MEXICO: USDMXN Prints Fresh Cycle Low, JPMorgan On Inflation Data
- The Mexican peso came roaring back in typical fashion on Wednesday with any bounces for USDMXN (-0.61%) continuing to be well sold into. The technical downtrend remains intact, and the pair’s bearish extension last week confirmed a recent bear flag formation on the daily chart, reinforcing the trend.
- The focus remains on 17.9401, the 2018 low, despite price briefly dipping below it during today’s session. A sustained break of this level would open 17.5746, the Aug 25 2017 low, with short-term resistance moving down to 18.3603, the 20-day EMA.
- February inflation data is due tomorrow at 1200GMT/0600Local, where headline and core inflation are expected to dip to 7.68% and 8.35% respectively.
- JPMorgan noted that this week’s final CPI print should reinforce their lingering concerns on sticky underlying inflation. However, beyond these aggregate measures, their focus remains on sequential core inflation for guidance on the underlying trend. On the surface, core price momentum is modestly slowing but there are several caveats which include the fact that price gains sustained at 0.6% m/m are consistent with near 7.5%oya inflation in one year’s time, about 2.5 times the central bank’s target.
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CANADA: Household Excess Savings Seen The Largest Upside Risk To Growth
- Within BOC’s Market Participants Survey for 4Q22 published today, the widest perceived upside risk to the growth outlook of the 27 participants surveyed was a greater deployment of accumulated savings.
- It’s a useful reminder that whilst the Canadian household savings rate has fallen considerably from pandemic surges, at 5.7% in 3Q22 it was still much higher relative to its pre-pandemic five year average of 2.2%.
- That’s in contrast to the US savings rate of 2.9% in Q4 vs its historical pre-pandemic average of 7.6%, running down ‘excess savings’ generated early in the pandemic in the process unlike in the case of Canada.
Canada household savings rate (white) vs US equivalent (yellow)Source: Bloomberg
US: State Department Spokesperson To Brief Press On China "Spy Balloon" Incident
US State Department Spokesperson Ned Price is shortly due to provide the first department press briefing since a suspected Chinese spy balloon forced the cancellation of Secretary of State Antony Blinken's key diplomatic trip to China.
- Livestream: https://www.state.gov/todays-briefing-schedule/
- The State Department indefinitely postponed Secretary Blinken's China trip shortly before the US military took steps to shoot down the balloon.
- Price may provide an update on the likelihood of rescheduling the trip in the near future. Although China has maintained its position that the balloon was civilian rather than military Beijing has struck a relatively conciliatory tone leading to cautious optimism that political fallout from the incident can be managed.
- Price will also provide an update on the aid and support being delivered to Turkey in response to last night's destructive series of earthquakes.
EURGBP TECHS: Trend Needle Points North
- RES 4: 0.9097 76.4% Retracement of the Sep 26 - Dec 1 bear leg
- RES 3: 0.9009 2.0% 10-dma envelope
- RES 2: 0.8992 61.8% Retracement of the Sep 26 - Dec 1 bear leg
- RES 1: 0.8945 High Feb 6
- PRICE: 0.8927 @ 16:44 GMT Feb 6
- SUP 1: 0.8875/0.8852 Low Feb 2 / High Jan 25
- SUP 2: 0.8839 20-day EMA
- SUP 3: 0.8782 50-day EMA
- SUP 4: 0.8722 Low Jan 19 and a reversal trigger
EURGBP trend conditions remain bullish following last week’s gains. The cross has cleared resistance at 0.8897, the Jan 13 high and a recent bull trigger. The clear breach of this level confirms a resumption of the uptrend that started early December last year and sights are on 0.8992, a Fibonacci retracement. Note that moving average studies are in a bull-mode position. First key support to watch lies at 0.8828, the 20-day EMA.
