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• EURCHF trades in a rather tight range
• The medium-term bearish trend remains valid
• Momentum indicators support the bearish trend

EURCHF is trading sideways today, testing once again the resistance set by the May 27, 2024 downward slopping trendline. EURCHF quickly rebounded from the November 22 low of 0.9204, but the bulls have failed to record another sizeable upleg. As a result, this pair has been trading in a very tight range over the past few sessions, despite the eurozone newsflow being extremely negative, both in terms of economic data and political developments.

This reduced volatility is reflected in the momentum indicators. In more detail, the Average Directional Movement Index (ADX) is moving sideways above its midpoint, and thus pointing to a weakening bearish trend in EURCHF. Additionally, the RSI continues to aimlessly hover below its midpoint, showing little appetite for a more forceful move lower. More importantly, the stochastic oscillator is preparing to test the support set by its moving average (MA). A bounce higher could reveal a buildup of bullish pressure in EURCHF, while a downwards break could open the door to another downleg in EURCHF.

If the bears remain confident, they could try to keep EURCHF below the May 27, 2024 trendline and then gradually push it towards the December 29, 2023 low at 0.9253. If successful, they could have the chance to retest the support set by the August 5, 2024 low at 0.9209 and record a new all-time low.

On the flip side, the bulls are craving a decent rally with the first obstacle being the May 27, 2024 trendline. If they manage to overcome both this trendline and the 50-day simple moving average (SMA) positioned at 0.9367, the next strong resistance could come at the 0.9430-0.9416 area. This region is populated by the 100-day SMA and the September 26, 2022 low, and a move above it could validate the bullish breakout.

To sum up, despite the negative eurozone newsflow, EURCHF bulls remain confident about staging an upleg, provided they manage to overcome a key trendline.

Markets

A typical in-between trading day ahead of major eco releases and central bank speeches got shaken up by news coming from South Korea. SK president Yoon declared an emergency martial law during a televised address. Yoon of the conservative People Power Party accuses the opposition – which is in control of the 300-member parliament since 2022 – of paralyzing the government with impeachment moves and sympathizing with North Korea. Yoon vowed to “eradicate pro-North Korean forces and protect the constitutional order.” The surprise decision came amid a near-constant political standoff with the opposition, amongst others over next year’s budget bill. It’s the first time a president declared martial law since the military dictatorship ended in the late 1980s. As South Korean politics take a turn for the worse, so does the currency. USD/KRW surges to 1422, nearing the post-pandemic and 13-yr highs of <1450. US Treasuries reversed earlier minor losses. Safe haven flows push yields between 0.7-2.9 bps lower, the front outperforming. Gold eked out some gains as well as the news broke out, rising to $2653/ounce. Bunds underperform Treasuries, holding on to most of the earlier losses. Yields rise between 0.6 and 3.7 bps, underperforming against swap as well. The dust settled for now for French OATs ahead of tomorrow’s vote on a motion of no confidence. French yields lose a few bps at all tenors but the short-term ones. Spreads vs Bunds and swap ease as well after hitting new 12-year highs yesterday. There are only little traces of the breaking news on currency markets outside SK. The Swiss franc rose marginally. With EUR/CHF at key levels around 0.93, markets are wary to push the CHF even further and provoke the Swiss National Bank into interventions. Yen gains are a bit bigger, especially against an overall weakish US dollar. USD/JPY drops to 148.8. US equity futures turned red with the tech-heavy Nasdaq leading the way down. Calm already returned by the cash open though, with major indices more or less trading flat.

News & Views

Swiss headline inflation declined 0.1% M/M, slightly raising the Y/Y measure from 0.6% to 0.7%, the Swiss Statistical Office reported. Core inflation (ex fresh and seasonal products and energy & fuel) was unchanged on the month. The Y/Y figure also rose slightly to 0.9% from 0.8%. The 0.1% decrease compared with the previous month is due to several factors including lower prices for hotels and international package holidays. Prices also decreased for new cars and fruiting vegetables. Housing rentals and air transport recorded a price increase. The Swiss National Bank sees price stability as inflation holding with the 0.0%-2.0% target range. Markets after today’s CPI release see a sightly higher chance on a 50 bps rate cut at next week’s meeting compared to 25 bps cut as was the case at the previous three meetings (policy rate currently 1.0%). Poor growth domestically and at some of its major trading partners, inflation holding in the lower part of the SNB target range and a strong franc recently caused the SNB head Martin Schlegel not to exclude the use of negative interest rates and FX interventions if necessary to maintain price stability. The Swiss Franc didn’t react much today with EUR/CHF holding near 0.93.

Turkish Statistical Office data showed that inflation in the country declined less than hope for in November. Monthly headline inflation rose 2.24% M/M and 47.09% Y/Y (was 2.88% M/M and 48.58 Y/Y in October) but consensus expected a more pronounced decline to 46.6%. Core inflation showed a similar dynamics easing from 47.75% to 47.13%. Food and non-alcoholic beverages showed the biggest rise (5.1% M/M). In its November 28 policy statement, the central bank (CBRT) guided that ‘The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range. Accordingly, the level of the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path, taking into account both realized and expected inflation.’ This was seen as potentially opening the door for a December rate cut in case of an ongoing favourable inflation developments. However as food prices, which are basically out of reach of monetary policy, are the main driver for the ‘upward’ surprise, the debate on a guarded rate cut at the December 26 policy meeting probably remains open. The lira today declined slightly further against the dollar trading at a record low USD/TRY 34.75.

Daily Pivots: (S1) 148.86; (P) 149.81; (R1) 150.53; More...

Intraday bias in USD/JPY stays on the downside as fall from 156.74 continues today. Current development suggests that whole rise from 139.57 could have finished at 156.74 already. Deeper fall should be seen to 61.8% retracement of 139.57 to 156.74 at 146.12 next. On the upside, above 150.74 minor resistance will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.0448; (P) 1.0511; (R1) 1.0560; More...

Range trading continues in EUR/USD and intraday bias remains neutral. Outlook stays bearish with 1.0609 resistance intact. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication. Nevertheless, firm break of 1.0609 will confirm short term bottoming, and turn bias back to the upside for 1.0760 support turned resistance first.

In the bigger picture, immediate focus is now on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

Daily Pivots: (S1) 1.2599; (P) 1.2671; (R1) 1.2724; More...

Intraday bias in GBP/USD remains neutral for the moment. While another rise cannot be ruled out, outlook will stay bearish as long as 55 D EMA (now at 1.2858) holds. Below 1.2615 minor support will turn intraday bias back to the downside for retesting 1.2486. Break there will resume whole fall from 1.3433.

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2867) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

Daily Pivots: (S1) 0.8814; (P) 0.8852; (R1) 0.8903; More…

USD/CHF dips notably today but stays in established range below 0.8956. Intraday bias remains neutral at this point. With 0.8800 support intact, further rally is still in favor. On the upside, break of 0.8956 will resume the rally from 0.8374, and target 0.9223 key resistance next. However, firm break of 0.8800 will confirm short term topping and turn bias back to the downside for 55 D EMA (now at 0.8731).

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern. Rise from 0.8374 is seen as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

Swiss Franc strengthened broadly after inflation data for November indicated a modest uptick, stabilizing after months of decline. Although the annual CPI reading missed market expectations, the stabilization reduces immediate pressure on SNB to implement a significant 50bps rate cut at its upcoming policy meeting this month.

However, uncertainty still lingers as SNB faces the challenge of balancing its decision against ECB's rate cut on the same day. A 50bps cut from ECB could drive upward pressure on the Franc, heightening deflationary risks for Switzerland and complicating SNB’s policy considerations.

Meanwhile, Dollar and Yen, which have led currency markets this week, are retracing some gains. Traders are awaiting US JOLTs job openings data later today for potential short-term volatility. However, the focus remains on Friday’s non-farm payrolls report, a high-stakes release that could set the tone for broader market movements across stocks, bonds, and currencies.

For the week so far, Yen is now the strongest performer, trailed closely by Dollar and and then Loonie. Sterling has displaced Euro as weakest currency, with Kiwi following in third-worst position. Swiss Franc and Aussie are holding middle positions.

Australia’s Q3 GDP report in the upcoming Asia session will be a focal point for the market. Growth is expected to accelerate to 0.5% qoq. A robust reading could bolster the case for RBA to hold off on rate cuts, supporting the Aussie in the process.

Technically, AUD/USD is staying in consolidations above 0.6433. Near term outlook remains bearish with 0.6549 resistance intact. Firm break of 0.6433 will resume the whole decline from 0.6941 to 0.6438 support next. However, firm break of 0.6549 will confirm short term bottoming, and bring stronger rebound back to 55 D EMA (now at 0.6597) and possibly above.

In Europe, at the time of writing, FTSE is up 0.89%. DAX is up 0.29%. CAC is up 0.53%. UK 10-year yield is down -0.0118 at 4.204. Germany 10-year yield is up 0.0009 at 2.037. Earlier in Asia, Nikkei rose 1.91%. Hong Kong HSI rose 1.00%. China Shanghai SSE rose 0.44%. Singapore Strait Times rose 0.93%. Japan 10-year JGB yield rose 0.0036 to 1.081.

ECB’s Cipollone: US tariffs likely to weaken both Eurozone growth and inflation

ECB Executive Board Member Piero Cipollone highlighted the potential economic implications of US tariffs on the Eurozone, emphasizing their dual impact on growth and inflation.

Cipollone noted that tariffs would weaken the Eurozone economy by reducing consumption, thereby lowering pressure on prices.

He pointed out that Chinese producers, excluded from the US market, might redirect their goods to Europe, potentially offering them at discounted prices.

On energy, Cipollone pointed out that while oil imports could become more expensive due to a stronger Dollar, US policies aimed at supporting domestic energy production could increase supply, offsetting price pressures.

"All this put together makes me think that we will have a reduction in growth but also a reduction in inflation," Cipollone concluded.

Swiss CPI stabilizes in Nov, but remains subdued at 0.7% yoy

Switzerland’s inflation data for November showed CPI falling -0.1% mom, matching expectations and mirroring October’s pace. Core CPI, which excludes volatile items like fresh and seasonal products, energy, and fuel, was flat on a monthly basis. Price movements showed domestic products falling -0.1% mom, while imported product prices dropped -0.4% mom.

On an annual basis, CPI edged up slightly from 0.6% yoy to 0.7% yoy, stabilizing after a downward trend since May, but falling short of market expectations of 0.8% yoy. Core CPI also rose modestly from 0.8% yoy to 0.9% yoy. Domestic product prices saw a slight decline from 1.8% yoy to 1.7% yoy, while imported product prices recovered somewhat, rising from -3.1% yoy to -2.3% yoy.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8814; (P) 0.8852; (R1) 0.8903; More…

USD/CHF dips notably today but stays in established range below 0.8956. Intraday bias remains neutral at this point. With 0.8800 support intact, further rally is still in favor. On the upside, break of 0.8956 will resume the rally from 0.8374, and target 0.9223 key resistance next. However, firm break of 0.8800 will confirm short term topping and turn bias back to the downside for 55 D EMA (now at 0.8731).

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern. Rise from 0.8374 is seen as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

• Oil prices are currently stable, but OPEC+ is likely to extend oil output cuts into Q1 2025 due to weaker global demand.
• China’s oil demand may have peaked due to a decline in transport fuel demand and the rise of electric vehicles.
• Upcoming API and EIA oil inventory data releases will provide insights into U.S. crude supply levels and influence oil prices.

Oil prices are holding steady near the $72.35 support level, staying in a 6-day period of little movement. OPEC+ meets on Thursday, and there’s a higher chance they will extend their oil output cuts to Q1 2025.

OPEC + to Consider Oil Cut Rollover

OPEC+, which produces about half of the world’s oil, has been planning to slowly increase production until 2025. But weaker global demand and more oil being produced outside the group have created challenges and pushed prices down.

One source told Reuters that the group will likely extend output cuts into the first quarter, though all sources chose to stay anonymous.

Oil prices have remained pressurized for large parts of this year with support arriving as a result of geopolitical concerns rather than demand optimism.

OPEC+ is limiting oil production by 5.86 million barrels a day, which is about 5.7% of global demand, as part of steps agreed on since 2022 to keep the market stable. They had planned a small increase of 180,000 barrels a day in January, but this plan has been delayed because oil prices have dropped.

The question is how much longer will this go on given that the Oil demand outlook for 2025 does not look that appealing at present. With the US likely to increase output under a Trump Presidency, 2025 looks as if it will be an intriguing one.

Has Chinese Oil Demand Peaked?

According to an IEA China Researcher, Oil product demand excluding petrochemical feedstocks peaked in 2023. Crude imports are also projected to peak next year as concerns have grown this year largely on the back of poor performance by the real estate sector.

Another reason cited is that a decline in transport fuel demand may add to oil demand woes. There is concern that these developments could end the country’s decade-long run as the dominant driver of expanding oil consumption globally.

The growing adoption of EV vehicles in China has also accelerated the concerns and is likely to lead to demand plateauing next year. The rise in EV adoption has led to a situation where the petrochemical sector will be the main sector to underpin demand moving forward.

All in all consensus appears to be growing that Chinese crude imports have or will peak in the next year or so. Although Jet Fuel demand is expected to rise it is not enough to offset the declines in other areas.

Crude Oil Net Imports in MLN T (China)

Source: LSEG

Oil Inventory Data Ahead

The upcoming API and EIA oil inventory data releases on December 3 and 4, will provide critical insights into U.S. crude supply levels, helping traders and analysts gauge the balance between supply and demand.

If the data reveals a larger-than-expected inventory build, it may signal weaker demand or oversupply, likely putting downward pressure on oil prices. Conversely, a substantial draw in inventories could highlight tighter supply conditions and potentially trigger a price rally.

Either way the bigger question on my mind is whether either move will be sustainable.

Technical Analysis

From a technical perspective, Oil has been rangebound for the last six trading days as bulls try to push price toward the recent swing high at 75.00.

At the time of writing Oil is up around 1.44% on the day and this could in part be down to rumors around a 3 month extension by OPEC + to production cuts. However, this delay was largely expected and unless we get a daily candle close above the 73.00 handle there is still a possibility of intraday pullback.

This is just based on recent history with Crude prices testing the 73.00 handle over the last two trading days being met by significant bearish pressure. Will today prove to be different?

Immediate resistance rests around the 75.00 handle before the 76.35 resistance zone comes into focus where we also have the 100-day MA.

Alternatively, a push lower from current prices will have to navigate support around the 72.38 handle, before the 71.00 handle becomes an area of focus.

Brent Crude Oil Daily Chart, December 3, 2024

Source: TradingView (click to enlarge)

Support

• 72.38
• 71.00
• 70.00 (key area of confluence)

Resistance

• 75.00
• 76.35
• 76.83

The Swiss franc has edged upwards on Tuesday. In the European session, USD/CHF is trading at 0.8846, down 0.21% on the day.

Is Switzerland facing deflation? Swiss CPI declined by 0.1% m/m in November, unchanged from October and in line with the market estimate. This marks the fourth successive month that inflation has failed to show a gain. On an annual basis, inflation climbed 0.7%, up from 0.6% in October but below of the market estimate of 0.8%.

SNB eyeing 50-bp cut

The inflation report comes one week before the Swiss National Bank’s meeting on Dec. 12 . The markets have priced an oversized 50-bp cut at 71%, with a 25-bp at 29%. Today’s inflation report indicates that risks are now on the lower side and the central bank is concerned about inflation moving to the lower band of the 0% to 2% target band.

The central bank has been aggressive in its easing cycle, lowering rates by 25 bp three times this year. The cash rate is currently at 1%, its lowest level in two years. The SNB is poised to cut rates next week and is likely to continue into next year.

The Federal Reserve meets on Dec. 18, its final meeting of the year. The Fed trimmed rates by 25 basis points last month and is expected to do the same at the December meeting. Fed Governor Christopher Waller said on Monday that he is leaning toward at cut in December but his decision could change if inflation surprised on the upside. The US releases November CPI one week prior to the rate announcement and the release will be a key factor as to whether the Fed cuts or maintains interest rates.

USD/CHF Technical

• USD/CHF is testing support at 0.8852. Below, there is support at 0.8814
• 0.8903 and 0.8941 are the next resistance lines

• GER40 index rises vertically, unlocks 20,000 number
• Short-term bias is positive, but caution is necessary

The German 40 index surged into uncharted territory, finally breaking above the 20,000 number on Tuesday despite the Eurozone’s biggest economy facing a gloomy economic and political outlook.

After a strong rally, the index could face a pullback, especially as the RSI and the stochastic oscillator fluctuate near their overbought levels. Resistance may appear around 20,220, where the 161.8% Fibonacci extension of the October-November downfall lies. If positive momentum holds, the index could target the upper band of the short-term bullish channel seen near 20,600.

If traders take profits, pushing the index below 19,900, support could emerge near the previous high of 19,678, with further backup from the 20- and 50-day moving averages near 19,380. The tentative support line at 19,135 could also provide protection, postponing a slump toward 18,650.

In summary, the German 40 index is in festive mode, aiming to extend its record rally within the 20,000 area. Given the overbought signals, though, resistance could be around the corner at 20,220.