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Market movers today

The most important data releases today will be the November Flash PMIs from the euro area, UK and US. We expect the figures to provide further evidence of GDP contraction in the euro area already during Q4, while we still see the US economy continuing its modest growth.

From the US, October durable goods orders and new home sales as well as the latest MBA mortgage figures will be released. While the broader economy is still in decent shape, especially the housing market has already showed clear signs of weakness.

Finally, FOMC minutes will be released tonight, and markets will naturally pay close attention to any hints about the future rate hike outlook.

The 60 second overview

The global economy should avoid a recession next year despite a long lasting inflation problem. That is the overall picture from the OECD's new economic outlook. The euro area and the US slows to 0.5% growth next year. At least for the euro area that looks like a good case scenario with inflation remaining at very high levels in the outlook.

Consumers: Euro area consumer confidence increased in November for the second month straight, as fiscal measures combined with falling natural gas and electricity prices looks to have broken the downward trend. Despite the recovery, confidence remains at deeply recessionary levels and still points to a significant decline in private consumption during Q4.

Gas price cap: After months of wrangling and fraught negotiations, the Commission proposed a cap level of 275 euros per megawatt-hour, well above current levels of about 120 euros, but below the highs the continent suffered in the summer. The proposal still needs approval from national governments and will be discussed by energy ministers at their emergency meeting in Brussels on Thursday, see euronews.

Record rate hike: The Reserve Bank of New Zealand (RBNZ) hiked the official cash rate by 75bp overnight to 4.25%, in line with our expectations. Markets were divided between 50 and 75bp ahead of the meeting, but RBNZ had discussed hiking by even 100bp, which together with the overall hawkish communication supported NZD FX. Earlier in the fall RBNZ was already eyeing the end of its hiking cycle, but the clear upside surprise in the Q3 underlying inflation combined with the recent rise in inflation expectations forced it to up the hiking pace from the earlier 50bp instead. We have highlighted similar risks of further tightening pressures elsewhere as well, especially in the US. Despite RBNZ also now forecasting a recession (GDP -1%) in 2023, markets currently price in the terminal rate at 5.5%.

Equities: Equities higher yesterday with defensives outperforming cyclicals for the fifth day in a row. VIX also lower for the fifth consecutive session just as value outperforming growth for the fifth session in a row. Yields lower and hence the negative correlation between yields and equities continuing. In US Dow +1.2%, S&P 500 +1.4%, Nasdaq +1.4% and Russell 2000 +1.2%. Asian stocks higher this morning with New Zealand going against the trend after the RBNZ lifted yields by 75bp overnight. European futures are higher while US futures are mixed this morning.

FI: Global bond yields keep declining and the curves continue to invert as the market braces for more rate hikes and increasing risk of a recession. 10Y Treasuries fell by 6bp, and the slope of the 2Y-10Y US curve is -75bp, a level not seen since 1981.

FX: The USD has erased part of its recent gains with EUR/USD bouncing back to the 1.03 level. NOK had a strong session yesterday with EUR/NOK now back in the low end of the recent range while EUR/SEK has settled just south of the 11-mark ahead of Thursday's Riksbank meeting. After the recent decline in EUR/GBP, the cross yesterday stabilised just north of 0.8650.

Credit: Credit indices improved yesterday and we saw decent activity in both primary and secondary markets. ITraxx Main tightened 3.2bp to 92.4bp and iTraxx Xover tightened 15.8bp to 461.2bp. The latter is the tightest closing level we have seen in over 5 months.

Daily Pivots: (S1) 167.34; (P) 167.83; (R1) 168.30; More...

Intraday bias in GBP/JPY stays mildly on the upside as rebound from 163.02 is still in progress. Correction from 172.11 might have completed at 163.20, after hitting 38.2% retracement of 148.93 to 172.11 at 163.25. Further rise would be seen to retest 172.11 high. On the downside, however, below 166.08 minor support will turn intraday bias neutral again first.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 123.94 (2020 low) could still resume through 172.11 high at a later stage. However, firm break of 159.71 support will argue that it's already in correction to the up trend from 123.94, and deeper decline would be seen back towards 148.93 support.

Daily Pivots: (S1) 145.02; (P) 145.37; (R1) 145.83; More....

As EUR/JPY's recovery from 142.54 extends, focus is back on 147.09 minor resistance. As noted before, correction from 148.38 might have completed at 142.54. Break of 147.09 resistance will indicate that larger up trend is ready to resume through 148.38 high. However, break of 144.32 minor support will dampen this case and bring retest of 142.54 support instead.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 114.42 (2020 low) could still resume through 148.38 to 149.76 (2014 high). However, break of 137.32 support argue that a medium term correction has already started to correct the whole up trend from 114.42.

Daily Pivots: (S1) 0.8640; (P) 0.8661; (R1) 0.8691; More...

EUR/GBP lost downside momentum well ahead of 0.8570 support, as seen in 4 hour MACD. Intraday bias is turned neutral again first. On the downside, firm break of 0.8570 will resume the whole decline form 0.9267, towards 0.8338 support. On the upside, above 0.8827 will resume the rebound from 0.8570 and flip bias back to the upside instead.

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 0.8869 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) 1.5453; (P) 1.5489; (R1) 1.5536; More...

EUR/AUD's corrective pattern from 1.5704 is still extending and intraday bias remains neutral. In case of another fall, downside should be contained by 55 day EMA (now at 1.5298) to bring rebound. On the upside, decisive break of 1.5704 will resume larger rise from 1.4281. However, sustained trading below 55 day EMA will bring deeper correction towards 1.4965 resistance turned support.

In the bigger picture, a medium term bottom should be in place at 1.4281, on bullish convergence condition in daily MACD. Further rise would be seen back to 1.6434 key resistance next. Break of 1.4965 resistance turned support is needed to indicate reversal. Otherwise, further rally will remain in favor.

Daily Pivots: (S1) 0.9770; (P) 0.9802; (R1) 0.9839; More....

Intraday bias in EUR/CHF stays neutral first as choppy sideway 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, rejection by 0.9970 support turned resistance retains medium term bearishness. That is, while 0.9407 is a medium term bottom, price actions from there would develope into a corrective pattern rather than a 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) 1.3336; (P) 1.3402; (R1) 1.3438; More....

Intraday bias in USD/CAD remains neutral for the moment, as range trading continues. On the upside, firm break of 1.3494 will indicate that correction from 1.3976 has completed at 1.3224, ahead of 1.3207 cluster support (61.8% retracement of 1.2726 to 1.3976 at 1.3204). Intraday bias will be turned back to the upside for 1.3807/3976 resistance zone. However, on the downside, sustained break of 1.3204/7 will carry larger bearish implication and target 1.2952 support next.

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).

Daily Pivots: (S1) 0.6613; (P) 0.6633; (R1) 0.6667; More...

Intraday bias in AUD/USD remains neutral for the moment. Further rise is expected as long as 0.6521 resistance turned support holds. On the upside, break of 0.6796 will resume the rise from 0.6169 to 0.6871 fibonacci level. However, sustained break of 0.6521 will argue that whole rebound from 0.6169 is over, and bring deeper fall to retest this low.

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 0.6923) will raise the chance of the start of a bullish up trend. This week now remain the favored case as long as 0.6521 resistance turned support holds.

Daily Pivots: (S1) 140.79; (P) 141.52; (R1) 141.94; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. With 142.45 minor resistance intact, further decline is in favor. Break of 139.63 minor support will bring retest of 137.66 low first. Break there will resume the decline from 151.93, to 133.07 fibonacci level, as a correction to the larger up trend. Nevertheless, firm break of 142.45 will turn bias back to the upside for stronger rebound to 55 day EMA (now at 143.32) and above.

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 130.28).

Daily Pivots: (S1) 0.9489; (P) 0.9541; (R1) 0.9572; More...

Intraday bias in USD/CHF stays neutral at this point. Near term outlook stays bearish with 0.9680 minor resistance intact. On the downside, break of 0.9474 minor support will bring retest of 0.9355 low first. Break there will resume the fall from 1.0146 to 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 0.9767) holds.