POLITICAL RISK: Pakistan Declares 'Open War' On Afghanistan

• RES 4: 0.7158 High Feb 2 2023   
• RES 3: 0.7123 2.000 proj of the Nov 21 - Dec 10 - 18 price swing
• RES 2: 0.7060 1.764 proj of the Nov 21 - Dec 10 - 18 price swing
• RES 1: 0.7023 Intraday high 
• PRICE: 0.7001 @ 08:13 GMT Jan 28
• SUP 1: 0.6892 Low Jan 26 
• SUP 2: 0.6772 20-day EMA 
• SUP 3: 0.6690 50-day EMA 
• SUP 4: 0.6660 Low Dec 31 

A bull cycle in AUDUSD remains in play and this week’s strong climb reinforces current conditions. The move higher also highlights an acceleration of the uptrend. Moving average studies are in a bull-mode position too, signalling a dominant uptrend. Sights are on 0.7060 next, a Fibonacci projection. The trend is overbought and any pullback would allow this  condition to unwind. Firm support to watch lies at 0.6772, the 20-day EMA.

• RES 4: $5508.6 - 1.764 proj of the Nov 18 - Dec 26 - Dec 31 swing
• RES 3: $5400.0 - Round number resistance 
• RES 2: $5378.3 - 2.000 proj of the Nov 18 - Dec 26 - Dec 31 swing
• RES 1: $5300.0 - Round number resistance                      
• PRICE: $5295.3 @ 08:03 GMT Jan 28 
• SUP 1: $4990.7 - Low Jan 26 
• SUP 2: $4708.9 - 20-day EMA 
• SUP 3: $4536.9 - Low Jan 16
• SUP 4: $4460.6 - 50-day EMA

The primary uptrend in Gold remains intact and another fresh cycle high reinforces the bull phase. This also maintains the price sequence of higher highs and higher lows. The psychological $5000.0 level has been cleared this week. Sights are on $5378.3 next, a Fibonacci projection. Initial firm support lies at $4708.9, the 20-day EMA. The trend is overbought, a pullback would allow this condition to unwind. First support is at $4990.7, the Jan 23 low.

Dovish repricing in EUR STIRs this morning after Austrian National Bank Governor Kocher suggested to the FT that continued EUR appreciation could create “a certain necessity to react in terms of monetary policy”. Note that in the same interview, Kocher stressed that recent EURUSD appreciation has been “modest” and does not necessitate a response for now. Markets are nonetheless reacting to the shift in the implied distribution of ECB policy rates. 

• ECB-dated OIS now price 7bps of easing through September, up from 2bps at yesterday’s close. Friday’s heavy data schedule (Q4 flash GDP, Spain/Germany flash  inflation) may be key in determining whether this repricing lasts.
• In an interview with El Pais this morning, Executive Board member Cipollone highlighted that “GDP has been resilient and we’re expecting figures that may even outperform the forecasts. And inflation has been hovering around our target in recent months. We are undoubtedly in a good place.”
• Euribor futures are +1.0 to +3.0 ticks through the blues, with the back of the white and red pack leading. Last Wednesday’s highs are the initial topside targets in ERZ6 and ERH7.
• We explored whether EURUSD’s push towards 1.20 was “complicated” for the ECB yesterday