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NASDAQ closed at new 2022 low, but a turnaround soon?

    By
    ActionForex
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    NASDAQ closed at new 2022 low at 10213.28 overnight as investor sentiment turned sour in thin holiday trading. Technically, it’s still staying above intraday low at 10088.82, but a break of that level should be seen soon, probably 10000 handle too.

    Technically, the key level lies in 9660/89 cluster projection level (61.8% projection of 16212.22 to 10565.13 from 13181.08 at 9689.96, 61.8% projection of 13181.08 to 10088.82 from 11571.64 at 9660.62). Strong support from this cluster level in January could set up the markets for a trend reversal attempt in the first half of 2023. But sustained break there would set up down trend extension for the upcoming period.

    We’ll soon find out whether a turn in the market is around the corner.

    WTI oil down as China boost fades

      By
      ActionForex
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      Oil prices closed lower overnight as the near term rebound appeared to be fading. The optimism over a surge in demand in China was replaced by concerns over infections in the country, as well as its outbound tourists. A regional councillor in Italy confirmed that half of passengers on China flight to Lombardy were tested COVID positive. US also announced to require travelers from China, including Hong Kong, to show negative Covid-19 test result before flights.

      WTI crude oil’s rebound from 70.34 stalled after hitting 55 day EMA. It’s also kept well inside the medium term falling channel from 124.12. While bullish convergence condition is seen in daily MACD, bearishness is maintained with recent development. Further decline from current level, followed by break of 73.52 support should confirm that the corrective rebound has completed in a three wave structure. Larger down trend should then be ready to resume through 70.34 low, towards next support level at 62.90.

      AUD/JPY extends rebound, hopeful for bounce in Chinese tourists

        By
        ActionForex
        -

        Australian Dollar is among the strongest ones for today, and appeared to be give a lift by China’s resumption of issuing outbound visas from January 8. Australia is among the top 10 destinations with fastest-growing search volume in China after the news, indicating its popularity in Chinese tourists. Tourism operators are hopeful that visitations will rebound strongly, which is 95 below the pre-pandemic levels.

        Japan, India, Italy and South Korea all said they would be imposing tighter COVID-testing requirements on tourists from China, with concerns on the lack of transparency on infections and variants in the country. But there is nothing heard from the Australian government yet.

        AUD/JPY is extending the rebound from 87.00, and it’s now pressing 90.81 key near term support turned resistance. Sustained break there will argue that corrective fall from 99.32 has completed at 87.00, after hitting 100% projection of 99.32 to 90.81 from 95.73 at 87.22. In such case, stronger rise should be seen back to 95.73/99.32 range, as the second leg of the corrective pattern from 99.32.

        US 10-year yield rebounds with USD/JPY

          By
          ActionForex
          -

          US 10-year yield rose notably overnight, ending up 0.109 at 3.860. The rally was believed to be triggered by news that China is further exiting pandemic restrictions and travel controls. The move was seen, on the one hand, as a boost to the global economy. On the other hand, Japan, India, Italy and South Korea all said they would be imposing tighter COVID-testing requirements on tourists from China, with concerns on the lack of transparency on infections and variants in the country.

          Anyways, 10-year yield’s break of 3.798 resistance argues that the slightly deeper than expected corrective fall from 4.333 has completed at 3.402. The range of the corrective pattern should be set between 3.4/4.3. Further rally is now in favor for the near term. But break of 4.333 is not envisaged until further developments.

          USD/JPY’s break of 133.61 support should confirm short term bottoming at 130.55, on bullish convergence condition in 4 hour MACD. With a little help from the rebound in yields, USD/JPY would rise further towards 38.2% retracement of 151.93 to 130.55 at 138.71.

          BoJ Opinions: Expansion of 10-yr yield fluctuations enhances sustainability of YCC

            By
            ActionForex
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            In the Summary of Opinions at BoJ’s December 19-20 meeting, several members noted that Japan is currently in a “critical phase” in achieving 2% inflation target. One noted that “signs of a virtuous cycle have started to be seen” between wages and prices”. This is “evidenced by the overall high levels of corporate profits and moves to increase wages amid tight labor market conditions.”

            But “price stability is not considered to have been achieved”. Thus, it’s appropriate for BoJ to continue with the Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control for as long as necessary, to “firmly support the economy and realize a favorable environment for firms to raise wages.

            Many members noted the “deterioration in the functioning of bond markets”, and “distortion in the price formation of 10-year bonds”. Expansion of the range of 10-year JGB yield fluctuation will address the deterioration and distortion. But it’s “not intended to change the direction of monetary easing”. The expansion will “contribute to enhancing the sustainability of yield curve control”.

            Full Summary of Opinions Here.

            Japan industrial production down -0.1% mom in Nov, output weakening

              By
              ActionForex
              -

              Japan industrial production declined -0.1% mom in November, better than expectation of -0.2% mom. But that’s still the third straight month of contraction, followed -3.2% mom in October and -1.7% mom in September.

              Looking at some details, general machinery output was down -7.9%, production machinery was down -5.7% while auto products was down -0.8%.

              The Ministry of Economy, Trade and Industry downgraded the assessment of industrial production to “weakening”. It expects output to rebound by 2.8% in December, then decrease -0.6% in January.

              ECB de Guindos: There will be further rate hikes until inflation on a path back to target

                By
                ActionForex
                -

                ECB Vice-President Luis de Guindos said in an interview, regarding how high are interest rates going to go, “that is something we will decide meeting by meeting and on the basis of incoming data, given the current high uncertainty.

                “As we announced this month, there will be further, necessary, rate hikes until inflation is on a path back to close to our 2% target,” he added.

                Regarding the economy, de Guindos said Europe is currently in a “very difficult economic situation”, with “high inflation rates… coinciding with an economic slowdown and low growth. With a recession on the horizon, the current high uncertainty makes it all the more difficult for businesses and entrepreneurs to distribute their capital. So, against this backdrop, it is very important to be prudent.”

                Full interview here.

                US goods trade deficit narrowed to USD -83.8B

                  By
                  ActionForex
                  -

                  US goods exports dropped -3.1% mom to USD 168.9B in November. Goods imports dropped -7.6% mom to USD 252.2B. Trade deficit narrowed from USD -98.8B to USD -83.3B, much smaller than expectation of USD -96.9B.

                  Wholesale inventories rose 1.0% mom to USD 933.6B. Retail inventories rose 0.1% mom to USD 738.7B.

                  Full release here.

                  Japan retail sales rose 2.6% yoy in Nov, unemployment rate down to 2.5%

                    By
                    ActionForex
                    -

                    Japan retail sales rose 2.6% yoy in November, below expectation of 3.8% yoy. The growth rate slowed from 4.4% in October and 4.8% in September. Nonetheless, that’s still the ninth straight month of expansion.

                    Released separately, unemployment rate fell from 2.6% to 2.5% in November, better than expectation of 2.6%. The jobs-to-applicants ratio was unchanged from October’s 1.35. This gauge of job availability stayed at the highest level since march 2020.

                     

                    ECB Knot: We are just at the beginning of the second half

                      By
                      ActionForex
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                      ECB Governing Council member Klaas Knot said in an FT interview that in the five monetary policy meetings from now till July, the central bank would deliver “quite a decent pace of tightening”.

                      “The risk of us doing too little is still the bigger risk,” Knot said. “We are just at the beginning of the second half.”

                      By slow the pace from 75bps to 50bps, “we grant ourselves a little bit more time along the way as we tighten into 2023 to evaluate the effects of our tightening,” he added.

                      Knot also said recent economic data indicated that recession in the bloc would be “short and shallow” and the “worst… may already be behind us”.

                      BoJ Kuroda: Japan approaching a critical juncture away from low inflation and growth

                        By
                        ActionForex
                        -

                        BoJ Governor Haruhiko Kuroda said yesterday that widening of the allowed band for 10-year JGB yield was “definitely not a step toward an exit” of ultra loose monetary policy.

                        “The Bank will aim to achieve the price target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under yield curve control,” he added.

                        “Labour market conditions in Japan are projected to tighten further, and firms’ price- and wage-setting behaviour is also likely to change,” Kuroda said. “In this sense, Japan is approaching a critical juncture in breaking out of a prolonged period of low inflation and low growth.”

                        US durable goods orders down -2.1% mom in Nov, ex-transport orders up 0.2% mom

                          By
                          ActionForex
                          -

                          US durable goods orders decreased -2.1% mom to USD 270.6B in November, worse than expectation of -0.7% mom. Ex-transport orders increased 0.2% mom to USD 179.3B, above expectation of 0.1% mom. Ex-defense orders declined -2.6% mom to USD 252.8B. Transportation equipment decreased -6.3% mom to USD 91.3B.

                          Full release here.

                          US PCE prices slowed to 5.5% yoy, core CPI down to 4.7% yoy

                            By
                            ActionForex
                            -

                            US personal income rose 0.4% mom or USD 80.1B in November, above expectation of 0.2% mom. Spending rose 0.1% mom or USD 19.8B, below expectation of 0.2% mom.

                            For the month, PCE price index rose 0.1% mom while core PCE price (excluding food and energy) rose 0.2% mom. Prices for goods decreased -0.4% mom while prices for services increased 0.4% mom. Food prices rose 0.3% mom and energy prices dropped -1.5% mom.

                            From the same month a year ago, PCE price index slowed from 6.1% yoy to 5.5% yoy, above expectation of 5.3% yoy. Core PCE price index slowed form 5.0% yoy to 4.7% yoy, matched expectations. Prices for goods rose 6.1% yoy and prices for services increased 5.2% yoy. Food prices increased 11.2% yoy and energy prices increased 13.6% yoy.

                            Full release here.

                            Canada GDP grew 0.1% mom in Oct, essentially unchanged in Nov

                              By
                              ActionForex
                              -

                              Canada GDP rose 0.1% mom in October, matched expectations. Services-producing industries expanded 0.3% while goods-producing industries contracted -0.7%. 11 of 20 industrial sectors grew.

                              Advance information indicates that real GDP was essentially unchanged in November. Increases in accommodation and food services and wholesale trade were offset by declines in construction as well as mining, quarrying and oil and gas extraction.

                              Full release here.

                              Japan CPI core rose to 3.7% yoy, highest in 40 yrs

                                By
                                ActionForex
                                -

                                Japan CPI core (all item ex fresh food) accelerate further from 3.6% yoy to 3.7% yoy in November, matched expectations. That’s also the highest level in more than 40 years since 1981.

                                CPI core-core (all time ex fresh food and energy), also rose from 2.5% yoy to 2.8% yoy, above expectation of 2.7% yoy. Headline all item CPI ticked up from 3.7% yoy to 3.8% yoy, above expectation of 3.7% yoy.

                                US initial jobless claims rose to 216k, below expectation

                                  By
                                  ActionForex
                                  -

                                  US initial jobless claims rose 2k to 216k in the week ending December 17, below expectation of 220k. Four-week moving average of initial claims dropped -6k to 222k.

                                  Continuing claims dropped -6k to 1672k in the week ending December 10. Four-week moving average of continuing claims rose 30k to 1657k.

                                  Full release here.

                                  ECB de Guindos: 50bps is the new norm for a period of time

                                    By
                                    ActionForex
                                    -

                                    ECB Vice President Luis de Guindos said in an interview with Le Monde, “increases of 50 basis points may become the new norm in the near term”. He added, “we should expect to raise interest rates at this pace for a period of time” and “enter into restrictive territory.”

                                    He expects inflation will be “somewhere around its current level” at 10% “over the course of the next two or three months”. Inflation will then drop to “hover around 7% by middle of the year. As it’s “still clearly above” ECB’s target of 2%, “We have no choice but to act.”

                                    Regarding the economy, he said, “our projections therefore expect the euro area to fall into a mild recession in the last quarter of this year and in the first quarter of 2023, when GDP is expected to contract by 0.1%.”

                                    Full interview here.

                                    AUD/NZD extending corrective rebound

                                      By
                                      ActionForex
                                      -

                                      As risk-on sentiment carried forward to Asian sessions, Aussie is benefiting much more than Kiwi for now. AUD/NZD is extending the rebound from 1.0469 and hit as high as 1.0640 so far.

                                      A short term bottom should be confirmed at 1.0469 with break of the near term channel resistance, on bullish convergence condition in hour MACD. Yet, the rebound should be more of a result of deeply oversold condition, as seen in daily RSI. It’s too early to call for a trend reversal.

                                      While further rise is now mildly in favor, upside should be capped by 55 day EMA (now at 1.0826). Indeed, break of 1.0564 minor support will suggest that the decline from 1.1498 is ready to resume through 1.0469.

                                      WTI oil extends rebound, but down trend still intact

                                        By
                                        ActionForex
                                        -

                                        Oil prices extended the near term rebound this week as winter storm hit the US. Heating demand would be boosted by the arctic blast, offsetting the curbed travel plans. Also, as reported yesterday, US oil inventories unexpected dropped -5.9m barrels in the week ending December 16.

                                        WTI is extending the rebound from 70.34 short term bottom and hit as high as 78.95 so far. While further rise cannot be ruled out, it’s too early to confirm the end of the medium term down trend, not to mention a reversal. There level layers of resistance ahead at 55 day EMA (now at 82.03), 83.82 resistance and then trend line resistance at 85.07.

                                        Another decline will remain in favor for now, at a later stage. Break of 73.52 minor support will likely send WTI through 70.34 low.

                                        US consumer confidence rose to 108.3, reversing consecutive declines

                                          By
                                          ActionForex
                                          -

                                          US Conference Board Consumer Confidence rose from 101.4 to 108.3 in December. Present Situation Index rose from 138.3 to 147.2. Expectations Index rose from 76.7 to 82.4.

                                          “Consumer confidence bounced back in December, reversing consecutive declines in October and November to reach its highest level since April 2022,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

                                          “The Present Situation and Expectations Indexes improved due to consumers’ more favorable view regarding the economy and jobs. Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus. Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further. This shift in consumers’ preference from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes.”

                                          Full release here.

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