Some Stock Indices Rebound, but Fed Bets Stay Elevated

USD RALLIES, WALL STREET SLIDES, AS PARTICIPANTS STILL BET ON AGGRESSIVE FED

The US dollar traded higher against all the other major currencies on Thursday and during the Asian session Friday. It gained the most versus JPY, EUR, and CHF, in that order, while it lost the least ground versus GBP and CAD.

EUR/USD — TECHNICAL OUTLOOK

EUR/USD tumbled yesterday, falling below the 1.1234 barrier, which acted as the lower end of the sideways range that had been containing most of the price action since November 26th. On top of that, the rate also dipped below the 1.1185 zone, marked by the low of November 24th, entering territories last seen in June 2020. In our view this paints an overly bearish picture.

NZD/JPY — TECHNICAL OUTLOOK

NZD/JPY traded lower yesterday, after hitting resistance at 76.43, but the slide was stopped slightly above the 75.65 barrier. Overall, the pair remains below the downside resistance line drawn from the high of January 5th, as well as below another steeper one taken from the peak of January 13th. Therefore, we believe that the near-term outlook stays bearish.

AS FOR TODAY’S EVENTS

We have the US personal income and spending rates for December, alongside the core PCE index for the month, the Fed’s favorite inflation metric. Personal income is expected to have accelerated somewhat, but spending is forecast to have declined. No forecast is available for the core PCE index yet.

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