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GBP/CHF continues consolidation pattern, targeting 1.104

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    ActionForex.com
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    GBP/CHF is so far one of the top movers for the week, even though over movements in the markets are rather indecisive. The decline from 1.1543 is seen as the third leg of the consolidation pattern from 1.1574. Deeper fall is expected as long as 1.1265 resistance holds.

    Strong support could be seen around 1.1045 cluster (38.2% retracement of 1.1043) to complete the three-wave pattern. Break of 1.1265 resistance will bring stronger rise back to retest 1.1574. Nevertheless, sustained break of 1.1043/5 will be a sign of trend reversal, and target 61.8% retracement at 1.0714.

    US initial jobless claims dropped to 900k, continuing claims down to 5.05m

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      ActionForex.com
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      US initial jobless claims dropped -26k to 900k in the week ending January 16, higher than expectation of 860k. Four-week moving average of initial claims rose 23.5k to 848k.

      Continuing claims dropped -127k to 5054k in the week ending January 9. Four-week moving average of continuing claims dropped -67k to 5126k.

      Full release here.

      Also released, Philly Fed manufacturing conditions rose to 26.5 in January, up from 9.1, above expectation of 12.2. Housing starts rose to 1.67m in December versus expectation of 1.56m. Building permits rose to 1.71m versus expectation of 1.60m.

      Japan’s Tankan manufacturing improves but non-manufacturing may have peaked

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        ActionForex.com
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        BoJ’s closely watched Tankan survey revealed that while manufacturing sector showed continued improvement, sentiment among non-manufacturers appeared to have peaked, which may complicate BoJ’s considerations for another rate hike later this month.

        The Tankan survey reported that large manufacturing index rose from 11 to 13, reaching its highest level since March 2022. Large manufacturing outlook also increased from 10 to 14. However, non-manufacturing index dipped slightly from 34 to 33, marking its first decline in 16 quarters, and non-manufacturing outlook remained unchanged at 27.

        Long-term corporate inflation expectations edged up, with companies forecasting inflation to hit 2.3% in three years and 2.2% in five years. Despite these rising expectations, the mixed sentiment data do not strongly support another imminent rate hike by BoJ.

        In a separate development, an unscheduled revision to historical data indicated that Japan’s real GDP contracted at an annualized rate of -2.9% in January-March, a much steeper decline than the previously estimated -1.8% contraction. This significant revision is likely to impact BoJ’s upcoming quarterly growth and price forecasts, which are due at the July 30-31 policy meeting.

        Gold and silver retreats after initial spike, consolidation but no correction yet

          By
          ActionForex.com
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          Both gold and silver spiked higher today but retreated sharply since then, apparently on profit taking. The consolidations are set for some consolidations. But there is no evidence for a deeper pull-back yet.

          Gold reaches new record high of 1981.16 but it’s now back below 1940. 100% projection of 1451.16 to 1747.75 from 1670.66 at 1967.25 is already met. Some consolidations is likely considering overbought condition, as seen in daily MACD. But recent up trend would resume sooner rather than later as long as 1899.51 support holds, which is close to 1900 handle. We’d maintain that 261.8% projection of 1046.37 to 1375.17 from 1160.17 at 2020.96 is the key resistance which might trigger a deeper correction.

          Silver also in steep retreat as spiking to 26.20. The risk of a deeper correction in higher in Silver as it just breached a long term fibonacci resistance level. That is 38.2% retracement of 49.78 to 11.25 at 25.96. Nevertheless, break of 22.24 support is still need to indicate short term topping first. Otherwise, recent rally is still in favor to resume sooner rather than later.

          EU Juncker said Brexit deal could be reached by Oct 31

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            ActionForex.com
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            Sterling rises notably after comments from European Commission President Jean-Claude Juncker. He told Sky News that he didn’t have “an erotic relation” to the so-called Irish backstop. As long as alternative arrangements are in place to achieve all main objectives of the backstop, he’s prepared to remove it from the Brexit withdrawal agreement.

            He also said that no-deal Brexit would have “catastrophic consequences” and he was doing “everything to get a deal Juncker believed that a Brexit deal can be reached by October 31.

            Fed Bostic: There could be significant reduction in inflation this year

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              ActionForex.com
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              Atlanta Fed President Raphael Bostic said yesterday that a pause in tightening in September might be a good idea, because market responses had been “far stronger than what we’ve historically seen.” “I want to make sure I truly understand the pace of change that’s associated with our policy response,” Bostic said.

              By September, some of the uncertainty over the economy could be resolved. Bostic expected that could lead to a “pretty significant reduction in inflation.”

              Yet, he’s “fully comfortable” to raise interest rates above neutral if inflation doesn’t come down. “The goal is to get inflation down. We’ve got to really tackle it in an intentional, persistent way,” he said. “I want to be open to both possibilities.”

              ECB Lane: Economy will not exit pandemic crisis without being weakened over a long period of time

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                ActionForex.com
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                ECB Chief Economist Philip Lane admitted in an interview with Les Echos that current lockdowns will “lead to a drop in activity” in Europe. But the measures are “less harsh” than those in Spring. Now, “manufacturing has been kept open, construction is continuing, essential shops remain open, and there is not too much disruption to supply chains.” Hence, the impact is likely to be “less severe” this time. Still “the situation will not materially improve in the last weeks of 2020.”

                Based on ECB’s projections, it’s assumed that coronavirus vaccine will be rolled out throughout 2021. Lane said “full recovery of GDP, back to where it was in 2019, will not happen before the autumn of 2022”. Also, “in spite of the vaccine, there will be some persistent damage and the European economy will not exit this crisis without being weakened over a long period of time.”

                Full interview here.

                Australian dollar lower after CPI miss, NZD down on trade deficit

                  By
                  ActionForex.com
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                  Both Australian Dollar and New Zealand Dollar are trading lower today after release of economic data.

                  Australia CPI rose 0.4% qoq, 2.1% yoy in Q2. The annual rate accelerated from Q1’s 1.9% yoy but missed expectation of 2.2% yoy. RBA trimmed mean CPI was unchanged at 1.9%, inline with expectation. RBA weighted median CPI slowed to 1.9% yoy, down from 2.0% yoy, matched expectation.

                  RBA is very clear with its stance that there is no compelling reason to raise interest rate in near term. And the inflation data certainly won’t alter that position.

                  New Zealand trade balance came in at surprised NZD -113m deficit in June, versus expectation of NZD 200m surplus. Exports dropped from NZD 5.35B to NZD 4.91B. Imports also dropped from NZD 5.15B to 5.02B.

                  AUD/NZD has been stuck in range of 1.0884/0991 since early July and there is no sign of a breakout yet. While 61.8% retracement of 1.1289 to 1.0486 at 1.0982 looks like a strong resistance. But the cross is holding above 55 day EMA as well as 1.0844 support, thus maintains near term bullishness. For now, further rise remains in favor.

                  New Zealand unemployment dropped to record low 3.4% in Q3

                    By
                    ActionForex.com
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                    New Zealand employment rose 2.0% qoq in Q3, much better than expectation of 0.4% qoq. Growth was largely driven by full-time jobs, which increased 2.3% qoq or 50k, while part-time jobs dropped slightly. Unemployment rate dropped sharply from 4.0% to 3.4%, better than expectation of 3.9%. The total employment matched the lowest level on record, reached last time in 2007. Labor force participation rate rose 0.7% to 71.2%.

                    “The fall in the unemployment rate is in line with reports of difficulty finding workers and high labour turnover, and continued travel restrictions on international arrivals, which put pressure on domestic labour supply,” work and wellbeing statistics senior manager Becky Collett said.

                    Full release here.

                    New Zealand BusinessNZ PMI unchanged at 48.4, stuck in a tight band of contraction

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                      ActionForex.com
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                      New Zealand BusinessNZ Performance of Manufacturing Index was unchanged at 48.4 in September, signaling same rate of contraction in the sector. The sub-index of new orders (50.1) recovered from its decline in August to just keep its head above water for September.  Also, employment (50.0) showed no change following four consecutive monthly declines.  However, the weak new order results in recent months meant production (46.2) fell to its lowest result since April 2012.  In addition, deliveries of raw materials (46.4) fell to its lowest since March 2011.

                      BusinessNZ’s executive director for manufacturing Catherine Beard said that “Overall, while it is good to see the sector not declining further, it remains stuck in a tight band of contraction.  The key to lifting it back into expansion will be a sustained boost to both new orders and production in the months ahead.” BNZ Senior Economist, Craig Ebert said that “if it’s a manufacturing recession then it’s an extremely mild one compared to what the industry went through in 2008/09”.

                      Full release here.

                      Canada employment dropped -207k, unemployment rate rose to 8.1%

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                        ActionForex.com
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                        Canada employment dropped -207k, or -1.1% in April, larger than expectation of -160.5k decline. Full times jobs dropped -129k, or -0.8%. Part-time jobs dropped -78k, or -2.3%. Unemployment rate jumped sharply by 0.6% to 8.1%, above expectation of 7.8%.

                        Full release here.

                        German Ifo business climate dropped to 102.1, EURUSD dip to day low

                          By
                          ActionForex.com
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                          German Ifo business climate dropped to 102.1 in April, below expectation of 102.8. Expectations dropped to 98.7, below consensus of 99.5. Current assessment also dropped to 105.7, below expectation of 106.5.

                          Ifo President Clemens Fuest commented that “high spirits among German businesses have evaporated,” and, “the German economy is slowing down.” Ifo economist Klaus Wohlrabe noted that the 5th drop in a row in the Ifo reading is merely a sign of normalization, and Germany is far from a recession. GDP growth is seen as slowed to 0.4% in Q1 versus Q4’s 0.6%.

                          EUR/USD dips to day low after the release and is on course for 1.2154 support.

                          BoC to stand pat, CAD/JPY in consolidations

                            By
                            ActionForex.com
                            -

                            BoC rate decision is a major focus today, together with Canadian CPI. BoC is widely expected to keep policy rate unchanged at 1.75%. The central bank appeared to have downplayed some downside surprises in recent economic data. Risks of receded with US-China trade deal phase one and ratification of USMCA in US Congress. The test for resilience of the Canadian economy could be over for now, and need of insurance rate cut largely vanished. The next move would be very much data dependent.

                            Suggested previews on BoC:

                            CAD/JPY turned into consolidation after forming a short term top at 84.56 last week. At this point, further rally is still in favor as rise from 78.50 could extend to 85.23 resistance and above. However, structure of such rise is no clearly impulsive. 61.8% retracement of 78.50 to 83.55 from 81.28 was met without follow through buying. Upside momentum has been diminishing too as seen in daily MACD. Break of 82.80 support will suggest that such rise is completed, and turn outlook bearish for 81.28 support and below.

                            Canada Trudeau on NAFTA: Might be days or weeks away … it might not be

                              By
                              ActionForex.com
                              -

                              Canadian Foreign Minister Chrystia Freeland said yesterday that she will go to Washington again for more NAFTA talks this week. But the data is not fixed yet. She told reporters “we agreed we would continue to talk in Washington later this week … there are some conversations it’s better to have face-to-face and I think it’s absolutely the right thing for us to meet this week.” But no details were given.

                              Prime Minister Justin Trudeau indicated again that he’s prepared if NAFTA talks breaks down. He said “We’re not there yet … we might be days or weeks away now, it might not be.” And he insisted in protecting “supply management” which is one of the deadlock in the negotiations. The so-called supply management system of import tariffs and production limits that ensure high prices for dairy, egg and poultry product in Canada.

                              Eurozone PMI manufacturing rose to 49.1, encouraging signs of pulling out of downturn

                                By
                                ActionForex.com
                                -

                                Eurozone PMI Manufacturing rose to 49.1 in February, up from 47.9, and beat expectation of 47.5. It’s the highest level in 12 months, even though it stayed in contraction region. PMI Services rose to 52.8, up from 52.5 beat expectation of 52.2. PMI Composite rose to 51.6, up from 51.3.

                                Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                                “The eurozone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus, which caused supply problems and showed signs of hitting travel and tourism numbers in particular. The flash PMI has climbed to a six-month high, consistent with GDP growing at a quarterly rate approaching 0.2%.

                                “The expansion is being led by welcome resilience in the service sector but manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year, with new orders falling at the slowest rate since late-2018.

                                “However, the outlook remains highly uncertain, notably in respect to the potential for further disruptions to supply chains, travel, tourism and demand arising from the coronavirus outbreak. In particular, the widespread delivery delays seen in February bode ill for production in March unless new deliveries can be secured.

                                “While the February survey data are welcome news in a month in which media headlines have been dominated by fears of economic growth being hit by the COVID-19 outbreak, the full immediate impact may not yet be apparent.”

                                Full release here.

                                China PMI services rose to 53.1, composite rose to 53.0

                                  By
                                  ActionForex.com
                                  -

                                  China Caixin PMI Services rose from 52.1 to 53.1 in December, above expectation of 51.9. PMI Composite rose from 51.2 to 53.0.

                                  Wang Zhe, Senior Economist at Caixin Insight Group said: “To sum up, the economy recovered in December with improvements in demand and supply of manufacturing and services. Inflationary pressure eased. But the job market was still under pressure and businesses were less optimistic, raising questions about the stability of the economic recovery. The repeated Covid-19 flare-ups and sluggish overseas demand were challenges to stability.”

                                  Full release here.

                                  GBP/CHF resuming medium term up trend quietly as traders focus on trade war

                                    By
                                    ActionForex.com
                                    -

                                    NZD and AUD are trading among the strongest ones today, with the help of recovery in US stocks. While DOW did suffer at initial trading, there ain’t no crash. CAD, however doesn’t share the same fortune as markets are back in concern over NAFTA renegotiation. CHF follows as the second weakest one.

                                    A quick glance at the action bias tables for each currency reveals that CHF is trading with rather broad based downside bias.

                                    GBP/CHF is a clear example with upside Action Bias across time frames. The patterns suggests that it has just finished a near term consolidation and is ready for further rally.

                                    GBP/CHF has indeed taken out 1.3194 key near term resistance today and is resuming the medium term up trend. Next target will now be 61.8% projection of 1.2219 to 1.3419 from 1.2861 at 1.3647.

                                    Fed Williams: Fed is nearing end of monetary policy normalization

                                      By
                                      ActionForex.com
                                      -

                                      New York Fed President John Williams said in speech that recent FOMC statement well summarized the current US economy, with the word “strong” appeared five times. And Fed “has attained its dual mandate objectives of maximum employment and price stability about as well as it ever has.” He added that “most indicators point to a very strong labor market” while “inflation is right on target:”

                                      He expected fiscal stimulus and favorable financial conditions to provide “tailwinds” to the economy for more strong growth. He expected real GDP to grow by 3.0% in 2018 and 2.5% in 2019. Unemployment rate is expected to edge down to slightly below 3.% next year. Price inflation is expected to move up a bit above 2%. But he added that “I don’t see any signs of greater inflationary pressures on the horizon.”

                                      Regarding removal of “accommodative” language in latest FOMC statement, Williams said “these more concise statements do not signify a shift in our monetary policy approach.” And, they just “represent the natural evolution of the language describing the factors influencing our policy decisions “. And the changes in communications are signs that Fed is “nearing the end of the process of normalizing monetary policy”.

                                      His full speech here.

                                      Italian PM Conte announce resignation, accused League leader Salvini

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                                        ActionForex.com
                                        -

                                        Italian Prime Minister Giuseppe Conte told the parliament that he would hand in his resignation to President Sergio Mattarella later today. Mattarella will then decide whether to put together a new coalition or dissolve the parliament and call early elections.

                                        Conte also accused League leader Matteo Salvini for dragging down the coalition. He said Salvini has shown “he is following his own interests and those of his party”. He also said Salvini’s decisions “pose serious risks for the country”.

                                        Salvini has demanded early elections, 3-1/2 years ahead of schedule, confident his surging popularity will sweep him into power as prime minister and push the coalition partner 5-Star Movement into opposition.

                                        China regrets EU’s WTO complaint on patent rights

                                          By
                                          ActionForex.com
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                                          The European Commission lodged a complaint to the WTO against China last week over its breach of patent rights of European companies. That came along side EC’s complaint against US steel and aluminum tariffs.

                                          Chinese Ministry of Commerce responded to the complaint over the weekend, saying that it regrets the complaint and said it will handle it through WTO dispute settlement. At this same time the MOFCOM said “The Chinese government has always attached great importance to the protection of intellectual property rights and adopted many powerful measures to protect the legitimate rights and interests of domestic and foreign intellectual property rights holders. The achievements have been obvious to all. In terms of intellectual property cooperation, China and the EU have established a working group mechanism for intellectual property rights. Through this mechanism, China and the EU have maintained effective communication and achieved positive results in many areas.”

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