Month to date, versus the US dollar, Europe's single currency is lower by -1.3% and has erased all of December's upside. Multi-timeframe technical approach highlights nearby resistance The Research Team acknowledged the following in recent analysis regarding the monthly timeframe: Overall, the currency pair has been in a downward trend since 2008, fashioned through a series of lower lows and lower highs evident on the monthly chart. Also apparent from this chart, the pullback from the September (2022) low of $0.9536 could be viewed as a long-term sell-on-rally scenario. Monthly resistance warrants attention overhead at $1.1233 and shares chart space with a 50-month simple moving average (SMA) at $1.1149. Equally, support from $1.0516 is noteworthy, a level that welcomed buyers in November 2023. Ultimately, given the downtrend in the EUR/USD, $1.1233 resistance will likely be a difficult barrier to penetrate and, thus, perhaps encourage selling if challenged again. Breaching current support, therefore, might be the long-term technical objective as of now, opening the door towards monthly support at $0.9873.  From the daily timeframe, you will note that price movement concluded the week flanked by the 50-day and 200-day simple moving averages at $1.0896 and $1.0845, respectively. You may recognise the pair discovered support from the latter in the second half of last week, and a Golden Cross materialised earlier this month—a long-term trend reversal signal, which somewhat conflicts against current price action: a fresh lower low that indicates the early phase of a downtrend. Beyond the moving averages, resistance is at $1.1011 and support falls in at $1.0758 (complemented by a 61.8% Fibonacci projection ratio and a 100% projection ratio at $1.0739 [a simple harmonic AB=CD pattern]). Meanwhile, the short-term H1 chart finished the week on the doorstep of a resistance zone between $1.0907 and $1.0900. Albeit small, the area consists of several technical tools to form rather meaningful confluence, including trendline resistance extended from the high of $1.1139, a double-bottom pattern's neckline and Fibonacci retracement ratios. Should price engulf this resistance area this week, buyers could enter the fray based on the double-bottom pattern's ($1.0845) completion (neckline breach), in which a profit objective tends to be derived from the base value and extended from the breakout point (in this case, $1.0969). Direction for the week ahead? Having noted the longer-term monthly trend facing south, and price action on the daily timeframe showing signs of an early downtrend (lower high followed by a subsequent lower low), as well as daily price ending the week testing the underside of the 50-day SMA at $1.0896, the H1 resistance zone between $1.0907 and $1.0900 could be a location sellers draw to in early trading this week. However, in the event of a breakout higher, not only would this see daily price navigate terrain north of the 50-day SMA, it would also essentially deliver the green light for short-term longs based on the H1 double-bottom pattern, targeting $1.0969. Source: TradingView

In the upcoming sessions, the direction of US interest rates is expected to be influenced by economic data releases and the market's response to the Treasury supply dynamics. When the Fed goes silent ahead of the January policy meeting, the market does not necessarily fly blind; instead, it creates an environment where market participants will zero in on incoming economic data. Additionally, the market's response to the issuance of new bonds, reflecting the supply of government debt dynamics, will be closely watched. Investors will assess how demand for these bonds impacts yields for short-, medium-, and long-term interest rate expectations. In the early months of 2024, Treasury prices have declined, leading to higher yields. Despite the rise in bond yields, equities have not been significantly impacted, and the S&P 500 even achieved a new record high. This occurred despite the notable yield increase at the front end of the yield curve against a backdrop of resistance from policymakers who expressed concerns about aggressive pricing for potential rate cuts. But as discussed at length last week, the prevailing sentiment suggests that the path of least resistance for the Fed is leaning toward a minimum of 75 bp of insurance rate cuts this year. But the key uncertainties revolve around the pace of cuts and, perhaps significantly, the timing of such monetary policy adjustments. However, we will likely have a better idea of where March cut probabilities sit after Friday's release of the US PCE deflator report for December, which is anticipated to provide evidence that inflation is slowing and possibly tipping the scales in favour of the March rate cut. Nonetheless, it was somewhat refreshing to witness stocks moving higher in response to positive macroeconomic data, suggesting that good news may once again be interpreted positively in the market. To the degree this good news is good news, the environment holds up. We will soon find out by the end of the week. The upcoming critical macroeconomic event leading to this month's Federal Open Market Committee (FOMC) meeting is the advance reading on the fourth-quarter US Gross Domestic Product (GDP). Consensus forecasts anticipate a 2% growth rate for the headline GDP figure and a 2.5% expansion in the personal consumption component. Investors will closely watch these figures as they provide insights into the overall economic performance and consumer spending trends, potentially influencing market sentiment and expectations leading to the FOMC meeting. As of January 19, the Atlanta Federal Reserve's GDPNow forecast stands at 2.4%, offering an early indication of the potential growth rate for the current quarter. While there may be a temptation to anticipate the risk associated with a strong GDP reading leading markets to adjust their expectations for a March rate cut, the broader focus could shift toward the core Personal Consumption Expenditures (PCE) metric. Notably, the final reading for the third quarter GDP revealed a downward revision in the core PCE print to 2%. Investors will likely pay close attention to this inflation measure, which is crucial in shaping monetary policy decisions. The impact of these developments on the likelihood of a March Fed rate cut remains a matter of debate. The upcoming pivotal event is Jerome Powell's press conference on January 31, where his messaging could significantly influence the betting odds for a Q1 rate reduction. The Federal Reserve will have input from additional data points by March, which will likely substantially impact market expectations more than the events in the coming week. There is a conceivable threshold regarding equities where a reduced expectation of Fed cuts could turn negative without a corresponding acceleration in earnings growth expectations. However, the stock market has experienced a positive trend in 2024, with traders trimming March rate-cut odds to around 40% last week and implied cuts for 2024 by approximately 30 basis points. Surprisingly, this adjustment did not hinder equities from reaching new highs.

Forget about the Federal Reserve (Fed) dovish expectations that should be dialed back because the American economy is too strong to require a rate cut as early as March from the Fed. Forget that strong US economic data is not good news for the market. And forget about the fact that the rally in tech stocks should temper, to let the rest of the market catch up with the Magnificent 7. Because it isn't happening. Nasdaq 100 hit a fresh ATH yesterday, even though the latest US data showed that the initial jobless claims fell more than expected to the lowest level in more than a year, the mortgage rates slipped after a two-week rise, and home data was better than expected, as well. TSM, the main chipmaker of Apple and Nvidia, jumped nearly 10% yesterday, after the company said that it expects a return to solid growth this quarter. Nvidia hit a fresh record. The US dollar index consolidates gains near its 200-DMA. The EURUSD is rangebound between its 50 and 200-DMAs, near the limit of the major 38.2% retracement on October to January rally, which should distinguish between the continuation of the positive trend or a medium term bearish reversal. I think that the latter is more likely and the USDJPY continues to extend gains above the 148 level, boosted by weak inflation data. The BoJ meets next week and will certainly push back on the normalization bets. Yet at the current levels, the USDJPY is subject to verbal intervention from the BoJ to cool down the selling pressure. Therefore, buying the USDJPY at the current levels is risky.

EUR/USD extends its sideways consolidative price move amid mixed fundamental cues. Mixed signals from ECB policymakers hold back traders from placing directional bets. Subdued USD price action also does little to provide any meaningful impetus to the pair. The EUR/USD pair oscillates in a narrow range through the early European session on Friday and remains within the striking distance of over a one-month trough touched on Wednesday. The European Central Bank (ECB) policymakers have struggled to send a clear message if they will raise interest rates or lower them, which is holding back traders from placing directional bets around the shared currency. In fact, Bundesbank President Joachim Nagel said on Monday that it is too early for the ECB to discuss cutting interest rates as inflation remains high. In contrast, ECB Governing Council Member Tuomas Valimaki on Tuesday signalled his openness to consider lowering interest rates sooner than most of his colleagues. Furthermore, ECB President Christine Lagarde declined to push back against bets for a cumulative of over 150 basis points (bps) rate cuts this year. Lagarde, however, cautioned against premature optimism in markets amid a rise in the Eurozone inflation, to the 2.9% YoY rate in December. Apart from this, subdued US Dollar (USD) price action failed to provide any meaningful impetus to the EUR/USD pair on the last day of the week. The better-than-expected US Retail Sales data released on Wednesday, along with Thursday's robust labor-market report, suggested that the economy is in good shape. Moreover, the recent hawkish remarks by several Fed officials tempered expectations for an early interest rate cut. Meanwhile, diminishing odds for a more aggressive policy easing by the US central bank lift the yield on the benchmark 10-year US government bond to its highest in over five weeks and lend some support to the buck. That said, the markets are still pricing in a 50% chance of a Fed rate cut in March. This, along with a stable performance around the equity markets, caps the upside for the safe-haven Greenback and lends some support to the EUR/USD pair. Hence, it will be prudent to wait for a sustained move in either direction before determining the near-term trajectory for the currency pair. Market participants now look forward to ECB President Christine Lagarde's comments at the World Economic Forum for some impetus. Later during the early North American session, traders will take cues from the US economic docket – featuring the release of the Preliminary Michigan Consumer Sentiment and Inflation Expectations, along with Existing Home Sales data. Apart from this, speeches by influential FOMC members, along with the US bond yields and the broader risk sentiment, could drive the USD demand and produce short-term trading opportunities around the EUR/USD pair. Nevertheless, spot prices remain on track to register weekly losses in the wake of the underlying bullish tone surrounding the USD. Technical Outlook From a technical perspective, this week's breakdown below the 61.8% Fibonacci retracement level of the December move-up favours bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the EUR/USD pair is to the downside. That said, a convincing break below the very important 200-day Simple Moving Average (SMA), currently pegged near the 1.0845 region, is needed to reaffirm the negative outlook. Spot prices might then accelerate the fall further towards the 100-day SMA, around the 1.0765 region, before aiming to challenge the December swing low, near the 1.0725-1.0720 area. This is closely followed by the 1.0700 mark, which if broken decisively should pave the way for an extension of the recent corrective decline from a multi-month peak touched in December. On the flip side, the 1.0900 mark might continue to act as an immediate barrier ahead of the 1.0920 horizontal zone, representing a nearly two-week-old trading range support breakpoint. Any further recovery is more likely to attract fresh sellers and remain capped near the 1.0970-1.0975 supply zone. The latter should act as a key pivotal point, which if cleared decisively might trigger a short-covering rally. The subsequent move-up has the potential to lift the EUR/USD pair beyond the 1.1000 psychological mark, towards the next relevant hurdle near the 1.1060 area. The momentum could extend further towards the 1.1100 mark en route to the multi-month peak, around the 1.1135-1.1140 region. EUR/USD daily chart

The mainstream psyche has latched onto a Goldilocks scenario where inflation dies, interest rates fall, and the economy glides to a soft landing. People should probably read the end of the story because Goldilocks dies. Also – it's a fairytale. When they hear the name Goldilocks, most people think of porridge and a little girl's quest for the "just right" bowl. As a result, Goldilocks is generally associated with the ideal. In the Goldilocks economic scenario, the Federal Reserve wins the inflation fight. It cuts interest rates and eases pressure on corporations, consumers, and governments all buried in debt, and the economy never dips into a recession. The Fed is the hero in this story. In a recent interview, economic commentator Jim Grant said he thinks Jerome Powell and other members of the Federal Reserve look in the mirror and see themselves as Captain Chesley Burnett "Sully" Sullenberger who landed a crippled U.S. Airways jet on the Hudson River.  The Fed has arrogated to itself the role of  central planning agency. … It's going to try to balance economic growth with the stability and integrity of the currency. How do they do that? I don't think it's given to mortal man and woman to do these things. And as Grant said in an interview last summer, "He's a nice guy, Jay Powell, but I think he is not Sully." And as I've already mentioned in the original Goldilocks story written by Eleanor Mure in 1831, the bears throw Goldilocks in a fire, then douse her with water and finally impale her on the church steeple. All of this is to say maybe the mainstream should give up on the Goldilocks fairytale. An economic reality check Occasionally, the mainstream gets a dose of reality.  On Wednesday (Jan. 17) gold was pressured to a one-month-plus low when, as a ZeroHedge headline put it, "Goldilocks Reality-Check Wrecks Dovish Dreams." The reality check was stronger than expected economic data, including better-than-expected retail sales report, unexpected homebuilder optimism, and higher than projected industrial production. We live in an upside-down world where good economic data is bad news. That's because the mainstream wants the Federal Reserve to think the economy is slowing so it will pull back interest rates. Why? Because everybody knows deep down that easy money is the mother's milk of the economy. The recent run of "strong" data along with recent comments by Federal Reserve Governor Chris Waller dampened rate cut hopes. As ZeroHedge put it, "Nothing there screams 'six rate-cuts or we all die' as the issue remains: the current growth trajectory of the economy does not suggest that rates need to come down at all." The December CPI report showing price inflation remains well above the 2 percent target reinforces this reality check. Indeed, the market expectation of a quick rate-cutting cycle has dropped precipitously this week. Waller reinforced market fears on Tuesday when he delivered a speech at The Brookings Institution and it was widely perceived to be a bit hawkish. Hawkish means that the Fed might not deliver the desperately sought-after rate cuts as quickly as hoped. That prospect sends traders into a panic. Waller said he does not see the need for aggressive cuts priced into the market. In other words, he was cautioning that you probably shouldn't be banking on cuts right now. When the time is right to begin lowering rates, he said, I believe it can and should be lowered methodically and carefully. With economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past. All of this put upward pressure on bond yields and the dollar. 10-year Treasuries crept higher up four basis points to 4.10 percent on Wednesday. The prospect of higher-for-longer interest rates pressured gold down to close to $2,000 per ounce. It also drove a stock market selloff with the Dow Jones falling 94 points and the NASDAQ shedding .59 percent. A reality check for the reality check The market is panicking needlessly. It's going to get its rate cuts. But it's not going to get the Goldilocks fairytale. The Federal Reserve isn't going to cut rates because inflation is beat. (Although it will probably try to spin it that way.) The Fed is going to cut rates because something breaks in the economy due to the high interest rates. I'm talking about an economic collapse or a financial crisis. You're probably thinking, but Mike, you just said the economic data looks good. How can you be talking about an economic collapse or a financial crisis? Everything is fine.  Yes. The economic data looks fine now. But the central bank broke things a long time ago. It just hasn't reared its ugly head – yet. History serves as an excellent teacher.  Interest rates are at the same levels as...

AUD/USD bounces off YTD lows near 0.6520. The Australian jobs report disappointed investors. Extra pullbacks are likely below the 200-day SMA. In quite a volatile session, AUD/USD managed to reverse several sessions of losses and advance marginally on Thursday. The daily recovery in the Aussie dollar came despite the intense march north in the greenback and disheartening prints from the domestic labour market report for the month of December. On the latter, the Unemployment Rate held steady at 3.9%, while Employment Change shrank by 65.1K individuals. Of note is that Full-Time Employment Change dropped by 106.6K, the largest single-month drop since May 2020. Meanwhile, the pair fully faded the rally seen in the second half of December, while the recent break below the 200-day SMA leaves the door wide open to further retracements in the short-term horizon. Back to the monetary policy front, recent inflation figures tracked by the Monthly CPI Indicator in combination with soft readings from the jobs report allow us to infer that the RBA will most likely keep its OCR unchanged at its February meeting. In the meantime, US dollar dynamics, persistent disappointment from Chinese fundamentals, intense weakness in commodity prices (especially copper and iron ore), and the expected steady hand by the RBA should all contribute to the continuation of the bearish tone in AUD/USD, at least in the short-term horizon. AUD/USD daily chart AUD/USD short-term technical outlook A drop below the 2024 low of 0.6524 (January 17) could motivate AUD/USD to dispute the transitory 100-day SMA at 0.6513. Further deterioration in the outlook should drag the pair to the 2023 bottom of 0.6270 (October 26). If bulls regain control, the attention will shift to the December 2023 high of 0.6871 (December 28), which comes before the July 2023 high of 0.6894 (July 14) and the June peak of 0.6899 (June 16), all of which are before the critical 0.7000 level. Spot seems to have entered a consolidative phase on the 4-hour chart. In fact, the breach of the year-to-date lows raises the prospect of a move to 0.6452. The MACD remains in the negative zone, while the RSI rebounds above 32, allowing for some near-term bounce. The bullish trend, on the other hand, may encounter first resistance at the 200-SMA at 0.6684, followed by the 100-SMA at 0.6715, which is considered the final line of defense before the previous high at 0.6870. View Live Chart for the AUD/USD