Market news.
Economists at JP Morgan are of the view that China’s reopening from the Covid restrictions will likely boost Australian economic growth by around 1.0%.
Additional takeaways.
"China’s shift toward an earlier reopening raises the question of potential implications for the Australian economy." "The largest potential upside from reopening itself sits within the services sector given China is the largest consumer of Australian tourism and education exports." "And that a full recovery in Australia’s tourism will add 0.5% to GDP." "The return of international students from China will add another 0.4%."
USD/JPY Price Analysis: Further downside hinges on 131.30 break.
USD/JPY remains pressured for third consecutive day as sellers poke one-week-old support line. Bearish MACD signals, downbeat RSI signal further south-run. Any recovery remains elusive below 135.00 resistance confluence.
USD/JPY holds lower ground near the intraday bottom surrounding 131.30 as bears flirt with the short-term key support during early Tuesday. In doing so, the Yen pair prints a three-day downtrend while justifying the bearish MACD signals and the absence of an oversold RSI (14).
With this, the USD/JPY price is likely to remain weak and could break the one-week-old support line, near 131.30 by the press time, in the near term.
Following that, the 131.00 round figure and 130.00 psychological magnet may entertain the Yen pair sellers before directing them to the recent trough surrounding 129.50.
It’s worth noting that the RSI (14) could turn oversold when the USD/JPY hit 129.50, which in turn may trigger a corrective bounce, if not then the 61.8% Fibonacci Expansion (FE) of the pair’s moves between November 30, 2022, and January 03, 2023, close to 128.30, will be in focus.
On the contrary, recovery moves may initially aim for the previous day’s peak of 132.65 before heading towards the late December 2022 swing high surrounding 134.50.
However, the 200-SMA and a downward-sloping resistance line from November 30, 2022, close to 135.00 by the press time, will be a tough nut to crack for the USD/JPY bulls to retake control.
USD/JPY: Four-hour chart.
Trend: Further downside expected.
WTI remains in bullish territory despite a correction in Asia.
WTI bulls pullback in Asia, but themes are upbeat as China reopens borders. China issued a fresh batch of import quotas, a signal that the world’s largest importer is ramping up to meet higher demand.
West Texas Intermediate, WTI, is down on the Asian session, losing some 0.4% at the time of writing despite hopes demand from China will improve as the country issued new import quotas. Nevertheless, overnight and at the start of the week, the news offered economic support for its flagging economy, while the US Dollar weakened, enabling investors a cheaper entry into the black gold rally.
Elsewhere, China continued to dismantle much of its strict zero-COVID rules around movement as it reopened its borders to international visitors for the first time since it imposed travel restrictions in March 2022. The BBC reported that ''incoming travellers will no longer need to quarantine, marking a significant change in the country's Covid policy as it battles a surge in cases. They will still require proof of a negative PCR test taken within 48 hours of travelling.''
As a consequence, oil prices surged early on Monday as hopes demand from China will improve as the country issued new import quotas and offered economic support for its flagging economy. Spot West Texas Intermediate crude was last seen at o $ 74.57 bbls.
Analysts at ANZ Bank explained that ''China issued a fresh batch of import quotas, a signal that the world’s largest importer is ramping up to meet higher demand.''
''Easing COVID-19 restrictions have already boosted travel. Some 34.7m trips within the country were made on the first official day of the Spring Festival travel rush, according to the Ministry of Transport. That’s more than 40% above comparable days in 2022. Roughly 2.1bn trips are expected over the 40-day period. This comes amid tightening supplies,'' the analysts said.
China's Envoy to Australia Xiao: Aussie-Sino relationship witnessed a turnaround in 2022.
Chinese Ambassador to Australia Xiao Qian talks up the relationship between Australia and China.
Key quotes.
In 2022, the Australia-Sino relationship experienced a turnaround. The relationship has been constructive so far.
Market reaction.
AUD/USD is holding higher ground on the upbeat comments, trading at 0.6925, up 0.20% on the day.
NZD/USD Price Analysis: Kiwi drops from 0.6400 amid ease in risk-on mood.
Investors are awaiting the speech from Fed Powell for fresh impetus. A Double Bottom formation signifies a responsive buying action after a weak selling interest around the previous cushion. A bull cross, represented by the 20-and 50-period EMAs at 0.6300, adds to the upside filters.
The NZD/USD pair has corrected to near 0.6370 after sensing selling pressure near the round-level resistance of 0.6400 in the Asian session. The Kiwi asset is likely to remain on the tenterhooks as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell for fresh impetus.
Meanwhile, the risk impulse is quite confusing as S&P500 futures are recovering after dropping sharply in the early Asian session. Also, the alpha generated by 10-year Treasury yields has accelerated to near 3.55%.
A formation of a Double Bottom chart pattern around 0.6200 on a four-hour scale resulted in a firmer rally in NZD/USD. Usually, the chart pattern signifies a responsive buying action after a weak selling interest on previous support levels by the market participants.
A bull cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 0.6300, adds to the upside filters. Also, the 200-EMA at 0.6277 has acted as a cushion for the New Zealand Dollar.
The Relative Strength Index (RSI) (14) is trying hard to keep oscillation in the bullish range of 60.00-80.00 as it will maintain strength in the US Dollar.
After a firmer rally, it is highly likely that the Kiwi asset will test the critical support placed from January 4 high around 0.6350, which will trigger a bargain buy opportunity and will drive the major towards Monday’s high at 0.6412 followed by the psychological resistance at 0.6500.
On the contrary, a break below December 22 low at 0.6230 will expose the Kiwi asset for more downside toward November 28 low at 0.6155. A slippage below the latter will drag the asset further to near November 21 low at 0.6087.
NZD/USD four-hour chart.
EUR/USD Price Analysis: Struggles around 1.0730 resistance amid looming bull cross on MACD.
EUR/USD seesaws around seven-month high as the key resistance line challenges bulls. Successful trading beyond seven-week-old ascending trend line, impending bulls cross on MACD keep buyers hopeful. Sellers need validation from 50-day EMA to retake control.
EUR/USD bulls appear running out of steam as they jostle with an important resistance around 1.0730 during early Tuesday. In doing so, the major currency pair makes rounds to the seven-month high while probing a two-day uptrend.
That said, a downward-sloping resistance line from late May 2022, around 1.0730, joins the looming bull cross on the MACD indicators to keep the EUR/USD buyers hopeful.
However, the mid-2022 peak surrounding 1.0790 and the 1.0800 threshold act as extra filters towards the north before directing the EUR/USD prices to April 2022 peak near 1.0936.
In a case where the EUR/USD pair remains firmer past 1.0936, the 1.1000 psychological magnet will be in focus.
Alternatively, pullback moves may initially aim for a seven-week-long support line, close to 1.0540 to convince the EUR/USD bears.
Even so, the 50-day Exponential Moving Average (EMA) level surrounding 1.0460 could act as an extra downside buffer to probe the sellers.
It should be noted that the tops marked during August 2022 and lows of November 2022, close to 1.0370 and 1.0220 in that order, could act as the last defense of the EUR/USD buyers.
EUR/USD: Daily chart.
Trend: Further upside expected.
USD/CNY fix: 6.7611 vs. the last close of 6.7730.
In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.7611 vs. the last close of 6.7730.
About the fix.
China maintains strict control of the yuan’s rate on the mainland. The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled. Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.
USD/CAD traders await key US CPI, testing 1.3400 with bulls in play.
USD/CAD bulls are in play and testing 1.3400. US CPI could now be the key driver for the week.
USD/CAD is flat in Asia, testing 1.3400 having travelled between a tight range of 1.3381 and 1.3406 so far. The US Dollar is making a slight recovery although the domestic jobs data is keeping a lid on the pair as the prospects for higher local rates continue to support the Loonie.
While there is good news being priced into the markets as China reopens, supporting a bid in the oil price on the week so far, investors are looking ahead to this week's United States inflation data following a slew of market-impacting economic data last week from the US economy to start the year off.
In the meanwhile, however, the stronger jobs number from Canada that came in data on Friday has put the Bank of Canada back in the hot seat. Analysts at TD Securities explained that ''another hike this month is not likely to resonate much with the CAD given where markets are priced. Instead, there is the chance that this hike - if realized - is perceived as its last given the pressures emerging on household imbalances and housing in general.''
As for USDCAD, the analysts at TD Securities ''think 1.35 acts as a broad anchor for now, but we expect a more definitive make-or-break moment for the pair and the CAD, in general, co the BoC decision;'
Technically, the analysts said, they note that ''USD/CAD is coiling into a flag formation established from the Oct highs/Aug 2022 lows.'' Strategically, they are biased for CAD to underperform in the first half of this year. ''Tactically, the CAD is likely to remain steady to slightly firmer on crosses following the Nonfarm Payrolls number.''
Markets are still digesting Friday’s Nonfarm Payrolls giving credence to a pivot from the Federal Reserve. This is what makes this week's inflation data so important. ''The jobs report was strong overall as Unemployment dropped back to the cycle low of 3.5%, supporting the view that the labour market remains red hot,'' analysts at Brown Brothers Harriman explained.
''However, markets focused on the bigger than expected drop in average hourly earnings to 4.6% year over year.'' However, the analysts argued that ''if the labour market remains as tight as it seems, wages are unlikely to fall much further in the coming months.''
Gold Price Forecast: XAU/USD skids below $1870 as yields rebound ahead of Fed Powell’s speech.
Gold price has slipped beneath $1,870.00, weighed down by a recovery in US Treasury yields. A rangebound action is expected from the US Dollar Index (DXY) ahead of Fed Powell’s speech. Fed policymakers see the terminal rate at 5.00-5.25% to tame stubborn inflation.
Gold price (XAU/USD) has slipped below the immediate resistance of $1,870.00 in the Tokyo session. The precious metal has delivered a breakdown of the consolidation formed in a range of $1,870.00-1,881.50 as the demand for US government bonds is derailing ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, which is scheduled for Tuesday.
The 10-year US Treasury yields have rebounded above 3.54%, weighing on risk-on impulse. Meanwhile, S&P500 futures have turned volatile after witnessing a sell-off in the late Monday session, portraying a caution in building positions in risk-sensitive assets. The US Dollar Index (DXY) is expected to attempt a break into the auction range above the immediate resistance of 103.00.
Investors are awaiting the speech from Fed Powell for fresh cues as it will provide a head-start for the entire CY2023. Well, other Fed policymakers are still favoring the terminal rate projection at 5.00-5.25% despite a significant drop in December wage inflation.
San Francisco Fed Bank President Mary Daly cited that it is reasonable for interest rates to be at 5%-5.25%. Also, Atlanta Federal Reserve bank president Raphael Bostic sees the interest rate peak in a 5%-5.25% range and the continuation of higher interest rates beyond CY2023.
Gold technical analysis.
Gold price is displaying signs of exhaustion as selling pressure is visible above $1,880.00. The precious metal has formed a Double Top chart pattern, which indicates a bearish reversal but needs more filters for activation. The yellow metal has slipped below the 20-period Exponential Moving Average (EMA) at $1,871.80, which indicates a correction in the north-side trend.
Also, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00, which indicates that the bullish momentum has faded.
Gold hourly chart.
Risk assets only partially reflect the better recent news on US inflation – Goldman Sachs.
Goldman Sachs (GS) recently came out with its take on the recently easing inflation signals from the United States. The investment bank initially said, “Price inflation is slowing sharply,” before stating that over the past two months, sequential core PCE (Personal Consumption Expenditure) inflation has averaged 2.6% at an annual rate – half the pace of the prior year. “If wage growth and core inflation continue to come down, Fed officials will become gradually more tolerant of easier conditions,” adds GS. Goldman Sachs also mentioned that core PCE inflation should drop under 3% this year while also adding, “Falling shelter inflation will help.” Also read:
US 5-year, 10-year inflation expectations probe Fed policy doves.
US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data appear to challenge the hopes of easy Fed rate hikes, which in turn justify the US Dollar’s latest rebound. That said, the US Dollar Index (DXY) bounces off a seven-month low to 103.30 as it snaps a two-day downtrend amid recently hawkish Fed talks. It’s worth noting that the latest prints of the 5-year and 10-year inflation expectations portray a stead print of 2.18% and a recovery to 2.22% respectively. On Monday, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed that the US consumers' one-year inflation expectation declined to 5% in December from 5.2% in October. Also read: US Dollar Index bounces off seven-month low ahead of Fed Chair Powell’s speech.
GBP/JPY Price Analysis: Uphill battle for bulls as 161.30 acts as immediate resistance.
GBP/JPY prints three-day uptrend as buyers keep the reins around one-week top. Convergence of 21-day EMA, fortnight-old descending trend line challenges short-term bulls. 200-day EMA appears crucial for determining further upside, MACD flashes strongest bullish signals in two months.
GBP/JPY picks up bids to renew intraday high near 160.90 during early Tuesday. In doing so, the cross-currency pair rises for the third consecutive day while reversing the previous day’s pullback from a one-week high.
The quote’s latest run-up could be linked to the strongest bullish MACD signals in nearly two months, as well as a successful rebound from horizontal support comprising multiple lows marked since late September.
Given the GBP/JPY pair’s ability to cross the 50% Fibonacci retracement level of September-October upside, the buyers are well set to battle with the 161.30 resistance confluence encompassing a two-week-old descending trend line and the 21-day Exponential Moving Average (EMA).
However, the pair’s further upside hinges on its ability to cross the 200-day EMA level of 162.55.
Also acting as an upside filter is the November 2022 low near 163.00, a break of which could direct GBP/JPY buyers toward the previous monthly high surrounding 169.30.
Alternatively, 50% and 61.8% Fibonacci retracement levels, respectively near 160.45 and 157.70, restrict short-term GBP/JPY downside.
Following that, the aforementioned horizontal support near 155.50 will be crucial for the bears to watch.
GBP/JPY: Daily chart.
Trend: Further upside expected.
GBP/USD faces resistance around 1.2200 despite solid UK Retail Sales.
GBP/USD has sensed selling pressure while attempting to surpass 1.2200 as investors’ risk appetite has trimmed. The USD Index is likely to remain sideways ahead of Fed Powell’s speech. UK’s annual Like-for-Like Retail; Sales have jumped by 6.5% vs. the former release of 4.1%.
The GBP/USD pair is sensing pressure while bridging the marginal gap in surpassing the round-level resistance of 1.2200 in the early Asian session. The Cable is struggling to extend its rally further as a decline in the demand for US government bonds is weighing on positive market sentiment. Considering the selling pressure on the Pound Sterling, it is highly likely that the Cable will correct further.
Meanwhile, S&P500 futures have extended their losses following the late sell-off on Monday, portraying that the market sentiment is getting risk-averse. It seems that the risk appetite of the market participants has been trimmed ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. The US Dollar Index (DXY) is likely to remain on tenterhooks as the speech from Fed Powell will provide cues about the likely monetary policy for the February meeting.
In a few trading sessions, the US Dollar Index has faced immense volatility after a severe contraction in Manufacturing and Services PMI in the United States economy along with a meaningful drop in wage inflation. However, Fed policymakers are seeing no change in terminal rate projections.
San Francisco Fed Bank President Mary Daly dictated that December wage data was one month of data, which can't be declared as a victory. It's too soon to declare victory and stop rate hikes. To tame stubborn inflation, it is reasonable for interest rates to be at 5%-5.25%. Also, Atlanta Federal Reserve bank president Raphael Bostic sees interest rate peak in a 5%-5.25% range and the central bank will continue keeping higher interest rates active beyond CY2023.
On the United Kingdom front, Bank of England (BoE) Chief Economist Huw Pill cited that supply-chain disruptions appear to have eased in recent months, as reported by Reuters. He warned that imported gas prices have remained significantly higher than in the past, then the threat of a second round may well remain.
Meanwhile, the release of an upbeat Like-for-Like Retail Sales (Dec), reported by the British Retail Consortium (BRC) has failed to provide support to the Pound Sterling. The economic data has climbed to 6.5% vs. the former release of 4.1% on an annual basis.
AUD/USD Price Analysis: Bears move in on key 0.6905 support structure.
While below 0.6950, the bias is to the downside for AUD/USD in the near term. A break of 0.6905 on an hourly closing basis could be significant in this regard.
AUD/USD is under pressure in Asia and is taking on a key structure as shown by the technical analysts below. First, taking a quick glance at the AUD/USD 4-hour chart, there are now breakout traders in the market and their stops are within range as the following analysis will illustrate.
The bullish impulse has left a void of orders that have created a price imbalance on the downside. Combining the phenomenon of mitigation of such an imbalance with the prospects of there being stop-loss orders in the same vicinity makes for a compelling case for the downside for the sessions ahead. Bears will have their eyes on 0.6885 prior resistance and will be keen to get below here to trap bulls and potentially initiate a fast slide to test the trendline support.
AUD/USD weekly chart.
Meanwhile, taking a look at the bigger picture, the following shows that there is indeed a downside bias given the area of resistance that is being tapped currently.
AUD/USD daily chart.
That is not to say that the bullish phase is over and that the bulls are about to throw in the towel. There are still prospects of a move to test 0.7000 while the price remains on the front side of the bullish daily trendline as follows?
AUD/USD H4 chart.
On the other hand, the M-formation is a topping pattern and should the bears commit at this juncture, a break of 0.6870 could spark off that fast capitulation of longs to test 0.6800 and the trendline support on the 4-hour chart:
AUD/USD H1 chart.
At this juncture, traders can monitor for bearish structure on the lower time frames, such as the hourly chart as follows:
While below 0.6950, the bias is to the downside for the near term and a break of 0.6905 on an hourly closing basis could be significant in this regard. That is not to say that the price will automatically fall but this will make way for prospects of a move to test the bullish commitments above 0.6870 for the sessions ahead. A break there will open the risk of a move into the 0.6800 figure and the targetted area between 0.6791 and 0.6748.
Stocks. Daily history for Monday, January 9, 2023.
Index Change, points Closed Change, % Hang Seng 396.7 21388.34 1.89 KOSPI 60.22 2350.19 2.63 ASX 200 41.7 7151.3 0.59 FTSE 100 25.44 7724.94 0.33 DAX 182.81 14792.83 1.25 CAC 40 46.41 6907.36 0.68 Dow Jones -112.96 33517.65 -0.34 S&P 500 -2.99 3892.09 -0.08 NASDAQ Composite 66.36 10635.65 0.63.
US Dollar Index bounces off seven-month low ahead of Fed Chair Powell’s speech.
US Dollar Index steadies after refreshing multi-day low. Hawkish Fedspeak, US inflation expectations probed DXY bears amid light calendar. US data, China-linked optimism and downbeat Treasury bond yields previously weighed on US Dollar Index. Fed Chair Powell needs to defend policy hawks to recall DXY buyers ahead of US inflation.
US Dollar Index (DXY) makes rounds to 103.15-20 as sellers pause after a two-day downtrend around the lowest level since June 2022. That said, the greenback’s gauge versus the six major currencies refreshed a multi-day low the previous day as the market’s risk-on mood joined hopes of easy Fed rate hikes. However, the recently hawkish comments from the US Federal Reserve (Fed) officials and cautious mood ahead of the key data/events seemed to have triggered the quote’s latest stoppage in further declines.
That said, China’s reopening of the international borders after a three-year halt joined Beijing’s readiness for stimulus and early signals of a shopping spree ahead of the Chinese New Year holiday season to underpin the firmer sentiment on Monday.
On the other hand, Friday’s US economics, mainly concerning the wage growth and ISM Services PMI for December, raised speculations that the Federal Reserve (Fed) finally has an upper hand in taming inflation, suggesting a pause to aggressive rate hikes. The same weighed on the US Treasury bond yields and the US Dollar even as the latest comments from the Fed officials restrict the Greenback’s latest downside.
It should be noted that Atlanta Federal Reserve bank president Raphael Bostic said on Monday that it is ''fair to say that the Fed is willing to overshoot.'' On the same line, San Francisco Federal Reserve Bank President Mary Daly stated that they are determined, united, resolute to bring inflation down. Additionally, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation declined to 5% in December from 5.2% prior. Alternatively, the three-year ahead expected inflation remained unchanged at 3% and the five-year ahead expected inflation edged higher to 2.4% from 2.3%.
Against this backdrop, Wall Street closed mixed and probed the S&P 500 Futures while the US 10-year Treasury yields dropped five basis points to 3.51% before snapping the three-day downtrend around 3.53% by the press time.
Moving ahead, the DXY traders should wait for Fed Chairman Jerome Powell’s speech considering the recently hawkish comments from other Fed policymakers and Thursday’s looming US Consumer Price Index (CPI).
Technical analysis.
An ascending support line from May 2021, around 102.90 by the press time, restricts short-term US Dollar Index downside.