Key highlights EUR/USD is eyeing an upside break above the 1.0700 resistance. A connecting bearish trend line is forming with resistance near 1.0710 on the 4-hours chart. EUR/USD technical analysis Looking at the 4-hours chart, the pair traded as low as 1.0481 and climbed higher. There was a move above the 1.0550 and 1.0600 resistance levels. The bulls were able to push the pair above the 50% Fib retracement level of the downward move from the 1.0713 swing high to 1.0481 low. The pair is now trading above the 1.0620 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). On the upside, an initial resistance is near the 1.0700 level. There is also a connecting bearish trend line forming with resistance near 1.0710 on the on the same chart. The next major resistance may perhaps be near 1.0720. A clear move above the 1.0720 resistance might start a steady increase. In the stated case, EUR/USD might start a steady increase. In the stated case, the pair could rise towards the 1.0800 level. On the downside, there is a key support at 1.0620 and the 100 simple moving average (red, 4-hours). The main support is now forming near the 1.0550 level. A downside break below the 1.0550 zone might push the pair lower. The next major support sits near the 1.0500 level. Any more losses might open the doors for a move towards the 1.0450 support zone.

Markets The first week of 2023 came with the usual slew of major economic data points, which on net point to the curious post-pandemic era combination of a resilient labour market set against eroding business confidence across the US economy. And if this trend keeps up, it will likely make for a highly bumpy trading landscape in the months ahead, with investors getting yanked in multiple directions. Still, investors may continue to embrace weak data, especially if signs of descending wage inflation continue. Any indications in the data that the Fed could tap the brakes on its monetary tightening cycle could boost calls for a softer landing that may be optimal for equities. However, as inflation and rates volatility apex, growth and recession risk will likely be the principal risk factors in 2023. Against that backdrop, if central banks continue tightening, real rates may move higher, choking both corporate profits and the economy more forcefully Hence US equity risk premia are too low considering recession risks, uncertainty over the growth/inflation mix and relatively weak expected profit growth.  On the other side of the pond, traders generally remain bullish on STOXX 600 from a valuation perspective amid China tailwinds. Still, based on local economic updrafts, markets could refrain from doing a victory lap and turn cautious about taking too much comfort in the latest series of EU inflation prints which primarily reflected declines in energy prices or government price interventions, whereas core inflation firmed modestly. Not to mention the headline inflation decline is unlikely to stem ECB hawkishness. The focus will be on the start of the 4Q22 earnings season, which unofficially begins on Friday with results from America's biggest banks and other industry bellwethers, including JPM, BAC, C, and others, Turning back to macro, the focus is squarely on the December CPI reading on Thursday. Also,  keep an eye on the December NFIB Small Business survey and the November Consumer Credit Survey. US rates & the Dollar Mixed US economic data helped fuel a large rally in USTs last week. Both employment measures—nonfarm payrolls and the household survey—were robust, though average hourly earnings rose by less than expected, with October and November readings revised lower. By itself, the jobs report suggested a potential cooling of wage pressures without a significant increase in unemployment. From a market perspective, it supported further downshift at the front end of the curve on the idea that the Fed would be able to ease policy by more than previously priced. Both ISM surveys, however, were in contractionary territory, implying a defoliated outlook. While this also raises the possibility of more cuts priced in sooner, it would impart more of a bull steepening bias to the yield curve if realized and typically a strong signal to sell the US dollar.  The Fed still drives currency sentiment, however. The minutes of the December FOMC meeting released last week suggested that no FOMC member saw the need to cut rates this year, even alongside forecasts for a material increase in the unemployment rate. Admittedly, this was within the context of an inflation projection well above target. Still, it indicates a high bar to cutting rates this year absent a rapid inflation normalization. As such, the focus switches to Thursday's CPI report. Markets are currently split on whether the Fed will raise rates by 25bp or 50bp at the February Federal Open Market Committee meeting. Given the softer wage bias in the NFP  data, and if we get another cool core CPI print, we should have more folks pitching tents in the 25 bp camp and thus selling US dollars. And supporting the currency challenger side of the equation, ECB's hawkish rhetoric continues, pointing to further rate hikes over the first half of 2023 As the Fed downshifts amid the  ECB upshift, the EURO could be the next keep-it-simple trade  FX markets ride. Although arguably, the Yuan keep-it-simple trade has more room to run  Commodities Short-Term Pain Longer-Term Gain? The focus on China's "reopening" and relaxation of COVID-related restrictions has intensified in recent weeks. Although infection rates have risen sharply, hurting the near-term growth picture, optimism about the growth outlook beyond the very near term has been growing. Oil and Commodity markets have underperformed even as Chinese equities have risen sharply as current growth weakness in China may matter more for commodity assets than it does for equities. If that is the case, then the prospect of commodity (oil) upside should enhance as we approach the point where China's growth turns more meaningfully positive again. One possible explanation is that spot growth weakness is a higher hurdle for oil markets to clear as stocks can look more easily through recent weakness to price forward growth prospects.    -------------------------------   The weekend epiphany of shorts US Markets U.S. stocks traded notably...

2023 has arrived and it looks set to be another interesting year for financial markets. Diverging forces are at play leaving markets in a tug of war between different drivers. In bond markets lower inflation and recession points to lower yields, but on the other hand still strong labour markets and high wage pressures as well as the Chinese reopening, which is set to be an inflationary force, is pulling in the other direction. An easing of financial conditions also challenge central banks as tighter conditions are needed to cool down the economy further. Hence, we see a risk of more hikes (and fewer cuts in H2 and 2024) than markets currently price – especially in the US. We look for bond yields to be range bound for some time caught in the middle of the diverging forces. In equity markets lower inflation, somewhat better visibility than in 2023, the Chinese reopening as well as plenty of cash on the sideline are all positive forces that could reduce risk premia and underpin stocks. However, the outlook of recession, still hawkish central banks and profits under pressure still point to a more defensive stance. We believe stocks will end the year higher but see the short-term outlook being murky still. EM should benefit from the Chinese reopening as we have seen reflected in markets also lately. In the FX market we see more two-way action for the USD. The USD has weakened lately but we look for a rebound as the market prices too few Fed hikes and current account imbalances still favour the USD. We look for EUR/USD to go back to previous lows around 0.98 over coming quarters but it is unlikely to happen in a straight line. We see increasing signs that headline inflation has peaked. German inflation for December dropped to 8.6% y/y from 10.0% y/y while Spanish inflation declined to 5.8% y/y from 6.8% y/y. However, the drop in Germany was driven by a government-backed discount to the energy bill and core inflation was high in both countries. Oil and gas prices have moved lower this week adding downward pressure on goods inflation and transport services. However, a key concern for the ECB is still the tight labour market. In an interview last week, ECB President Christine Lagarde said that wages are probably rising faster than expected and limiting fast wage growth was key to reining in inflation. The Fed also struck a hawkish tone in the FOMC minutes from the December meeting and Fed member Neel Kaskhari (voter, hawk) said on Wednesday he sees rates move to 5.4% (market prices peak around 5%). Like ECB, the Fed also highlights a tight labour market as key for sustaining the tightening path. In addition, easing financial conditions is a concern for the Fed, see also Research US – Good news is bad news for the Fed, 4 January. China’ re-opening has led to a surge in Covid cases, but the wave looks set to peak within the next month. We look for a recovery starting in February/March, which will make China an inflationary force in the global economy again. Next week all eyes will be on the US CPI for December. Lower gasoline and food prices will likely weigh on the headline (0.0% m/m), but services will continue to support core (0.3% m/m). In the euro area, we will keep an eye on data for unemployment and ECB comments following the recent CPI prints. Download The Full Weekly Focus

That‘s what S&P 500 needs – and with my patient call of the upside resolution to the recent range being more probable. For all the excitement of making another great call, don‘t lose the big picture view. The not overly hot jobs figure allows for the Jan top to be made, with the first objective to be completed, being the upside break of 3,875. Note how well silver, copper, gold and oil are doing in the NFPs aftermath. I‘ll keep commenting the live price action on Twitter as: (…) The narrow window of opportunity to allow the market celebrate CPI while PPI continues raising its ugly head, is at hand. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock. So, make sure you‘re signed up for the free newsletter and that you have my Twitter profile open with notifications on so as not to miss a thing, and to benefit from extra intraday calls. Let‘s move right into the charts. S&P 500 and Nasdaq outlook 3,875 is likely to give today, and 3,895 – 3,910 zone awaits for Monday. Yes, be patient because stocks are running with a Fed tightening misperception – the central bank isn‘t backing off. Gold, Silver and miners Silver will again rise from here, it‘s a matter of very short time till $23.80 goes in the rear view mirror. Note also my yesterday‘s tweets about fine reversals in GDX and SIL. Crude Oil Crude oil, this laggard of 2023, is hesitantly starting to move as well, but don‘t expect miracles too soon or too fast. Still worth holding here for more upside though. As 2022 was the year of energy, and 2023 would belong to metals and agrifoods.

In this Trading Opportunities Webinar, Neerav Yadav (Author of "Think with the Markets") has discussed charts of Forex, Commodities, Indices. All discussions are based on Advanced Elliott Wave, with detailed Wave counts as well standard Supply and Demand analysis.

The dollar eased after US labor data on Friday, as US economy added 223K jobs in December, beating expectations for 200K increase, but wage growth slowed slightly (Dec 0.3% m/m vs 0.4% Nov / f/c) and unemployment fell to 3.5% from 3.6%, hitting pre-pandemic levels. The data suggest that the labor market remains tight, but also fuel expectations for softer approach by the central bank in its policy meeting in February, as bets for 25 basis points rate hike rose from 54% to 67%, while expectations for 0.5% raise dropped to 33%. Slightly calmer view of Fed’s hawkishness deflated the dollar index, which reversed the largest part of its Thursday’s rally, after bulls were trapped above daily Kijun-sen (105.10) that would add to negative impact from fundamentals. Daily studies show momentum indicator heading south and breaking into negative territory, which contributes to bearish signals. Fresh weakness looks for Friday’s close below daily Tenkan-sen (104.26) to further weaken near-term structure and keep recent multi-month lows at 103.12/06 (Dec 30/15) under increased pressure, with break lower to signal continuation of larger downtrend from 2022 high (114.72). Only firm break above daily Kijun-sen would bring bulls in play for fresh recovery. Res: 104.81; 105.10; 105.70; 106.24 Sup: 103.77; 103.38; 103.06; 102.11  

Summary The December employment report was generally encouraging. Nonfarm payroll growth slowed modestly but remained solid with a 223K monthly gain. More importantly for Fed officials worried about the inflation outlook, wage growth cooled in December, and the labor force participation rate ticked higher for both prime age (25-54) and older (55+) workers. Despite the directional improvement in labor supply, the labor market remains exceptionally tight. The unemployment rate fell two tenths of a percentage point to 3.5%, matching its lowest level on record since 1969. It will take more than just this report to convince the FOMC that supply and demand in the labor market are in healthy balance. Cooler hiring and a bump in labor supply The December jobs report brought further signs that the labor market is beginning to soften, but remains incredibly strong. Nonfarm payrolls increased by 223K in December, not far off the Bloomberg consensus forecast of 202K. Revisions to the previous two months were slightly negative on net. The 223K new jobs added in December was the slowest pace of job growth since December 2020, when a surge in COVID cases was weighing on the U.S. economy. Job growth was generally broad-based and was led by leisure & hospitality (+67K), healthcare (+55k) and construction (+28K). Information, which includes many tech-related industries, was an exception with payrolls slipping by 5K. Beyond the downshift in hiring, there were additional signs in the establishment survey that labor demand is gradually cooling. Employment in temporary help services declined by 35K in December and has fallen by 111K since July. The average number of weekly hours worked declined by 0.1 hour to 34.3 in December and also has been falling in recent months. With 12 months of complete data, nonfarm payroll growth averaged 375K per month in 2022, but all signs point to a material slowdown in job growth in 2023. Download The Full Economic Indicator

Summary Over the last few weeks, President Lula da Silva has moved forward with some of the fiscal policies that he not only campaigned on, but that also worried market participants. Recently, Lula has gathered support to raise constitutional spending limitations and enhance social spending, while he has also promoted the use of subsidized lending from state-owned development banks to drive economic growth. We believe this new direction for fiscal policy will ultimately be inflationary, and we now believe the Brazilian Central Bank (BCB) will delay easing monetary policy until Q3-2023. Moreover, financial markets believe BCB policymakers will resume the tightening cycle before cutting interest rates, which in our opinion presents investors will an opportunity to take advantage of a possible mispricing in Brazilian interest rates. Risks around our Brazilian real forecasts are also rising, and while we believe the currency can hover around current levels in the short-term and strengthen over the longer-term, more explicit evidence of an erosion of fiscal responsibility would prompt us to change our outlook on the Brazilian currency. Download The Full International Commentary

Summary United States: Economic Growth Remains on a Positive Trajectory, For Now During December, payrolls rose by 223K while the unemployment rate fell to 3.5% and average hourly earnings eased 0.3%. Job openings (JOLTS) edged down to 10.46 million in November. ISM manufacturing fell to 48.4 in December, while the services index unexpectedly dropped to 49.6. Construction spending increased 0.2% in November. The U.S. trade deficit narrowed to $61.5 billion in November. Next week: Small Business Optimism (Tue), CPI (Thu), Consumer Sentiment (Fri) International: Fiscal Policy Has Brazil Off to a Rocky Start Enhanced government spending has the potential to place Brazil's sovereign debt burden on a more unsustainable trajectory. With Brazil's public finances already in a precarious position and Lula now officially sworn into office, concerns regarding a lack of fiscal discipline are starting to materialize and shake confidence. Next week: Mexico Inflation (Mon), Brazil Inflation (Tue), Central Bank of Peru (Thu) Interest Rate Watch: Clear Message from December Minutes: Higher Rates for Longer The minutes from the Fed's latest policy meeting in December were released on Wednesday and highlighted a mildly-hawkish to neutral tone from Fed officials headed into last month's meeting. What stands out to us is the Fed's direct communication: Don't underestimate its reaction function. Expect rates to remain higher for longer. Credit Market Insights: The Housing Market is Collateral Damage As the Fed continues its inflation fight, elevated mortgage rates have crushed affordability for potential homebuyers. The Mortgage Bankers Association (MBA) reported that refinance mortgage applications fell 86.6% year-over-year in the last week of December, and applications for purchase were down 42.4%. While home prices have started to slide, we do not expect price declines as severe as the housing bust. Topic of the Week: House Arrest: What a Perilous Speaker Vote Means for the Budget The U.S. House of Representatives continues its quest for a speaker. On Tuesday, the chamber went to a second ballot for the first time in a century after Representative Kevin McCarthy (R-CA) fell short of the votes needed to secure the speaker position. Read the full report here

The US gained 223K jobs in December, below the "whisper" expectations A cooling labor market implies a nearing end to the tightening cycle.  Wages are sliding and implies the stickiest inflation is falling – and the Fed is watching. Overpromise, underdeliver – that explains the decline of the US Dollar in response to the Nonfarm Payrolls. While the labor report showed an increase of 223K jobs – above what the calendar showed –, it is below what investors had expected following robust leading indicators. ADP's figures and an upbeat employment component in the ISM Manufacturing PMI raise real expectations to roughly 250K. That explains the initial response, but there are deeper reasons to expect further falls. First, the trend in labor market growth is too the downside – December's 223K iks lower than 256K according to the revised data for December. It extends a trend of moderation.  Secondly, wage growth decelerated to 4.6% YoY, significantly below estimates. That is a huge sigh of relief for the Federal Reserve. The world's most powerful central bank went to lengths to explain that labor-related inflation is what it is focusing on. Why? First, non-core inflation such as energy and food prices are out of the Fed's control and are set in global markets. Price rises related to goods are falling thanks to the unsnarling of supply chains – the transitory inflation the Fed was talking about a long time ago. Another type of inflation is set to come down – housing, which is down due to the Fed's rate hikes, but the full effect will only be seen in 2023. What's left is called "non-shelter core services inflation" – things like getting help from an account, a haircut or anything involving people giving services. These all cost more – but this jobs report provides some optimism. I will go with a bold call – this jobs report opens the door to the Fed ending its tightening cycle in March. Officials will decide on a 25 or 50 bps hike in February according to the inflation report coming out on January 12, and will then do something similar in the following meeting.  Afterward, it is hard to see further increases to borrowing costs with a cooling jobs market. This is the beginning of the end of the Great Tightening of 2022, which spills into 2023 – but not much. 

After a choppy start to the new year, markets will be bracing for the next set of CPI data out of the United States next week amid ongoing unease about Fed policy. Inflation stats are also due out of Australia, while in the United Kingdom, monthly GDP numbers could stoke recession fears yet again. China’s economy will be at the forefront of investors’ minds too as the December economic indicators start rolling in. But a potentially bigger market-moving event is a gathering of central bankers in Sweden where Fed chief Jerome Powell will be participating. Will US CPI maintain its descent? Markets may have given up hope of an early Fed pivot but they are still not convinced that rates will have to be raised too high into restrictive territory. The consumer price index for December due Thursday will be the next vital release that will either bolster bets of a more aggressive Fed or undermine policymakers’ warnings of additional rate increases to come. Inflation is clearly on the way down in the US. The question now is: how long will it take for it to fall back to within the Fed’s 2% goal and is there a risk it could begin to creep back up again before reaching the target? The December CPI readings will further paint the picture on this. After falling to 7.1% in October, America’s inflation rate could drop below 7% in December for the first time in 13 months. The month-on-month rate is predicted to maintain the lowly pace of 0.1%, but the core measure could quicken slightly from 0.2% to 0.3% m/m. There will be further views on inflationary pressures on Friday from the University of Michigan’s closely watched consumer sentiment survey. Although consumer sentiment has barely recovered from all-time lows and only a slight pickup is anticipated in the index in January, the survey’s gauges of consumer inflation expectations have been more encouraging. Both one- and five-year inflation expectations confirm the recent peak highlighted by the other price metrics and if there is a further decline in January, this could lift sentiment at the end of the trading week. The US dollar has been directionless lately as the rising threat of the US economy tipping into recession has offset the boost from the Fed’s ultra-hawkish stance. It’s been somewhat of a similar story on Wall Street and stocks continue to struggle. But with concerns about weakening demand growing by the day, it will be difficult to get anything more than a short-term bounce in risk assets should the inflation figures undershoot expectations. Riksbank symposium eyed as Powell attends However, the dollar may find some love on Tuesday when Chair Powell is set to speak at an international symposium on central bank independence, organized by Sweden’s Riksbank. Other prominent speakers will include the Bank of England’s Bailey, the Bank of Canada’s Macklem and the Bank of Japan’s Kuroda, who will soon be departing from the central bank world like his host Stefan Ingves of the Riksbank. But all eyes will probably be on Powell, who has not made any public remarks since the December FOMC press conference. Given the theme of the symposium, it’s likely that Powell will refrain from commenting on domestic policy, but any fresh views on the interest rate outlook could lift the dollar. Are China’s woes over? Aside from Fed policy, another uncertainty weighing heavily on the markets lately has been China’s Covid response. After a year of endless shutdowns that have ravaged the Chinese economy, Beijing’s abrupt change of heart about zero-Covid policy has been bittersweet for the markets. Although military-style lockdowns are now a thing of the past, surging infections have meant that consumers are still not spending as much and businesses are being disrupted from workers calling in sick. Hopes of a quick economic turnaround have subsequently been dashed, with commodities such as oil taking a substantial hit from this reality check. However, if investors spot some signs of stabilization in the data towards the year end, this may be taken as a positive development. The first opportunity for this will come on Thursday with the December CPI and PPI publications where any uptick in price pressures would indicate a demand recovery is underway. On Friday, the latest trade numbers are due. In October and November, China was in the unusual position of reporting back-to-back yearly declines in both exports and imports, underscoring the unsustainability of zero Covid. Inflation data may pose upside risk for the aussie Any improvement in the December readings could buoy equities as well as the Australian dollar, as China is Australia’s biggest export customer. Domestically, CPI figures out on Wednesday will also be crucial for the aussie. Like in most countries, inflation appears to be peaking down under, but the Reserve Bank...

US CPI (Dec) – 12/01 – the last few months have seen US CPI fall from peaks of 9.1% in June to levels of 7.1% in November. This was well below expectations of 7.3% and a sharp fall from October’s 7.7%, offering a boost to those who think that the Federal Reserve may not have to go as hard, or as far on rate hikes this year. Core prices also subsided from 6.3% to 6% and could well slide further this week to 5.7%. Since then, some of that optimism has undergone a bit of a reset due to firmer wages numbers which do appear to offer some two-way risk to a narrative that wants to see the FOMC slow the pace of rate hikes to 25bps when they next meet on February 1st. Fed officials including Chairman Powell have insisted that rates need to go much higher and while markets remain sceptical of that narrative the calculation also needs to be made that many on the FOMC would rather err on the side of doing too much than too little and as such might be tempted to ignore the warnings signs of a hard landing. ECB Minutes – 12/01 – December’s ECB meeting caught a lot of people off guard when President Christine Lagarde signalled that while the 50bps rate hike signalled a slowdown in the pace of the rate hiking cycle it did not signal a sign the ECB was going soft on its inflation fight. On the contrary she spooked the markets by saying that the intention was to hike rates at successive meetings by at least 50bps for the next 3 meetings. This sparked a sharp rise in European bond yields amidst concerns that the ECB was about to make another big mistake, only 10 years after it made a similar error, hiking aggressively into a downturn. It is clear from the narrative coming from several ECB Governing council members that they want to put the inflation genie back in its bottle with several members arguing for a terminal rate in excess of 3%. While Lagarde acknowledged that there were sizeable differences on the governing council about how high rates need to go, there is a risk that the ECB might well overplay its hand. This could in turn provoke an even steeper downturn in order to assuage the deep concerns in Northern European countries about the stickiness around current levels of inflation and where there is a deep-rooted fear about high inflation levels. The publication of the latest minutes ought to give a deeper insight into how deep these splits are, and how much the ECB is prepared to push rates higher.  China Trade (Dec) – 13/01 – having seen the Chinese government do a screeching U-turn on its zero-Covid policy last month, there is little sign that this change is likely to have an imminent material impact in the short term. In November the various shutdowns, had a chilling effect on domestic demand, as well as China’s ability to act as the workshop to the world. Exports plunged in November by -8.9%, with some of the reasons well documented, with the unrest at the Foxconn plant in Zhengzhou being one well-documented example. Imports also plunged by more than expected at -10.6%, the worst month since May 2020, as Chinese domestic demand continued to struggle in the face of over 2 years of perpetual restrictions and lockdowns. The decision to ease restrictions in the face of rising popular discontent has had the effect of making the Covid problem worse in terms of infection as well as death rates as a largely unvaccinated population suddenly finds the virus ripping through it. This is likely to see further weakness in the December trade numbers, with exports set to slow by -12% and imports set to decline by -10%.           Sainsbury Q3 23 – 11/01 – post Christmas trading numbers are generally a decent bellwether when it comes to consumer spending patterns, and are likely to be even more so given how much tighter peoples budgets are now with the soaring cost of energy.  When Sainsbury reported in November the UK’s number 2 supermarket reported that H1 revenues rose 4.4% to £16.4bn, while profits before tax slid 29% to £376m. Total grocery sales rose 0.2% in H1, with all the gain coming in Q2, which saw sales rise by 3.8%. When general merchandise is included, the picture is less bright, with declines in Argos and Sainsbury GM and clothing. This was offset by a big increase in fuel sales. Total retail excluding fuel saw a decline of -1.3%, and including fuel, an increase of 4.4%. As we look ahead to this week’s Q3 updates it is worth noting that grocery price inflation of over...