Gold’s break of 1784.67 should now indicate resumption of fall from 1959.16. Bias is back on the downside for 1764.31 and below. Price actions from 2075.18 are seen as corrective whole up trend from 1160.17 to 2075.18. Such correction would have a take on 38.2% retracement of 1160.17 to 2075.18 at 1725.64 before completion.
On the upside, break of 1810.38 minor resistance will delay the bearish case. But risk will stay on the downside as long as 1855.17 resistance holds.
UK CPI accelerated to 0.7% yoy in January, up from 0.6% yoy, above expectation of 0.5% yoy. Core CPI was unchanged at 1.4% yoy, above expectation of 1.3% yoy. RPI also accelerated to 1.4% yoy, up from 1.2% yoy, above expectation of 1.2% yoy. PPI input came in at 0.7% mom, 1.3% yoy. PPI output was at 0.4% mom, -0.2% yoy. PPI output core was at 0.3% mom, 1.4% yoy.
US 10-year yield accelerated higher overnight and breached 1.3% for the first time in a year, before closing at 1.299, up 0.099. Reflation trade over the massive US stimulus package, together with loose Fed policy was a factor in driving funds out of treasuries. Also, there is increasing optimism of returning to normal with the pace of vaccine rollout, domestically and globally.
TNX’s solid break of 1.266 resistance is an important bullish development. Upside momentum is also accelerating with the medium term channel resistance taken out, with a gap up. The strong support from 55 week EMA is also a medium term bullish sign.
Now, further rally is expected as long as 1.131 support holds. We’re tentatively looking at key resistance zone between 1.429 and 38.2% retracement of 3.248 to 0.398 at 1.4867 at next target.
Japan’s export rose 6.4% yoy to JPY 5780B in January. By region, exports to China jumped a massive 37.5% yoy, largest annual gain since April 2010. Exports to the US, on the other hand, dropped -4.8% yoy. Imports dropped -9.5% yoy to JPY 6104B. Trade deficit came in at JPY -324B.
In seasonally adjusted term, exports rose 4.4% mom to JPY 6362B. Imports rose 6.9% mom to JPY 5969B. Trade surplus narrowed to JPY 393B, below expectation of JPY 480B.
Also from Japan, machine orders unexpectedly rose 5.2% mom in December, versus expectation of -6.2% mom decline.
Australia Westpac leading index rose from 4.24% to 4.48% in January. The data points to “above trend growth in the Australian economy through 2021”. Westpac expects 4% GDP growth in 2021, led by consumer spending, which contributes to around 3% to the overall growth rate.
As for RBA policy, Westpac expects the bond buying program to be extended beyond October. Yield curve control will be maintained through 2021. However, the Term Funding Facility will be “largely scaled back” after June.
RBA Assistant Governor Christopher Kent said in a speech that some factors have contributed to the appreciation of the Australian Dollar since November. The factors include “general improvement in the outlook for global growth” and a “marked increase in many commodity prices”.
Iron ore prices “has increased by around 40 per cent” since early November. And, “historical relationships with commodity prices would have implied a much larger appreciation of the Australian dollar than what’s actually occurred,” he added.
“While history only provides a rough guide, this difference suggests that the Bank’s policy measures have contributed to the Australian dollar being as much as 5 per cent lower than otherwise (in trade-weighted terms),” Kent said.
US Empire State Manufacturing business conditions rose to 12.1 in February, up from 3.5, well above expectation of 5.5. That’s also the highest level since July 2020. 32% of respondents reported that conditions had improved, while 20% said conditions had worsened.
New orders rose 4.2 pts to 10.8. Shipments dropped -3.3 to 4.0. Prices paid jumped 12.3 pts to 57.8. Prices received also rose 8.2 to 15.2. Number of employees edged up by 0.9 to 12.1 Average employee workweek also rose slightly by 2.7 to 9.0.
German ZEW Economic Sentiment rose to 71.2 in February, up from 61.8, well above expectation of 60.0. Current Situation Index dropped to -67.2, down from -66.4, missed expectation of -67.0. Eurozone ZEW Economist Sentiment rose to 69.9, up from 58.3, well above expectation of 59.2. Current Situation Index rose 4.3 pts to 74.6.
“The financial market experts are optimistic about the future. They are confident that the German economy will be back on the growth track within the next six months. Consumption and retail trade in particular are expected to recover significantly, accompanied by higher inflation expectations,” comments ZEW President Achim Wambach.
Eurozone GDP contracted -0.6% qoq in Q4, following the strong rebound of 12.4% qoq in Q3. EU GDP contracted -0.4% in Q4, following 11.5% qoq growth in Q3. For 2020, annual contraction in Eurozone GDP was at -6.8%, and -6.4% for EU. Eurozone employment rose 0.3% qoq while EU employment also rose 0.3% qoq.
Gold is struggling in tight range above 1810.38 temporary low for a few days already. There has been no strength for a rebound despite Dollar’s selloff elsewhere. It’s also kept below 4 hour 55 EMA, as well as 55 day EMA, keeping risks on the downside.
We’re sticking to the case that rebound from 1784.67 has completed at 1855.17 already. Deeper decline is in favor and break of 1784.67 will resume whole fall from 1959.16. Such fall is seen as the third leg of the corrective pattern from 2075.18. Thus, break of 1764.31 should be seen before the correction completes.
Nevertheless, break of 1833.88 minor resistance will at least delay the bearish case and turn focus back to 1855.17 resistance first.
CHF/JPY’s rally resumes this week with upside breakout, as Yen clearly under performs in strong risk-on environment. The cross is now pressing an important resistance level at 118.59 (2017 high). Decisive break there will resume whole rise from 101.66 (2016 low). Next medium term target will be 100% projection of 101.66 to 118.59 from 106.71 at 123.67.
It’s early to judge but there is prospect of further upside acceleration through 123.67, if rise from 101.66 is developing into a long term up trend. We’ll see. For now, near term outlook will stay bullish as long as 117.73 resistance turned support holds, even in case of retreat.
Hong Kong HSI follows global stocks higher as it’s back from lunar new year holiday. It’s up 1.8% or 543 pts at the time of writing. For the near term outlook will stay bullish as long as the lower side of the gap at 29828.61 holds. Current up trend from 21139.26 should target 161.8% projection of 21139.26 to 26782.61 from 23124.25 at 32255.19 next.
As for the medium term, outlook will stay bullish as long as 28259.73 support holds. Corrective pattern from 33484.07 should have completed with three waves down to 21139.26. Considering the strong up side momentum as seen in weekly MACD, current rise is likely be resuming the long term up trend. We’re tentatively putting 100% projection of 18278.80 to 33484.07 from 21139.26 at 36344.53 as next medium term target.
Minutes of RBA’s February 2 meeting noted that a number of major central banks had already announced extensions of their QE program. There was also a widespread expectation for RBA to extend its own. Hence, “if the Bank were to cease bond purchases in April, it was likely that there would be unwelcome significant upward pressure on the exchange rate.”
Outlook for the economy also indicated that it would be “some years before the goal of inflation and unemployment were achieved”. Hence, RBA decided to purchase an additional AUD 100B of Australian Government and states and territories after the current program completes in April.
On interest rate, the minutes reiterated that a negative policy rate is “extraordinarily unlikely”. Cash rate would be maintained at 10 basis points for “as long as necessary”. The conditions for a rate hike are not expected to be met “until 2024 at the earliest”.
BoJ Governor Haruhiko Kuroda told the parliament that “optimism over the global economic outlook and steady vaccine rollouts may be behind the recent surge in stock prices”. Nevertheless, he also warned that “global outlook remains highly uncertain and risks to Japan’s economy remained tilted to the downside. His comment came when Nikkei closed above 30k level for the first time in three decades.
Kuroda also noted that it’s premature to consider exiting the massive monetary stimulus measures, including ETF purchase. “It’s likely to take significant time to achieve our price target. As such, now is not the time to think about an exit including from our ETF buying,” he said.
Finance Minister Taro Aso also said, it’s not time to withdraw fiscal support. “The biggest issue now is when to shift from crisis-mode policy to fiscal restoration. In doing so, it’s important for such action to be coordinated,” he added.
Canada manufacturing sales rose 0.9% mom to CAD 54.2B in December, well above expectation of 0.2% mom. Sales were up in 9 of 21 industries. On a quarterly basis, sales rose 1.1% qoq in Q4.
For the year of 2020, manufacturing sales dropped to their lowest level since 2016. Total manufacturing dropped -11.4% to CAD 610.6B in the year, largely because of lower sales in the transportation equipment (-23.5%) and petroleum and coal product (-37.4%) industries. Overall, sales were down in 17 of 21 manufacturing industries.
Eurozone exports rose 2.3% yoy to EUR 190.7B in December. This is the first increase since February 2020. Imports dropped -1.3% yoy to EUR 161.5B. Trade surplus came ion at EUR 29.2B. Intra-eurozone trade rose to EUR 148.7B, by 0.9% yoy.
In seasonally adjusted term, Eurozone exports rose 1.1% mom to EUR 191.6B. Imports dropped -0.3% mom to EUR 164.0B. Trade surplus widened to EUR 27.5B, above expectation of EUR 22.3B.
Eurozone industrial production dropped -1.6% mom in December, worse than expectation of -0.6% mom. Production of capital goods fell by -3.1% mom and non-durable consumer goods by -0.6% mom, while production of durable consumer goods rose by 0.8% mom, intermediate goods by 1.0% mom and energy by 1.4% mom.
EU industrial production dropped -1.2% mom. Among Member States, for which data are available, the largest decreases were registered in Hungary (-2.5% mom), Belgium (-1.9% mom) and Finland (-0.9% mom). The highest increases were observed in Denmark (+2.4% mom), Portugal (+1.8% mom), Estonia and Luxembourg (both +1.6% mom).
NZD/JPY finally follows other commodity yen crosses, and break through 76.12 support to resume recent rally. Current rise is seen as part of the up trend from 59.49. Next target is 100% projection of 63.45 to 71.66 from 68.86 at 77.07. At this point, we’d stay cautious on topping around this projection level to complete the five wave sequence from 63.45.
But firstly, break of 75.34 support is needed to be the first signal of short term topping. Secondly, sustained break of 77.07 would likely prompt some upside acceleration for 161.8% projection at 82.14 next.
GBP/CHF’s up trend resumes today and hits as high as 1.2393 so far, on news that UK is mulling lockdown exit after 1.5m of its most vulnerable population are vaccinated already. Health Secretary Matt Hancock said that there will be judgement this week while Prime Minister Boris Johnson will set out the roadmap on the 22nd.
GBP/CHF now pressing 61.8% projection of 1.1102 to 1.2259 from 1.1683 at 1.2398 and outlook will stay bullish as long as 1.2267 support holds. Sustained break above there will be a sign of more upside acceleration. Whole rebound form 1.1102 would then target 100% projection at 1.2840.
The projection level is close to 55 month EMA (now at around 1.2800). Sustained break there will at least eliminate medium term bearishness and could at least extend the rally to 1.3310 resistance next.
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Bitcoin breaks 51k, to enter take profit zone with current rally
Bitcoin is finally having some follow through buying to sustain above 50k handle. Hourly MACD also indicates it’s building up some upside momentum again. Current up trend is back on track to 100% projection of 17629 to 41964 from 29283 at 53618.
Nevertheless, it should be noted that Bitcoin appears to be in the fifth wave of the five wave sequence from 29283, which is channeling adequately well. 61.8% projection of 37232 to 48264 from 47812 at 54629 could be the area to end the impulsive move from 29283.
Hence, 53618/54629 zone would be an area to finally take profit from long position, and wait for a counter-trend pattern to enter again.