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The Canadian dollar softened as November’s inflation reading showed signs of slowing down. On the daily chart, the uptrend remains intact and a bullish MA cross indicates solid support and a potential acceleration to the upside. However, the pair is still grinding the supply area around 1.3700 as the pressure builds up. A breakout would lead to a test of November’s peak at 1.3800, which would be a step closer to a bullish continuation. On the downside, 1.3530 next to the 30-day moving average is the first support.

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.

Daily Pivots: (S1) 159.29; (P) 160.16; (R1) 160.85; More...

Intraday bias in GBP/JPY's is turned neutral for consolidation above 158.57 temporary low. Further decline is expected as long as 162.24. Break of 158.57 will target 161.8% projection of 172.11 to 163.02 from 169.26 at 154.55 next. However, break of 162.24 will turn bias to the upside for stronger rebound.

In the bigger picture, sustained break of 55 week EMA (now at 161.26) will confirm medium term topping at 172.11, on bearish divergence condition in weekly MACD. Fall from 172.11 should be correcting whole up trend from 123.94 (2020 low). Deeper decline should be seen to 38.2% retracement of 123.94 to 172.11 at 153.70 and possibly below. This will now remain the favored case as long as 55 day EMA (now at 166.11) holds.

Daily Pivots: (S1) 139.81; (P) 140.29; (R1) 140.91; More....

Intraday bias in EUR/JPY is turned neutral for consolidation above 138.79 temporary low. But further decline will remain in favor as long as 141.60 minor resistance holds. Firm break of 100% projection of 148.38 to 140.75 from 146.71 at 139.08 will pave the way to 161.8% projection at 134.36. However, break of 141.60 will bring stronger rebound instead.

In the bigger picture, as long as 55 week EMA (now at 138.54) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, firm break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40 before completing the correction from 148.38.

Daily Pivots: (S1) 0.8733; (P) 0.8761; (R1) 0.8807; More...

Intraday bias in EUR/GBP stays on the upside for 0.8827 resistance. Firm break there will argue that whole decline from 0.9267 has completed and turn near term outlook bullish. On the downside, break of 0.8689 minor support will bring retest of 0.8545 low, and retain near term bearishness.

In the bigger picture, fall from 0.9267 is seen as a down leg inside long term range pattern. Deeper fall could be seen towards 0.8201/8338 support zone. But strong support should be seen there to bring reversal. Nevertheless, firm break of 0.8827 resistance will turn favor to the case that such decline is merely a correction in the up trend from 0.8201. That is, further rally would be seen at a later stage through 0.9267.

Daily Pivots: (S1) 1.5760; (P) 1.5852; (R1) 1.5905; More...

Intraday bias in EUR/AUD is turned neutral first with break of 1.5773 minor support. Some consolidations could be seen but further rally will remain in favor as long as 1.5441 support holds. Break of 1.5976 will resume larger rise from 1.4281 to 61.8% projection of 1.4281 to 1.5704 from 1.5271 at 1.6150.

In the bigger picture, strong support from 55 day and 55 week EMA affirms underlying bullishness. As long as 1.5271 support holds, rise from 1.4281 medium term bottom is expected to continue to 1.6434 key resistance next. Decisive break there should confirm medium term bullish trend reversal.

Daily Pivots: (S1) 0.9815; (P) 0.9837; (R1) 0.9853; More....

No change in EUR/CHF's outlook as consolidation from 0.9953 is in progress. Intraday bias stays neutral. 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, as long as 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds, price actions from 0.9407 medium term bottom will be treated as a corrective pattern. That is, long term down trend would resume through this low at a later stage. Nevertheless, firm break of 1.0072 will also have 55 week EMA (now at 1.0053) taken out. That would be an initial sign of long term bullish reversal.

Market movers today

Another quiet day on the data front, but Swedish November retail sales and Norwegian December unemployment rate will be released today.

The central bank of Turkey is expected to maintain rates unchanged in its meeting today.

Overnight, the Japanese November inflation figures will be interesting in light of the BoJ's shift earlier this week, we are now calling for the first 10bp hike in Q2 2023.

The 60 second overview

The US equity market turned positive after better-than-expected earnings from Nike and FedEx as well as an improvement in US consumer confidence. US Treasury yields stabilised after the sell-off seen the last few days. US yields have declined modestly in Asian trading this morning.

The positive sentiment from US has had a positive spill over effect on the Asian equity markets this morning. Most indices in Asia have risen this morning.

The EUR and JPY has strengthen modestly against USD this morning, but both FX crosses are fairly stable after the big move in the JPY after the BoJ meeting this week.

Yesterday, the price of European natural gas fell to the lowest level since mid-June on the back of both plenty of inventor and a near-record import of LNG gas. On top of this the weather is turning milder.

FI: There was a modest bounce back in yields yesterday after the dramatic rise in global yields since last week's ECB meeting. The BTPS-Bund spread tightened 5bp as Italian government bonds rallied across the curve, but we are still well above the lows from early December, where the 10Y BTPS-Bund spread touched 180bp. It currently trades around the 210bp-level. The Bund ASW-spread also bounced back, and widened some 3bp to 65bp.

FX: Yesterday's session was characterised by a stabilisation in JPY-crosses following Tuesday's Bank of Japan surprise. USD/JPY is consequently back above 132 while EUR/USD continues to hover around the 1.06-level. NOK enjoyed the bounce in risk sentiment and oil prices while EUR/SEK continues to trade just below the 11.10 level. GBP has traded slightly on the back-foot with EUR/GBP back to the highest levels since November.

Credit: Under continued low liquidity the credit markets had a positive day yesterday taking its clues from the rally in the equity markets. Itraxx main tightened 4.3bp to 94.4bp while Xover tightened 28.6bp to 477.6bp.

Daily Pivots: (S1) 1.0581; (P) 1.0613; (R1) 1.0636; More...

Intraday bias in EUR/USD remains neutral as range trading continues below 1.0733. Further rally is expected as long as 1.0481 resistance turned support holds. Firm break of 61.8% projection of 0.9729 to 1.0481 from 1.0289 at 1.0754 will pave the way to 100% projection at 1.1041. However, firm break of 1.0481 will confirm short term topping and bring deeper fall to 1.0289 support.

In the bigger picture, focus stays 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) 1.2028; (P) 1.2111; (R1) 1.2166; More...

Intraday bias in GBP/USD is back on the downside with break of 1.2084 temporary low. Fall from 1.2445 would target 55 day EMA (now at 1.1900). Firm break there will target 38.2% retracement of 1.0351 to 1.2445 at 1.1645. On the upside, break of 1.2240 minor resistance will turn bias back to the upside for retesting 1.2445 instead.

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. This will remain the favored case as long as 55 day EMA (now at 1.1900) holds.