• AUD/USD fell to 0.69835 overnight, NY opened near 0.7000, rally extended

• US$ buying halted as US rates EDZ3 softened, riskier assets lifted

• Equities ESv1, copper HGv1 turned positive, USD/CNH neared 6.7525

• AUD/USD rallied above the 10-DMA, neared flat, traded near 0.7055 late

• Long legged doji, rising monthly RSI are bullish technical signals

• US Jan. ISM mfg-PMI, Jan. ADP & Fed meeting risks are due Wednesday

• For more click on FXBUZ

• EUR/USD hit 1.0802 on EBS overnight, NY opened near 1.0835, rally extended

• US$ buys abated as rates EDZ3 softened, USD/CNH slid be3low 6.7550

• Slower US wage growth nL1N34G1E7 helped risk-on sentiment intensify

• Equities turned positive while commodities LCOc1 bounced off their lows

• EUR/USD turned positive, climbed above the 10-DMA, hit 1.0869 on EBS

• Techs lean bullish; daily RSI diverged on the low, daily bull hammer formed

• US Jan. ISM mfg-PMI & ADP, Fed meeting are key risks looming for Wednesday

• For more click on FXBUZ

Danske Research discusses its expectations for the BoE policy meeting on Thursday.

"We expect the Bank of England (BoE) to hike the Bank Rate (Policy Rate) by 50bp on 2 February bringing it to 4.00%. Importantly, we consider it a closer call between 50bp and 25bp than what markets are pricing and the distribution of analyst expectations would suggest. That said, we believe the latest data releases support a continued forceful response by the BoE which favours a slightly more aggressive 50bp hike compared to the 25bp alternative," Danske notes. 

"In our base case of a dovish 50bp hike, we expect EUR/GBP to move slightly lower upon announcement, but reverse higher on the back of a dovish statement and press conference. In its statement we expect the BoE to highlight the dire state of the UK economy lending support to our call that market pricing is too aggressive currently pricing a peak in the Bank Rate at 4.40% by June 2023. Combined with the expectation of a hawkish 50bp hike by the ECB later in the afternoon, we expect EUR/GBP to move higher during the afternoon, ending the day ca. ½ figure higher than the opening levels," Danske adds.

• USD/JPY marginally lower in tight range before Wed's Fed and key US data

• Pair trades in a tight 129.75-130.54 range on EBS, down 0.28% last

• US ECI nL1N34F1MU, Chi PMI nZON0079L1 cons confidence nL1N34F1N1 mixed

• Drop in Tsy yields weighs on USD/JPY, but support by 129 is well below

• Topside limited by Kijun, 30-DMA and last week's high, all near 131

• ADP, ISM mfg and JOLTS are on tap Wed ahead of the Fed announcements

• Fed still priced to hike 25bp Wed and again in March, ease in H2

• BoJ's JGB yield cap is under duress again, and more QE is now likely

• Japan wage negotiations nL1N34G0BX eyed after this week's major events

• Those events topped off with Fri's payrolls and ISM services reports

For more click on FXBUZ

Bank of America Global Research discusses its expectations for the ECB policy trajectory versus the Fed.

"While most central banks seem to be winding down their tightening cycles, the ECB still seems to be on automatic pilot. Ruben Segura and team expect 50 bp hikes in both February and March and two more 25 bp hikes by June. That brings the depo rate to 3.5%, with a risk of more. At first blush that does not seem very hawkish, but keep in mind two things. First, the neutral policy rate in the Euro Area is likely quite low-the ECB pegs it at 1 to 2%, but Ruben thinks it is at the low end of that range," BofA notes.

"Moreover, unlike the UK and US the Euro Area does not have an overheating labor market. The inflation problem is almost entirely due to supply shocks. This suggests that they should be less aggressive, not more aggressive, than the Fed," BofA adds. 

GBP/USD fell on Tuesday and remained under pressure even after rallying from sub-1.23 lows after U.S. ECI and home sales data lifted dovish Fed expectations, though the data-related rise is likely to be short-lived with cable capped near recent highs by 1.24 pre-Fed.

Futures markets have been pricing in a reduction in Fed rate hikes from 50bp to 25bp over the next two meetings, with data hinting that inflation is slowing, but price growth remains elevated, making the case for shifting from higher-for-longer to a more dovish stance unlikely.

On the UK side of the equation, markets expect a 50bp hike Thursday and traders will pay keen attention to the nature to the vote count, with a dovish tightening move likely to send GBP/USD hurtling lower, targeting the 30-day moving average at 1.2189 and the Jan.
12 low at 1.2089 coming quickly into focus.

For more click on FXBUZ

MUFG Research notes a lot of a lot of good news on China's reopening has already been priced into markets.

"Market expectations for stronger growth in China were encouraged further by the release overnight of the latest PMI surveys from China that revealed a stronger than expected bounce back in business sentiment. The composite PMI jumped by 10.3 points to 52.9 in January and hit the highest level since June 2022," MUFG notes.

"However, there has been limited market impact overnight from the release of the PMI surveys that have failed to provide a fresh boost for Asian currencies and other commodity-related currencies such as the Australian dollar. The price action suggests market participants are nervous over a hawkish policy surprise from central banks including the Fed this week, and/or a lot of good news has already been priced into markets now in anticipation of China’s economy reopening more fully," MUFG adds. 

• Drop to 1.2308 allows us to bring our short stop down to entry

• Need a break under 1.2264, Jan. 24 low to strengthen the s/t bear run

• Into month-end and potential for a fourth monthly bull close

• Cls above 10-month moving average, 1.2027, could force a change of strategy

• Near-term weakness could be presenting better levels to buy

  For more click on FXBUZ

• 2-3-month expiry USD/JPY implied volatility is much higher than other dates

• 2-month gets March BoJ and 3-month now captures April's BoJ policy meeting

• High implied volatility flags increased perceived risk of actual volatility

• Market focus on next BoJ meetings after BoJ failed to touch policy in Jan

• April BoJ garners biggest risk premium as will be first under a new BoJ Gov

• Related comment nL1N34G0KE

  
  

  
  

For more click on FXBUZ

The best EUR/USD strategy may be a simple one which accounts for current levels, positioning, sliding volatility, and interest rate returns.
With that in mind EUR/USD may have reached levels worth selling.

EUR/USD has soared since September with traders aggressively buying, flipping a 6 billion bet on a drop to an 18 billion bet on a rise.
This big bet is roughly equivalent to the total of all bets made on dollar rising in 2022.

Large speculative positions are usually reverse indicators and because many of those long are making money, the drop in volatility is cause to anticipate profit taking.

Should this occur it will be near big levels as 1.0938 is 50% of the 2021-22 drop, and this year's high at 1.0930 is the top of the weekly Ichimoku cloud.
These big points are hard to cross and are just shy of 1.1000 which is hugely important for hedging purposes - a point likely to draw big selling interests.

Should the rally stall, the dollar's yield advantage - seen 1.5% throughout 2023 - will matter.
Ranges may slip from 1.05-1.10 towards 1.03-1.08.

For more click on FXBUZ

• Cable falls to 1.2311 as USD recoups some of its Jan losses before month-end

• 1.2311 is lowest level since Jan 25 (1.2286 was low that day)

• Safe-haven USD benefits from negative start for European stocks nL4N34G1VQ

• 1.2300 and 1.2264 (Jan 24 low) are support levels either side of 1.2286

• February gets underway with Fed event risk, before BoE steps up to plate

• UK public inflation expectations cool again: Citi/YouGov survey nL8N34G20P

• Cable has traded a 37 pip range thus far Tuesday: 1.2332 = intra-day low

• 1.2332 is also the lowest level since Jan 25 (1.2286 was low that day)

• Drop to 1.2332 influenced by weaker global equities (GBP is risk-sensitive)

• Fed event risk looms large beyond month-end nL1N34B2UN. BoE MPA Feb 2

• IMF slashes UK growth outlook nL8N34F30B. UK left EU three years ago

• UK Dec mortgage approvals and consumer credit data due 0930 GMT; MA f/c 45k

• German retail sales -6.4% yy in December vs -1.8% f/c and prior -5.9%

• Dec MM sales -5.3% vs +0.2% f/c

• Traders are broadly long EUR/USD ahead Wednesday Fed and Thur ECB meetings

• Most of those long are sitting on profitable positions

• Given event risk/data, those long may be inclined to book profits

• EUR/USD rallies held below the decisive level nL1N34F0EY

• Target for minor correction Jan rally is 1.0706

• Monday bear close just keeping our 1.2390 short in the game

• First close below the 10-day moving average since Jan. 5

• Ranges remain tight and direction clouded: 1.2270 target-1.2435 stop

• Can just about make out a rounding top on dailies

• Jan. 24 1.2264 low seen pivotal support

• Daily momentum readings are falling but RSI yet to confirm price drop

  For more click on FXBUZ

• AUD/USD last 0.7041, off Tues low 0.7027, vs Mon close 0.7061

• Feeble bounce could mark end of near-term bullish bias

• Closing below 0.7062 nullifies Bollinger uptrend channel

• Consolidation lower till 21 DMA support 0.6958 may follow

• China, Australia trade ministers to meet virutally next week

• First meeting in three years as relations thaw nL1N34G0C9

• For more click on FXBUZ

TD Research discusses its expectations for this week's BoE policy meeting on Thursday.

"This is likely the last 50bps hike of the cycle, with a clear signal that the MPC is gearing down to 25bps hikes as it nears terminal. Guidance is likely to be tweaked to remove "respond forcefully", but the MPC is likely to reinforce market pricing," TD notes. 

"If we're wrong on a 50bps hike, a 25bps hike would likely be accompanied by a very persistent tone, like the Fed in December," TD adds. 

• -0.2%, in a busy 0.7038-0.7065 D3 range after very weak retail sales

• Retail sales fell 3.9%, median forecast -0.3% as cost of living hits

• Knee jerk 0.7038 AUD dip on data, then settled around 0.7050

• RBAWATCH 25pt Feb 7 hike 90%, but June implied slipped from 67bp to 62bp

• Charts; momentum studies crest, 21 day Bollinger bands head higher

• 5, 10 & 21 daily and weekly moving averages all climb - net bullish setup

• Break of 0.7136 August high would target a test of the 0.7282 June top

• Close below 0.6957 rising 21 day moving average would end topside bias

For more click on FXBUZ

• +0.1% near the top of a low key 1.2348-1.2369 range with the USD off 0.1%

• IMF slashes UK growth outlook, adding policy pressure on fin min Hunt

• Britain is the only G7 economy forecast to shrink by the IMF in 2023

• Month end rebalancing flows often cause volatility in sterling

• Techs; 5, 10 & 21 day moving averages conflict, 21 day Bollinger bands climb

• Momentum studies crest - modest net positive setup needs progress soon

• Sustained 1.2450 Dec/Jan range top break would target 1.2666 May high

• Close below 1.2248 21 day moving averages would end the topside bias

For more click on FXBUZ

• Off 0.3% in a knee jerk response to weak -3.9% retail sales - poll -0.3%

• RBAWATCH prices implied 4 April meeting hike at 44bp from 50bp pre data

• Dec Private sector credit +0.3% last +0.5%, housing credit +0.3% last +0.4%

• AUD now trades down just 0.16%, but data certainly increases downturn fears

• Charts; negative momentum studies, 21 day Bollinger bands head higher

• 5, 10 & 21 daily and weekly moving averages all climb - net bullish setup

• Break of 0.7136 August high would target a test of the 0.7282 June top

• Close below 0.6958 rising 21 day moving average would end topside bias

  For more click on FXBUZ

• Steady after closing -0.4% amid broad USD strength as risk appetite eased

• UK firefighters vote to strike, joining a slew of public service workers

• Brexit popularity wanes, as the negative economic impact extends

• Techs; 5, 10 & 21 day moving averages conflict, 21 day Bollinger bands climb

• Momentum studies crest - modest net positive setup needs progress soon

• Close above 1.2450 would target a test of the 1.2666 May high

• Close below 1.2248 21 day moving averages would end the topside bias

• NY 1.2339 low and London 1.2415 high is initial support and resistance

For more click on FXBUZ

• Steady after closing -0.15% with the broad safe haven U.S. dollar strength

• Risk off caution led, into a slew of event risk - Fed, BoE and ECB decisions

• Yield spreads tightened, after much stronger than expected Spanish CPI

• 10yr bund +6bp 2.308%, 10yr UST +3bp 3.542%- risk off overcame yield spreads

• Charts; neutral momentum studies, 21 day Bollinger bands edge higher

• 5, 10 & 21 day moving averages show mixed signals - modest topside bias

• Major resistance at 1.0938 50% of the 2021-2022 fall remains resilient

• Close below 1.0783 rising 21 day moving average would end topside bias

  For more click on FXBUZ

SEB Research discusses its expectations for this week's FOMC policy meeting.

"Fed funds rate. 25bp hike to new target range of 4.50-4.75%. QT. Balance sheet reduction to continue according to plan. Guidance. Declining inflation and weakening sentiment indicators have eased the pressure on the Fed, but more data is needed before the Fed can declare its job done. We see scope for a small tweak in the guidance in the statement (Dec: “ongoing increases”). We expect Powell to refer to FOMC projections in December of a policy rate peak above 5%, but with policy dependent on data and decided on a meeting by meeting basis," SEB notes. 

"Look out for ECI. Key Q4 ECI wage data will be released the day before the meeting and may affect guidance, but most likely not the rate decision unless there is a major upside surprise.  SEB forecast. We expect the February hike to be the last in the current cycle," SEB adds. 

• AUD/USD down 0.65% Mon as traders trim positions into Wed Fed rate decision

• Caution justified after near one-way 4.8% Jan AUD rally on Fed pivot hopes

• Fed's words in focus as markets bet rate hikes will soon end

• Stocks close lower, U.S. yields rally ahead of risk events, weighing on AUD

• Downside limited on hawkish RBA expectations and China reopening optimism

• Mon range 0.7120-0.7051; support 0.7035-40, 0.7010, resistance 0.7090-0.7100

• For more click on FXBUZ