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Daily Pivots: (S1) 1.2133; (P) 1.2184; (R1) 1.2261; More...

No change in GBP/USD's outlook as range trading continues. Intraday bias stays neutral. Further rise remains mildly in favor as long as 1.1898 support holds. On the upside, break of 1.2343 will resume the rally from 1.0351 and target 1.2759 medium term fibonacci level next. However, firm break of 1.1898 support will confirm short term topping and turn bias back to the downside.

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.

Daily Pivots: (S1) 0.9369; (P) 0.9403; (R1) 0.9443; More...

Intraday bias in USD/CHF stays neutral as range trading is still in progress. Considering bullish convergence condition in 4 hour MACD, break of 0.9545 will indicate short term bottoming at 0.9325. Intraday bias will be back on the upside for 55 day EMA (now at 0.9642). On the downside, below 0.9325 will resume the near term decline and target 0.9287 fibonacci level.

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. 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 0.9690) holds.

Daily Pivots: (S1) 135.93; (P) 136.89; (R1) 137.57; More...

Intraday bias in USD/JPY is turned neutral with 4 hour MACD crossed below signal line. On the downside, break of 135.95 minor support will indicate rejection by 4 hour 55 EMA, and turn bias back to the downside for retesting 133.61 low. On the upside, above 137.84 will resume the rebound to 55 day EMA (now at 141.20).

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 131.33). Some support should be seen around this zone to bring rebound. However, sustained break of 55 week EMA will pave the way to 61.8% retracement at 121.43.

Daily Pivots: (S1) 0.6682; (P) 0.6712; (R1) 0.6755; More...

AUD/USD recovers ahead of 0.6641 resistance but stays below 0.6850 resistance. Intraday bias remains neutral first. Again, considering bearish divergence condition in 4 hour MACD, break of 0.6641 support should indicate short term topping, following rejection by 0.6871 fibonacci level. Intraday bias will be back on the downside for 0.6521 resistance turned support first. However, sustained break of 0.6871 will extend the rise from 0.6169 towards 55 week EMA at 0.6922.

In the bigger picture, a medium term bottom is in place at 0.6160 already. But it's too early to call for trend reversal. Nevertheless, even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 0.6922) will raise the chance of the start of a bullish up trend. However, rejection by 0.6781 or 55 week EMA, followed by 0.6521 resistance turned support and retain medium term bearishness.

Australia Dollar leads commodity currencies higher, in otherwise still very quiet markets today. Prospect of further easing of restrictions is probably giving some industrial metals and oil prices a lift. But the positive sentiment is not much reflected in the global stock markets. Dollar is back under selling pressure, followed by Yen. European majors also turn weaker.

Technically, copper is now eyeing 3.9472 resistance with today's rally. Firm break there will resume the whole rebound from 3.1314. Next target will be 50% retracement of 5.0332 to 3.1314 at 4.0823. If happens, that would help support AUD, in particular against Dollar and Yen.

In Europe, at the time of writing, FTSE is up 0.07%. DAX is down -0.15%. CAC is down -0.06%. Germany 10-year yield is up 0.0279 at 1.814. Earlier in Asia, Nikkei dropped -0.40%. Hong Kong HSI rose 3.38%. China Shanghai SSE dropped -0.07%. Singapore Strait Times rose 0.33%. Japan 10-year JGB yield rose 0.0015 to 0.256.

US initial jobless claims rose to 230k, below expectations

US initial jobless claims rose 4k to 230k in the week ending December 3, below expectation of 245k. Four-week moving average of initial claims rose 1k to 230k.

Continuing claims rose 62k to 1671k in the week ending November 26. Four-week moving average of continuing claims rose 43k to 1582k.

Australia trade surplus little change at AUD 12.22B in Oct

Australia exports of goods and services dropped -0.9% mom to AUD 60.01B in October. Imports dropped -0.7% mom to AUD 47.85B. Trade surplus narrowed slightly from AUD 12.44B to AUD 12.22B, slightly above expectation of AUD 12.10B.

Looking at some details, the decline in exports was driven mainly by AUD -0.6B fall in gold while imports decline was driven by AUD -0.5B fall in energy. Fuel exports, dominated by LNG, rose AUD 0.3B to AUD 11.2B, and hit a new record high. Rural goods exports rose AUD 0.1B to AUD 7.2B, also a record high.

AUD/USD Mid-Day Report

Daily Pivots: (S1) 0.6682; (P) 0.6712; (R1) 0.6755; More...

AUD/USD recovers ahead of 0.6641 resistance but stays below 0.6850 resistance. Intraday bias remains neutral first. Again, considering bearish divergence condition in 4 hour MACD, break of 0.6641 support should indicate short term topping, following rejection by 0.6871 fibonacci level. Intraday bias will be back on the downside for 0.6521 resistance turned support first. However, sustained break of 0.6871 will extend the rise from 0.6169 towards 55 week EMA at 0.6922.

In the bigger picture, a medium term bottom is in place at 0.6160 already. But it's too early to call for trend reversal. Nevertheless, even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 0.6922) will raise the chance of the start of a bullish up trend. However, rejection by 0.6781 or 55 week EMA, followed by 0.6521 resistance turned support and retain medium term bearishness.

Economic Indicators Update

US initial jobless claims rose 4k to 230k in the week ending December 3, below expectation of 245k. Four-week moving average of initial claims rose 1k to 230k.

Continuing claims rose 62k to 1671k in the week ending November 26. Four-week moving average of continuing claims rose 43k to 1582k.

Full release here.

At next week's meeting, we expect the ECB to deliver a 50bp rate hike with a hawkish twist. Specifically, we expect the ECB to present key principles of the end to reinvestments under the APP process (in which reinvestments will almost come to a full stop) and an open-ended wording for more rate hikes to come. This will be a compromise, which we believe will be palatable to both hawks and doves.

Nominal rates have repriced lower since the latest meeting in October by almost 40bp (10y EA GDP-weighted yield), while inflation has increased somewhat and as a result the 1y forwards have repriced back to late August levels. We expect the hawks to use the easing of financial conditions in the past weeks to argue for a more aggressive calibration, as textbook would say that the current ECB stance is not particularly restrictive.

The European economy fared surprisingly well in Q3, but we expect the ECB to have a mild recession in its baseline staff projections. For inflation, we expect the new staff projections to only point to headline inflation at the 2% target in 2025.

We currently expect ECB rate hikes into Q1 next year, with the deposit rate peaking at 2.75%, but with risks skewed for more hikes.

Full report in PDF.

The British pound is in negative territory on Thursday. In the European session, GBP/USD is trading at 1.2174, down 0.29%. We’ll get a look at inflation expectations in both the UK and the US on Friday, ahead of the key US inflation report next week.

It has been a rather quiet week on the economic calendar, save for the November PMIs out of the US and the UK. The PMIs reflect the different directions taken by the UK and US economies. In the UK, the Services PMI remained in negative territory, unchanged at 48.5. This points to contraction in the services sector, which has been hit by the cost-of-living crisis and economic uncertainty, which has dampened consumer spending. In the US, Services PMIs rose to 56.5, above the previous read of 54.4 and the consensus of 53.5. The services sector is showing expansion and this will lend support to the argument that the US economy is resilient enough to absorb additional rate hikes, as the Fed continues to battle high inflation.

BoE expected to raise by 50 bp

Like the Federal Reserve, the BoE has also circled inflation as public enemy number one, but Governor Bailey doesn’t have a strong economy to work with. With GDP in negative territory and inflation at a staggering 11.1%, the economy may already be experiencing stagflation. Despite this grim background, the BoE will have to keep raising rates in order to get the upper hand on inflation and keep inflation expectations in check.

The BoE is expected to raise rates by 50 bp next week, which would raise the cash rate to 3.50%. As rates continue to rise, there is the danger of the recession becoming deeper and lasting longer. This winter is likely to bring a rash of strikes from public workers, which will keep the BoE on guard for signs of a wage-price spiral, which could complicate the Bank’s efforts to curb inflation.

GBP/USD Technical

• 1.2169 and 1.2027 are the next support levels
• GBP/USD is testing support at 1.2169. Below, there is support at 1.2027

EURUSD has been in a nice and strong recovery from 0.9730 from where we can count five waves up, so wave (C)/(3) might have come to an end especially if we consider a divergence on the RSI. As such, a minimum of three waves of a pullback can be in play down from 1.06-1.07 resistance based on two 4h wave counts. Support is at 1.03-1.02.

The Euro remains constructive above solid supports at 1.0448/52 (10DMA / Fibo 38.2% of 1.0222/1.0594 upleg) which contained pullback after larger bulls failed to break pivotal Fibo barrier at 1.0578 (Fibo 38.2% of larger 1.2266/0.9535 downtrend).

Daily studies remain in bullish setup and support the action, however, bullish weekly close with minimum requirement on close above Monday’s high (1.0550) is needed to confirm bear-trap under 1.0452 Fibo support and additionally support near-term action.

On the other hand, overbought weekly studies warn that bulls may lose traction, with bearish weekly close to signal bull-trap above 1.0578 Fibo barrier and increase risk of deeper pullback, which would look for confirmation on sustained break of 10DMA.

Res: 1.0550; 1.0578; 1.0608; 1.0700.
Sup: 1.0448; 1.0397; 1.0353; 1.0290.