Dollar Selloff Continues, Euro Ready for Upside Breakout

Selloff in Dollar remains the main theme today, but Yen is also sharing some burden. US 10-year yield is falling below 3.6 handle again, giving the greenback some additional pressure. Swiss Franc breaks through recent resistance against Dollar already, with help from cross buying. But Euro might also follow very soon. For now, Aussie and Kiwi are still the strongest ones, with Loonie lagging behind.

Technically, EUR/USD could break through 1.0733 resistance during the rest of the session. In that case, whole rally from 0.9534 low should resume. Next target would be channel resistance (now at 1.0905). Reaction from there would decide whether upside acceleration would follow to 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164.

In Europe, at the time of writing, FTSE is up 0.04%. DAX is up 0.86%. CAC is up 0.42%. Germany 10-year yield is up 0.0656 at 2.277. Earlier in Asia, Hong Kong HSI rose 1.89%. China Shanghai SSE rose 0.58%. Singapore Strait Times rose 0.88%. Japan was on holiday.

ECB: Wage growth over the next few quarters very strong

In an economic bulletin article, ECB said, “Looking ahead, wage growth over the next few quarters is expected to be very strong compared with historical patterns.”

“This reflects robust labour markets that so far have not been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation.”

“Beyond the near term, the expected economic slowdown in the euro area and uncertainty about the economic outlook are likely to put downward pressure on wage growth.”

Eurozone Sentix rose to -17.5, sharp economic downturn off the table

Eurozone Sentix Investor Confidence improved from -21 to -17.5 in January, slightly below expectation of -17.0. That’s nonetheless the highest since June 2022. Current Situation Index rose from -20.0 to -19.3, highest since last August. Expectations rose from -22.0 to -15.8, highest since last February.

Sentix said: “Investors are still assuming a recession, but it is expected to be much milder. The sharp economic downturn, which was expected by the majority of investors by October 2022, is therefore off the table (for now)…a

“Overall, the economic environment remains challenging. The latest increases should not be misinterpreted as a general turnaround. The risks of recession remain.”

Eurozone unemployment rate unchanged at 6.5% in Nov, EU at 6.0%

Eurozone unemployment rate was unchanged at 6.5% in November. EU unemployment rate was unchanged at 6.0%.

Eurostat estimates that 12.950m men and women in the EU, of whom 10.849m in the Eurozone, were unemployed in November 2022. Compared with October 2022, unemployment increased by 10k in the EU and decreased -by 2k in the Eurozone.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9228; (P) 0.9319; (R1) 0.9368; More…

USD/CHF’s down trend resumed by breaking through 0.9199 support. Intraday bias is back on the downside. Next target is 100% projection of 0.9545 to 0.9199 from 0.9407 at 0.9061. On the upside, break of 0.9407 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 should be a medium term down trend itself. Next target is a test on 0.8756 low. Strong support should be seen there to bring rebound. Still, further decline will now be expected as long as 0.9407 resistance holds, in any case.

Economic Indicators Update