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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."

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ETHUSD (Ethereum) experienced a sharp decline in the four-hour chart, with the price falling below both its 50- and 200-period simple moving averages (SMAs). Even though the digital coin has been trading sideways in the last few sessions, the completion of the impending ‘death cross’ between its 50- and 200-period SMAs could spark a selloff.

The momentum indicators suggest that near-term risks are tilted to the upside, diverging from the bearish ‘death cross’ signal. Specifically, the MACD histogram remains above both zero and its red signal line, while the RSI is hovering above its 50-neutral mark.

To the upside, bullish actions could propel the price towards the recent resistance of 1,229, where the 50- and 200-period SMAs are likely to converge. Piercing this threshold, the bulls could aim for the December peak of 1,352. Even higher, further advances might come to a halt at the 1,500 support territory, which could now act as resistance.

Alternatively, should sellers push the price lower, the recent support of 1,200 could act as the first line of defence. If that floor collapses, Ethereum could test the December low of 1,150. A violation of the latter could open the door for the double-bottom region of 1,071.

Overall, ETHUSD appears to be stuck between opposing directional forces, waiting for developments that could provide a fresh directional impetus. Hence, the completion of the ‘death cross’ could probably trigger a retreat towards its recent lows.

Consumer price inflation took a small step down in November, to 6.8% year-on-year (y/y), after holding steady at 6.9% through September and October.

Canadians got some relief at the pumps in November, with prices down 3.6% m/m, after prices surged 9.2% in October. However, gasoline prices are still up 13.7% versus a year ago.

Food inflation was back on the rise in November, up 10.3% y/y, up from 10.1% in October. Food purchased from stores was up even more versus a year ago at 11.4% y/y.

On net, underlying inflation pressures appeared to have picked up slightly in November. CPI ex-food and energy was 5.4% higher versus a year ago, a tick higher than 5.3% in October. Perhaps more importantly, the two measures that the BoC has indicated provided a more timely gauge of underlying inflation through the pandemic - CPI-trim (stayed steady at 5.3% y/y) and CPI-median (picked up to 5.0% y/y from 4.9%) showed no signs of cooling.

Shelter inflation accelerated again in November, up 7.2% y/y from 6.9% y/y. Upward pressure came from higher mortgage interest costs (+14.5% y/y) – which saw the highest increase since 1983 – and rents (+5.9% y/y versus 4.7% in September). Inflation for homeowners' replacement cost did cool to 5.8% y/y thanks to a slowing resale market.

Key Implications

Today's inflation report was a step in the right direction, in line with our forecast for a gradual cooling in inflation over the coming year. Core inflation pressures have been somewhat slow to cool, but are roughly consistent with our December forecast. Canadian consumers are showing signs of strain under the weight of high inflation and higher interest rates, with retail sales losing momentum in recent months. This is expected to translate to softer price pressures, which are starting to show up in categories like furniture and clothing.

The Bank of Canada will get to see another inflation report before their next interest rate announcement at the end of January. With the battle against inflation not yet won, we expect the Bank to hike a quarter point, and then take a pause to assess the cumulative impact of a year of dramatic tightening on the economy.

Daily Pivots: (S1) 1.0582; (P) 1.0621; (R1) 1.0662; More...

Sideway trading continues in EUR/USD and intraday bias stays neutral. 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) 1.2106; (P) 1.2165; (R1) 1.2244; More...

Intraday bias in GBP/USD remains neutral first. Risk stays on the downside with 1.2445 resistance intact. Below 1.2084 will resume the fall from 1.2445 to 55 day EMA (now at 1.1894). Firm break there will target 38.2% retracement of 1.0351 to 1.2445 at 1.1645.

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 1.1874) holds.

Daily Pivots: (S1) 129.04; (P) 133.26; (R1) 135.95; More...

No change in USD/JPY's outlook and intraday bias stays on the downside, with immediate focus on on 55 week EMA (now at 131.76). Decisive break there will pave the way to next fibonacci level at 121.43. On the upside, above 133.61 support turned resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 138.16 resistance holds, in case of recovery.

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 131.76) 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) 0.9233; (P) 0.9271; (R1) 0.9299; More...

USD/CHF dips mildly today but stays in range above 0.9214. Intraday bias stays neutral for the moment. Further decline is in favor with 0.9378 resistance intact. On the downside, break of 0.9214 will resume the fall and target 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056. However, break of 0.9378 resistance will indicate short term bottoming and turn bias back to the upside for 0.9545 resistance instead.

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 0.9545 resistance holds.

The markets appear to be back in risk-on mode as seen in major European indexes and US futures. Aussie is recovering notably, followed by Swiss Franc. But New Zealand Dollar is the weakest for the day, followed by Sterling and then Yen. Dollar and Euro are mixed. As for the week, Kiwi is the worst performer for now, followed by Dollar, and the Sterling. yen is still the best performer, followed by Swiss Franc, and then Canadian.

Technically, AUD/USD recovers notably today and focus is back on 0.6742 resistance. Break there will suggest that pull back from 0.6892 has completed at 0.6628, ahead of 38.2% retracement of 0.6169 to 0.6892 at 0.6616. Stronger rise would then be seen back to retest 0.6892 high.

In Europe, at the time of writing, FTSE is up 0.94%. DAX is up 0.96%. CAC is up 1.23%. Germany 10-year yield is down -0.0250 at 2.280. Earlier in Asia, Nikkei dropped -0.68%. Hong Kong HSI rose 0.34%. China Shanghai SSE dropped -0.17%. Japan 10-year JGB yield rose 0.0619 to 0.479.

Canada CPI slowed to 6.8% yoy, but accelerated excluding food and energy

Canada CPI slowed from 6.9% yoy to 6.8% yoy in November. Excluding food and energy, CPI accelerated from 5.3% yoy to 5.4% yoy. On a monthly basis, CPI rose 0.1% mom, much slower than October's 0.7% mom.

CPI median accelerated from 4.9% yoy to 5.0% yoy. CPI trimmed was unchanged at 5.3% yoy. CPI common, accelerated sharply from 6.3% yoy to 6.7% yoy.

Germany Gfk consumer sentiment rose to -37.8, slowly working its way out of depression

Germany Gfk Consumer Sentiment for January improved from -40.1 to -37.8. In December, economic expectations rose from 17.9 to -10.3. Income expectations rose from -54.3 to -43.4. Propensity to buy rose form -18.6 to -16.3.

"The third increase in a row indicates that consumer sentiment is slowly working its way out of the depression. The light at the end of the tunnel is getting a little brighter", explains GfK consumer expert Rolf Bürkl.

"The measures taken by the federal government to mitigate skyrocketing energy costs are apparently having an effect. However, it is still too soon to give the all-clear. The recovery of the consumer sentiment, as we are currently experiencing, is still on shaky ground. For example, if the geopolitical situation were to worsen again, leading to significantly higher energy prices, the light at the end of the tunnel would very quickly become dimmer again or even go out altogether."

Australia leading index consistent with below trend growth well into 2023

Australia Westpac-MI leading index dropped from -0.84% to -0.92% in November. Growth rate was, thus, in negative territory for the fourth consecutive month. The data is consistent with below trend growth well into 2023. Drivers of weakness are the RBA interest rate and commodity prices.

Westpac expects another 25bps rate hike by RBA in February, "give the outlook for wages; inflation and economic growth". It expects wages and inflation challenges to persist through early months of 2023, requiring "further increase of 25bps in both March and May.

IMF: BoJ YCC adjustment a sensible step

Ranil Salgado, the IMF's mission chief to Japan, said that "with uncertainty around the inflation outlook, the Bank of Japan's adjustment of yield curve control settings is a sensible step including given concerns about bond market functioning."

"Providing clearer communications on the conditions for adjusting the monetary policy framework would help anchor market expectations and strengthen the credibility of the Bank of Japan's commitment to achieve its inflation target," he said.

BoJ announced to raise the cap on 10-year JGB yield from 0.25% to 0.50% yesterday, to " correct distortions in the yield curve".

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9233; (P) 0.9271; (R1) 0.9299; More...

USD/CHF dips mildly today but stays in range above 0.9214. Intraday bias stays neutral for the moment. Further decline is in favor with 0.9378 resistance intact. On the downside, break of 0.9214 will resume the fall and target 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056. However, break of 0.9378 resistance will indicate short term bottoming and turn bias back to the upside for 0.9545 resistance instead.

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 0.9545 resistance holds.

Economic Indicators Update

Canada CPI slowed from 6.9% yoy to 6.8% yoy in November. Excluding food and energy, CPI accelerated from 5.3% yoy to 5.4% yoy. On a monthly basis, CPI rose 0.1% mom, much slower than October's 0.7% mom.

CPI median accelerated from 4.9% yoy to 5.0% yoy. CPI trimmed was unchanged at 5.3% yoy. CPI common, accelerated sharply from 6.3% yoy to 6.7% yoy.

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Bulls are consolidating under one-week high ($1821) posted after a 1.7% rally on Tuesday, with near-term action being biased higher, though bulls face headwinds and the action remains congested at this zone for the third straight week.

Fundamentals point to overall positive signals, as the Fed showed more hawkish than expected stance in the latest meeting, but the central bank is probably in the late tightening cycle of policy tightening, which is seen as supportive for the metal.

On the other hand, positive signals are still too light to spark more significant rise of gold price, which would require at least a pause in tightening, or perhaps rate cuts.

Technical studies are mixed on daily chart, with bullish configuration of moving averages being countered by fading bullish momentum, suggesting that the action may continue to move within the range.

Initial supports lay at $1800/$1797 (psychological / 10DMA), followed by converging 200/20 DMA’s ($1784/83) and range floor at $1773.

Range top ($1824, Dec 13 peak, the highest since June 30, reinforced by upper 20-d Bollinger band) marks strong barrier, followed by $1842 (50% retracement of $2070/$1614).

Lower volumes in pre-holiday mode also point to calmer action in coming days.

Res: 1746; 1754; 1767; 1786
Sup: 1800; 1788; 1784; 1773