US CPI rates in focus 

The USD remained relatively unchanged against its counterparts yesterday yet dropped against safe haven currency JPY, as the market maintained a wait-and-see position in regard to the release of the US CPI rates for December which is expected to be the highlight of the day. It should be noted that the Employment data for December showed that the US employment market remains tight, thus allowing the Fed to remain hawkish yet the CPI rates are expected to slow down. The headline rate on a year-on-year level is expected to slow down to 6.5% yoy if compared to November’s 7.1% yoy and if actually so would be marking a considerable slowdown of inflationary pressures in the US economy. Nevertheless, the rates would still be considerably higher than the Fed’s target of 2% but could solidify the market’s expectations for an easing of the Fed’s aggressive hawkish, stance. Should the rates slow more than the market expects, we may see the USD relenting some ground while should the rates fail to slow down as expected we may see the greenback getting some support. At the same time, it should be noted that US stock markets were on the rise yesterday as the market sentiment tended to improve from exactly the prementioned expectations of a possible easing of the Fed’s aggressiveness with the release of the US CPI rates being a stop before the kick-off of the earnings season on Friday with big banks releasing their reports. Gold’s price failed to benefit from USD’s relative inactivity yesterday, even edged a bit lower yesterday, yet tended to be on the rise during today’s Asian session showing the market’s intentions. Back in the FX market, the Aussie on the other hand failed to actually gather some support during today’s Asian session despite the unexpected widening of its trade surplus for the month of November, adding another plus for the Australian economy after the CPI and retail sales growth rates. Also, the jump of JPY mentioned earlier seems to have been caused by expectations that BoJ may review the side effects of its ultra-loose monetary policy. On the commodities front, we note that oil prices were on the rise yesterday, despite another massive rise of US oil inventories being reported for the past week, as hopes for increased demand from China surfaced. Analysts tend to mention that China’s needs in oil are to rise substantially due to the new Lunar Year festivities and changes in its Covid policy.

USD/JPY dropped breaking the 132.00 (R1) support line, now tuned to resistance. Despite the drop we still tend to maintain our bias for a sideways motion, yet the bearish tendencies made their presence felt. Should the drop evolve to a clear selling interest for the pair, we may see USD/JPY breaking the 130.50 (S1) support line and aim for lower grounds. Should the buyers take charge of the pair’s direction we may see USD/JPY breaking the 132.00 (R1) resistance line and aim if not breach the 133.90 (R2) resistance level.

AUD/USD maintained a sideways motion yesterday as was expected, near the 0.6900 (S1) support line. We tend to maintain our expectations for the sideways motion to continue for the time being. Should though the bulls take the initiative, we may see AUD/USD aiming if not breaching the 0.7010 (R1) resistance line. Should on the other hand the bears take over, we may see the pair breaking the 0.6900 (S1) support line clearly and aim if not test the 0.6800 (S2) support base.  

Other highlights for the day:

Today in the European session, we note the release of Norway’s GDP rate for November. In the American session besides the release of the US CPI rates for December, we also note the release of the weekly initial jobless claims figure. On the monetary front, Philadelphia Fed President Harker, St. Louis Fed President Bullard and Richmond Fed President Barkin are scheduled to speak. In tomorrow’s Asian session, we highlight the release of China’s trade data for December, with Aussie exporters of raw materials keeping the import growth rate under the magnifying glass.

USD/JPY H4 Chart

Support: 130.50 (S1), 128.60 (S2), 126.50 (S3)

Resistance: 132.00 (R1), 133.90 (R2), 135.65 (R3)

AUD/USD H4 Chart

Support: 0.6900 (S1), 0.6800 (S2), 0.6630 (S3)

Resistance: 0.7010 (R1), 0.7125 (R2), 0.7265 (R3)

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