In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.7382 vs. the last close of 6.7357.
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.
EUR/USD has surrendered the round-level support of 1.0900 in the Asian session. The major currency pair is facing sheer heat as investors have underpinned the risk aversion theme ahead of the release of the United States Nonfarm Payrolls (NFP) data. The Euro witnessed a massive sell-off on Thursday after the interest rate decision by the European Central Bank (ECB) in which the central bank pushed interest rates to 2.50% by announcing a 50 basis point (bp) interest rate hike.
S&P500 futures have met with significant offers in the Tokyo session, showing signs of a halt in the three-day winning spell amid anxiety ahead of the US Employment data. The US Dollar Index (DXY) is struggling to extend above 101.40 after a minor correction from above 101.50, however, the upside bias seems favored due to a sheer decline in investors’ risk appetite. The return generated by 10-year US Treasury bonds has further dropped below 3.39%.
Wednesday’s release of the downbeat US Automatic Data Processing (ADP) Employment Change and Job Openings data indicated that labor demand is exceeding the supply in the United States. As per the ADP Employment data, the US economy added 105K jobs in January while job openings showed resilience portraying an absence of an adequate labor force. Also, the US Department of Labor showed a surprise decline in the number of individuals applying for jobless claims for the first time last week to 183K vs. the consensus of 200K. Despite rising interest rates by the Federal Reserve (Fed) and declining economic activities, the US labor market is showing resilience.
According to the estimates, the US NFP data is seen at 185K lower than the former release of 223K. Apart from that, the Unemployment Rate is expected to escalate to 3.6% vs. 3.5% the prior release.
Apart from the official US employment data, investors will also focus on the US ISM Services PMI data. The Services PMI is expected to escalate to 50.3 from the former release of 49.6 while the New Orders Index could jump to 57.6 against 45.2 released earlier.
After observing a downtrend in the US Consumer Price Index (CPI) and the presence of evidence that invokes confidence for a further slowdown in the inflationary pressures, the street is expecting a pause in the restrictive monetary policy by the Federal Reserve. From the swap market perspective, traders are pricing for an interest rate peak at 4.88% by summer followed by a rate cut to 4.40% by December, as reported by Reuters.
From declining consumer spending and Producer Price Index (PPI) to the slowdown in economic activities, each inflation indicator is calling for a continuation of inflation softening ahead. However, the labor cost index is still a concern for Fed chair Jerome Powell as higher purchasing power with households could trigger revenge buying and therefore a jump in retail demand.
On Friday, the Average Hourly Earnings data is seen at 4.9% vs. the prior release of 4.6% on an annual basis. While monthly data is seen steady at 0.3%. Led by exceeding labor demand against the supply, higher negotiation power in favor of job seekers could dent the price index declining trend, which can shrug off the rumors calling for a pause in the policy tightening pace by the Federal Reserve.
An interest rate hike of 50 basis points (bps) by the European Central Bank was widely expected. Softening energy prices and easing supply chain bottlenecks have trimmed headline inflation while the core price index that excludes oil and food prices is still solid in Eurozone. Also, ECB President Christine Lagarde cleared that the disinflationary process has yet not been initiated in Eurozone. Therefore, the European Central Bank will continue hiking interest rates to achieve price stability.
For interest-rate guidance, European Central Bank Lagarde explicitly told that the central bank would stay the course in the fight against high inflation and that the magnitude of the interest rate hike will remain similar in March. While two members of the ECB's rate-setting Governing Council told Reuters that at least two more rate hikes are expected ahead.
EUR/USD witnessed a massive sell-off after an Inventory Distribution chart formation on an hourly scale. The inventory distribution in a minor range of 1.1006-1.1033 indicates a shift of inventory from institutional investors to retail participants. EUR/USD might found an intermediate cushion around February 2 low at 1.0885.
The 20-and 50 period Exponential Moving Averages (EMAs) are on the verge of delivering a bear cross, which will strengthen further downside bias.
While, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.
GBP/USD is on the defensive following a recent break of daily structure that led to a colossal sell-off in the London and New York equities opening hours. GBP/USD fell from a high of 1.2401 to a low of 1.2222 by the close of New York. Cable is pr4innting fresh lows in Tokyo of 1.2205 as traders look ahead to the Nonfarm Payrolls today in the US session while the price is destined for lower according to the following analysis:
On the hourly time frame, we can see that the bulls need to show up or face prospects of a breakout:
With the test of the support, the question one needs to ask now is whether or not breakout traders chasing the move are about to get trapped:
|Index||Change, points||Closed||Change, %|
The USD/CHF pair has rebounded after a corrective move to near 0.9115 in the early Asian session. The Swiss franc asset is struggling to stretch an upside rally further as the US Dollar Index (DXY) has turned sideways ahead of the United States Nonfarm Payrolls (NFP) data.
Meanwhile, a hawkish commentary from Swiss National Bank (SNB) Chairman Thomas J. Jordan failed to strengthen the Swiss Franc bulls. SNB’s Jordan confirmed more interest rate hikes as inflationary pressures are stronger than the central bank can tolerate. The SNB is ready to be active in currency markets when necessary.
S&P500 futures have dropped sharply in the Asian session after a three-day winning spell, portraying a sheer decline in investors’ risk appetite. The 10-year US Treasury yields have dropped below 3.40%.
USD/CHF displayed a stellar recovery after testing previous lows plotted from January 18 low at 0.9085 on an hourly scale. The recovery action was extremely solid as it pushed the asset above the 20-and 50-period Exponential Moving Averages (EMAs) at 0.9120 and 0.9130 respectively in no time.
The Swiss franc asset has reached near the supply zone in a 0.9140-0.9160 range. It would be optimal to observe the price action around the supply range before making any constructive position.
Also, the Relative Strength Index (RSI) (14) is struggling to scale into the bullish range of 60.00-80.00. An occurrence of the same will trigger the upside momentum.
For further upside, the major needs to deliver a confident move above the 0.9140-0.9160 supply zone, which will drive the asset toward January 18 high at 0.9246 followed by January 24 high at 0.9280.
On the flip side, a breakdown of Wednesday’s low at 0.9059 will drag the major toward 4 August 2021 low at 0.9018. A slippage below the latter will drag the asset further toward 10 May 2021 low at 0.8986.
The Commodity Futures Trading Commission's weekly commitments of traders' report will be delayed due to a ransomware attack on ION trading UK.
The CFTC is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which include futures, swaps, and certain kinds of options.
USD/JPY was forced lower on a bout of US Dollar strength on Thursday in an extension of the drop from the mid-point of the 130s. The price has been supported in the midpoint of the 127s and has left no bias on the carts from an immediate directional perspective until the 129.50s or the aforementioned 127.40s are broken. However, there are prospects of a meanwhile correction for the day ahead as traders get set for the US Nonfarm Payrolls data as the last puzzle of the puzzle for this week.
The price has met the 61.8% Fibonacci retracement at 127.588 of the move from between the November 2021 swing lows of 112.53 and the October swing highs of 151.95 highs range which is acting as a support which the bears need to break.
Zoomed in ...
The price is drifting out of the deciding channel having hit support and this leaves prospects of a phase of consolidation outside of the channel that could lead to accumulation for a move higher.
Zoomed in ...
In the meantime, a correction could be in order towards prior support that would be expected to act as a resistance zone where the 61.8% ratio meets the structure near 129.60.
The AUD/JPY pair has shown a muted response to the upbeat Australian S&P Global PMI. The Services PMI has landed at 48.6 higher than the consensus and the prior release of 48.3. Also, the Composite PMI has scaled to 48.5 against the former release of 48.2. An absence of a contraction in economic activities despite rising interest rates by the Reserve Bank of Australia (RBA) could keep Australian inflationary pressures intact.
The Australian Dollar is expected to remain volatile on Friday ahead of the release of the Caixin Services PMI (Jan). The economic data is seen at 47.3 lower than the former release of 48.0. A decline in the Services PMI could impact the Australian Dollar as Australia is a leading trading partner of China.
Next week, the Australian Dollar will remain in the spotlight due to the interest rate decision announcement by the RBA. The Australian inflation rate has not shown a peak yet as it has shown a fresh high of 7.8% in the fourth quarter of CY2022. RBA Governor Philip Lowe might not have another option than to hike interest rates further.
Analyst at Deutsche Bank Australia sees the RBA likely to drive the Official Cash Rate (OCR) to 4.1%, citing the most recent inflation update of a 7.8% increase in the CPI, which was slightly higher than expected. “While the RBA will likely move more slowly in 2023 than it did in 2022, we now expect four more 25 basis point hikes this year: 25 basis points in each of February and March, and 25 basis points each at the May and August meetings” as reported by Forbes Advisor.
On the Japanese Yen front, investors are awaiting the release of the Jibun Bank Services PMI for fresh cues. The economic data is seen steady at 52.4. The street is still confused about the rationale behind widening the Yield Curve Control (YCC) by the Bank of Japan (BoJ) in its December monetary policy meeting. Meanwhile, BoJ Deputy Governor Masazumi Wakatabe is back on the wires this Thursday, noting that the “BoJ's Dec decision to widen band was a necessary step to make YCC more sustainable, but the move alone may have had the effect of weakening stimulus effect.”
The USD/CAD recovered some ground, trimmed some of its Wednesday’s losses on Thursday, and rose by 0.19% after hitting a new YTD low at 1.3262. As the Asian session begins, the USD/CAD exchanges hands at 1.3313, below its opening price at the time of writing.
Technically speaking, the USD/CAD is still upward biased, once achieved to stay above the 200-day Exponential Moving Average (EMA) at 1.3256. However, it should be said that once the USD/CAD tumbled below a three-month-old upslope support trendline, it failed to clear the latter, exposing the USD/CAD pair to some selling pressure.
If the USD/CAD tumbles back below 1.3300, bears next target would be the 200-day EMA. Once broken, the USD/CAD could extend its losses towards 1.3200.
As an alternate scenario, if the USD/CAD extends its recovery beyond the trendline mentioned above that passes around 1.3350, that would exacerbate a rally to 1.3400. If the bulls moved in, the USD/CAD following target would be the 100-day EMA at 1.3409, followed by the 50-day EMA at 1.3440, ahead of the January 19 swing high at 1.3520.
Gold price (XAU/USD) nosedived to near $1,912.00 after a blockbuster recovery move from the US Dollar Index (DXY) on Thursday. The precious metal is staring at the round-level resistance of $1,900.00 as further downside looks possible ahead of the United States Nonfarm Payrolls (NFP) data.
The downside pressure in the USD Index led by rising expectations that the Federal Reserve (Fed) might consider a pause in the policy tightening as the US inflation is softening significantly has been shrugged off. The US labor cost index is still solid and carries the ability to dismantle the Fed policy pause context.
In the US NFP gamut, Analysts at TD Securities expect a 220K increase in payroll and a modest increase in the Unemployment Rate to 3.6%. As per the consensus, Average Hourly Earnings data is seen at 4.9% vs. the prior release of 4.6% on an annual basis. While monthly data is seen steady at 0.3%. Led by exceeding labor demand against the supply, higher negotiation power in favor of job seekers could dent the price index declining trend, which can shrug off the rumors calling for a pause in the policy tightening pace by the Fed.
Meanwhile, risk-perceived assets like S&P500 have displayed a three-day winning streak despite further policy tightening by the Fed.
Gold price has demonstrated a perpendicular sell-off after an Inventory Distribution chart formation on an hourly scale. The inventory distribution in a minor range of $1,950-1,960 indicates a shift of inventory from institutional investors to retail participants. The 20-and 200-period Exponential Moving Averages (EMAs) have delivered a bear cross at $1,927.80, which indicates more weakness ahead.
In addition to that, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.
AUD/USD refreshed seven-month highs at around 0.7157 but collapsed as the US Dollar (USD) remained bid during Thursday’s session after market participants’ reaction to the US Federal Reserve (Fed) decision to lift rates weakened the greenback across the board. Nevertheless, the US Dollar stages a comeback, as shown by the AUD/USD exchanging hands at 0.7072 at the time of writing.
The AUD/USD dropped in the session, even though investors’ sentiment was upbeat. The US Federal Reserve decision hurt the US Dollar, as the Fed, led by Jerome Powell, stated that the US central bank has made progress curbing stubbornly high inflation amidst a tight labor market. Data revealed by the US Department of Labor (DoL) showed that Initial Jobless Claims for the last week ending on January 28 came at 183K below estimates of 200K, suggesting that companies had continued to hire personnel.
Therefore, the AUD/USD dwindled as traders brace for January’s US Nonfarm Payrolls report, with consensus at 185K, below the previous month’s reading of 223 K. Any readings above the consensus would keep the Fed on its tightening cycle. Still, Powell said that terminal rates are around the corner.
Regarding Australia, its economic calendar featured the Judo Bank Services and Composite PMI on its Final readings, at 48.6 and 48.5, respectively. Although the readings came higher than the previous month’s data, they remained in contractionary territory, portraying a gloomy scenario for the Australian Dollar (AUD).
The US economic calendar will feature employment data led by the Nonfarm Payrolls report, alongside the ISM Non-Manufacturing report, would update the US economy status.
The GBP/USD pair has shown a vertical sell-off to near 1.2225 and is expected to continue its downside journey to near the round-level support of 1.2200 ahead. The Cable witnessed a massive sell-off after investors shrugged off expectations that the Federal Reserve (Fed) will pause policy tightening ahead and poured funds into the US Dollar Index (DXY). Apart from that, investors dumped the Pound Sterling despite the Bank of England (BoE) continuing its hawkish stance on interest rates.
On Thursday, the USD Index recovered firmly after building a cushion around 100.50. The extremely oversold condition of the USD Index triggered buying interest among the market participants. The USD Index soared above 101.50 and has now turned sideways below 101.40 ahead of the United States Nonfarm Payrolls (NFP) data for further guidance.
To tame the double-digit inflation figure, BOE Governor Andrew Bailey announced an interest rate hike by 50 basis points (bps), which pushed borrowing rates to 4%. The BoE was an early adopter that started contracting its monetary policy after the pandemic period and has now announced its 10th consecutive interest rate hike. However, the inflation rate is still double-digit amid rising wage rates due to squeezed labor supply. Also, the softening energy prices are offset by the rising food price index, which was recorded at 16.8% for December.
There is no denying the fact that BoE policymakers have done much with interest rates to decelerate inflation, however, the United Kingdom economy is not responding, as expected, to extreme policy tightening.
On Friday, the release of the US NFP data will be of utmost importance. According to the consensus, the United States economy has added 185K jobs in the labor market in January vs. the former release of 223K in times when labor demand is exceeding supply. The Unemployment Rate is seen at 3.6% vs. 3.5% released earlier. The catalyst that will be critically monitored by investors for further action will be the Average Hourly Earnings data.
The EUR/USD pair is displaying a back-and-forth action around 1.0900 after a pullback move from 1.0885 in the early Asian session. The major currency pair has turned sideways ahead of the United States Nonfarm Payrolls (NFP) data, which will release on Friday. On Thursday, the Euro witnessed a massive sell-off after a sheer recovery move by the US Dollar Index (DXY) and the announcement of 50 basis points (bps) interest rate hike by the European Central Bank, which trimmed the Federal Reserve (Fed)-ECB policy divergence.
The USD Index is showing signs of volatility contraction after witnessing some volatile moves and has now shifted into a rangebound auction around 101.40. Meanwhile, S&P500 settled Thursday’s session on a bullish note, portraying that the risk-appetite theme is intact. The 500-US stock basket has already shown a three-day winning spell and is expected to continue its upside momentum further. The demand for US government bonds remained subdued, which led to a minor gain in the 10-year US Treasury yields above 3.40%.
On Thursday, ECB President Christine Larage pushed interest rates to 2.50% by announcing a 50 bps interest rate hike in line with the street estimates. No doubt, the Eurozone inflation has started softening after a sheer decline in energy prices and a recovery in supply chain disruptions. However, the ECB is required to restrict its monetary policy further as the inflation rate is extremely far from the desired rate of 2%.
Led by a deceleration in the energy price, the headline price index has come down for January month to 8.5% but the core inflation that strips oil and food prices has remained stubborn and is demanding exclusive attention from the ECB policymakers.
For further guidance, US NFP data will be keenly watched. The economic data is seen at 185K lower than the former release of 223K. Apart from that, the Unemployment Rate is expected to escalate to 3.6% vs. 3.5% in the prior release.
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