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USD/CAD - Will retail sales weigh on the Canadian dollar?The Canadian dollar is trading quietly ahead of a key retail sales report later today. USD/CAD is trading in Europe at 1.3484, down 0.13%. The Canadian consumer is holding tightly to their wallet, which is not all that surprising in the current economic climate. Inflation ticked higher in April, rising from 4.3% to 4.4%. Add in high interest rates and it's not hard to sympathize with consumers who are struggling with the cost of living. The April retail sales report may show that things are getting worse - headline retail sales is expected to slow to -1.4%, down from -0.2% in March, and the core rate is expected to fall from -0.7% to -0.8%. Not exactly a winning recipe for economic growth. A decline in today's report could unnerve investors and send the Canadian dollar lower. The Bank of Canada will not be pleased with the slight increase in inflation, although the core rate, which is a more reliable gauge of inflation trends, did move lower. The BoC meets next on June 7th and there is only one more tier-1 release before the meeting, that being GDP. If retail sales contracts for a second straight month as expected, there will be more support for the BoC to continue to hold rates at 4.50%, where they have been pegged since March. It's a bare economic calendar in the US today, with no data releases. The markets will have a chance to focus on Fedspeak, with Jerome Powell and two FOMC members delivering public remarks. Just a few weeks ago, the markets had priced in a pause at the June meeting at over 90%. That has changed to a 66% chance of a pause and a 33% chance of a hike of 25 basis points, according to CME's FedWatch. That downward revision is due to a consistently hawkish message from the Fed and a solid US economy. USD/CAD is testing support at 1.3479. Below, there is support at 1.3394 1.3644 and 1.3729 are the next resistance lines
by OANDA
GBP/USD ends slide, employment report nextGDP/USD has started the week in positive territory, after a two-day slide that saw the pound lose 1.5%. In the North American session, GBP/USD is trading at 1.2514, up 0.54%. On the economic calendar, it's a fairly quiet start to the week. There are no releases out of the UK. In the US, the Empire State Manufacturing Index slid to -31.8, versus 10.8 prior and an estimate of -2.5 points. This was the lowest level in three years and pointed to a sharp contraction. Orders and inventories fell sharply, and the report was another indication of the sorry state of the manufacturing sector. The US releases retail sales on Tuesday, with the markets expecting an improvement in the April data. The headline reading is expected to improve to 0.7%, up from -0.6%, and the core rate is projected to rise to 0.4%, up from -0.4%. If the data is within expectations, it would indicate that consumers are still spending, despite a drop in consumer confidence. Friday's GDP release pointed to a UK economy in trouble. March GDP came in at -0.3%, and Q1 growth posted a meagre gain of 0.1%. The economy might manage to avoid a recession, but the BoE is projecting practically zero growth in 2023. The labour market has remained robust in the UK, despite the weak economy and the bite of rising interest rates. However, cracks are appearing - unemployment claims rose by 28,200 in April, and are expected to rise by 31,200 in the April report, which will be released on Tuesday. The Bank of England will be keeping a close eye on wage growth, a driver of inflation. The estimate for average earnings including bonuses for January-March stands at 5.8%, versus 5.9% in the previous release. GBP/USD is putting pressure on resistance at 1.2524. The next resistance line is 1.2604 1.2369 and 1.2289 are the next support levels
by OANDA
AUD/USD - Australian dollar takes traders for a wild rideThe Australian dollar has steadied on Monday, trading just above the 0.67 level. We could see further movement from the Aussie early on Tuesday, as China releases GDP. The markets received another clear sign on Friday that the US economy is slowing, after a disappointing March retail sales report. Headline retail sales fell by 1% and the core rate by 0.8%, worse than expected and marking a second straight decline for both. A soft US retail sales report is usually a recipe for US dollar weakness, but that wasn't the case on Friday, as AUD/USD fell by 1%. The US dollar received a boost from strong earnings results, higher inflation expectations and some hawkish Fed speak. Bank earnings impressed on Friday, with strong results from JP Morgan, Citigroup and Wells Fargo. This indicates that the bank crisis has been contained for now, although further contagion cannot be ruled out. On the inflation front, UoM inflation expectations for 12 months jumped 4.6% in April, up sharply from 3.6% in March. Consumer confidence has been on the low side as inflation remains high, and the weak retail sales report was clear proof that consumers are spending less due to high inflation and rising rates. Fed member Waller had a hawkish message on Friday, saying that the Fed would need to continue raising rates because inflation is "far above target" and the labor market remains "quite tight". Waller warned that the Fed would have to keep rates at a high level for an extended period and for longer than the markets expected. Fed member Bostic said he supported one or two more 25-bp hikes to end the current tightening cycle. The likelihood of a 25-bp increase in May has jumped to 80%, up from 68% prior to the retail sales release. There is resistance at 0.6897 and 0.6791 AUD/USD tested support below 0.6700 earlier today. The next support level is 0.6608
by OANDA
GBP/USD - Another strong week for the British poundThe British pound is poised to post its fifth successive winning week. During this time, the GBP/USD has sparkled, rallying almost 500 points. This week's UK releases have not been as positive as the pound's upswing. GDP was flat in February on a monthly basis, down from 0.4% in January and unable to hit the estimate of 0.1%. Manufacturing Production was also flat and Industrial Production came in at -0.2%. Inflation remains in double digits, despite the Bank of England's aggressive rate policy, which has raised the benchmark cash rate to 4.25%. The combination of high inflation and rising interest rates has created a cost-of-living crisis and is weighing on businesses as well. To make things even worse, the country has been hit by widespread strikes in the public sector, as workers protest the drop in real income due to soaring inflation. An IMF forecast released this week indicated that the UK economy is projected to be the worst performer in the G20, which includes Russia. The economic situation isn't pretty, and the government and the BoE are under strong pressure to right the ship, and fast. Finance Minister Hunt has said he'll cut inflation in half and a recession can be avoided, but it's hard to share his optimism. This week pointed to further deceleration in inflation levels in the US. Headline CPI fell to 5.9%, down from 5.0%, although the core rate nudged up to 5.6%, up from 5.5%. The Producer Price Index declined to 2.7%, down sharply from 3.4%, and the core rate eased to 3.4%, down from 4.8%. Will the drop in inflation be accompanied by a decline in consumer spending? The markets are bracing for a soft retail sales report for March. Headline retail sales is expected to fall by 0.4% y/y and the core rate is projected to decline by 0.3% y/y.  A weak release could push the US dollar lower, as there will be more pressure on the Fed to consider pausing its rate hikes at the May meeting. GBP/USD touched resistance at 1.2537 earlier. The next resistance line is 1.2656 There is support at 1.2405 and 1.2282
by OANDA
EUR/USD - Euro gains ground as investor confidence improvesThe Eurozone economy continues to recover, but there is plenty of work ahead. The Sentix Investor Confidence index improved to -8.7 in April, above the March read of -11.1 and better than the estimate of -11.7 points. The concerns over an energy crisis in Europe this winter failed to materialize and Germany and the rest of the eurozone came out of the winter better than many had expected, given the weak global economy and the Russia-Ukraine war. Still, the economic outlook remains pessimistic, as Sentix Investor Expectations remain negative in both Germany and the eurozone, at -13 and -11.5, respectively. Still, the markets were pleased with the slight improvement in investor confidence and the euro has responded with gains of around 0.60%. Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses. The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February. The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%. EUR/USD is testing support at 1.0889. Below, there is support at 1.0804 There is resistance at 1.0989 and 1.1074
by OANDA
AUD/USD - Aussie on the move, RBA expected to pause ratesThe Australian dollar has edged higher at the start of the week. In the European session, AUD/USD is trading at 0.6715, up 0.45%. The RBA meets on Tuesday (Australia time) and is expected to pause rates. The US releases ISM Manufacturing PMI, which is expected to record another decline. The RBA has aggressively tightened interest rates in the current cycle, raising rates 10 straight times. The fight against inflation continues but there has been some improvement. February CPI fell sharply to 6.8%, vs. 7.4% prior and 7.1% anticipated. Inflation is more than triple the RBA target, but the sharp rise in rates has dampened economic activity and further hikes could jeopardize a soft landing. The RBA is widely expected to stay on the sidelines, with the market pricing in a pause at 86%. Governor Lowe has said that in addition to inflation, employment and consumer spending data would play a key factor in the RBA's decision. The labour market remains tight, but retail sales hit the breaks in February and slowed to just 0.2%, down from 1.8% in January and just above the consensus estimate of 0.1%. The weak retail sales data supports the RBA taking a breather. The banking crisis, which roiled global financial markets, raised fears of a financial meltdown. Although the contagion appears to have been contained, central banks are having to think twice about raising rates in an uncertain economic landscape, and if the RBA does pause, it could use the banking crisis as further ammunition in defending its decision. We're seeing a decline in manufacturing across the globe as demand remains weak. The Russian invasion of Ukraine and China's Covid-zero policy interrupted supply chains and dampened demand, and manufacturing is yet to recover even though China has made an about-face and relaxed its Covid regulations. The US is no exception to this disturbing global trend. ISM Manufacturing PMI has been in decline for four straight months, with readings below the 50 threshold, which separates expansion from contraction. The estimate stands at 47.5, a bit lower than the 47.7 reading in January. AUD/USD is putting pressure on resistance at 0.6737. Above, there is resistance at 0.6790 There is support at 0.6678 and 0.6582
by OANDA
AUD/USD - Aussie falls as inflation dipsThe Australian dollar is trading at 0.6670 in Europe, down 0.57%. Australian inflation was lower than expected, raising speculation that the Reserve Bank of Australia might pause at its April meeting. Australia's inflation rate for February eased to 6.7% y/y, down from 7.4% prior and the 7.2% estimate. It may be too early to declare that inflation has peaked, but there's no question that inflation is heading in the right direction. That is good news for businesses and households, which have been hurt by the double-punch of high inflation and rising interest rates. The unexpected sharp drop in inflation likely has cemented the RBA pausing at the April 4th meeting, and that is weighing on the Australian dollar today. RBA Governor Lowe had said that this week's retail sales and inflation releases would be key factors in the rate decision. Retail sales slowed to just 0.2% m/m in February, down from 1.2% prior and shy of the estimate of 0.4%. Weak consumer spending and falling inflation point to the economy slowing, and the RBA will likely respond with a pause, which would be the first since the rate-tightening cycle began in May 2022. The markets have fully priced in a pause at next week's meeting, with a likelihood of around 90%. In the US, higher rates have taken a toll on the housing sector. Pending Home Sales has recorded mostly declines over the past year, as potential home buyers are finding it more difficult to afford a new home. The indicator is expected to come in at -2.9% in February, after an unexpected jump of 8.1% in January. AUD/USD is testing resistance at 0.6676. Above, there is resistance at 0.6728. There is support at 0.6565 and 0.6402
by OANDA
AUD/USD eyes CPI, GDPThe Australian dollar remains under pressure and has edged lower on Tuesday. AUD/USD dropped below the 0.67 line on Monday for the first time since Jan. 3. Australian retail sales jumped 1.9% m/m in January, following an upwardly revised 4% decline in December and beating the consensus of 1.5%. The data indicates that consumer demand remains resilient despite rising interest rates and higher inflation. For the RBA, the upswing in consumer spending is a sign that the economy can continue to bear higher rates. The central bank has hiked some 325 basis points since May 2022 in a bid to curb inflation. The cash rate is currently at 3.35% and the markets have priced in a peak rate of 4.3%, with four rate hikes expected before the end of the year - one more than what is expected for the Fed. The RBA meets on March 7 and is widely expected to raise rates by 25 basis points. Wednesday could be a busy day for the Australian dollar, as Australia releases inflation and GDP reports. Inflation for January is expected to ease to 7.9% y/y, following an 8.4% gain in December. GDP for the fourth quarter is projected to slow to 2.7% y/y, after a robust gain of 5.9% in Q3. A decline in inflation and in GDP would indicate that high interest rates are having their intended effect and slowing economic activity. The question is whether the RBA will be able to guide the slowing economy to a soft landing and avoid a recession. In the US, a recent string of strong numbers has raised speculation that the Fed could raise interest rates as high as 6%. The unseasonably warm weather in January may have played a part in the better-than-expected numbers and we'll have to see if the positive data repeats itself in February. The markets have shifted their stance from a final rate hike in March with rate cuts late in the year to pricing in three more rate hikes in 2023. If upcoming inflation, employment and consumer spending reports point to a weaker economy, we can expect the markets to revert to pricing in a dovish pivot by the Federal Reserve. AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858
by OANDA
AUDUSD:Potential Breakout due to strong USD envrionmentHey Traders, based on the last strong NFP numbers that were out of expectations with 517,000 new jobs created in January, retail sales smashing expectations of 1.9% with 3%, CPI and other strong USD data we can notice that the market is pricing more rate hikes, and we expect the USD to continue outperforming until the next fed decision on March that will clarify more the USD path. in case of a breakout on AUDUSD chart i would monitor a retrace around 0.685 zone. i would also like to give a risk management advice to traders, i personally risk between 0.5% to 2% per trade so even if i'm in the wrong path that would take me a bunch of consecutive losing trades to get my account marginated which is too far. so for example if you risk 1% per trade that will take you more than a hundred consecutive losing trades to lose your account. but if you risk 10 times the recommended amount for example a 20% risk per trade that means 4-5 consecutive losing trades will knock your account out from the market. Please feel free to ask me questions regarding fundamentals and technicals in the comment section! Trade safe, Joe. source of USD data: www.forexfactory.com
Short
by JoeChampion
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EUR/USD at 3-week low after strong US dataThe euro is down for a third straight day and fell earlier to 1.0629, its lowest level since Jan. 23. In the European session, EUR/USD is trading at 1.0639, down 0.30%. The US dollar is showing some strength this week against the majors, as US data continues to shine. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Is the disinflation process stalled? The markets didn't expect such good numbers, but the economy has proved to be surprisingly resilient to rising interest rates. The Fed has been preaching 'higher for longer' for some time, but the markets stuck to their dovish stance, expecting that the Fed would have to pivot and even cut rates later in the year. The host of strong US numbers has forced investors to recalibrate, and the markets have revised upwards their peak rate forecast to above 5%. The US dollar has been the big winner of the shift in market thinking, and US Treasury yields are at their highest level this year. Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn't falling quickly enough. Mester said that she didn't see inflation falling to 2% until 2025, which points to a long disinflation process. The ECB raised rates by 50 basis points in February and has signalled that it will do the same at the Mar. 16 meeting. The main financing rate is currently at 3%, well below the Fed (4.5%) and other major central banks. It's not clear what the Bank has planned after the first quarter, but with inflation running at 8.5%, the risk for further rate hikes is skewed to the upside. The ECB has made it clear that rates will remain high until there is evidence that inflation is falling toward the target, which means that the current rate-tightening cycle isn't anywhere near its end. EUR/USD is testing support at 1.0629. Below, there is support at 1.0581 1.0762 and 1.0847 are the next resistance lines
by OANDA
1
GBP/USD steadies, eyes UK retail salesThe British pound has steadied on Thursday. In the European session, GBP/USD is trading at 1.2053, up 0.25%. This follows a sharp drop of 1.2% a day earlier. UK inflation continues to fall but remains disturbingly high. Headline inflation fell to 10.1% in January, down from 10.5% in December and below the consensus of 10.3%. The drop in inflation is welcome news, but food prices, a key driver of inflation, surged by 16.8% in January. With inflation still in double digits, the Bank of England will have to continue raising rates, with the most likely scenario being a 25-basis increase at the Mar. 22 meeting. The market probability of a 25-bp hike rose as high as 73% on Wednesday before dipping to 66% today, according to Refinitiv data. In the US, retail sales delivered an impressive gain of 3% in January, above the estimate of 1.8%. This was a strong rebound from the December reading of -1.1% and marked the largest gain since January 2022. This positive release follows the January inflation report that ticked lower to 6.4% but was higher than expected. These strong numbers translated into strong gains for the US dollar on Wednesday, as the Fed will likely raise rates even higher in order to put the brakes on the strong economy. The UK wraps up the week with retail sales on Friday. The markets are braced for bad news, with an estimate of -5.5% y/y for the headline figure (-5.8% prior) and -5.3% for the core rate (-6.1%). A weak retail sales report could sour investors on the pound and send the currency lower. GBP/USD tested resistance at 1.2071 earlier in the day. The next resistance line is 1.2180 1.1958 and 1.1838 are providing support
by OANDA
Key Levels and Market overview into the Asian session openA look at the price action from the European and US sessions and what that may mean for the Asian market open after some stronger than expected US retail Sales triggered a choppy session. I feel data is still showing 'sticky inflation' which eventually leads to higher interest rates and lower spending which will cap the indexes...although traders are focused on a resilient economy fending off a recession.. I look at some key levels to watch and the price action setups I expect to play out. Markets covered :- DOW Nasdaq DAX FTSE ASX200 Hang Seng USD Index Gold Oil Copper
CBOT:ZN1!
by TradeTheStructure
AUD/USD sinks on hawkish LoweIt has been a disastrous session for AUD/USD, which has plunged 1.26% and is trading at 0.6899. RBA Governor Philip Lowe faced a grilling from Australian lawmakers earlier. Higher rates and high inflation have caused a cost-of-living crisis and the RBA has been heavily criticised for the sharp rate-tightening cycle. Lowe confirmed that more rate hikes were on the way due to the need to curb inflation. Lowe warned that the battle against inflation was paramount, saying high inflation could lead to an increase in inflation expectations which would result in higher rates and more unemployment. Inflation is running at 7.8%, the highest level in over 40 years, which Lowe said was "way too high". Australia will release employment data on Thursday. The economy is estimated to have created 20,000 new jobs in January, following a decline of 14,600. The US will release January retail sales later today. Headline retail sales is expected to rebound with a 1.8% gain while core retail sales is forecast to rise 1.1%. Both releases came in at -1.1% in December, so a strong showing would be bullish for the US dollar. The markets have been dovish about the Fed's rate policy on the assumption that the economy is weakening, but the blowout employment report and an inflation release that was higher than expected have forced investors to rethink expectations that the Fed will pivot and cut rates later this year. A strong retail sales report would support the Fed's hawkish stance of "higher for lower" and possibly a higher terminal rate than previously expected. AUD/USD is testing support at 0.6962. Below, there is support at 0.6846 0.7036 and 0.7143 are the next resistance lines
by OANDA
EUR/USD dips to 1-month lowThe euro has fallen for three straight sessions and has extended its losses on Tuesday. Earlier in the day, EUR/USD fell below the 1.07 line for the first time since Jan. 23. German and eurozone numbers have been soft this week, adding to the euro's woes. Eurozone retail sales fell 2.7% in December, worse than the estimate of -2.5% and well off the November read of 1.2%. German Industrial Production came in at -3.2% in December, down from 0.4% in November and below the expectation of -0.6%. Germany is the locomotive of the bloc but the engine is stuttering, which is bad news for the rest of the eurozone. GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The US dollar received a much-needed boost from the January nonfarm payroll report, as the 517,000 gain crushed expectations. There are no major releases out of the US today, but Fed Chair Powell will participate in a panel discussion. If Powell strikes a hawkish tone, the US dollar could extend its gains. There are a host of Fed members speaking this week, and if they reiterate the "higher for longer" stance that the Fed continues to embrace, the US dollar could continue to move north. How will the Fed react to the stellar employment report?  Fed member Mary Daly called the employment release a "wow number" and said that the Fed's December forecast of a peak rate of 5.1% was a "good indicator" of Fed policy. With the benchmark rate currently at 4.5%-4.75%, we're likely looking at two more rate hikes, exactly what Jerome Powell said at the FOMC meeting last week. The spike in job creation has raised hopes that the Fed can pull off a "soft landing" and there is even talk on Wall Street of a "no landing" which would mean that a recession could be avoided. 1.0758 is a weak support line, followed by 1.0633 There is resistance at 1.0873 and 1.0954
by OANDA
EUR/USD extends lossesThe euro continues to lose ground and has started the week in negative territory. In the European session, EUR/USD is trading at 1.0783, down 0.19%. Earlier in the day, the euro has now fallen to its lowest level since Jan. 23. The euro sent market participants on a roller-coaster ride last week. The Fed's rate increase pushed the euro higher by 1.16%, but the ECB rate hike and the blowout US nonfarm payroll report sent the euro tumbling close to 2%. The January US nonfarm payrolls was an absolute blowout that surprised everybody. The economy created 517,000 new jobs, crushing the estimate of 185,000 and well above the December gain of 260,000. The unemployment rate fell from 3.5% to 3.4%, its lowest rate since 1969. The US dollar surged against most of the major currencies after the employment report and the euro fell by 1%. There has been talk that the Fed might deliver a "one and done" rate hike in March which would end the current rate-hike cycle, even though Jerome Powell said at last week's FOMC meeting that two more rate hikes were likely. After the massive gain in nonfarm payrolls, the "one and done" proponents will be lying low. How will the Fed react to the job data? The labour market, which has shown remarkable resilience to the Fed's steep rate-tightening cycle, is much too strong for the Fed's liking, as a weaker labour market is needed for inflation to continue falling. Fed member Mary Daly called the employment release a "wow number" and said that the Fed's December forecast of a peak rate of 5.1% was a "good indicator" of Fed policy. With the benchmark rate currently at 4.5%-4.75%, we're likely looking at two more rate hikes, exactly what Jerome Powell said at the FOMC meeting last week. Since the employment report, the markets have become less dovish and have priced in an increase in May. Eurozone data was a mixed bag today. German factory orders bounced back in December with a gain of 3.2% m/m, after a 4.4% decline in November. The estimate stood at 2.0%. Eurozone Sentix Investor Confidence improved to -8.0, up from -17.5 points. However, eurozone retail sales slid 2.7% m/m in January, down from a 1.2% gain in December and worse than the consensus of -2.5%. 1.0758 is a weak support line, followed by 1.0633 There is resistance at 1.0873 and 1.0954
by OANDA
USD/CAD eyes retail salesThe Canadian dollar is unchanged on Friday, trading at 1.3466 in the European session. We could see some volatility in the North American session, as Canada releases retail sales. The markets are bracing for a downturn in retail sales for November, with a forecast of -0.5% m/m for the headline figure and -0.4% for the core rate. This follows a strong report in October, as the headline reading was 1.4% and core retail sales at 1.7%. If the releases are as expected or lower, it could be a rough day for the Canadian dollar. Today's retail sales release is the final major event prior to the Bank of Canada's meeting on January 25th. The markets have priced in a 25-bp increase, but a hold is also a possibility, especially with December inflation falling to 6.3%, down from 6.8%. The BoC has raised rates by some 400 basis points in the current rate-tightening cycle, which began in March 2022. Similar to the market outlook on the Fed's rate policy, there is significant speculation that the BoC could wind up its tightening at the first meeting of 2023 and then keep rates on hold. The BoC has said that future hikes will be determined by economic data, and there are signs of strength in the economy despite the Bank's aggressive rate policy. GDP expanded by 2.9% in Q3 which was stronger than expected and job growth sparkled in December, with over 100,000 new jobs. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. 1.3455 is a weak support line, followed by 1.3328 1.3582 and 1.3707 are the next resistance lines
by OANDA
AUD/USD slides after soft Aussie job reportThe Australian dollar has extended its slide on Thursday. AUD/USD is trading at 0.6884 in Europe, down 0.82%. Australia's December employment report was weaker than expected, sending the Australian dollar sharply lower. The headline reading showed a loss of 14,600 in total employment, which may have soured investors. The release wasn't all that bad, as full-time jobs showed gains of 17,600, with part-time positions falling by 32,200. The unemployment rate remained at 3.5%, but this was a notch higher than the forecast of 3.4%. On the inflation front, recent releases point to inflation moving higher. November CPI rose to 7.3%, up from 6.9%, and the Melbourne Institute Inflation Expectations climbed to 5.6%, up from 5.2%. We'll get a look at the all-important quarterly inflation reading next week. Inflation came in at 1.8% q/q in Q3, and an acceleration in Q4 would force the Reserve Bank of Australia to consider raising rates higher and for longer than it had anticipated. The cash rate is currently at 3.10%, and I expect the RBA will raise it to 3.50% or a bit higher, which means we are looking at further rate hikes early in the year. The US dollar seems to take a hit every time there is a soft US release, and this week has had its share of weak data. The Empire State Manufacturing Index sank to -32.9, while headline and core retail sales both fell by -1.1%. PPI came in at -0.5%. All three releases were weaker than the November readings and missed the forecasts, indicating that cracks are appearing across the US economy, as the bite of higher rates is being felt. The markets are clinging to the belief that softer numbers will force the Fed to ease up on its pace of rate hikes and possibly end the current rate-cycle after a 25-bp increase in February. The Fed has done its best to dispel speculation that it will pivot, but I expect the US dollar to lose ground if key releases are weaker than expected. AUD/USD is testing support at 0.6893. Below, there is support at 0.6810 0.6944 and 0.7027 are the next resistance lines
by OANDA
Pound jumps as inflation easesThe British pound is in full flight upwards on Wednesday. In the North American session, GBP/USD is trading at 1.2393, up 0.86%. UK inflation eased for a second straight month in December. Headline CPI dipped to 10.5%, down from 10.7% in November and just below the forecast of 10.6%. Core CPI, however, did not show an improvement as it remained unchanged at 6.3%. The downtrend is welcome news, but inflation still remains stubbornly high after hitting 11.1% in October, a 41-year high. The Bank of England has raised rates to 3.50% but clearly, more work needs to be done. The labour market remains robust, with wage growth climbing to 6.4% in December, up from 6.2% in November and brushing past the forecast of 6.1%. This is well below inflation levels, much to the chagrin of workers, but it is much too high for the BoE, which is focussed on curbing inflation. The BoE meets next on February 2nd and the markets have priced in a second-straight 50-bp increase. The BoE will also release updated economic forecasts, which could play a key role in the central bank's rate policy over the next several months. US consumers cut back on spending in December for a second consecutive month. Retail sales fell 1.1%, driven lower by a decline in vehicle sales due to rising interest rates for vehicle loans, as well as lower gas prices. This was lower than the November reading of -1.0% and the consensus of -0.8%. Core retail sales also declined by -1.1%, compared to -0.6% in November and the forecast of -0.8%. The disappointing numbers have sent the US dollar lower against the majors, as speculation rises that the Fed may have to ease up on the pace of rate hikes due to a weakening economy. GBP/USD has pushed above resistance at 1.2292 and 1.2352. The next resistance line is at 1.2455 There is support at 1.2189 and 1.2129
by OANDA
Japanese yen dips, inflation risesUS and Japanese markets are open on Tuesday, but trading remains thin after the Christmas holiday. There are some key Japanese events on the calendar, although US releases are all tier-2 events. In the North American session, USD/JPY is trading at 133.41, up 0.44%. There are a host of events out of Japan today. Retail sales rose for a ninth consecutive month in November, buoyed by the tourist trade after Japan opened its borders. Still, the gain of 2.6% y/y was well off the 4.4% gain in October and 4.8% in September, and below the consensus of 3.7%. Household and consumer consumption account for more than half of economic growth, so the downtrend is clearly worrying. Japan's economy contracted in Q3, as a poor global outlook, the slowdown in China and a weak yen put a squeeze on economic growth. Inflation continues to rise in Japan, although the levels pale in comparison to what the US, the UK and the eurozone are experiencing. The Bank of Japan's preferred inflation gauge, BOJ Core PCI, accelerated for a ninth straight month in November, rising to 2.9% y/y, up from 2.8% and above the consensus of 2.7%. Last week, Japan's Core CPI rose 3.7% y/y in November, its highest level since 1981. Inflation is moving higher as firms continue to pass along higher costs to consumers, unable to absorb the rise in energy, food and raw materials. The rise in inflation hasn't budged the BoJ, with Governor Kuroda saying that inflation would fall back below the 2% target in 2023. Kuroda stated on Monday that the widening of the yield curve band was not a prelude to an exit from the Bank's ultra-loose policy. We'll get more details of that dramatic move later today, with the release of the BoJ Summary of Opinions from last week's policy meeting. The report should make for some interesting reading. 133.62 is a weak resistance line. Above, there is resistance at 134.12 There is support at 132.80 and 131.83
by OANDA
GBP/USD under pressure, UK GDP nextGBP/USD is sharply lower on Wednesday. In the North American session, the pound is trading at 1.2093, down 0.74%. There was an unexpected surprise from the UK CBI Realized Sales today. December sales volumes showed a strong rebound, rising 11 points. This easily beat the November reading of -19 and the consensus of -21. However, retailers expect the rebound to be short-lived and are predicting a decline in January, with a forecast of -17. The UK releases Final GDP for Q3 on Tuesday. The consensus stands at -0.2%, after an identical release from GDP in the second quarter. Two consecutive quarters of negative growth would technically mean that the UK economy is in recession, but it's clear that there is a recession even without this definition. The Office for Budget Responsibility (OBR) is projecting that the UK is in a recession that will last more than one year and cause a massive 7% drop in household incomes over the next two years. Households have been hit by a double punch of high inflation and rising interest rates, and wages have failed to keep pace with inflation. Tens of thousands of ambulance workers went on strike today in England and Wales, and more public sector workers are expected to follow suit this winter. This sets up the specter of a wage-price spiral, which would complicate the Bank of England's struggle to curb inflation, which remains in double digits. We'll also get a look on Tuesday at UK Revised Business Investment for Q3. A weak release of -0.5% is expected, after an identical reading in the second quarter. GBP/USD is testing support at 1.2106. Next, there is support at 1.2023 There is resistance at 1.2234 and 1.2349
by OANDA