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Daily Pivots: (S1) 1.5437; (P) 1.5543; (R1) 1.5605; More...

Intraday bias in EUR/AUD remains neutral for the moment. As long as 1.5271 support holds, further rally is expected. On the upside, firm break of 1.5747 will resume larger rally from 1.4281. Next target is 61.8% projection of 1.4281 to 1.5704 from 1.5271 at 1.6150.

In the bigger picture, as long as 1.5271 support holds, rise from 1.4281 medium term bottom is expected to continue to 1.6434 key resistance next. However, firm break of 1.5271 will argue that such rebound has completed, and keep medium term outlook neutral at best. But in this case, more range trading should be seen above 1.4281 low first.

Daily Pivots: (S1) 0.9816; (P) 0.9853; (R1) 0.9880; More....

Intraday bias in EUR/CHF remains neutral first and consolidation pattern from 0.9953 could extend further. On the upside, firm break of 0.9953 resistance will resume larger rally from 0.9407 to 1.0072 fibonacci level. However, break of 0.9720 will extend the decline from 0.9953 to 61.8% retracement of 0.8407 to 0.9953 at 0.9616.

In the bigger picture, price actions from 0.9407 medium term bottom are currently seen as a corrective pattern, rather than trend reversal. Down trend resumption through 0.9407 is mildly favored at a later stage. This will remain the favored case now, as long 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds.

Bank of England Preview - Back to 50bp as BoE Nears End of Hiking Cycle

• We expect the Bank of England (BoE) to hike the Bank Rate by 50bp on Thursday.
• We still expect the Bank Rate to peak at 3.75% in February 2023.
• A slightly dovish BoE and a hawkish ECB should send EUR/GBP higher during the day.

BoE call. We expect the Bank of England (BoE) to hike the Bank Rate by 50bp on 16 December bringing it to 3.50%. Markets are currently pricing slightly above 50bp for the meeting next week (55bp). As a result of a more balanced fiscal policy, market conditions have cooled off and broadly returned to conditions we saw prior to the mini-budget. We thus expect a return to slower hiking pace.

We expect the Bank to return to its more dovish stance as recession risks are becoming more pronounced and the growth outlook is increasingly becoming weaker. This was highlighted by the MPC's latest projections, which described a very challenging outlook for the UK economy, where it now expects the UK "to be in a recession for a prolonged period." The BoE's November Decision Maker Panel also shows that broad inflation expectations dropped with participants expecting CPI inflation to be 7.2% one-year ahead, down from 7.6% in the October survey. Additionally, the BoE tends to ear on the side of caution, why we expect the return to a 50bp hike.

We keep the rest of our forecast unchanged, expecting a final 25bp hike in February 2023, which is fewer hikes than priced in markets (currently 160bp until August 2023). If inflation pressures persist and/or the economy surprises on the upside we see a case for an additional rate hike in March 2023.

We expect no news regarding QT-communication and expect the BoE to continue reducing the government bond holdings by a total of 80bn by November 2023.

Growth outlook. The UK economy held up during the first half of 2022, but the Q3 GDP figure marked in our view an official start of the recession as the economy is likely to weaken further. We expect the economy to contract for four consecutive quarters and growth not to return until the Q4 2023. We now see the economy contracting by 0.7% in 2023 followed by a modest 0.8% growth in 2024. The labour market remains tight with high wage pressure although we are seeing the first signs of easing as unfilled vacancies have returned to pre-pandemic levels. On fiscal policy, the increased focus from the new government led by PM Rishi Sunak on closing the fiscal gap was broadly confirmed by the governments Autumn Statement on 17 November.

FX. In our base case of a 50bp hike, we expect EUR/GBP to move slightly higher on announcement. In its statement we expect the BoE to highlight the dire state of the UK economy lending support to our call that market pricing is too aggressive currently pricing a peak in the Bank Rate at 4.60% by August 2023. Combined with the expectation of a hawkish 50bp hike by the ECB later in the afternoon, we expect EUR/GBP to move further higher during the afternoon, ending the day ½ figure higher

Daily Pivots: (S1) 1.0497; (P) 1.0543; (R1) 1.0579; More...

Range trading continues in EUR/USD and intraday bias stays neutral. On the downside, break of 1.0442 support will indicate rejection by 1.0609 fibonacci level. Bias will be back on the downside for 1.0222 support and below. However, firm break of 1.0594/0609 resistance zone will carry larger bullish implication. Next near term target is 61.8% projection of 0.9729 to 1.0481 from 1.0222 at 1.0687, and then 100% projection at 1.0974.

In the bigger picture, focus is now on 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Rejection by 1.0609 will suggest that price actions from 0.9534 medium term bottom are developing into a corrective pattern. Thus, medium bearishness is retained for another fall through 0.9534 at a later stage. However, sustained break of 1.0609 will raise the chance of trend reversal and target 61.8% retracement at 1.1273.

Daily Pivots: (S1) 1.2211; (P) 1.2267; (R1) 1.2325; More...

Intraday bias in GBP/USD stays neutral and further rally is expected as long as 1.1898 support holds. Break of 1.2343 will resume larger rally from 1.0351 and target 1.2759 medium term fibonacci level next. However, firm break of 1.1898 support will confirm short term topping and turn bias back to the downside.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Daily Pivots: (S1) 0.9313; (P) 0.9347; (R1) 0.9382; More...

Intraday bias in USD/CHF stays mildly on the downside with focus on 0.9287 fibonacci level this week. Decisive break there will target 0.9149 structural support next. On the upside, though, break of 0.9454 resistance will now indicate short term bottoming. Intraday bias will be turned back to the upside for 0.9545 resistance and above.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 might be a medium term down trend itself. Sustained break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 55 day EMA (now at 0.9621) holds.

Daily Pivots: (S1) 135.83; (P) 136.37; (R1) 137.13; More...

Intraday bias in USD/JPY stays neutral for the moment. On the upside, break of 137.84 resistance will revive the case of short term bottoming at 133.61, and turn bias back to the upside for 55 day EMA (now at 140.89). However, break of 133.61 will resume the decline form 151.93 through 133.07 fibonacci level.

In the bigger picture, price actions from 151.93 medium term could be just a corrective pattern to up trend from 102.58 (2021 low). Strong support from 38.2% retracement of 102.58 to 151.93 at 133.07 and 55 week EMA (now at 131.71) will set the range for such corrective pattern. However, sustained break of 55 week EMA will pave the way to 61.8% retracement at 121.43.

Daily Pivots: (S1) 0.6757; (P) 0.6786; (R1) 0.6824; More...

Intraday bias in AUD/USD remains neutral as consolidation from 0.6850 is extending. On the downside, break of 0.6641 should confirm rejection by 0.6871 resistance. Intraday bias will be back on the downside for 0.6521 resistance turned support. However, sustained break of 0.6871 will extend the rise from 0.6169 to 55 week EMA at 0.6912.

In the bigger picture, it's still unsure if price actions from 0.6169 medium term bottom are developing into a corrective pattern or trend rejection. Rejection by 38.2% retracement of 0.8006 to 0.6169 at 0.6871 will maintain medium term bearishness for another fall through 0.6169 at a later stage. However, firm break of 0.6871, and sustained trading above 55 week EMA (now at 0.6912) will raise the chance of the start of a bullish up trend.

Daily Pivots: (S1) 1.3579; (P) 1.3635; (R1) 1.3701; More....

Intraday bias in USD/CAD remains neutral as consolidation from 1.3699 is still in progress. The favored case is still that correction from 1.3976 has completed at 1.3224. Above 1.3699 will resume the rebound from there to 1.3807 resistance, and then retesting 1.3976 high. However, break of 1.3383 support will dampen this case and bring retest of 1.3224 low instead.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Dollar rises mildly in Asian session as investors turned cautious. Euro is also firmer but Sterling is on the softer side together with Aussie and Kiwi. Market focus are on the four central bank meetings this week, and lots of important indicators. Among them, Fed's new economic projections and dot plot would likely be most market moving.

GBP/CHF could be a mover this week with BoE and SNB featured. Technically, rebound from 1.1047 is seen as the second leg of the consolidation pattern from 1.1574. Upside momentum has been diminishing just ahead of this resistance, as seen in 4 hour MACD. For now, break of 1.1574 is not anticipated in case of another rise. Instead, break of 1.1326 support should indicate the start of the third leg, and target 1.1047 again. But downside should be contained there to complete the pattern.

In Asia, at the time of writing, Nikkei is down -0.27%. Hong Kong HSI is down -1.88%. China Shanghai SSE is down -0.63%. Singapore Strait Times is up 0.04%. Japan 10-year JGB yield is up 0.0022 at 0.258.

Japan PPI slowed to 9.3% yoy in Nov, global commodity prices easing

Japan corporate goods price index slowed from 9.4% yoy to 9.3% yoy in November, above expectation of 8.9% yoy. The index, at 118.5, was a record high. Yen-based import price index slowed notably from 42.3% yoy to 28.2% yoy.

"Companies were passing on rising raw material costs for a broad range of goods. But some goods saw the impact of recent easing of global commodity prices," a BOJ official told a briefing.

Also from Japan, MoF's Business Survey Index for all large industries rose from 0.4 to 0.7 in Q4. BSI large manufacturing, however, dropped from 1.7 to -3.6. BSI large non-manufacturing improved form -0.2 to 2.7. BSI medium all industries rose from -2.2 to 4.7. BSI small all industries rose from -15.9 to -6.0.

Fed, ECB, BoE and SNB to hike 50bps

Four central banks are expected to raise interest rate this week. Fed is widely expected to slow down the pace of tightening, and hike interest rate by 50bps to 4.25-4.50%. Tightening is certainly not finished and the FOMC statement will make it clear. The main focus is on the new economic projections where three questions would be answered: The terminal rate, the time to get there, and the time to stay there. Currently, markets are expecting the federal funds are to peak at 5.00-5.52% in Q2 next year.

ECB is also expected to slow down and deliver a 50bps rate hike to 2.50%. There are expectations that ECB's main refinancing rate will peak at 3.00% in Q1. But the central bank reiterate its meeting-by-meeting approach, and reveal little about the path forward, except the direction. Another focus is any announcement regarding quantitative tightening.

BoE is also expected to slow the pace of tightening and hike by 50bps to 3.50%. Opinions on the terminal rate for BoE vary, and it could very much depend on the depth of the recession. Meanwhile, some attention will be on the voting. Last month, only seven MPC members voted for the 75bps hike. Swati Dhingra voted for 50bps, while Silvana Tenreyro voted for 25bps.

SNB is also expected to raise the policy rate by 50bps to 1.00%. With inflation much tamer than other major regions, SNB's terminal rate will certainly be much lower. A focus in on whether the central bank would indicate how close it is to the end of the cycle. Also, some attention would be on its rhetorics on exchange rates.

The week will also feature a large number of important economic data, before people head off to holidays. Here are some highlights for the week:

• Monday: Japan BSI manufacturing index, PPI, machine tools orders; UK GDP, production, trade balance, NIESR GDP estimate.
• Tuesday: Australia Westpac consumer sentiment, NAB business confidence; UK employment; Swiss SECO economic forecasts; Germany CPI final, ZEW economic sentiment; US NFIB small business index, CPI.
• Wednesday: New Zealand current account; Japan machine orders, Tankan survey; UK CPI, RPI; Swiss PPI; Eurozone industrial production; Canada manufacturing sales; US FOMC rate decision, import prices.
• Thursday: New Zealand GDP; Japan trade balance, tertiary industry index; Australia employment; China industrial production, retail sales, fixed asset investment; SNB rate decision; BoE rate decision; ECB rate decision; Canada housing starts; US retail sales, Philly Fed survey, jobless claims, industrial production, business inventories.
• Friday: New Zealand BusinessNZ manufacturing index; Australia PMIs; Japan PMI manufacturing; UK retail sales, PMIs; Eurozone PMIs, CPI final, trade balance; Canada wholesale sales; US PMIs.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3579; (P) 1.3635; (R1) 1.3701; More....

Intraday bias in USD/CAD remains neutral as consolidation from 1.3699 is still in progress. The favored case is still that correction from 1.3976 has completed at 1.3224. Above 1.3699 will resume the rebound from there to 1.3807 resistance, and then retesting 1.3976 high. However, break of 1.3383 support will dampen this case and bring retest of 1.3224 low instead.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Economic Indicators Update