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Euro is given a further boost after ECB President Christine Lagarde said in the the post-meeting press conference that "interest rates will still have to rise significantly and at a steady pace." She added, "Obvious that we should expect 50 bps hikes for period of time." The clarity of Lagarde's message was a rather big surprise to the markets.

EUR/CAD's rally accelerates to as high as 1.4591 and it's on track to 161.8% projection of 1.2867 to 1.3694 from 1.3270 at 1.4608. Firm break there will put focus to key long term fibonacci level of 1.6151 to 1.2867 at 1.4897.

Daily Pivots: (S1) 1.0635; (P) 1.0665; (R1) 1.0711; More...

EUR/USD's rally continues in early US session and intraday bias stays on the upside for 61.8% projection of 0.9729 to 1.0481 from 1.0289 at 1.0754. Firm break there could prompt upside acceleration to 100% projection at 1.1041. On the downside, break of 1.0604 minor support will turn intraday bias neutral first. But further rally will remain in favor as long as 1.0481 resistance turned support holds.

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) 1.2365; (P) 1.2405; (R1) 1.2469; More...

Intraday bias in GBP/USD is turned neutral with current retreat. On the downside, break of 1.2205 minor support will indicate short term topping, bearish divergence condition in 4 hour MACD. Intraday bias will be turned to the downside for deeper pull back to 55 day EMA (now at 1.1860). On the upside, though, break of 1.2445 will resume larger rise to 1.2759 medium term fibonacci level next.

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 1.1860) holds.

Daily Pivots: (S1) 0.9207; (P) 0.9253; (R1) 0.9290; More...

USD/CHF continues to lose downside momentum, but there is no sign of bottoming yet. Intraday bias stays mildly on the downside for 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.

Daily Pivots: (S1) 134.66; (P) 135.32; (R1) 136.13; More...

Intraday bias in USD/JPY remains neutral first as range trading continues. On the downside, firm break of 133.61 support and 133.07 medium term fibonacci level will confirm resumption of whole fall from 151.93. On the upside, however, break of 137.95 will turn bias back to the upside for stronger rebound to 142.24 resistance instead.

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) 0.8576; (P) 0.8596; (R1) 0.8617; More...

EUR/GBP's break of 0.8674 resistance indicates short term bottoming at 0.8545. Intraday bias is back 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. Nevertheless, risk will stay mildly on the downside before break of 0.8827.

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.

Daily Pivots: (S1) 1.5497; (P) 1.5550; (R1) 1.5619; More...

EUR/AUD's strong break of 1.5747 resistance confirms resumption of larger rally from 1.4281. Intraday bias is back on the upside. Next target is 61.8% projection of 1.4281 to 1.5704 from 1.5271 at 1.6150. For now, outlook will remain bullish as long as 1.5441 support holds, in case of retreat.

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.

EURCHF remained on the sidelines on Thursday following the ECB policy announcement, completing a symmetrical triangle below the 200-day simple moving average (SMA) at 0.9868.

The formation occurred within a short distance above the 7½-year low of 0.9551, with the momentum indicators currently flagging a neutral-to-bullish bias. The RSI is moving horizontally marginally above its 50 neutral mark, the stochastics – although pointing upwards – maintain a neutral trajectory between their 20 and 80 levels, while the MACD is stable around its red signal line.

For the bulls to get full control, the pair will need an advance above the triangle and beyond the 200-day SMA, which is currently lying around the 50% Fibonacci retracement of the June-September downfall at 0.9958. If the recovery extends above the 1.00500 constraining zone, the next target will be the 61.8% Fibonacci of 1.0160.

A step beneath the triangle’s lower trendline, where the 38.2% Fibonacci of 0.9827 and the shorter-term SMAs reside, may initiate a new bearish wave towards the 0.9700-0.9655 territory. Some consolidation could follow around the 0.9600 and 0.9500 numbers before the 2022 low of 0.9551 shows up on the radar.

Summarizing, EURCHF could become volatile in the coming sessions as a symmetrical triangle nears a completion. A sustainable rally above 0.9950 could give the lead to the bulls.  

Daily Pivots: (S1) 143.90; (P) 144.32; (R1) 145.17; More....

EUR/JPY's rebound from 140.75 resumed after brief retreat and intraday bias is back on the upside. Outlook is unchanged that correction from 148.38 could have completed at 140.75. Break of 146.12 resistance will target a retest on 148.38 high. For now, further rise will remain in favor as long as 143.48 support holds, in case of retreat.

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.

Dollar rebounds broadly following risk-off sentiment as delayed reaction to Fed's hawkish projections overnight. SNB, BoE and ECB met expectations with 50bps rate hike. Euro is strong as ECB maintains hawkish bias, with upward revision in inflation projections. Swiss Franc is the third strongest after SNB indicates the possibility of more tightening. Meanwhile, Sterling is notably weaker after somewhat dovish MPC voting. But Aussie and Kiwi are even worse on overall sentiment.

Technically, Euro is making progresses in some crosses with EUR/JPY breaking through 145.33 temporary top. EUR/AUD is on the verge of breaking 1.5747 resistance. EUR/CAD is also extending near term rally. A question now is when EUR/GBP would break through 0.8674 minor resistance to confirm short term bottoming at 0.8545. Euro's strength in crosses will keep EUR/USD in range.

In Europe, at the time of writing, FTSE is down -0.66%. DAX is down -1.98%. CAC is down -1.87%. Germany 10-year yield is up 0.970 at 2.038. Earlier in Asia, Nikkei dropped -0.37%. Hong Kong HSI dropped -1.55%. China Shanghai SSE dropped -0.25%. Singapore Strait Times dropped -0.15%. Japan 10-year JGB yield dropped -0.0002 at 0.258.

US retail sales down -0.6% mom in Nov, ex-auto sales down -0.2% mom

US retail sales dropped -0.6% mom to USD 689.4B in November, worse than expectation of -0.1% mom. Ex-auto sales dropped -0.2% mom to USD 562.9B, worse than expectation of 0.2% mom rise. Ex-gasoline sales dropped -0.6% mom to USD 625.1B. Ex-auto, ex-gasoline sales dropped -0.2% to USD 498.6B. Total sales for September through November were up 7.7% yoy from the same period a year ago.

Initial jobless claims dropped -20k to 211k in the week ending December 10, smaller than expectation of 230k. Four-week moving average of initial claims dropped -3k to 227k. Continuing claims rose 1k to 1671k in the week ending December 3. Four-week moving average of continuing claims rose 43k to 1625k.

ECB hikes 50bps, expects to raise rates further

ECB raises the three key interest rates by 50bps today as expected. The main refinancing, marginal lending, and deposit rates are 2.50%, 2.75% and 2.00% respectively. The Governing Council expects to "raise them further" based on "substantial upward revision to the inflation outlook".

Also ECB noted that "keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations." Future policy decisions will continue to be "data-dependent", following a "meeting-by-meeting approach".

Reinvestment under the APP purchases will continue until the end of February 2023. The portfolio will then decline at a "measured and predictable pace" subsequently, amount to EUR 15B per month on average until Q2 2023. Reinvestment under PEPP will continue at least until the end of 2024.

Based on new economic projections, inflation is expected to reach 8.4% in 2022, then fall to 6.3% in 2023, and then 3.4% in 2024, and 2.3% in 2025. Core inflation, excluding energy and food, is projected to be at 3.9% in 2022, 4.2% in 2023, 2.8% in 2024, and then 2.4% in 2025. The economy is projected to grow 3.4% in 2022, 0.5% in 2023, 1.9% in 2024, and then 1.8% in 2025.

BoE hikes 50bps, majority expects further increases

BoE raises Bank Rate by 50bps to 3.50% as expected, by 6-3 vote. Two members, Swati Dhingra and Silvana Tenreyro voted for no change. On the other hand, Catherine Mann voted for 75bps hike.

The "majority" of the MPC judged that "should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate may be required".

It's also reiterated that "The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary."

SNB hikes 50bps to 100%, cannot rule out more

SNB raises the policy rate by 50bps to 1.00% as widely expected, to "countering increased inflation pressure and a further spread of inflation". The central added that additional rate hikes "cannot be ruled out". It also maintained the willingness to be "active in the foreign exchange markets as necessary".

In the new conditional inflation forecast based on 1.0% policy rate, inflation forecasts was lowered from 3.0% to 2.9% in 2022, left unchanged at 2.4% in 2023, and raised from 1.7% to 1.8% in 2024. Inflation forecast was indeed raised from Q3 2023 through Q4 2024.

The highest inflation forecasts was "attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index."

Regarding GDP growth, SNB expects its to be at around 2.0% this year. But weaker overseas demand and higher energy prices are likely to "curb economic activity marked in the coming year". SNB expects GDP growth to slow to 0.5% in 2023.

SNB Jordan: We will continue to sell foreign currency if appropriate

In the post meeting press conference, SNB Chairman Thomas Jordan said that this year's 4% appreciation in Swiss Franc exchange rate "has helped ensure that less inflation has been imported from abroad, thus curbing the rise in inflation."

He said that the central bank sold "foreign currency in recent months" to ensure appropriate monetary conditions. He added, "We will also sell foreign currency in the future if this is appropriate from the monetary policy perspective. Conversely, we remain willing to buy foreign currency again if necessary, i.e. if there were to be excessive appreciation pressure."

Australia employment grew 64k in Nov, participation rate back at record high

Australia employment grew 64.0k in November, much better than expectation of 19.4k. Unemployment rate was unchanged at 3.4%, matched expectations. Participation rate rose 0.2% to 66.8%. Monthly hours worked dropped -0.4% mom.

Bjorn Jarvis, head of labour statistics at the ABS, said: "The participation rate increased by 0.2 percentage points to 66.8 per cent in November, returning to the record high we saw in June 2022. It was 1.0 percentage point higher than before the pandemic."

"The record high participation rate continues to show that it is a tight labour market, especially when coupled with very low unemployment."

Japan continues trade deficit streak for the 16th month

Japan export rose 20.0% yoy to JPY 8838B in November, a record high, led by cars autos and mining machinery shipment to the US. Imports rose 30.3% yoy to JPY 10865B, also a record high, as led by imports of crude oil, coal and LNG.

Trade deficit came in at JPY -2.03T. That the 16th straight month of trade deficit, and the fourth month in a row at the JPY 2T level.

In seasonally adjusted term, exports dropped -1.4% mom to JPY 8787B. Imports dropped -5.3%mom to JPY 10520B. Trade deficit narrowed to JPY -1.73T, versus expectation of JPY -1.24T.

China retail sales down -5.9% yoy in Nov, industrial production up 2.2% yoy

China retail sales contracted -5.9% yoy in November, much worse than expectation of -3.9% mom. Industrial production grew 2.2% yoy, below expectation of 3.4% yoy. Fixed asset investment rose 5.3% ytd yoy, below expectation of 5.6%.

"The consumption market was under pressure in November due to the impact of Covid and other factors, and the decline in market sales widened," said NBS statistician Fu Jiaqi.

"However, online consumption grew faster, retail sales of basic living goods increased relatively well, some upgraded consumption was higher than overall, and retail businesses such as supermarkets and convenience shops increased steadily."

EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 143.90; (P) 144.32; (R1) 145.17; More....

EUR/JPY's rebound from 140.75 resumed after brief retreat and intraday bias is back on the upside. Outlook is unchanged that correction from 148.38 could have completed at 140.75. Break of 146.12 resistance will target a retest on 148.38 high. For now, further rise will remain in favor as long as 143.48 support holds, in case of retreat.

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.

Economic Indicators Update