• USD/JPY resumes cautious mood ahead of CPI inflation

• GBP/USD sends mixed signals as GDP figures awaited

• AUD/USD trades at a make-or-break point; inflation and China’s data eyed

 

US CPI inflation --> USD/JPY

Nonfarm payrolls increased by 210k in December, more than analysts’ forecast of 170k, and the unemployment rate ticked down to 3.7%, sending USD/JPY closer to the 146.00 mark on Friday. Despite that, gains proved short-lived after the ISM services PMI report surprisingly headed lower, indicating careful hiring, persisting economic concerns, and fewer new orders. Rate cut expectations bounced back to 60% for the Fed March meeting in the aftermath, with the focus turning to the next CPI inflation report this week.

Consumer prices are expected to have grown negligibly faster by 3.2% y/y in December from 3.1% in the previous month, though the core measure, which excludes food and energy, is forecast to ease to 3.8% y/y from 4.0%. If that proves to be the case, investors could remain confident that a rate reduction could come as soon as in March, adding more pressure to USD/JPY.

Technically, the pair was capped by the 38.2% Fibonacci retracement of the latest downfall at 144.60 at the time of writing, while the 50% Fibonacci mark of 146.00 and the 50-day simple moving average (SMA) could prevent any improvement, too. Hence, although there are some bullish signs in the market, traders might wait for a decisive rally above those boundaries to drive the price higher, especially after Friday’s red doji candlestick.

UK GDP growth -->  GBP/USD

In the UK, monthly GDP growth figures for November will provide an update for investors as to the state of the economy on Friday at 07:00 GMT. Final S&P Global services PMI figures revealed a stronger performance in December, creating optimism that a recession has probably been narrowly avoided despite a cloudy outlook for the 2024 election year.

According to analysts, economic activity is expected to have strengthened by 0.2% m/m after a 0.3% contraction in October, but it has probably displayed a feeble expansion of 0.1% compared to the same period a year ago. Likewise, the three-month average could tick down to -0.1%, suggesting that the fourth quarter has been another struggle.

In charts, the flattening short-term uptrend in GBP/USD is reducing hopes for a positive continuation, but the pair has not exited the bullish area yet. An acceleration above 1.2820 is needed to shift the attention back to the upside. Otherwise, a downside correction below 1.2615 could resume selling appetite, especially if the downfall extends below the 50- and 200-day SMAs.

Australia inflation, China trade data --> AUD/USD

AUD/USD might be worth keeping a close eye on this week as Australian monthly CPI inflation readings and China’s trade figures could provide fresh direction to the market. The pair managed to stay within the bullish channel on Friday, closing at 0.6711. Nevertheless, downside risks have not entirely faded out.

On Wednesday, a measure of core inflation (weighted CPI) is expected to ease to 4.4% y/y from 4.9%. Although Australia’s inflation is still elevated compared to the US's and the Eurozone's OR compared to that in the US and Eurozone, a couple of surveys have raised confidence that price pressures have further cooled. If forecasts are right, the odds for a rate cut as soon as in May could bounce up ahead of February’s RBA policy meeting.

The aussie could also become sensitive to Chinese trade data on Friday as new tensions in the technology sector and on the political front make headlines again.