Price actions in Asian session remain indecisive. Euro is staying as the worst performer today, weighed down by cross selling against Swiss Franc and, to a lesser extent, Sterling. Aussie and Kiwi are the stronger ones but overwhelmed by the Franc. Dollar and Yen are mixed for now awaiting further guidance from risk sentiment. US stocks closed lower overnight as consolidations continued while major Asian indexes are mixed.

Technically, overall price actions suggest that Dollar’s near term rebound isn’t over yet. But, to have more sustainable rally, USD/CHF will have to break through 0.9287/9 resistance zone decisively to confirm short term bottoming at 0.9058. USD/JPY will also have to break through 132.89 to resume the rebound from 127.20. Otherwise, rise in the greenback elsewhere could remain half-hearted.

In Asia, at the time of writing, Nikkei is down -0.13%. Hong Kong HSI is up 1.00%. China Shanghai SSE is up 0.97%. Singapore Strait Times is down -0.78%. Japan 10-year JGB yield is up 0.0017 at 0.498. Overnight, DOW dropped -0.61%. S&P 500 dropped -1.11%. NASDSAQ dropped -1.68%. 10-year yield dropped -0.021 to 3.653.

Fed Waller: I am prepared for a longer fight to get inflation down

Fed Christopher Waller said in a speech that while some believe that inflation will come down quite quickly this year, “I’m not seeing signals of this quick decline in the economic data”.

“I am prepared for a longer fight to get inflation down to our target,” he added.

“Though we have made progress reducing inflation, I want to be clear today that the job is not done,” Waller said.

“It might be a long fight, with interest rates higher for longer than some are currently expecting. But I will not hesitate to do what is needed to get my job done.”

Fed Kashkari: We need to do more to bring labor market into balance

Minneapolis Fed President Neel Kashkari said yesterday, “there’s not yet much evidence, in my judgment, that the rate hikes that we’ve done so far are having much effect on the labor market.”

“We need to bring the labor market into balance so that tells me we need to do more,” he added.

He noted that Fed will likely need to raise interest rates to around 5.4% in order to bring inflation down to the 2% target.

BoC minutes: The bar for additional rate increases now higher

BoC published a minutes-like document yesterday for the first time to improve transparency. The minutes noted, “members were in broad agreement that, going forward, it would be appropriate to pause any additional tightening to allow economic developments to unfold.”

“The bar for additional rate increases was now higher”. Also, the council “would need an accumulation of evidence to determine whether further rate increases would be required.” Yet, it was important to be clear about the “conditionality” of the pause, and the Governing Council “would be prepared to raise the policy rate further if these upside risks materialized.”

Looking ahead

EU economic forecasts will be a major focus today. Meanwhile, US will publish jobless claims on a Thursday as usual.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0696; (P) 1.0728; (R1) 1.0747; More…

EUR/USD is staying in consolidation above 1.0668 and intraday bias remains neutral. Correction from 1.1032 short term top could still extend lower. Break of 1.0668 will target 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Nevertheless, firm break of 4 hour 55 EMA (now at 1.0804) will bring retest of 1.1032 high instead.

In the bigger picture, current development suggests that the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

Economic Indicators Update