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WTI crude rallied after the EIA report showed a larger-than-expected fall in US inventories.

The bulls are looking to hold onto their recent gains after they cleared the 30-day moving average and daily resistance at 73.20. 79.00 from November’s sharp sell-off is a major hurdle ahead. A bullish breakout could put the rally back on track.

The RSI’s overextension may cause a brief pullback. The 38.2% Fibonacci retracement level is an area of interest as it coincides with the previous low at 72.60.

The Dax 40 climbed higher as investors favor value stocks in telecoms, transportation, and utilities.

A break above December’s high at 15840 is a strong signal that the bulls may have had the last word. Trend followers would jump in, in anticipation of continuing above the psychological level of 16000.

The RSI’s overbought situation could prompt intraday buyers to take profit. The previous resistance 15700 (now turned support) is the first level to evaluate buying interest. 15500 is the second support in case of a deeper pullback.

Growing risk appetite weighs on a safer US dollar. The rally above 1.3360 confirms that short-term sentiment has turned around.

However, the push might have run out of steam as the RSI shows a bearish divergence. The deceleration indicates limited buying interest after the price went parabolic.

1.3400 is an immediate support. Its breach could trigger a correction and force the latest buyers out. Then 1.3300 would be the next support. 1.3500 is a major resistance from the daily chart.

ECB Governing Council member Klaas Knot said he had a "different view" to ECB's projection that inflation will fall back to 1.8% after 2022. He said, "I think the chance we remain stuck above 2% is just as big. Not far above 2%, but still."

Separately, another governing council member Ignazio Visco said, "(Inflation) forecasts below 2% in 2023-24 are of course subject to both downside and upside risks."

General trend

• South Korea’s industrial production rebounded in Nov amid rise in auto output [similar trend was seen in Japan’s Nov IP data].
• USD/JPY traded above ¥115 [first time since late Nov].
• US equity FUTs trade slightly lower after mixed Wall St. session.
• Nikkei 225 pared decline amid the rise in USD/JPY.
• Hang Seng and HK TECH indices rebounded; SenseTime and Chervon Holdings rise in HK debuts.
• Shanghai Composite ended morning trading near session highs (+0.8%).
• S&P ASX 200 traded generally flat.
• Samsung Biologics denied M&A speculation related to Biogen.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• Various markets will be closed for holiday on Fri (Japan and South Korea); Australia and Hong Kong to close early.
• South Korea expected to release Dec CPI data on Fri. (Dec 31st) – financial press.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened flat.
• HUM.AU Bank of Queensland said to be interested in humm - Aussie press (shares +7.8%).
• Bank of Queensland [BOQ.AU]: Follow up: said not pursuing transaction with humm.
• (AU) Australia PM Morrison: Omicron variant means country needs to reset the pandemic response; Have changed definition of close coronavirus contacts.

Japan

• Nikkei 225 opened -0.4%.
• 8802.JP Announces JV with Capitaland Development, to invest CNY1.5B to develop a business park in China’s Suzhou New District.
• USD/JPY tests above ¥115 (last tested in late Nov, which hadn’t previously happened since 2017).
• (JP) Nikkei Poll shows ~18% of companies plan to raise wages by 3.0% [PM Kishida target for wage growth].

Korea

• Kospi opened +0.2%.
• (KR) South Korea Nov Industrial Production M/M: 5.1% v 2.5%e (Highest since June 2020); Y/Y: 5.9% v 3.4%e.
• (KR) South Korea Nov Retail Sales M/M: -1.9% v 0.2% prior; Y/Y: 4.6% v 7.4% prior.
• (KR) South Korea Nov Cyclical Leading Index Change: -0.4 v -0.4 prior.

China/Hong Kong

• Hang Seng opened +0.2%; Shanghai Composite opened flat.
• 3333.HK Reportedly owes $255M of interest on two dollar bonds and some bondholders have yet to receive coupons due Tuesday (Dec 28th) - press.
• DIDI Reports Q3 (CNY) -25.91 v nil y/y; Rev 42.7B v 43.4B y/y, board approves plans to list on Hong Kong Exchange.
• (CN) Former China PBOC Official Sheng Songcheng: Calls for easing of macro policy as soon as possible to boost vitality of participants - China Daily.
• 6185.HK Mexico said to be cutting vaccine order by >50%, Mexico noting that it is clear that company will deliver far fewer vaccines than agreed upon – press.
• (CN) China PBOC sets Yuan reference rate: 6.3674 v 6.3735 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY100B in 7-day reverse repos v CNY200B prior; Net inject: CNY90B v CNY190B prior.
• 9898.HK Alibaba said to explore options for its Weibo stake with some state firms, including Shanghai Media Group - press.
• (CN) China Govt: Regional Comprehensive Economic Partnership (RCEP) trade deal will offset coronavirus negative impact on economy.
• (CN) China Finance Ministry official Wang Xiaolong said China will issue a record amount of Treasury bonds in 2022, will guide overall interest rates lower for the record amount of 2022 issuance - financial press.
• (CN) China Privately held refiners said to have receive a 109Mt import quota for crude.
• (CN) China Vice Commerce Min: Reiterates China will face an unprecedented degree of difficultly in 2022 in stabilizing foreign trade; Expects trade >20% higher at $6.0T in 2021.
• (CN) China President Xi to deliver New Year speech on Fri [Dec 31st] at 7pm local time - Xinhua.

North America

• JNJ: Said that the co's booster has cut omicron related hospitalizations in South Africa by up to 85% - US financial press.
• BIIB Samsung Group reportedly in talks to acquire Biogen for over $40B - Korean press.
• INTC Hynix confirms to pay out ~$7.0B out of total $9.0B for acquisition of NAND flash unit after phase 1 deal completion.
• TPGY TPG Pace Beneficial Finance and EVBox Group mutually agree to terminate business combination agreement.
• (US) Defense Sec Austin ordered group of warships to remain in Mediterranean Sea, amid growing tensions between Russia and Ukraine - NYP.
• (US) Sec of State Blinken calls on China to stop targeting Hong Kong journalists.

Europe/Middle East

• (SA) Saudi Arabia King: Oil market stability and balance is a pillar of Saudi energy policy, important that all producers comply with OPEC+ agreement, its essential to market stability.
• (RU) Follow Up: US President Biden and Russia President Putin to hold a phone call at 15:30ET.
• (TR) Turkey has increased deposit insurance limit to TRY200K.

Levels as of 00:20 ET

• Nikkei 225, -0.3%, ASX 200 flat , Hang Seng +0.2%; Shanghai Composite +0.8% ; Kospi -0.4%.
• Equity S&P500 Futures: flat; Nasdaq100 flat, Dax flat; FTSE100 -0.1%.
• EUR 1.1360-1.1332 ; JPY 115.06-114.93 ; AUD 0.7268-0.7244 ;NZD 0.6849-0.6826.
• Gold -0.3% at $1,800/oz; Crude Oil +0.3% at $76.79/brl; Copper -0.3% at $4.4025/lb.

Daily Pivots: (S1) 154.39; (P) 154.76; (R1) 155.47; More...

GB/JPY's rise continues today and break of 154.70 resistance should confirm that correction from 158.19 has completed with three waves down to 148.94, after defending 148.93 key support. Intraday bias remains on the upside for retesting 158.19 high next. On the downside, below 153.97 minor support will turn intraday bias neutral and bring consolidations. But retreat should be contained by 152.60 resistance turned support to bring another rally.

In the bigger picture, strong rebound from 148.93 key structural support will retain medium term bullishness. Firm break of 158.19 high will resume whole up trend from 123.94 (2020 low), to 61.8% retracement of 195.86 to 122.75 at 167.93. Nevertheless, firm break of 148.93 will bring deeper correction to 38.2% retracement of 123.94 to 158.19 at 145.10, and possibly further lower, as a correction to up trend from 123.94 at least

Daily Pivots: (S1) 129.93; (P) 130.24; (R1) 130.83; More....

Intraday bias in EUR/JPY remains on the upside for the moment. Whole consolidation from 134.11 could have completed with three waves down to 127.36, ahead of 126.58 medium term fibonacci level. Further rally would be seen to retest 133.44/134.11 resistance zone. On the downside, however, break of 129.25 minor support will dampen this bullish view and turn intraday bias neutral first.

In the bigger picture, as long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of medium term bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

Daily Pivots: (S1) 1.5609; (P) 1.5640; (R1) 1.5685; More...

Intraday bias in EUR/AUD remains mildly on the downside. As noted before, rebound from 1.5354 should have completed with three waves up to 1.6168. Deeper fall would be seen to 1.5250/5354 support zone. On the upside, break of 1.5898 is needed to indicate short term bottoming. Otherwise, further decline is in favor in case of recovery.

In the bigger picture, medium term outlook remains neutral for the moment. Rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low. Further rise cannot be ruled out, but even in that case, strong resistance should be seen at 38.2% retracement of 1.9799 to 1.5250 at 1.6988. Larger down trend from 1.9799 is in favor to extend through 1.5250 at a later stage.

Daily Pivots: (S1) 0.8403; (P) 0.8414; (R1) 0.8425; More...

Intraday bias in EUR/GBP is mildly on the downside for 0.8379 support. Firm break there will resume larger down trend from 0.9499 towards long term support at 0.8276. On the upside, above 0.8462 minor resistance will turn intraday bias neutral first.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8593 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8593 will now be an early sign of medium term bottoming. Further break of 0.8656 will pave the way to 38.2% retracement of 0.9499 to 0.8379 at 0.8807.

Daily Pivots: (S1) 1.0367; (P) 1.0375; (R1) 1.0387; More....

Intraday bias in EUR/CHF remains mildly on the downside. Current down trend from 1.1149 should target 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next. On the upside, however, break of 1.0432 minor resistance will indicate short term bottoming, and turn bias back to the upside for 1.0465 resistance and above.

In the bigger picture, long term down trend from 1.2004 (2018 high) is now extending. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. On the upside, break of 1.0505 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.