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Daily Pivots: (S1) 135.97; (P) 137.07; (R1) 138.90; More...

Break of 137.95 suggests resumption of rebound from 133.61. Intraday bias is back on the upside for 142.24 resistance next. On the downside, however, firm break of 133.61 support and 133.07 medium term fibonacci level will confirm resumption of whole fall from 151.93.

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) 0.6823; (P) 0.6852; (R1) 0.6895; More...

A short term top is formed at 0.6892 in AUD/USD with current decline. Intraday bias back on the downside for 38.2% retracement of 0.6169 to 0.6892 at 0.6616. Sustained break there will suggest rejection by 0.66871 fibonacci level. Deeper fall should then be seen to 61.8% retracement at 0.6445. For now, risk will stay mildly on the downside as long as 0.6892 resistance holds, in case of recovery.

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) 1.3563; (P) 1.3618; (R1) 1.3698; More....

Range trading continues in USD/CAD and intraday bias remains neutral for the moment. 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).

In November, UK retail sales volumes declined -0.4% mom, much worse than expectation of 0.3% mom rise. Ex-fuel sales dropped -0.3% mom, worse than expectation of 0.3% mom. Fuel sales volumes declined -1.7% mom.

In value term, retail sales rose 0.5% mom while ex-fuel sales rose 0.1% mom.

Full release here.

Market movers today

Markets will continue to digest the flurry of central bank meetings yesterday and we look out for ECB 'sources' stories, after the 'hawkish' rates guidance yesterday (see below).

December flash PMI figures are on the agenda for the euro area, UK and US today and we expect them to bring further evidence of the rising recession risks ahead, while focus will also be on the strength of the labour market and further signs of easing input cost pressures.

The 60 second overview

Macro: US retail sales declined in November, while consensus had expected a small increase. Private consumption in the US looks like it has started to give in to higher interest rates.

ECB: The 50bp policy interest rate increase was widely expected by us and the market and even though we expected hawkish signals on top on that, we had not foreseen such a sharp increase in interest rates further out the curve as ECB prepared the market for more large rate hikes next year.

Russia: EU approved a ninth package of sanctions against Russia yesterday that targeted Russia's access to drones and more banks. US sanctioned Vladimir Potanin - the owner of Norilsk Nickel.

FI: It was all about the central bank meetings yesterday and most came broadly in line with expectations, except for the ECB. ECB surprised yesterday which led to a massive bearish flattening of the curves. While the 50bp rate hike was well anticipated the communication about the coming rate hikes left a significant impact on markets. 2y Germany sold off by 25bp on the day which compares to a 5bp sell-off in the 30y segment. The aggressive ECB communication is in contrast to other major central banks what communicate being closer ending its tightening bias. ECB gave absolutely no indication of that.

FX: FX markets will continue to digest this week's central bank decisions. The biggest drama yesterday was in a EUR/USD on the back of super-hawkish comments from Lagarde where the cross spiked temporarily above 1.07 and then came back down to square one as sour equities weighed in. NOK first strengthened when Norges Bank struck a slightly hawkish tone, while GBP dropped when two BOE dissenters favoured to keep the policy rate unchanged. The sell-off in equities however meant that both NOK and SEK dropped against EUR and USD, although EUR/SEK still remains in the familiar range of 10.80-11.00.

Credit: Yesterday, credit markets had a weak session following BOE and ECB announcements. Both CDS indices were wider with iTraxx Main 6.5bp higher at 89.9bp, while iTraxx Crossover jumped 32bp to close at 469.5bp.

Nordic macro

Danmarks Nationalbank (DN) hiked its key policy rate 50bp to 1.75%. DKK4bn in FX intervention in November was not enough to justify a further widening of the spread to ECB even as the market was about priced for another widening of c. 10bp. The decision to mirror ECB 1:1 should send EUR/DKK back down to 7.4365 near-term and trigger more FX intervention selling. We stick to our call that a 10bp widening will come in February when ECB is expected to hike again and for DN to follow ECB after that and hike to 2.90% in May. As expected, Norges Bank yesterday hiked policy rates by 25bp. In a slight hawkish surprise NB clearly guided towards another 25bp hike in March with the executive board concluding: 'Based on the Committee's current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in 2023 Q1'. The firm guidance does put in question our call that yesterday's hike marked the last hike in the cycle. That said, we are still not convinced that NB will get to deliver on the final 25bp hike in March even if we acknowledge that it has become a close call - also when taking into account yesterday's ECB message. Markets are now pricing an additional 22bp worth of hikes for 2023 of which 18bp are priced for Q1.

I should admit that I thought the major event of this week would be Federal Reserve (Fed) President Jerome Powell’s speech and a dot plot from the FOMC members, which would look significantly more hawkish than the expectations, and a couple of eventless 50bp hikes from the other major central banks including the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB).

But the week’s central bank surprise came from Christine Lagarde yesterday.

Lagarde’s ‘whatever it takes’ moment 

The ECB raised its interest rates by 50bp as expected yesterday, and hinted at the accompanying statement that there would be more rate hikes on the pipeline.

And President Christine Lagarde killed all hope that the ECB would take into account the slowing economy, and recession, when hiking rates.

Instead, Lagarde kept telling reporters that the rates in the Eurozone will continue to rise ‘steadily and significantly’ over the next meetings. She said that the ECB will raise the rates by another 50bp at the next meeting. Then by another 50bp in the meeting after that. And another 50bp in the meeting after that. Then another one!

No central banker has given such ‘forward guidance’ before. The idea of ‘meeting to meeting adjustment to the monetary policy’, the concept of ‘we will be watching the data to decide the next steps’ got hammered, yesterday. Christine Lagarde made the most hawkish speech since she came to the office. And yesterday’s meeting was one of the most important ones since Mario Draghi’s ‘whatever it takes’, back in July 2012.

Lagarde’s speech was the ‘reverse whatever it takes’, or the new ‘whatever it takes to bring inflation to 2%’.

And oh, the ECB will also start unwinding its balance sheet from March, but the officials sound like they don’t have a clue about how that will play out, because they have never done it before. This is what they said.

Merry Xmas!

European yields spikde during Madame Lagarde’s speech. The German 10-year yield jumped more than 10%. The French and the Spanish 2-year yield did the same. The Italian 2-year yield soared more than 13%.

Christine Lagarde’s speech also sent the markets to hell yesterday, and smashed whatever hope was left for a year-end stock rally.

The DAX and the CAC fell more than 3%.

Of course, the ECB’s hawkish announcements – that came a day after the Fed’s hawkish decision - wreaked havoc across the US equities as well. The S&P500 slipped below its 100-DMA, as Nasdaq fell below its 50-DMA.

Here in Switzerland, the SMI also paid the price of a 50bp hike from the SNB and the ECB. The index fell around 2.50%, although some breathed a sigh of relief that the EURCHF stayed relatively stable, not the get the Swiss franc more expensive for European clients.

Go, euro! 

Even though the euro was relatively stable against the franc, the single currency got a nice initial boost from the ECB decision and especially Lagarde’s cruelly hawkish press conference against the US dollar.

The EURUSD spiked to 1.0736, the highest level since April, then gave in to the broadly stronger US dollar, and is back below the 1.07 mark this morning.

But the significant hawkish shift in ECB’s policy stance, and the determination of the European leaders to shot inflation to the ground should continue giving some more support to the euro, therefore, price pullbacks in EURUSD could be interesting dip buying opportunities for a further rally toward the 1.10 mark.

And if the US dollar strengthened yesterday, it was certainly due to a heavy selloff in stocks and bonds that ended up with investors sitting on cash. Other than that, the data released in the US yesterday was not brilliant! The retail sales fell by most in a year; holiday shopping apparently didn’t help improve numbers. The Empire Manufacturing index tanked from 4.5 to -11, versus -1 expected by analysts. Both data hinted at a slowing economic growth in the US, which should normally boost recession fears and keep the Fed hawks at bay. And that could mean a further downside correction in the dollar in the run up to Xmas.

Daily Pivots: (S1) 167.28; (P) 167.83; (R1) 168.94; More...

Outlook in GBP/JPY is unchanged and intraday bias stays neutral first. On the upside, above 169.26 will resume the rebound from 163.02 for retesting 172.11 high. On the downside, however, break of 164.02 support will resume the fall from 172.11 through 163.02 support.

In the bigger picture, medium term upside momentum has been diminishing as seen in bearish divergence condition in weekly MACD. Sustained break of 55 week EMA (now at 160.90) will argue that it's already correcting whole up trend from 123.94 (2020 low). Nevertheless, before that, such up trend could still extend through 172.11 high.

Daily Pivots: (S1) 144.92; (P) 145.83; (R1) 147.34; More....

Intraday bias in EUR/JPY stays on the upside at this point. Outlook is unchanged that correction from 148.38 could have completed at 140.75. Rise from there should continue to retest 148.38 high next. On the upside, break of 143.48 support is needed to indicate completion of the rebound, or further rise will remain in favor.

In the bigger picture, considering bearish divergence condition in weekly MACD, 148.38 could be a medium term top already. Fall from there is probably correcting whole up trend from 114.42 (2020 low). Deeper decline would be seen to 55 week EMA (now at 138.08), or further to 38.2% retracement of 114.42 to 148.38 at 135.40 before completion.

Daily Pivots: (S1) 0.9831; (P) 0.9874; (R1) 0.9909; More....

Intraday bias in EUR/CHF remains neutral as range trading continues. 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.

Daily Pivots: (S1) 0.8635; (P) 0.8682; (R1) 0.8773; More...

Intraday bias in EUR/GBP remains on the upside at this point. Rebound from 0.8545 short term bottom in in progress 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 0.8675 minor support will turn intraday bias neutral first.

In the bigger picture, current development suggests that fall from 0.9267 is 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.