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Inflation

Canadian dollar shrugs as CPI declinesIt has been a quiet day in the currency markets, and the Canadian dollar has followed suit. In the North American session, USD/CAD is trading at 1.3386, down 0.15%. Inflation in Canada slowed to 6.3% y/y in December, down from 6.8% a month earlier and matching the consensus. On monthly basis, the decline was noticeable at -0.6%, compared to 0.0% in November and the forecast of -0.1%. Core CPI fell to 5.4% y/y, down from 5.8% in November and below the forecast of 6.1%. The driver of the drop in inflation was a sharp decline in gasoline prices. Food prices, however, remain high and rose by 11% in December, a slight improvement over the November read of 11.4%. The Canadian dollar shrugged off the drop in inflation and remains close to the 1.34 round-figure mark. The drop in inflation suggests that the Bank of Canada's aggressive rate cycle is having the desired effect, although inflation remains much higher than the BoC's target of 2%. The BoC holds its rate meeting next week, and the markets have priced in a 25- basis point hike, which would bring the cash rate to 4.50%. If inflation continues to downtrend, the expected hike next week could signal the end of the current rate-tightening cycle. The BoC has said that future hikes would be determined by economic data, and there are signs of economic strength despite the rate hikes. GDP is expected to rise 1.2% y/y in Q4 and job growth sparkled in December, with over 100,000 new jobs. The markets are expecting a 25-bp hike next week, but it's uncertain what the central bank has planned after that. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. USD/CAD is testing support at 1.3389. Below, there is support at 1.3328 1.3455 and 1.3546 are the next resistance lines
by OANDA
Yen's gains look cappedThe end of an era The global stock of bonds yielding sub-zero yields has been erased at the start of 2023, after peaking at US$18.4Trn in late 20201. The fight over inflation has caused central banks from the US, Europe, UK and across the world to exit their low to negative interest rate policy. Even the Bank of Japan – the world’s last dovish monetary authority- has left the sub-zero club and is inching towards normalisation. BOJ policy shift The Bank of Japan (BOJ) unexpectedly widened its target range for the 10-year Japanese Government Bond yields (JGB) from ±25Bps to ±50Bps at its December 20th meeting. Since then, the surge in 10-year JGB yields has caused a sharp rise of additional fixed rate and fixed amount purchases by the BOJ amounting to ¥17Trn. Market participants are speculating that BOJ will be forced to tighten policy even more in 2023. Political pressure alongside costly intervention forced the BOJ to tweak policy In 2022 – despite the BOJ keeping the Japanese 0–10-year curve fixed, sharply rising yields globally led the Yen to depreciate to a 24-year low, thereby stimulating Japanese net exports. This placed direct upward pressure on Japanese inflation via higher import prices. Japan was no longer able to sustain its yield curve control policy against a backdrop of ever-rising global yields because the interventions it needed to make in its government bond markets to defend the rise in JGB yields were becoming too costly. In addition, pressure from the Kishida administration due to concern about Yen’s depreciation pushing up prices and inflicting further damage on cabinet approval ratings. Yen gains look capped as policy framework likely to be maintained for longer The change in policy prompted the yen to appreciate to ¥130 versus the US dollar, a level last seen in early August. The Yen’s current rally marks a sharp turnaround from last year where investors were shorting the yen owing to the widening interest rate gap between the US and Japan. As illustrated below, an unwind -63%2 in net speculative short positioning helped drive the appreciation in the Yen towards the end of the year. If the BOJ were to make additional adjustments, it could spur further Yen appreciation. However, we feel the BOJ probably wants to keep its modified framework in place for a longer time frame, especially now that Yen versus USD stands at more comfortable levels. This was evident from its announcement of expansion of JGB purchases to ensure yields stay in the new range. Signs that current inflation isn’t sustainable The more concerning reason is wages are failing to keep up with inflation. In November, inflation adjusted pay slide 3.8% which was far worse than October’s 1.2% drop, marking the worst reading in 8 years3. 2023 wage growth depends largely on the results of annual spring negotiations between corporate management and labour unions. We expect bigger raises in base pay this year than in 2022, however its likely to keep up with inflation as the global economy slows. Japanese economy could avoid a recession in 2023 Japan’s inflation is likely to remain low in 2023, resulting in less need to tighten policy further. Japan is likely to avoid a recession in 2023. As it has yet to benefit from the re-opening trade that the Western economies have witnessed over the last two years. Consumption is likely to benefit from the economic re-opening and capex intentions are likely to rise on the back of pent-up demand for goods and services. While goods exports could soften due to the global economic slowdown, services exports are poised to steadily improve throughout the year, led by inbound spending following the lifting of border controls by the Japanese government in October 2022. The government also launched a new economic stimulus package in October to tame inflation and cushion the blow from rising raw material prices which should support the economic recovery in 2023. Factors underpinning the resilience in Japanese equity market performance In the face of the global equity market turmoil in 2022, Japanese equities4 performance has been fairly resilient (-11% versus -20%5 for global equities). Japan generates a large portion (nearly 52.7%6) of its revenues from global markets. So, a weaker Yen supported its profit outlook thereby making Japanese exporters more competitive than global peers. In 2022, a number of companies announced increased dividend pay-out ratios as well as share buybacks, with the intention of protecting shareholder returns amidst the global market volatility. Pay-out ratios rose to 63% from 40%7 at the start of 2022.
CME:6J1!
by aneekaguptaWTE
Moderating inflation could further reinforce gold and silverLet’s begin with a recap. In 2022, precious metals were down 4.4% when the S&P500 Index was down 19.4%. That is an outperformance of 13.8% for precious metals against equities. Still, many firm believers of gold were, at times, questioned why gold was not scaling new highs in a year when inflation was doing exactly that. As Nitesh Shah outlines in his model, gold is influenced by four variables. These are: 1. Changes in the US dollar basket (-ve relationship) 2. Consumer price index (CPI) inflation (+ve relationship) 3. Changes in nominal yields on 10-year US Treasuries (-ve relationship) 4. Investor sentiment measured by speculative positioning in futures (+ve relationship) Although inflation was supportive of gold last year, the aggression with which central banks acted to tighten monetary policy strengthened the US dollar and lifted Treasury yields creating headwinds for precious metals. As a result, investor sentiment was also weak (see figures 01 and 02). A shift in sentiment Although the Federal Reserve (Fed) has not yet signalled a dovish pivot, markets are beginning to expect this to happen at some point this year. With the US consumer price index (CPI) inflation falling for its sixth straight month in December and moderating to 6.5% vs 7.1% in November , this market consensus might be reinforced. Even if the Fed remains on its tightening path in the first half of this year, the pace of rate increases could slow down. If inflation figures continue to decline steadily and growth data has not become alarmingly worrying, the central bank may hold its rates at a terminal rate during the second half. Of course, the exact trajectory of these dynamics cannot be predicted. Still, however, market consensus is at least forecasting reduced hawkishness compared to last year. As a result, investor sentiment in gold has been on the rise since November. If Treasury yields and dollar continue to pull back, inflation moderates gradually, and economic data slowly deteriorates, sentiment towards gold as a safe-haven asset could continue to improve. The silver lining Silver often exhibits a leveraged relationship with gold. We experienced this in the twelve months after the March 2020 Covid crash in markets when silver meaningfully outperformed gold while both metals rallied. In 2022, things went in the other direction. As gold’s sentiment deteriorated, investor sentiment towards silver fell even further. And once again, gold’s recovery is enabling silver to bounce back even more strongly. Silver is, of course, affected by the dynamics of industrial metals as well given more than half of its demand comes from industrial applications. This was also a factor for its lacklustre performance last year as industrial metals were pricing in a slowdown in China and recessionary fears across major economies more widely. If in 2023, China’s lockdowns are lifted for good and the economic engine starts firing again, fuelled by accommodative monetary policy, this could be the catalyst for the recovery of industrial metals. It could also spur silver’s rally further. The risk to the view If the Fed takes markets by surprise and continues to tighten into the second half of this year, our base case could be challenged, and gold and silver may face newfound resistance. If the Fed signals such intentions early this year, say, in response to inflation numbers as they become available, these challenges could present themselves sooner. For now, it appears, that inflation is moderating steadily encouraging the markets to believe that so will Fed’s hawkishness.
MCX:GOLD1!
by aneekaguptaWTE
Where is the EURUSD headed amid the EU and US inflation lag?We hope everyone had a great start to the year! As we think about the year ahead and some of the major themes that might play out, the EU vs US inflation story is among those catching our eyes now in particular. “Inflation” & “Rate Hikes” were the main talking points for the US Economy in 2022 as the US Federal Reserve (Fed) reacted and adjusted to stubborn inflation. On the other side of the Atlantic, a similar situation is playing out, albeit with a 4 to 7 months lag behind the US. Measuring the difference between the turning points, we can roughly determine the lag between the economic indicators. Headline Inflation (top chart) in the US moved up close to 7 months before the EU’s. Core Inflation (middle chart) in the EU lags the US by 5 months. Policy reaction (bottom chart) of the European Central Bank (ECB) lags the Fed by 4 months. This dynamic is important when trying to understand the path forward for the EURUSD currency pair as central banks watch inflation figures and adjust policy rates accordingly. EU & US policy rate differentials help us sniff out major turning points for the EURUSD pair. As seen in the chart above, the yield differential measured using CME Eurodollar and Euribor futures, started to widen in September 2021, which marked the EURUSD tumble from 1.160 all the way to 0.987. But now it appears the reverse is happening. Yield differentials are starting to close as markets adjust to slower pace of rate hike environment in the US while ECB still battles stubbornly high inflation. Using CME’s Fed watch tool as well as Bloomberg’s OIS Implied Euro interest rate probability tool, we can estimate the market implied forward path for the 2 major central bank’s policy rates. With the market expecting the Fed to pause rate hikes in March, while the ECB is expected to only pause in July. Interestingly, the difference in expected rate pivot is in line with the 4 to 7 months lag in economic conditions we established from the analysis above. As the ECB continues to hike while the Fed pauses, yield differential is likely to close, helping to boost Euro’s attractiveness against the USD. Coupled with the dollar’s downward momentum, This could favor further strength in the EURUSD pair. On the technical front, we see a golden cross with 50-day moving average crossing above the 200-day moving average for the pair. Coupled with an uptrend and spike in the RSI, it has marked the recent up trends remarkably well. If this historical behavior holds, the EURUSD pair could still have further room to run. For those who use Parabolic SAR, the current chart has just flipped back to a buy signal after the recent price consolidation. Given the ECB’s policy lag, dollar weakness, and a bullish technical setup, we lean on the buy side for the EURUSD pair. We set our stop at the 1.0520 level, and take profit level at 1.12800, with each 0.00005 increments per EUR in the EURUSD futures contract equal to 6.25$. Do also check out our previous EURUSD idea which played out nicely: The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.cmegroup.com www.cmegroup.com Bloomberg
CME:6E1!Long
by inspirante
Fourth HalvingSometime in early Q2 of 2024 the Bitcoin network will experience it's fourth supply cut, Economically I am seeing rapid cooldown of inflation with month over month inflation currently sitting at -0.10 month over month 5 year forward expectation rate of inflation as of today is currently sitting at 2.16 only 16 basis points away from 2% target in my opinion inflation should level off in about 1 and a half months from now maybe around end of Q1 but in the immediate term we are also facing a debt ceiling crisis where the debt ceiling will need to be raised or suspended by the end of next week. additionally short term government bonds are yielding higher than the long term government bonds specifically the 2 month is yielding higher than the 2 year bond the situation is an inverted yield curve during a liquidity crunch therefore in my opinion this places Bitcoin in a 2015 situation and I expect long term logarithmic growth and the occasional aggressive parabola ***Not financial advice always do your own research educational purposes only under the right of fair use***
COINBASE:BTCUSDLong
by ILL_Midas
CPI & Inflation Rate USHello everyone! Let's take a look on what happened yesterday on the US financial market and understand the impact of CPI and inflation rate. The Consumer Price Index (CPI) and inflation news from the United States can have a significant impact on financial markets and the value of the U.S. dollar. The CPI measures the change in the price of a basket of goods and services consumed by households, and inflation is the rate at which the general level of prices for goods and services is rising. When the CPI and inflation numbers are higher than expected , it can indicate that the economy is growing, which can boost stock prices, lead to higher interest rates, and appreciate the dollar. This is because as the economy grows, companies will see increased demand for their products and services, which can lead to higher profits and stock prices. Higher interest rates can also attract more investors to bonds, which can lead to higher bond prices. Additionally, a strong economy can lead to increased demand for U.S. goods and services, and increased foreign investment in the U.S. economy. As a result, the demand for dollars increases, which can lead to an increase in the value of the dollar. On the other hand, if the CPI and inflation numbers are lower than expected , it can indicate that the economy is slowing down , which can lead to lower stock prices, lower interest rates and depreciation of the dollar. This is because as the economy slows down, companies will see decreased demand for their products and services, which can lead to lower profits and stock prices. Lower interest rates can also lead to less investors in bonds, which can lead to lower bond prices. Additionally, a weak economy can lead to decreased demand for U.S. goods and services, and decreased foreign investment in the U.S. economy. As a result, the demand for dollars decreases, which can lead to a decrease in the value of the dollar. It's important to note that the Federal Reserve uses inflation as an indicator to change the monetary policy, as they use interest rates as a tool to control inflation. Typically if inflation is too high, the Fed will increase interest rates to slow down the economy and curb inflation, and if inflation is too low, the Fed will decrease interest rates to stimulate the economy. These monetary policy decisions can also have an impact on the value of the dollar, as when the Fed raises interest rates, it can make the U.S. a more attractive place to invest, which can lead to an appreciation of the dollar. Conversely, when the Fed lowers interest rates, it can make the U.S. a less attractive place to invest, which can lead to a depreciation of the dollar.
ECONOMICS:USCPIEducation
by m_maia14
A Grim Picture of InflationFed Funds Futures (ZQ) CBOT:ZQ1! , 2-Yr Yield (2YY) CBOT_MINI:2YY1! , 10-Yr Yield (10Y) CBOT_MINI:10Y1! This is the third report in the series “Year of the Rabbit: Short-tailed Trading”. US Consumer Price Index (CPI) declined 0.1% in December 2022 on a seasonally adjusted basis, after increasing 0.1% in November, the U.S. Bureau of Labor Statistics reported on Thursday, January 12th. Over the last 12 months, the headline CPI increased 6.5%. The inflation index for all items less food and energy rose 0.3% in December, after rising 0.2% in November. The Core CPI increased 5.7% year-over-year. December is the only month in 2022 when aggregate price falls below prior-month level. The headline CPI is now 0.5% lower than a year ago on an annualized basis. Cooling inflation is welcoming news to consumers, businesses, and investors. It also gives the US Federal Reserve more flexibility to moderate its hawkish monetary policy. Inflation by Category Data Paints a Different Picture The December CPI data was a “one-man show”. Gasoline price declined 9.4% in one month, bringing its annual change to -1.5%. After an all-time high record of $5/gallon reached in June, we ended 2022 with lower gasoline price year-over-year. If you think we are getting relief in energy cost, nothing could be further from the truth. • Fuel oil dropped 16.6% in December, but it is up 41.5% for the year • Electricity price went up 1% in December and +14.3% for the year • Pipelined natural gas were up 3% monthly and +19.3% yearly Americans are getting bigger utility bills to light up the room and heat the house this winter. Other essential items: • Food cost +0.3% in December and +10.4% Y/Y in 2022 • Shelter cost +0.8% monthly and +7.5% annually • New cars cost 5.9% more but used cars are 8.8% cheaper in 2022 Inflation is certainly on the way down, but it is sticky. Many product and service items essential to household living and business operation are far from under control. Interest Rate Outlook for 2023 After the release of new CPI data, market consensus centers on a modest 25-basis-point increase on February 1st., which would bring the Fed Funds rate up to 4.50-4.75%. I also expect another 25-bp raise on March 22nd, setting the so-called terminal rate at 4.75-5.00% for the rest of 2023. This is my baseline forecast for 2023. The previous section shows that inflation is still uncomfortably high for food, housing, and energy to power the home, as well as for new vehicle. The Fed’s job for fighting inflation is far from over. I do not expect any rate cuts to occur in foreseeable future. When it comes to central bank monetary policy, there is a lagging period before it works its way through the economy. The response lag could be anywhere from 6 to 12 months. By my estimate, it takes about 7 months in this rate-hike cycle. The Fed initiated the first increase in March, but inflation did not peak until June at 9.1%. Monthly CPI was unchanged the following month. However, the slowdown was solely due to a sharp decline in gasoline price, not attributable to the Fed. Core CPI topped 6.6% in September, then subsequently moved lower to 6.3%, 6.0% and 5.7% in the fourth quarter. October was the first month when core inflation reverses its rising path. This is where I mark the start of inflation response to monetary tightening. Once the Fed reaches its terminal rate, the force of inertia would carry the policy impact on inflation for several more months. That’s why the Fed is likely to keep the rate unchanged for the remainder of 2023, measuring the policy effect. Fixed Income Investment Opportunities On “The Real Cost of Fed Rate Hikes”, published on July 25th, I spelled out the impact of interest rate increases to households, corporations, Federal and local governments. With the risk-free rate expected to reach 5%, all borrowing cost will go up further, even after they rose significantly last year. As the economy slows down, those with high debt loads may not make it through this downturn. If you plan on investing in bonds, default risk should be on the very top of your mind. Consider safe play: Avoid any issuer with a high debt-to-equity ratio. Corporate high-yield, municipal bonds, and securities backed by adjustable-rate mortgages and credit card balance fit this bill. JPMorgan Chase took notice. On Friday the 13th, JPM NYSE:JPM posted revenue that beat expectations, but the biggest US bank warned it was setting aside more money to cover credit losses because of a “mild recession” is its “central case.” The bank posted a $2.3 billion provision for credit losses in Q4, a 49% increase from the 3rd quarter. For relatively safe investment options, bank certificates of deposits (Jumbo CD) and high-quality corporate bonds (rated A or above) offer yields from 4.50% to 6.0%. They could beat inflation in the coming years. Spread Trade Opportunities We have been in a negative yield-curve environment since July. In my opinion, slower rate hikes weaken the force that drives short-term yield rising faster than long-term ones. Once the Fed actions are over, mean reversion could occur so long as we do not fall into a deep recession. A Refresher: Yield curve plots the interest rates on government bonds with different maturity dates, notably 3-month Treasury Bills, 2-year and 10-year Treasury Notes, 15-year and 30-year Treasury Bonds. Bond investors expect to be paid more for locking up their money for a long stretch, so interest rates on long-term debt are normally higher than those on short-term. Plotted out on a chart, the various yields for bonds create an upward sloping line. Sometimes short-term rates rise above long-term ones. That negative relationship is called yield curve inversion. An inversion has preceded every U.S. recession for the past half century, so it’s seen as a leading indicator of economic downturn. On January 12th, 2-year T-note is quoted at 4.20% in cash market, while the 10-year T-note is priced at 3.61%. This measures the 10Y-2Y yield spread at 59 basis points. The negative yield curve could become less inverted, then change to a flat yield curve in the coming months. It could reverse back to an upward sloping normal yield curve in 2024. Here are my reasoning: • Easy money created by record government spending kept the borrowing cost low. This was a main reason why longer-term yields rise less than short-term ones. • The new Republican-controlled Congress would stall the approval of big-ticket expenditure bills. Closing the flood gate could bring the borrowing cost back up. • After the depletion of low-cost capital, lenders will have no choice but to raise the long-term lending rate above the short-term deposit rate. CBOT Micro Yield Futures offer a way to express your view on future yield direction. You could also observe how the expected yield spread changes between 10Y and 2Y. On January 12th, February Micro 10Y Yield Futures (10YG3) was settled at 3.446. February Micro 2Y Yield Futures (2YYG3) was settled at 4.081. The 10Y-2Y spread is -63.5 basis points. Micro Yield Futures are notional at 1,000 index point, with each point equal to 1/10 of 1 basis point and value at $1. For example, if the 10Y-2Y spread narrows to -40 basis points, your position would gain $235 (= (-40+63.5) x 10) if you long the spread. To trade Micro Yield futures, margins are $375 for 10Y and 2YY. A long spread can be constructed by a Long 10Y and a Short 2YY positions. Happy trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CBOT:ZQ1!Long
by JimHuangChicago
3
INFLATION RATE AND BTC MOONHello Traders As you know, the inflation rate decreased to 6% in the past day, this news created a significant bullish movement for Bitcoin Price, but don't get FOMO, Yet. As you can see Bitcoin's overall Technical shows that, the price is still in a bearish phase in the bigger picture, and is currently on an excellent resistance level, both Dynamic and static. On the Onchan side, I screenshotted a metric called Net realized Profit/Loss, Net Realized Profit/Loss is the net profit or loss of all moved coins, the value shows that the whole network was moving their bitcoins in profits today, which can cause a reversal in the bullish trend. Overall I can see a Correction or consolidation for bitcoin before the bullish phase. Note that this is an Intraday analysis and is only valid for a couple of days or even hours. ------------------------------------------------------------------------ What is your opinion? Comment below. If you like the idea, please hit the boost button and follow me so you will get the updates. The information given is never financial advice. Always do your research too. Good luck.
by Crypto_MD
2
GBP/USD edges higher as GDP outperformsThe British pound is slightly higher on Friday. GBP/USD is trading at 1.2234, up 0.24%. The pound has enjoyed a solid week, with gains of 1.2%. US inflation continues to decline and slowed for a sixth straight month in December. Headline CPI fell to 6.5%, down from 7.1% and matching the estimate. The drop was driven by lower prices for gasoline as well as new and used vehicles. Core CPI showed a similar trend, dropping from 6.0% to 5.7%, which matched the forecast. Inflation is coming down slowly and remains much higher than the Fed's 2% target, as any Fed member will be quick to point out. Still, it's clear that inflation is on the right path as the impact of the Fed's aggressive tightening cycle is being felt in the economy. The inflation data came in as expected, but the markets were nonetheless delighted and the US dollar sustained losses across the board on Thursday. The Fed was also pleased that inflation continues to downtrend. After the inflation release, Fed member Harkins said he supports a 25-basis point hike at the February meeting and expects rates to rise "a few more times this year", with a 25-bp pace being appropriate. This sounds like an acknowledgment that inflation has peaked, although we won't be hearing the "P" word from any Fed official, for fear of the markets going overboard and loosening conditions, which would complicate the fight against inflation. Other Fed members have come out in support of a 25-bp hike in February and the CME's FedWatch has pegged the odds of a 25-bp increase at 93%. Barring some unforeseen event, a 25-bp hike looks like a done deal. In the UK, GDP for November outperformed, with a 0.1%, gain, above the forecast of -0.2% but weaker than the October read of 0.5%. The broader picture is not pretty, with GDP falling by -0.3% in the three months to November. The UK economy is sputtering and the Bank of England has its work cut out as it must continue raising rates, despite the weak economy, in order to curb high inflation. The BoE meets next on February 2nd. GBP/USD tested support at 1.2192 earlier in the day. The next support level is 1.2017 There is resistance at 1.2290 and 1.2366
by OANDA
WHAT HAPPENED WITH JPY?Hello guys! Here is a quick summary of what happened in the market today, especially in the Japanese one, after the Bank of Japan surprised everyone. On Tuesday, the Bank of Japan made its first move towards a shift away from ultra-loose monetary policy after weeks of speculation. As part of an adjustment to its yield curve control policy, the BoJ decided to increase the range of its target for the yield on 10-year government bonds from +/- 25 basis points to +/- 50 basis points. Despite this change, the Bank kept its short-term policy rate at -0.1% and maintained its commitment to easing in its statement. In fact, the BoJ plans to increase its purchases of Japanese government bonds in the coming quarter, from 7.3 trillion yen per month to 9 trillion yen. The Bank of Japan's policy adjustment was more hawkish than financial markets had anticipated, and contributed to the yen's further recovery from a 30-year low reached this October. A stronger yen may provide some relief to the Japanese economy, which has been grappling with the high cost of imports due to the sharp decline in the value of the yen this year. As the possibility of more hawkish central bank actions and a potential recession in 2023 increased, the value of Asian currencies against the US dollar decreased further and risk appetite remained low. While the US dollar strengthened against most Asian currencies, the strength of the yen, euro, and pound weighed on the dollar index and dollar index futures. What do you think about the BoJ's move? FX:USDJPY FX:USDJPY BMFBOVESPA:JPY1! PEPPERSTONE:JPYX
Short
by m_maia14
4
EUR/USD Jumps To Nine-Month Highs After U.S. CPI DataThe EUR/USD pair advanced sharply on Thursday and reached its highest level since April 2022 after data showed U.S. consumer inflation slowed down for a sixth consecutive month. At the same time, the euro got a boost from hawkish comments from European Central Bank (ECB) Governing Council members, which signaled more rate hikes in 2023. At the time of writing, the EUR/USD pair is trading at the 1.0850 area, 0.86% above its opening price. The pair reached a nine-month high of 1.0867 before easing. The greenback faced severe selling pressure during the American session after data showed the U.S. Consumer Price Index rose by 6.5% in December, just as the markets expected, posting a 0.1% monthly decrease and decelerating from its previous reading of 7.1%. Core inflation came in at 5.7% from November's 6% rate, matching the consensus, although core prices still posted a 0.3% monthly increase. As the annual inflation rate eased for a sixth consecutive month from its June peak of 9.1%, expectations of a less aggressive Fed are mounting. The WIRP tool suggests that investors practically discard a 50 bps hike in February as they are betting on 94.7% odds of a 25 bps increase. Against this backdrop, U.S. Treasury yields and the dollar took a hit, with the DXY index falling to its lowest level since June at 102.07. In contrast, ECB's Governing Council member Olli Rehn stated on Wednesday that rate increases will still be necessary over the course of the next several meetings in order to restore price stability. On the same line, ECB policymaker Pablo Hernandez de Cos suggested that in order to bring down inflation expectations, rates must be raised at a consistent rate going forward. From a technical perspective, the EUR/USD holds a short-term bullish bias according to the daily chart, as the pair is trading above its key moving averages while indicators are gaining momentum, with the RSI moving closer to overbought territory. On the upside, the next resistance is seen at the 1.0900 area, where the 50% Fibonacci retracement of the 1.2266 - 0.9535 decline stands. Beyond that level, April's monthly high of 1.0936 and the 1.0950 area are the next barriers. On the downside, short-term support levels are seen at 1.0800 and 1.0700, followed by the 20-day SMA around 1.0645.
by Alex_Boltyan_FXAnalyst