Sample Category Title

• GBPNZD reversed from key support level 1.9135
• Likely to rise to resistance level 1.9400

GBPNZD today reversed up from the key support level 1.9135 (which has been repeatedly reversing the pair from the start of November) – intersecting with the lower daily Bollinger Band.

The upward reversal from the support level 1.9135 will form the daily Japanese candlesticks reversal pattern Bullish Engulfing – if the pair closes today near the current levels.

GBPNZD gas can be expected to rise further toward the next resistance level 1.9400 (top of the earlier minor correction (ii) from the start of this month).

• Gold reversed from key resistance level 1800.00
• Likely to fall to support level 1765.00

Gold previously reversed down from the major resistance level 1800.00 (which has been steadily reversing the price from May, when it served as the strong support).

The resistance level 1800.00 was further strengthened by the intersecting upper daily Bollinger Band and by the 50% Fibonacci correction of the downward impulse from April.

Gold gas can be expected to fall further toward the next support level 1765.00 (low of the earlier Morning Star from the start of December).

The crude oil market keeps trying to stabilise but fails. Brent barrel started this week by an attempt to reach 76.55 USD.

On the whole, the probability of an equally fast decline looks limited. Nonetheless, investors may react negatively to the oil demand forecasts presented by OPEC and the IEA. However, market participants can use the fact that the Keystone Pipeline that delivers crude oil from Canada to the US is still laying idle.

According to Baker Hughes, the number of active drills in the US has dropped by 2 over a week, reaching 625 units.

On H4, Brent has reached the local goal of the wave of decline at 75.33. Today the market is forming a structure of a wave of growth to 89.40. A link of correction to 82.30 is expected, followed by growth to 101.00. Technically, this scenario is confirmed by the MACD: its signal line is headed strictly upwards to zero. A breakaway and further growth to new highs should follow.

On H1, Brent has formed the first impulse of growth to 77.00. A link of correction to 76.06 is not excluded. Then a new structure of growth is expected to develop to 78.78. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under 80, headed strictly down to 50. A bounce off it and growth back to 80 are expected.

Markets

‘Quite before the (potential) storm’ on markets today as investors are counting down to a large plethora of data and policy decisions later this week. European and Asian investors started the week with a tentative risk-off mood as a cold snap in most of Europe and rising Covid infections in China highlight short-term roadblocks to economic activity in both regions. European equities are ceding about 0.5%. US indices open marginally positive after Friday’s setback. Contrary to end last week when higher yields weighed on (especially) US equities, a fragile risk sentiment again caused a bull flattening/further inversion of EMU and US yields curves. German yields are ceding between 2 bps (2-y) and 7 bps (30-y). US yields in a similar fashion are declining between 2 bps (2-y) and 6.5 bps (30-y). Still, with the German and US 10-y yield holding at 1.85% and 3.53% respectively, key technical levels at 1.77% and 3.50/3.42% for now aren’t challenged any further. Intra-EMU spreads continue a cautious narrowing (10-y Italy minus 3 bps) even as the ECB on Thursday is expected to announce a framework to start a (gradual) roll-off of its APP bond holdings. Later today, the US Treasury will sell $40 bln of 3-year and $32 bln of 10-y Notes. It’s interesting to see investors appetite for the bond after recent substantial repricing/curve inversion, especially for bond with longer-dated maturities.

On FX markets, the dollar again fails to maintain Friday’s rebound even as declines in US and European yields are quite similar. The DXY TW USD (104.75) index again dropped below the 105 barrier with the correction low (104.11) still within reach. At 1.056, the EUR/USD cross rate also keeps the key 1.0611 target on the radar. The yen underperforms with USD/JPY trying to regain the 137 big figure. Higher-than-expected Japanese PPI inflation (9.3%) published this morning obviously isn’t enough to change markets’ assessment on the BOJ’s approach in the near future. After a surprising outperformance of sterling on Friday, EUR/GBP today returned to well-known territory in the 0.86 area. UK October production/monthly GDP data were slightly better than expected, but should be considered a bit outdated and probably won’t change the BoE’s assessment. Among the smaller currencies the Swiss franc continues to trade rather weak (EUR/CHF 0.986) as markets ponder whether the SNB will raise its policy rate by 75 or 50 bps at its policy meeting on Thursday, with the second option seen as most likely.

News Headlines

Czech inflation accelerated more than expected in November, by 1.2% M/M lifting the Y/Y outcome from 15.1% in October to 16.2%. Inflation would have been 3.6 percentage points higher if it weren’t for the inclusion of government measures. “Housing, water, electricity, gas and other fuels” and “food and non-alcoholic beverages” recorded the biggest monthly increases. Last year’s lower comparative base, when VAT was waived for electricity and natural gas prices, partially contributed to the increase. Prices of goods in total went up by 1.8% M/M (18.5% Y/Y) and prices of services by 0.3% (12.7% Y/Y). The overall November inflation figure was more than two percentage points lower than expected in the Czech National Bank’s autumn forecast. The negative deviation was due mainly to administered prices, which reflected a fall in electricity prices in October due to the statistical inclusion of the energy savings tariff. Core inflation declined, but remains high at 13.8% Y/Y. The CNB expects Y/Y price growth to remain volatile in the near future. It will only be around mid-2023 that inflation is expected to fall to single digit levels with a return closer to the 2% inflation target in H1 2024. EUR/CZK didn’t respond to the release, trading extremely steady at 24.30. The Czech swap yield curve turns slightly more inverse with yields up to 5 bps higher at the front end following an initial spike of almost 15 bps.

Slovak debt agency Ardal announced its 2023 borrowing requirements. They aim to raise €8bn in long term funding, split evenly between regular auctions (9) and new syndications (2). It compares with €5.2bn YTD this year. The country’s maturity profile suggests a new long 10-12y bond and one with a medium-term maturity. Typically, Ardal aims for early Spring and Autumn syndications. T-bill issuance doesn’t make part of next year’s plans. Slovakia has around €55bn of government bonds outstanding with the debt to GDP ratio expected to revert <60% by the end of this year and stabilize thereafter.

The Swiss National Bank (SNB) holds its final meeting for 2022 on Thursday, December 15. The current market pricing points to a 50bps rate hike. Will this hike be enough to turn the tide around for the swissie against the euro or developments elsewhere could be more impactful?

The September meeting did not appease the market

The SNB holds its fourth and final rate-setting meeting for 2022, joining the chorus of rate meetings from other major central banks this week. It has been some time since the last meeting on September 22 when the SNB announced the return to a positive policy rate. The 75-bps rate hike was in line with expectations and failed to inspire the markets. In addition, the post-meeting press conference’s message was slightly dovish as Chairman Jordan did not appear overly enthusiastic about further rate hikes.

Recent data somewhat stronger than in other regions

The Swiss economy appears to be in better shape than its main trading partners. While at 3.0%, the year-on-year CPI remains above the SNB's comfort zone, it is clearly lower than the double-digit increases seen not far from the Swiss borders. Similarly, the manufacturing PMI stands comfortably above the 50-expansion level. But the domestic economy cannot come out completely unscathed by the economic hardship seen elsewhere, as consumer sentiment in the fourth-quarter dropped to record low levels, and annual growth in retail sales continues to hover around zero. Hence, consumer spending appears to be affected even though the electricity market in Switzerland remains highly regulated for small consumers and households.

Swissie under pressure against the euro lately

The escape from negative rates did not prove beneficial for swissie as the market had already turned its focus elsewhere. The swissie has enjoyed a steady bid against the euro over the past few years reaching a multi-decade high of 0.94 per euro on September 26, on the back of the elevated inflation rates across Europe and the increased chances of recession in both the euro area and US matter in 2023. SNB’s preference for a stronger currency at this juncture is not concealed, as it is one of the reasons for the lower inflation rates recorded in Switzerland. Hence, the fourth-quarter rally in the euro/swissie pair should have raised some eyebrows at the SNB head offices.

Could the SNB be more aggressive at this meeting?

The SNB has been a laggard among the major central banks in the current rate hiking cycle. Contrary to the ECB’s 200bps rate increase, the SNB has raised rates by just 125bps in 2022. With both the Fed and ECB expected to hike again this week by 50bps respectively, the onus is on the SNB to make its next move. The market currently assigns a 77% probability for a 50bps rate hike, with the remaining 23% looking for a quarter-point rate move. There will be the usual interest on the ensuing press conference and the conditional inflation bank forecasts. However, two days before the meeting we will get the SECO forecasts. These forecasts, which tend to be in line with, albeit a bit more conservative than the SNB’s forecasts, thus limiting the surprise element on the meeting day.

If the SNB wishes to appear determined about keeping the swissie strong, and thus offsetting the potentially higher imported inflation, the door is open for a stronger move of 75bps and a hawkish showing at the press conference. Otherwise, a 50bps rate hike would mostly appease the market and allow the SNB to use its FX reserves to manage unwanted moves in the euro/swissie pair. Additionally, if the bleak forecasts for a 2023 recession in the euro area get confirmed or there is another energy-related episode, the SNB could just wait on the sidelines. The swissie would most likely enjoy another safe-haven inflow without the need for aggressive hikes from the SNB.

Likely market reaction

Should the SNB meeting hold no surprises, euro/swissie should look for guidance at the ECB meeting later on Thursday. Should the swissie bulls attempt to control the market, their primary aim would be the 100-day simple moving average at 0.9746 followed by the 0.9665 area. On the other hand, another attempt from swissie bears to recover part of the ground lost during 2022, means that the busy 0.9958-75 area should be tested first.

The Euro regained traction in early Monday’s trading after Friday’s close in red, and attacks again key Fibo barrier at 1.0578 (38.2% of 1.2266/0.9535) where the action was already rejected twice last week.

Daily studies maintain strong bullish momentum and the action was underpinned by a double golden-cross (10/200 & 20/200DMA’s) which supports bodes well for final push through cracked 1.0578 (Fibo) and 1.0590 (falling 55WM pivots, to signal bullish continuation and expose targets at 1.0786 (May 29 lower top) and 1.0901 (50% retracement of 1.2266/0.9535).

On the other hand, warning of possible rally stall comes from weekly chart, as stochastic is strongly overbought and bullish momentum is fading, along with last week’s Doji.

Rising 10 DMA offers initial support at 1.0491 which should hold to keep immediate bulls intact and guard 20DMA (1.0421) and 200DMA (1.0350) with loss of the latter to sideline bulls.

Res: 1.0590; 1.0615; 1.0700; 1.0782.
Sup: 1.0522; 1.0491; 1.0421; 1.0350.

Daily Pivots: (S1) 143.20; (P) 143.84; (R1) 144.50; More....

EUR/JPY's break of the near term channel resistance suggests that correction from 148.38 has completed at 140.75. Intraday bias is back on the upside for 146.12 resistance first. Firm break there will bring retest of 148.38 high. On the downside, however, break of 143.16 minor resistance will dampen this bullish case and turn intraday bias neutral again.

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) 135.83; (P) 136.37; (R1) 137.13; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. 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) 0.9313; (P) 0.9347; (R1) 0.9382; More...

No change in USD/CHF's outlook. Intraday bias stays mildly on the downside with focus on 0.9287 fibonacci level. 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.