MNI US MARKETS ANALYSIS - Gold at Fresh Cycle Highs

US TSYS: Paring Midweek Gains

• Volumes a little below avg (TYH3 <270k) ahead light data: Existing Home Sales (4.09M, 3.95M); MoM (-7.7%, -3.4%) at 1000ET. TYH3 futures 10.5 at 115-10 well above first technical support at 114-16, Jan 18 low.
• Focus on final (scheduled) Fed speakers ahead policy blackout at midnight:
  • Philly Fed Harker eco-outlook at NJ bank conf, text, Q&A at 0900ET
  • Fed Gov Waller, speaks at Council on Foreign relations, 1300ET
• Fed funds implied hike for Feb'23 at 26.8bp, Mar'23 cumulative 45.6bp to 4.788%, May'23 56.1bp to 4.893%, terminal at 4.900% in Jun'23.

FOREX: Markets Backtrack Thursday Moves, Putting JPY on Backfoot

• After the sharp mid-week recovery off the post-BoJ decision lows, JPY is the weakest currency across G10 Friday, helping USD/JPY re-top Y129.50. This tips the pair above the 50% retracement of the post-BoJ range, leaving Y130.05 as the next upside level.
• AUD, NZD are also bouncing, among the best performers in G10 after sliding throughout Thursday hours. AUD/USD trades in close proximity to a sizeable option expiry rolling off at today's cut: A$3.8bln rolling off at $0.6900.
• EUR/CHF saw a flurry of buying interest alongside the European open, putting the cross closer to parity and narrowing the gap with the Monday highs at 1.0054. SNB's Jordan spoke for a second consecutive day at the WEF in Davos, but provided few new details on policy.
• Canadian retail sales and US existing home sales are the data highlights Friday, with the speaker highlights including Fed's Harker and Waller - both of which are voters on the FOMC this year.

FX OPTIONS: Expiries for Jan20 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0500(E611mln), $1.0650(E1.2bln), $1.0800(E1.0bln), $1.0900(E933mln), $1.0950(E500mln), $1.1000-05(E1.4bln)
• USD/JPY: Y125.00($708mln), Y129.75-00(E1.1bln), Y130.00($1.1bln), Y133.95-05($1.3bln)
• AUD/USD: $0.6900(A$3.7bln), $0.7200(A$2.3bln)
• USD/CAD: C$1.3450($828mln), C$1.3500($1.5bln)
• USD/CNY: Cny6.8000($2.6bln)

BONDS: BTPs Lead Core FI Lower

• Core fixed income has moved lower this morning, led by EGBs with BTPs in particular under pressure this morning (10-year BTP yields up 13.6bp this morning).
• The moves in Bund futures have seen them move back to around 138.50 (down around 100 ticks on the day), almost fully reversing Tuesday's rally.
• 2-year yields are up around 4bp across Schatz, USTs and gilts.
• Looking ahead, we have US existing home sales data and will hear from the Fed's Harker and Waller.
• TY1 futures are down -0-10 today at 115-10+ with 10y UST yields up 4.4bp at 3.437% and 2y yields up 4.2bp at 4.169%.
• Bund futures are down -0.99 today at 138.56 with 10y Bund yields up 8.0bp at 2.138% and Schatz yields up 4.1bp at 2.554%.
• Gilt futures are down -0.42 today at 104.45 with 10y yields up 6.9bp at 3.341% and 2y yields up 4.0bp at 3.464%.
• BTP futures are down -1.25 today at 116.28 with 10y yields up 13.6bp at 3.905% and 2y yields up 9.1bp at 2.893%.

EQUITIES: Eurostoxx Futures Trade Lower Thursday, Signalling Potential Corrective Pullback

EUROSTOXX 50 futures traded lower Thursday. The broader trend outlook remains bullish, however, the cycle is overbought and this warns of the potential for a short-term pullback. A move lower would allow the overbought reading to unwind. A continuation lower would open 4038.20, the 20-day EMA and a key near-term support. On the upside, key short-term resistance and the bull trigger has been defined at 4206.00, the Jan 18 high. S&P E-Minis traded lower again Thursday. A key short-term resistance has been defined at 4035.25, the Jan 17 high and price has traded through support at 3930.77, the 50-day EMA. A clear break would highlight a potential bearish reversal and expose 3891.50, the Jan 10 low. On the upside, the contract needs to clear 4035.25 to cancel any developing bearish threat and confirm a resumption of recent bullish activity.

COMMODITIES: Trend Conditions in Gold Bullish After Trading to Fresh Cycle High Thursday

WTI futures traded higher Wednesday but price pulled back from the $82.38 session high. This highlights a potential bearish threat. Attention is on support at $77.75, the 20-day EMA. A break of this average would highlight a stronger bear threat and expose support at $72.46, the Jan 5 low. On the upside, key short-term resistance has been defined at $82.38 where a break would reinstate the recent bullish theme. Trend conditions in Gold remain bullish and the yellow metal traded to a fresh cycle high on Thursday. This confirms an extension on the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull mode position - reflecting the uptrend. The focus is on $1963.0 next, a Fibonacci retracement. Support to watch lies at $1867.4, the 20-day EMA. Short-term pullbacks are considered corrective.