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USD/JPY accelerates to as high as 115.80 so far today, and breaks 115.51 resistance to resume the medium term up trend from 102.58. The rally comes as supported by strong rise in US treasury yields overnight, and the strength of Nikkei (which is up 1.5% or 438 pts at the time of writing).

Technically, the strong support from 55 day EMA is taken as a solid bullish sign. Next target will be 61.8% projection of 109.11 to 115.51 from 112.52 at 116.67. Sustained break there could trigger further upside acceleration to 100% projection at 118.92, which is close to 118.65 long term resistance. Decisive break there would pave the way to 125.85 (2015 high), probably within the first half of the year.

China Caixin PMI Manufacturing rose to 50.9 in December, up from November's 49.9, above expectation of 50.0. The data signaled a renewed improvement in the sector with best reading since June. Caixin said rise in output was stronger amid renewed upturn in sales. Input cost inflation eased to 19-month low. Business confidence weakened amid pandemic and supply chain worries.

Wang Zhe, Senior Economist at Caixin Insight Group said: "To sum up, manufacturing demand and supply improved in December with easing inflationary pressure. But the job market was still under pressure and businesses were less optimistic, indicating unstable economic recovery. The repeated Covid-19 flare-ups and sluggish overseas demand were factors of instability."

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Japan PMI Manufacturing was finalized at 54.3 in December, slightly lower than November's 54.5. But that was well above 2021's average of 52.7. Markit said output and new orders increased at slower rates. Employment level rose at fastest pace in nearly four years. Business optimism eased to four-month low.

Usamah Bhatti, Economist at IHS Markit, said: "Domestic markets were buoyed by a gradual recovery from the COVID-19 pandemic however a sharp rise in cases, particularly in South Korea, hindered international demand and continued to disrupt supply chains across the sector... Delivery delays and material shortages remained a dampener on production and sales... Average lead times across the final quarter of 2021 deteriorated further... Though still optimistic, Japanese goods producers were wary of the continued impact of the pandemic and supply chain disruption, which resulted in confidence dipping to the softest since August."

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Key Highlights

• GBP/USD started a fresh increase and climbed above 1.3500.
• A key rising channel is forming with support near 1.3475 on the 4-hours chart.
• EUR/USD seems to be facing another hurdle near 1.1380.
• The US ISM Manufacturing Index could drop from 61.1 to 60.2 in Dec 2021.

GBP/USD Technical Analysis

The British Pound started a fresh increase from the 1.3200 zone against the US Dollar. GBP/USD climbed above the 1.3350 and 1.3400 resistance levels to move into a positive zone.

Looking at the 4-hours chart, the pair settled above the 1.3400 level, the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

The pair even climbed above the 1.3500 level and tested 1.3550. It is now consolidating gains and facing resistance near 1.3550. The next major resistance is near the 1.3620 level. A close above 1.3620 could open the doors for a steady increase.

On the downside, an immediate support is near the 1.3480 level. There is also a key rising channel forming with support near 1.3475 on the same chart.

A downside break below the channel support might send the pair towards 1.3420. Any more losses might send the pair towards the 1.3350 level and the 100 simple moving average (red, 4-hours).

Looking at EUR/USD, the pair surpassed the 1.1350 resistance, but there was no clear move above the 1.1380 and 1.1390 levels.

Economic Releases

• Germany’s Unemployment Change for Dec 2021 - Forecast -15K, versus -34K previous.
• Germany’s Unemployment Rate for Dec 2021 – Forecast 5.3%, versus 5.3% previous.
• UK Manufacturing PMI for Dec 2021 – Forecast 57.6, versus 57.6 previous.
• US ISM Manufacturing Index for Dec 2021 – Forecast 60.2, versus 61.1 previous.

Elliott Wave View in DAX (DAX-XET) suggests it is correcting cycle from last October, 2021 low in larger degree 3 swings. The decline is unfolding as a zig zag elliott wave structure. Down from November 18 2021 peak (16289.48), wave (A) ended at 15015.42 and rally in wave (B) is in progress. This wave (B) is forming a flat correction (3-3-5) where wave A made 3 swings up ending at 15834.04 and then we saw 3 swings down to 15060.10 to complete wave B. From this low we should see 5 swings rally to complete flat correction structure as wave C and also wave (B).

Up from wave B, wave ((i)) ended at 15296.08 and pullback in wave ((ii)) ended at 15206.95. Wave ((iii)) higher ended at 15974.79 and wave ((iv)) correction ended at 15803.59. Near term, expect the last rally wave ((v)) to end soon. This should complete wave C and wave (B) where we should see a market rejection to indicate wave (C) has started. This wave (C) should continue lower to break 15015.42 wave (A) low. Near term, as far as pivot at 16289.48 high stays intact, expect the Index to turn lower soon.

DAX 1 Hour Elliott Wave Chart

• USDCHF reversed from support level 0.9100
• Likely to rise to resistance level 0.9250

USDCHF currency pair recently reversed up from the support level 0.9100 (which has been repeatedly reversing the price from the middle of August).

The support zone near the support level 0.9100 was strengthened by the lower Bollinger Band and by the 61.8% Fibonacci correction of the upward price impulse from June.

USDCHF currency pair can be expected to rise further toward the next resistance level 0.9250 (which reversed the price multiple times in December).

• NZDUSD reversed from pivotal resistance level 0.6840
• Likely to test support level 0.6700

NZDUSD currency pair recently reversed down from the pivotal resistance level 0.6840 (former strong support from August) intersecting with the upper Bollinger Band and the 38.2% Fibonacci correction of the downward price impulse from November.

The resistance zone near the resistance level 0.6840 was strengthened by the upper Bollinger Band and by the 38.2% Fibonacci correction of the downward price impulse from November.

NZDUSD currency pair can be expected to fall further toward the next support level 0.6700 (which reversed the waves 1 and (b) in December).

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US PMI Manufacturing was finalized at 57.7 in December, down from November's 583. Markit said output expansion was muted, as firms registered slower upturn in new orders. Rate of cost inflation remained marked despite easing to softest since June. Backlogs of work rose at slowest pace for ten months.

Siân Jones, Senior Economist at IHS Markit said:

"December saw another subdued increase in US manufacturing output as material shortages and supplier delays dragged on. Although some reprieve was seen as supply chains deteriorated to the smallest extent since May, the impact of substantially longer lead times for inputs thwarted firms' ability to produce finished goods yet again.

"Adding to the sector's challenges was an ebb in client demand from the highs seen earlier in 2021, with new orders rising at the slowest pace for a year, largely linked to a reluctance at customers to place orders before inventories were worked through. Alongside a slight pick-up in hiring, softer demand conditions contributed to the slowest rise in backlogs of work for ten months.

"While shortages remained significant, the end of the year brought with it some signs that cost pressures have eased. The uptick in input prices was the slowest for six months, and firms recorded softer increases in selling prices amid efforts to entice customer spending."

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Dollar recoups losses; Euro and cyclicals retreat

The dollar ticked higher against most of its major rivals today, supported by the surging US Treasury yields, despite the risk-on sentiment in the first trading session of 2022. However, no major moves are expected in the forex spectrum as London, Europe’s main forex trading market, is closed today.

On the other hand, the euro is on the retreat after the final German PMI figure came out weaker-than-expected earlier in today’s session. Moreover, the spread of the Omicron variant in Europe seems likely to delay the ECB’s monetary tightening, inflicting further damage to the currency.

The commodity-linked currencies are struggling in the current session, even though most industrial commodity prices are nudging higher as investors and markets seem to be downplaying the impact of the Omicron variant on the global economy. Inversely, safe haven currencies such as the Japanese yen and the Swiss franc are inching lower as the increasing risk appetite in the markets has curtailed their safe haven demand.

The British pound has taken a hit today even after UK Prime Minister Boris Johnson announced that there will be no further restrictions imposed for the time being, but he also mentioned that the situation will be closely monitored and actions will be promptly taken if needed.

US stocks pick up from where they left off in 2021

Wall Street is set to extend its recent rally as the risk-on sentiment has boosted stock prices. More specifically, e-mini futures for the major US indexes have jumped in pre-market trade, indicating a higher open for today’s session. Furthermore, European indices are also marching higher today, further endorsing the improving risk tone in the markets.

In individual stock news, Tesla’s stock is surging in pre-market trade after the company announced that it sold a record of 308,600 vehicles in the last quarter of 2021.

Gold plunges; oil ticks slightly lower

Gold is experiencing a pullback but remains above the $1,800/oz mark today, heavily pressured by the stronger dollar, rising Treasury yields and improving risk sentiment. Despite edging higher early in the session, oil prices surrendered their gains and are currently trading lower ahead of the OPEC+ policy decision on Tuesday. OPEC+ is expected to stick to its planned output increases, an outcome that would be relatively neutral for oil prices