• Cracks appearing in the bear trend but stronger reversal signals needed

• A Tues low of 1.1962, just shy of the 1.1951 200-day moving average

• Subsequent bounce into the close formed a tight doji-hammer candle (bullish)

• The candlestick signal needs confirmation today

• Resistance is at the 1.2093 daily cloud top

• Note the 10-21DMA bearish cross over

• Mixed signals, we stand aside for now: looking for further reversal signals

  For more click on FXBUZ

• Steady in a tight 1.2043-1.2061 range in a low key FX majors session in Asia

• UK's NIESR cuts growth outlook for 2023, warns on falling living standards

• NIESR Jagjit Chadha said the forecasts paint "incredibly depressing picture"

• Charts; 5, 10 & 21 day moving averages head lower, 21 day Bolli bands expand

• Momentum studies slide - bearish setup - 1.2004 lower 21 day Bolli resilient

• 1.1984, 76.4% of the 2023 rise held on the close - 1.1842 2023 base below

• 1.2095 NY high then 1.2225 10 day moving average are initial resistance

For more click on FXBUZ

• Trades near the top of a 0.6951-0.6970 range in a low ket Asian FX session

• RBAWATCH prices yields to top out in Oct at 4.01%, from 3.8% post RBA

• A 50 pt RBA hike on March 7 to 3.85% is priced at 44.67%, 25pt 55.33%

• Significant change in expectations makes Friday's SOMP forecasts pivotal

• Charts; momentum studies slide, 5, 10 & 21 day moving averages conflict

• 21 day Bollinger bands contract - mixed signals leave a neutral setup

• Resistance starts 0.6989 NY high, then 0.7003 21 day moving average

• Earlier 0.6951 Sydney low, then 0.6886 NY low are initial supports

  For more click on FXBUZ

• Steady after closing up 0.25% in a volatile session - U.S. dollar off 0.25%

• Expecting sterling to be lead by risk appetite and U.S. dollar in Asia

• UK PM Sunak shuffled the cabinet to enable his pledges on the economy

• Mixed reception to the reorganization, which will likely take time to bed in

• Techs; 5, 10 & 21 day moving averages head lower, 21 day Bolli bands expand

• Momentum studies slide - dip leaves a bearish setup on daily charts

• 1.1984, 76.4% of the 2023 rise held on the close - 1.1842 2023 base below

• 1.2095 NY high then 1.2225 10 day moving average are initial resistance

For more click on FXBUZ

• Steady after closing little changed, despite the U.S. dollar slipping 0.25%

• ECB policymaker Joachim Nagel - we need further, significant rate hikes

• ECBWATCH prices a 50pt hike on March 16th at 48.88% - peak in July at 3.43%

• Charts; negative momentum studies, horizontal 21 day Bollinger bands

• 5, 10 & 21 day moving averages crest/fall - modest negative signals

• Closed above 1.0704 lower 21 day Bollinger band again - remains support

• Sustained 1.0700 break would open the door to the 1.0482 2023 base

• NY 1.0767 high then 1.0830 21 day moving average are initial resistance

  For more click on FXBUZ

Bank of America Global Research discusses Canada economic outlook and USD/CAD forecasts through 2023.

Will Canada have a recession in 2023?

"Most likely, although probably a mild one...We expect Canada to grow 0.8% yoy in 2023 and 1.0% yoy in 2024. We expect three consecutive quarters of negative growth in 2023. Medium term, North America has a big opportunity due to reshoring/nearshoring,"BofA notes.

Will USD/CAD eventually fall in 2023?

"Yes, we maintain our downtrend USD/CAD forecast for the year despite the BoC rate hike pause. We believe CAD will benefit from supportive equity factor, energy factor, and seasonality in the coming months. We maintain our Q1 forecast of 1.32 and year-end forecast of 1.25 for USD/CAD," BofA adds 

• AUD/USD to remain supported on dips after closing 1.1% higher on Tuesday

• Choppy trading likely to continue, c.bank rate expectations dictate moves

• Powell says jobs report shows inflation fight may last 'quite a bit of time'

• Points to inflation starting to abate but acknowledges need for higher rates

• Hawkish RBA and elevated commodity prices will continue to underpin Aussie

• Australia hikes rates, but pause from big central banks is near

• Asia may focus on Biden's State of the Union Address; RBA SOMP Friday

• Resistance 0.6990-0.7000, 0.7040-50, support 0.6905-15, 0.6880-85

• For more click on FXBUZ

The dollar gained against the euro and sterling on Tuesday but had to navigate through choppy trade after markets initially reacted dovishly to a highly anticipated live interview of Fed Chair Jerome Powell.

Investors applied heavy scrutiny to Powell's comments since they followed last Friday's frothy jobs data nL1N2UT1TV.

The market initially focused on Powell's prediction of significant declines in inflation this year, disregarding his other remarks and those of hawkish Fed speakers nL1N34N1G4that highlighted how tight U.S. labor market conditions are and the lengthy process of taming inflation that still lies ahead.

Powell also noted that he had yet to see much disinflation in the service sector, which is where most are employed and the bulk of GDP is derived.

It's likely that part of the initial dovish reaction to the Fed Chair's comments was due to post-payrolls rises in Treasury yields and the dollar running into technical resistance this week, leaving markets on edge.

EUR/USD fell 0.2% after reversing initial gains on Powell's remarks, and slipping well away from its 1.0767 high on EBS after Treasury yields came sharply off their lows.
Traders will be watching the pivotal 55-day moving average support at 1.0665 by Tuesday's 1.06695 low.

USD/JPY fell 0.95% after earlier extending its fall from Monday's rebound high by the descending 55-DMA and Fibo resistance by 133.

The sell-off was driven largely by yen demand from risk-off repatriation flows, Japanese exporters, renewed speculation about BoJ policy normalization and wariness regarding how far the yen could slip without prompting FX warnings from the MoF.

The 130.47 EBS low is by the tenkan at 130.49 and well above the pivotal 21-DMA at 129.95 last.

Sterling's post-Powell rebound from a 1-month low was fleeting and fended off below 1.2300, leaving marginally lower Tuesday amid UK recession risk and the BoE's inflation fighting dilemma.

For more click on FXBUZ

• EUR/USD slid overnight, NY opened near 1.0705, slide extended in the a.m.

• Firmer US rates EDZ3, US$ buys & risk-off sank EUR/USD to 1.06695 on EBS

• Risk improved during Powell's comments nW1N33R03B, rates, U$ softened

• Equities turned positive while USD/CNH fell towards 6.7765

• EUR/USD rallied into positive territory, struck 1.0767 on EBS then slid

• US$ firmed again and EUR/USD sat near 1.0705 late, traded down -0.20%

• Techs lean bearish; RSIs are falling and the pair is below 10- & 21-DMAs

• For more click on FXBUZ

TD Research changes its call for the RBA call, adding a 25bps hike in May for a new terminal rate at 3.85%.

"The RBA lifted the cash rate 25bps as expected, but today's Statement read more hawkish compared with prior Statements. Speculation of a RBA pause has been building for months but today's Statement puts that on the backburner. There was no mention or reference to its Central Banks peers slowing or even considering pausing, adding to the hawkish tone," TD notes. 

"A 25bps hike from the RBA next month remains our view but now we expect the RBA to pause in April, with a final 25bps hike in May to our new forecast of terminal of 3.85%," TD adds. 

• Fed Chair Powell gives US$ bulls nothing to hold onto nW1N33R039

• Rates EDZ3 fell which drove broad US$ selling during Powell comments

• EUR/USD rallied into positive territory, struck 1.0767 on EBS

• Equities ESv1 gained, USD/CNH neared 6.7770 as riskier assets sought

• Daily RSI diverged on today's 1.06695 EBS low, bull hammer candle formed

• For more click on FXBUZ

Danske Research highlights some of the candidates positions for carry trades in G10 over the coming months.

We still sense that markets in general, including FX markets, are adaptive and extrapolate from the latest data point. Central bank forward guidance has little value for markets currently. The US CPI report next Tuesday could therefore prove the next milestone for markets. Cleveland Fed's Nowcast model points to a rebound in core inflation to 0.5% m/m and consensus to 0.4% m/m - the highest since September. If that turns out right, we expect FX markets to continue on the path of the past couple of days," Danske notes. 

 "Carry may prove the way forward in the current murky trading environment. In particular, since we are headed for quieter period rest of February in terms of big monetary policy events and data releases. Within G10, short EUR/USD and EUR/CAD, long USD/JPY, EUR/CHF and EUR/DKK positions are candidates from a carry-to-risk perspective," Danske adds. 

EUR/USD traded lower Tuesday as investors remained focused on dollar strength following last week's extraordinarily strong U.S. jobs report, and further downside seems likely as options and technicals heighten the bearish influences.

EUR/USD risk reversals EUR1MRR=FN indicate vol premiums for puts over calls have increased and trade at levels not seen since early December.
Options investors appear to be hedging for EUR/USD downside by buying EUR put/USD call options with downside strikes nL1N34N13D.

Technicals highlight downside risks.
Daily and monthly RSIs are falling and aren't oversold, which implies downside momentum is intact.

EUR/USD is trading below the falling 10- and 21-day moving averages and the 10-DMA is poised to cross below the 21-DMA, which could send another bearish signal.

February's monthly inverted hammer candle and the recent break below the up trend line off November's low reinforce bearish signals.

Rhetoric from the Fed suggests rate hikes will persist and may go higher than expected nFWN34M2TXnW1N32Z014, which is likely to underpin the dollar for now.

Unless Fed rhetoric takes a less hawkish stance EUR/USD should remain heavy.
Focus remains on U.S. CPI USCPF=ECI due Feb.
14.
An upside surprise could send EUR/USD much lower.

For more click on FXBUZ

Barclays Research sees the balance of risk-reward shifting towards a softer GBP over the coming weeks.

"Last week’s dovish pivot by the BoE despite acute domestic inflation pressures is shifting the balance of risks in the direction of a still-weaker pound. Even if the MPC ends up lifting rates further, this would likely be in the wake of sticky inflation, and the experience with reactive tightening through 2022 suggests this is no great help for the currency," Barclays notes. 

"Accordingly, we see risks to our 0.87 medium-term forecast for EURGBP as skewed to the upside, even as valuations are broadly neutral. The provisional Q4 GDP print stands out on the data docket, while a number of MPC member are due to speak. Last week’s price action also means we stopped out of our long GBP trade recommendation," Barclays adds. 

Citi flags some hawkish risks from Fed Powell speech in Washington this afternoon (12pm ET)

"We see hawkish risks from Fed Chair Powell following the payrolls beat on Friday. Less focus will be on Fed’s Barr, who will discuss Financial Inclusion at 19:00 GMT. CitiFX Strategy reminds that Powell maintained full optionality," Citi notes. 

"Overall, the FOMC and the data points to the status quo as of the December SEP (a la peak Fed funds rate of 5.1% in May), but we suspect the next set of data (including January CPI) probably point to hawkish risks relative to the base case," Citi adds. 

Following Brexit which pushed GBP/USD ranges lower into the 1.20-1.40 area, and the UK's mini budget in September which saw that range broken with a drop towards parity, it's likely that long-term range will drop again.

This year's trade has likely established the peak of future ranges lies around 1.25, and certainly sustainable gains over 1.30 should not occur if the idea of a lower long-term range is to evolve.

The base of ranges will probably be in the order of 20 cents, roughly 1.05, which would make sense as any down move that threatens parity, or results in a move below it, would change the outlook, resulting in a far more bearish situation and significant decline.

One month option vol (the benchmark) which soared towards 24 in September has dropped to single digits, implying a quiet period, suiting range trading.
As much as the slump towards 1.0327 was overdone, so too was the following surge to 1.2447 that suggested a bright outlook for the UK - far removed from the expected recession.

A retreat towards neutral territory - 50% Sep-Dec gains is 1.1386 - may unfold gradually this year, and become the pivot point for a 1.05-1.25 range.

Recent FX moves and gambling look way overdone nL1N34N0KO

For more click on FXBUZ

EUR/USD is increasingly looking fragile due to a combination of fundamental and technical factors.
FX traders should brace for bigger falls in coming sessions.

The dollar soared against the euro after as last week's blockbuster U.S. jobs report raised the likelihood of the U.S. Federal Reserve keeping on with its inflation-fighting interest rate hikes for longer.

EUR/USD's three black crows pattern -- three long black candlesticks with consecutively lower closes -- is a ominous sign that points to a likely bigger reversal lower.
Especially as fourteen-day momentum remains negative, reinforcing the overall bearish market.

The risk grows for a much bigger drop to the focus on the 1.0679 Fibo, a 23.6% retracement level of the 0.9528 to 1.1034 (September to January) EBS rise, a break and daily close below will accelerate further into the thick daily cloud that spans 1.0234-1.0565 region.

For more click on FXBUZ

• USD/JPY soared on Monday on BOJ's Amamiya speculation nL1N34M0OC

• However, it peaked at 132.90 on the EBS, ahead of 133.00 psychological level

• Spot suffered a setback from Asia 132.71 to hit 131.69 in London, on Tuesday

• Still likely to break above key 133.05 Fibo once gap filled nL1N34N0K5

• Gap opened up between Friday's 131.20 high and Monday's 131.52 low

• EUR/JPY's correlation with USD/JPY high, 30/60-day logs are well above +0.5

• Cable elicits support by 1.1985 after falling further from 1.2265

• 1.1985 is 76.4% Fibo of 1.1842 (Jan 6 low) to 1.2447 (Jan 23 high)

• 1.2265 was Friday's high, before big NFP/ISM data beats nL1N34M0IV

• Data spurred hawkish shift in Fed expectations, to benefit of dollar

• 5.00-5.25% Fed policy rate is currently fully priced for June FEDWATCH

• Fed chair Powell to speak at the Economic Club of Washington at 1740 GMT

• Bear run now looking to the 76.4% Fibo off the 1.1842-1.2447 climb, 1.1985

• Market in need of consolidation or a correction before lower again

• Daily RSI is diverging bullishly, adding to the correction call

• Fading the daily cloud top, 1.2098, a strategy

• However, still risk is for an eventual full retrace to 1.1842 Jan. 6 low

• We stand aside for now but will monitor any rebound

  For more click on FXBUZ

• Cable has traded a 39 pip range thus far Tuesday; 1.2018-1.2057

• 1.2057 is also the high water-mark since Monday's one-month low of 1.2006

• Drop to 1.2006 spurred by hawkish shift in Fed expectations nL1N34M1Y2

• Fed chair Powell will speak at the Economic Club of Washington at 1740 GMT

• GBP/USD could fall further if Powell is more hawkish than expected

• UK house prices stabilise after four-month fall, Halifax says nL8N34N1KE

• EUR/USD trades firm in Asia after 1.0710 overnight low

• Failure ahead of 1.0672 23.6% fibo, caution on hawkish ECB rhetoric underpin

• EUR/USD may trade back to 1.08 intraday but should attract fresh selling

• Techs bearish with short dates moving averages pointing lower

• Close below 1.0670 targets 1.0450 next

• EUR/USD traded amid 1.0721-42 range so far, last 1.0739-43

• DXY last 103.45, traded 103.41-59 range so far in Far East

• For more click on FXBUZ

  
  

• AUD/USD up 0.8% in Asia as RBA hikes rates 25bps, provides hawkish outlook

• Says further hikes needed to ensure inflation returns to its target of 2-3%

• Drops previous guidance that it wasn't on pre-set path; another hawkish sign

• Market pricing in peak RBA rate of nearly 4% for October 0#RBAWATCH

• AUD rally muted on caution ahead of Powell interview; range 0.6882-0.6952

• Likely to hold up well if Fed Chair hawkish, may rally strong if he is not

• Resistance 0.6950-55, 0.7000-05, support 0.6890-0.6900, 0.6850-60

• For more click on FXBUZ

Citi discusses its expectations for tonight's RBA policy decision.

"Focus on markets’ attention now draws to the RBA rate decision tomorrow, where we think risks are tilted hawkish post the CPI beat in January. We also expect a revision to inflation forecasts CitiFX Strategy notes the RBA looks set to hike rates by 25bps in its meeting this week, and the hike alone is unlikely to move AUD crosses," Citi notes.

"Forward guidance and peek to the Feb SoMP will be in focus, and our base case is for AUD crosses to trade higher as the terminal rate looks underpriced by the market," Citi adds.