USD/JPY The USDJPY keeps firm negative tone and dips to new lowest levels in over seven months on Friday, in extension of strong acceleration on Thursday, when the pair lost 2.3% of its value, in the biggest daily drop since Dec 20. The dollar was deflated by growing expectations that the Fed would continue slow the pace of its rate hikes, following further easing of US inflation. Also, Japanese yen received fresh support from talks that the Bank of Japan would soon start modifying its monetary policy, which is still unchanged, despite the other central banks already strongly tightened its monetary policies. The pair is on track for the biggest weekly loss since late November and weekly close below psychological 130 support for the first time since June 2. Bearish daily studies add to negative near-term outlook, as bears eye initial target at 127.58 (Fibo 61.8% of 112.53/151.94, break of which would generate fresh bearish signal for extension of steep downtrend from 151.94 (2022 peak, the highest in nearly 33 years) towards target at 124.66 (20MMA). Broken 130 support reverted to solid barrier, along with 55WMA (131.12), marking significant resistance zone which should limit corrective upticks (as daily studies are oversold) and keep bears in play. Res: 129.39; 130.00; 130.56; 131.12. Sup: 127.58; 127.00; 126.25; 125.48. Interested in USD/JPY technicals? Check out the key levels

EUR/JPY The cross extends steep fall into second straight day, losing 1.3% until early US session on Friday, following 1.6% drop on Thursday, as yen rose sharply on weaker dollar and speculations that BoJ is about to start revisions of its ultra-loose monetary policy. Strong bearish acceleration broke through pivotal support at 140.00 (psychological) and 139.12 (Fibo 61.8% of 133.39/148.40 rally), retracing the most of 137.38/142.85 corrective leg and signaling that larger bears are tightening grip for possible continuation after limited corrective phase. Formation of 10/200DMA death-cross contributes to negative outlook, as bearish momentum is strengthening on daily chart and RSI and Stochastic indicators are heading south. Firm break of 137.33/38 pivots (Sep 26/Jan 3 lows) would signal continuation of the downtrend from 148.40 (2022 high). Upticks under broken 140 support, reverted to solid resistance, should offer better selling opportunities. Res: 139.12; 140.00; 140.37; 140.68. Sup: 137.91; 137.38; 136.93; 135.51.

In today's live stream, Coach covered the Cable setup and the Divergences in Euro and Aussie. He updated Precious metal and the progress of the forecasted Platinum High.

Outlook: Today we get import/export prices and consumer confidence, with a couple more Feds to speak. Consumer confidence may have been trumped by yesterday’s inflation seeming tamer.   Everyone is satisfied that the inflation data came in as forecast, but it will take only a short while for critics to start complaining the numbers should have been lower and what’s wrong with economists, anyway? The Cleveland Fed has 5.87% y/y for Dec core CPI but the forecast was for 5.7%. The Cleveland Fed must be biased. So is the Atlanta Fed, whose sticky-price core is 6.6%. Let’s all use the q/q annualized, because that appears so much better! Q4 CPI annualized is a mere 1.6%, better than 2% in Q3. The core version is only 3.2% from 6% in Q3. Core services were up but core goods prices fell by 4.8% in this version. Housing is on the way down, too, so after leaving it out entirely this time, let’s put it back next time. Therefore, the Fed will definitely be cutting rates before year-end and maybe even in Q3!   This is normal exaggeration and standard undue extrapolation. Just because it’s normal doesn’t mean it’s right. Granted, the Fed will be happy to change its mind and not see a pause/cut as premature if it can be satisfied some lag or another is not going to jump up and bite it on the rear. That will have to include suppressed wage growth and energy costs staying tame. We are inclined to doubt that giant rate hikes can tame inflation that fast, and we worry that once it sinks in that inflation will be higher for longer, too, traders will throw a tantrum. Goldman has a cute estimate of the probability of recession–45-55%. This is funny in its own way. It also says if we do get a recession, it will be mild and short-lived. And it won’t stop US equities from performing well. The S&P will close this year up 12% y/y, following the 19.4% drop in 2022, the worst performance since 2008. That’s even if the S&P falls in Q1.   Bottom line, we have a revised likelihood of only a mild recession in the UK and Europe coupled with no recession at all in the US. But inflation is higher over there and the BoE and ECB are playing catch-up with the Fed. They are still hiking, and by the bigger 50 bp than the Fed’s newly measly 25 bp. The FX market wants to buy sterling and euros. Separately, the BoJ might be changing its tune next week and pressure against the 10-year is already driving the yen. We agree with the yen story, but the UK/eurozone story is excessively optimistic. It neglects the war, for example, not to mention the relatively stronger capability of unions to get wage-push inflation and their relatively higher starting point. Take a look at the weekly euro/dollar chart. The Schaff cycle indicator is already topping out, implying the max gain for the euro is 1.0942 (the 50% retracement) or 1.1272 (the 62%). Yes, the dollar got seriously overbought last year. But for good reasons, and those reasons can return. By mid-year, the US will still have decent growth, still-falling inflation and the highest rates anywhere. In the absence of a crisis, risk-on can still drag it down, but the minute some serious risk appears–N. Korea, Russia’s nuclear, climate crisis or an unknown unknown, the dollar becomes not only the safe haven, but a darn good one. More about inflation: The NY Fed’s Underlying Inflation Gauge (UIG) doe Dec has the full price version down 0.3% from Nov at 5.4% and the prices-only version down 0.5% at 4.5%. So, prices-only is a mere 4.5% vs. 6.5% for standard CPI. Include a bunch of other factors, “underlying” is 5.4% vs. 6.5% for the standard CPI.   Meanwhile, the Atlanta Fed offers the sticky price inflation rate for Dec at 6.7% y/y, while the core sticky-price index rose 6.6%. Both fell at a hefty pace, if slightly less than the month before..   Both charts show convincing moderation in inflation. It’s certainly true that inflation is falling, but it’s still at a high level and a level far above what the Fed wants on the PCE basis. It’s unreasonable to imagine inflation by any measure can fell enough in two or three quarters to have the Fed ready to cut rates. The Fed is far more likely to stand firm on what it will have already done. This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading....

In the first Live from the Vault of 2023, Andrew Maguire reports on Russia’s Sberbank issuing its first gold-based blockchain asset in a game-changing manoeuvre that might instigate further de-dollarization of commodity trading. The precious metals expert provides an in-depth commentary on the LBMA’s recent presentation on physical silver, which has indeliberately exposed some of the market's price-setting machinations.

S&P 500 didn‘t like CPI coming in line with expectations, and it was indeed„ buy the rumor sell the news“ reaction, followed by cutting into 4,010 on confirming bond and dollar price action. No fresh fuel though making for a larger reaction. And today we have some telling bank earnings, facilitating the approach to 3,955 – and University of Michigan consumer confidence data which wouldn‘t prove any huge disappointment. Just around the expected figure, making for an uneventful session Friday, with the only two daily questions being whether the buyers can reconquer 3,980, and whether the sellers can push below 3,955 closer to 3,910 or at least midpoint. Remember, the Fed is hawkish and will remain hawkish, and the rally is running on borrowed time. 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 Given the banking earnings aftermath, the key „point of control“ at 3,955 has to hold so as to prevent levels mentioned in the opening part of today‘s analysis. Close above 3,980 would be ideal for the bulls, but unless 4,010 is cleared, stocks remain in a precarious zone, and vulnerable to swift reversals at the 200-d MA. Copper Copper consolidation mentioned yesterday, looks to be starting. Risk-on consequences, so watch out.