing with the only 0.3% growth coming from construction.

Also released was that November manufacturing output fell by -0.5% mom, -5.9% yoy versus expectations of -0.2% mom, -5.2% yoy . Industrial production declined -0.2%mom, -5.1%mom, vs expectations of -0.1%mom, -2.8%mom. Goods trade deficit widened to GBP -15.6bn vs. GBP -14.9bn expected

NIESR expects 0.1% UK GDP growth in Q4, Q1 risk on the downside

Following today’s release of UK GDP, NIESR forecasts that December GDP will fall compared to November. Overall, however, service-driven GDP growth of 0.1% is estimated in Q4.

Paula Bejarano Carbo, Associate Economist, NIESR, said: “Given that the purchasing managers’ indices for services, manufacturing and construction are all below the neutral reading of 50 in December, we expect a slight decline in GDP in December compared to November ; That does mean a surge in quarterly GDP, however, possibly a sign that households are enjoying one last hurray before belt-tightening in 2023.

“Looking ahead to Q1 2023, risks to GDP appear to remain on the downside, driven by weak growth in key sectors, weak consumer and business confidence and a widespread fall in real incomes.”

Industrial production in the euro area rose by 1.0% mom in November and by 0.9% mom in the EU

Industrial production in the Eurozone rose 1.0%m/m in November, ahead of expectations of 0.6%m/m. Capital goods increased by 1.0%, intermediate goods by 0.8% and consumer durables by 0.4%, while energy decreased by -0.9% and non-durable consumer goods by -1.3%.

Industrial production in the EU rose by 0.9% month-on-month. Among the Member States for which data are available, the highest monthly increases were recorded in Ireland (+6.4%), Luxembourg (+5.0%) and Malta (+4.6%). The largest decreases were observed in Estonia (-3.7%), Sweden (-3.3%) and Croatia (-1.9%).

Euro-zone exports rose 17.2% yoy in November, while imports rose 20.2% yoy

Euro-zone exports of goods to the world rose 17.2% yoy to €264.7 billion in November. Imports rose 20.2% year-on-year to EUR 276.3 billion. The trade deficit amounted to EUR -11.7 billion. Trade within the euro zone increased by 16.8% year-on-year to EUR 241.5 billion.

Seasonally adjusted, exports increased by 1.0% mom to EUR 251.5 billion. Imports fell -3.8% mom to EUR 266.7 billion. The trade deficit narrowed to -EUR 15.2 billion from -EUR 28.1 billion in October, versus expectations of -EUR 20.0 billion. Euro-zone intraday trade fell to €232.2 billion from €233.4 billion in October.

ECB-Kazakhs: Core inflation is currently an important indicator of inflation persistence

ECB Governing Council member Martins Kazaks pushed back talks that the central bank would cut interest rates by the end of this year. He said he sees no “reasons” for it.

“It would take a deep recession with a sizeable rise in unemployment for inflation to come down, pushing for interest rate cuts,” the governor of the Central Bank of Latvia said. “But that’s not likely given the current macro outlook.”

“It is possible that core inflation will continue to trend higher even if headline inflation is declining, for example due to fluctuations in energy prices,” he said. “In my view, core inflation is currently a key indicator of inflation persistence and policy decisions.”

He expects interest rates to rise “well into restrictive territory” but declined to estimate the final rate. “The uncertainty is too great and we will find it step by step,” he said.

Chinese exports fell -9.9% yoy in December, imports fell -7.5% yoy

Chinese exports plunged -9.9% yoy in USD terms in December, the sharpest drop since February 2020 but slightly better than expectations of -10.0% yoy. Imports fell -7.5% yoy, better than expectations of -9.8% yoy. The trade surplus widened to $78.0 billion from $69.8 billion, slightly above expectations of $77.9 billion.

In CNY terms, exports fell -0.5% yoy while imports rose 2.2% yoy. The trade surplus widened to CNY 550 billion from CNY 494 billion, beating expectations of USD 533 billion.

For 2022 as a whole, exports rose 7.2% in US terms, much worse than the 29.6% in 2021. Imports rose 1.1%, a sharp decline from 30.0% in 2021 .

EUR/USD midday outlook

Daily Pivots: (S1) 1.0766; (P) 1.0816; (R1) 1.0902; More…

With 1.0729 minor support intact, EUR/USD intraday bias remains slightly up. Current rise from 0.9534 should target 61.8% forecast from 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, minor support below 1.0729 will initially neutralize intraday bias again. But near-term outlook remains bullish as long as 1.0482 support holds in case of a pullback.

Overall, recent action suggests that the rally off the 0.9534 low is more of a medium-term uptrend than a correction. Another rally calls for a 61.8% retracement from 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the preferred case as long as 1.0482 support holds

Update of economic indicators

Greenwich Mean Time	Ccy	events	Indeed	forecast	previous	Revised
11:50 p.m	JPY	Money supply M2+CD Y/Y Dec	2.90%	3.30%	3.10%
03:20	CNY	Trade Balance (USD) Dec	78.0B	77.9B	69.8B
03:20	CNY	Exports (USD) Y/Y Dec	-9.90%	-10%	-8.70%
03:20	CNY	Imports (USD) y/y Dec	-7.50%	-9.80%	-10.60%
03:20	CNY	Trade Balance (CNY) Dec	550B	533B	494B
03:20	CNY	Exports (CNY) Y/Y Dec	-0.50%		0.90%
03:20	CNY	Imports (CNY) Y/Y Dec	2.20%		-1.10%
07:00	British pound	GDP M/M Nov	0.10%	-0.30%	0.50%
07:00	British pound	Directory of Services 3M/3M Nov	-0.10%	-0.40%	-0.10%
07:00	British pound	Manufacturing Production M/M Nov	-0.50%	-0.20%	0.70%
07:00	British pound	Manufacturing Production Y/Y Nov	-5.90%	-5.20%	-4.60%	-5.70%
07:00	British pound	Industrial Production M/M Nov	-0.20%	-0.10%	0.00%	-0.10%
07:00	British pound	Industrial Production Y/Y Nov	-5.10%	-2.80%	-2.40%	-4.70%
07:00	British pound	Goods Trade Balance (GBP) Nov	-15.6B	-14.9B	-14.5B	-12.3B
09:00	EUR	Italy Industrial Production M/M Nov	-0.30%	0.40%	-1.00%
10:00 a.m	EUR	Eurozone trade balance (EUR) Nov	-15.2B	-20.0B	-28.3B	-28.1B
10:00 a.m	EUR	Eurozone Industrial Production M/M Nov	1.00%	0.60%	-2.00%	-1.90%
12:00 p.m	British pound	NIESR GDP estimate (3 months) Dec	0.10%		-0.30%
1:30 p.m	USD	Import Price Index M/M Dec	0.40%	-0.90%	-0.60%
15:00	USD	Michigan Consumer Sentiment Index Jan P		61.6	59.7

At this point, the euro is the strongest of the week so far while the Swiss franc is the weakest thanks to the upside breakout and yesterday’s rally. The dollar is also on the soft side, but there is still no clear follow-up selling after Monday’s decline. It seems traders are still holding their bets awaiting today’s US consumer inflation data. Significant deceleration in both headline and core CPI is expected, which should signal a smaller 25 basis point rate hike by the Fed in February.

Technically 1.1574 correction pattern following GBP/CHF should have completed after yesterday’s 3 wave surge to 1.1094. Further recovery is now expected as long as 1.1180 support holds. Should see a retest of 1.1543/74 resistance zone next. As EURGBP struggles to firmly break the 0.8876 resistance, the current moves from the European majors are more about the Swiss Franc’s own weakness.

In Asia, the Nikkei is up 0.05% at the time of writing. The Hong Kong HSI is down -0.30%. China Shanghai SSE is down -0.16%. The Singapore Strait Times is down -0.45%. The Japanese 10-year JGB yield is up 0.0039 to 0.510. Overnight, the DOW rose 0.80%. The S&P 500 rose 1.28%. NASDAQ rose 1.76%. The 10-year yield fell -0.067 to 3.554.

Fed Collins: I would bet 25 for the February meeting

Boston Fed President Susan Collins said in an interview with The New York Times that “25 or 50 is reasonable” for a February rate hike. She added, “I would bet 25 at this point, but it’s very data dependent.”

“Slow adjustment gives more time to evaluate the incoming data before making a decision as we near our goal. Minor changes give us more flexibility,” she said.

ECB de Cos: We plan to raise interest rates significantly in the next few meetings

ECB Governing Council member Pablo Hernandez De Cos said yesterday: “We plan to hike interest rates further significantly at the next meetings.” In addition, tightening will continue “until a sufficiently restrictive level is reached to ensure that inflation is on target over the medium term.” of 2% returns”.

“Keeping interest rates low will reduce inflation by dampening demand and will also protect against the risk of a sustained upward movement in inflation expectations,” he said.

De Cos also noted that since the last meeting, markets have upgraded the expected final rate by 30 basis points to 3.4%. However, market interest rates contain a positive premium and “the market’s true expectation for the maximum level of the deposit facility rate is slightly below this number.”

On the data front

New Zealand building permits rose 7.0% mom in November. Australia’s trade surplus widened to A$13.2 billion in November, beating expectations of A$11.3 billion. Japanese bank lending rose 2.7% yoy in December, with the current account reporting a surplus of JPY1.92k in November. China’s CPI rose to 1.8% yoy in December, while the PPI rose to -0.7% yoy.

Looking ahead, today’s focus will be on US CPI while also posting jobless claims.

EUR/USD daily outlook

Daily Pivots: (S1) 1.0730; (P) 1.0753; (R1) 1.0780; More…

The intraday bias in EUR/USD remains upside despite some loss of upside momentum. Current rally 0.9534 would target 61.8% view 0.9630 – 1.0733 from 1.0482 at 1.1164. On the downside, minor support below 1.0711 will initially neutralize intraday bias again. But near-term outlook remains bullish as long as 1.0482 support holds in case of a pullback.

Overall picture focus remains on the 38.2% retracement from 1.2348 (2021 high) to 0.9534 at 1.0609. A rejection at 1.0609 suggests that price action could develop into a corrective pattern from 0.9534, the medium-term floor. Thus, a mid-range bearish hold for further decline to 0.9534 at a later date. However, a sustained break of 1.0609 increases the likelihood of a trend reversal and targets a 61.8% retracement at 1.1273.

Update of economic indicators

Greenwich Mean Time	Ccy	events	Indeed	forecast	previous	Revised
21:45	CHF	Building permits M/M Nov	7.00%		-10.70%
11:50 p.m	JPY	Bank Loans Y/Y Dec	2.70%	2.80%	2.70%
11:50 p.m	JPY	Checking Account (JPY) Nov	1.92T	0.65T	-0.61T
00:30	CHF	Trade Balance (AUD) Nov	13.20B	11:30 a.m	12.22B	12.74B
01:30	CNY	CPI Y/Y Dec	1.80%	1.80%	1.60%
01:30	CNY	PPI Y/Y Dec	-0.70%	-0.10%	-1.30%
05:00	JPY	Eco Watchers Survey: Current Dec	47.9	47.8	48.1
09:00	EUR	ECB economic report
1:30 p.m	USD	Initial Jobless Claims (January 6)		210,000	204K
1:30 p.m	USD	CPI M/M Dec		0.00%	0.10%
1:30 p.m	USD	CPI Y/Y Dec		6.50%	7.10%
1:30 p.m	USD	CPI Core M/M Dec		0.30%	0.20%
1:30 p.m	USD	CPI Core Y/Y Dec		5.70%	6.00%
15:30	USD	natural gas storage		-15B	-221B

The Australian dollar regained some ground in the Asian session today after stronger-than-expected monthly CPI data. In the background, market sentiment is also stabilizing after Fed Chair Jerome Powell refrained from commenting on monetary policy or inflation. The New Zealand dollar is currently the second strongest, followed by the Swiss franc. The Yen is the worst performer, followed by the Canadian and then the Dollar and the Euro. Sterling is mixed for now.

Technically, the dollar’s sell-off has clearly lost momentum so far this week, but there are no signs of a sustained recovery just yet. Traders are likely to just hold their bets ahead of tomorrow’s US CPI release. Gold rally is still on track 100% forecast 1616.51 – 1786.63 from 1728.48 at 1898.80. Given the weak upside momentum on the 4-hour MACD, the 1900 grip could end on the first try to the upside and prompt a pullback. That could give the dollar a chance to rally elsewhere.

In Asia, the Nikkei is up 0.98% at the time of writing. The Hong Kong HSI is up 1.02%. China Shanghai SSE is up 0.20%. The Singapore Strait Times is up 0.29%. Japan 10-year JGB yield fell -0.0074 to 0.504. Overnight, the DOW rose 0.56%. The S&P 500 rose 0.70%. NASDAQ rose 1.01%. The 10-year yield rose 0.104 to 3.621.

Fed Bowman: Rates will remain at sufficiently restrictive levels for some time

Fed Governor Michelle Bowman said in a speech“In recent months we’ve seen some inflation measures fall, but we still have work to do, so I expect the FOMC to continue raising interest rates to tighten monetary policy, as we explain after our December meeting to have. ”

“My views on the appropriate size of future interest rate hikes and the final level of the Federal Funds Rate continue to be guided by the incoming data and their impact on the outlook for inflation and economic activity.”

“I will look for compelling signs that inflation has peaked and more consistent signs that inflation is on a downward path to determine both the appropriate size of future rate hikes and the level at which the policy rate should be raised is sufficiently restrictive.”

“My expectation is that once we achieve a sufficiently restrictive federal funds rate, it will need to stay at that level for some time to restore price stability, which in turn will help create conditions that support a sustained strong labor market .”

ECB Centeno: Inflation will fall again from March

ECB Governing Council member Mario Centeno said yesterday: “We are nearing the end of the current rate hike process, I think that’s right.”

Centeno said that “wage updates in Europe could make it difficult for prices to fall further over the next two months” but “after that, inflation will start falling again from March”.

BoJ Public Survey: 32.5% expect a significant price hike vs. 28.9%

According to the BoJ’s December survey of public attitudes and behavior, 32.5% of respondents expect prices to rise significantly in a year from 28.9% in the September survey. Those expecting prices to rise fell to 52.5% from 56.8%. Combined, those who expected prices to rise fell to 85.0%, down slightly from 85.7%. Only 2.4% expect falling prices.

Regarding the state of the economy in a year, those expecting an improvement fell from 10.5% to 9.1%. Those expecting unchanged fell to 44.4% from 46.0%. Those expecting worsening conditions rose to 46.2% from 42.9%. DI fell from -32.4 to -37.1.

Australia’s monthly consumer price index rose back to 7.3% yoy in November on continued inflationary pressures

Australia’s monthly CPI accelerated to 7.3% yoy in November from 6.9% yoy, ahead of expectations of 7.2% yoy.

Michelle Marquardt, Head of Prices Statistics at ABS, said: “The annual move of 7.3% this month compares to 6.9% in October and 7.3% in September, suggesting continued inflationary pressures.”

The main contributors to the annual increase in November were housing (+9.6%), food & non-alcoholic beverages (+9.4%), transport (+9.0%), furniture, appliances & services (+8.4% ). Leisure and culture (+5.8%).

Retail sales in Australia rose 1.4% mom in November on Black Friday sales

Retail sales in Australia rose 1.4%m/m in November, well above expectations of 0.7%m/m. Seasonally adjusted sales of AUD 35.92 billion were a new record.

Ben Dorber, Head of Retail Statistics at ABS, said: “While we typically see an increase in spending around Black Friday sales, the strong seasonally adjusted increase in November 2022 shows that the effect is increasing over time as the event has become more common everywhere retailers and sale times are getting longer.”

“With Black Friday sales rising in popularity, October’s slower spike could indicate consumers are waiting to take advantage of November’s discounts, especially amid downward pressure on the cost of living.”

looking ahead

Italy’s retail sales and US crude inventories are the only features on another ultra-light day.

AUD/USD daily report

Daily Pivots: (S1) 0.6859; (P) 0.6894; (R1) 0.6927; More…

AUD/USD intraday bias remains neutral as consolidation extends from temporary top at 0.6949. Prospects remain bullish as long as 0.6721 support holds. The break of 0.6949 will continue the larger rise from 0.6169 to 61.8%, the projection from 0.6169 to 0.6892 from 0.6721 to 0.7444 next. However, a firm break of 0.6721 will indicate a short-term reversal and turn the bias back down.

Overall corrective decline from 0.8006 (2021 high) should be complete with three waves down to 0.6169 (2022 low). Further recovery should be watched until the 61.8% retracement from 0.8006 to 0.6169 at 0.6871. A sustained break there will open the way for a retest of 0.8006. This will now remain the preferred case as long as 0.6721 support holds.

Update of economic indicators

Greenwich Mean Time	Ccy	events	Indeed	forecast	previous	Revised
00:30	EUR	Retail M/M Nov	1.40%	0.70%	-0.20%
00:30	EUR	CPI Y/Y Nov	7.30%	7.20%	6.90%
05:00	JPY	Leading Economic Index Nov P	97.6	98.8	98.6
09:00	EUR	Italy Retail M/M Nov		0.20%	-0.40%
15:30	USD	crude oil inventories		-2.0M	1.7 million