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The price of crude oil moved sideways after positive crude oil inventories data from the United States. According to the Energy Information Administration (EIA), inventories declined by more than 4.71 million barrels last week. This was a deeper drawdown than the median estimate of 2.7 million barrels. It was also bigger than the American Petroleum Institute (API) estimate of 3.6 million barrels Oil prices also held steady after countries like the US and UK announced more policies to curb the spread of the Omicron variant. For example, the UK announced more orders of drugs by Merck and Pfizer.

The US dollar index was relatively unchanged as the market reflected on the latest economic data from the United States. The Conference Board published strong consumer confidence data. The number showed that confidence rose from 111.9 in November to 115.8 in December. This was a bigger increase than analysts were expecting. Further data showed that the existing home sales rose from 6.34 million to more than 6.46 million. Additionally, the country’s statistics agency said that the economy expanded by 2.3% in the third quarter. Later today, the key data to watch will be the latest US durable goods, inflation, new home sales, and initial jobless claims numbers.

US equities were in the green on Wednesday as volume declined. The Dow Jones index rose by more than 135 points, while the S&P 500 and Nasdaq 100 indices rose by more than 0.50%. This made it the second straight day of gains after the equities crashed hard on Monday. This performance was tied to strong US economic numbers and the fact that the Omicron variant’s symptoms don’t look severe. A study published on Wednesday showed that the illness has an 80% lower risk of hospitalization.

XBRUSD

The XBRUSD pair tilted higher in the evening session. The pair rose to a high of 74.40, which was significantly higher than last week’s low of 69.24. It has also moved slightly above the middle line of the Bollinger Bands. Oscillators like the Relative Strength Index (RSI) have moved to the neutral level. It has also formed a small bullish flag pattern. Therefore, the pair will likely keep rising as bulls target the key resistance at 75.50.

EURUSD

The EURUSD pair rose to a high of 1.1323, which was the highest level since December 17th. On the four-hour chart, the pair moved slightly above the 25-day moving average. It is also still slightly below the upper side of the rectangle channel. The RSI and the momentum oscillator also moved slightly higher. Therefore, the pair will likely keep rising as bulls target the key resistance at 1.1357. This price is along the upper side of the rectangle pattern.

NZDUSD

The NZDUSD pair rose to 0.6810, which was the highest level since December 16th. The price is significantly above the key support at 0.6735, which was the lowest level on December 4. The pair moved above the 25-day moving average and is along the upper side of the Bollinger Bands. The MACD also moved slightly above the neutral level. Therefore, the pair will likely keep rising later today.

Daily Pivots: (S1) 151.48; (P) 152.03; (R1) 152.96; More...

Break of 152.60 resistance suggests that GBP/JPY's rebound from 148.94 is resuming. More importantly, the break of 55 day EMA also argues that correction from 158.19 is finished after defending 148.93 support. Intraday bias is back on the upside for 154.70 resistance first. Firm break there should confirm this bullish case and target a test on 158.19 high.

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). 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) 128.73; (P) 129.12; (R1) 129.66; More....

Intraday bias in EUR/JPY remains neutral first. Outlook stays bearish with 129.62 resistance intact. On the downside, firm break of 127.36 will resume fall from 133.44 and larger pattern from 134.11. Next target is 126.58 medium term fibonacci level. However, firm break of 129.62 will now argue that fall from 133.44 has completed, and turn bias back to the upside for this resistance.

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) 0.8472; (P) 0.8491; (R1) 0.8503; More...

Intraday bias in EUR/GBP remains neutral and outlook is unchanged. On the upside, firm break of 0.8593 resistance will be the first sign of larger bullish reversal and target 0.8656 resistance next. On the downside, however, break of 0.8452 will turn bias back to the downside to retest 0.8379 low instead.

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) 1.5649; (P) 1.5740; (R1) 1.5794; More...

Intraday bias in EUR/AUD remains neutral for the moment. On the downside, break of 1.5655 will resume the fall from 1.6168 to retest 1.5253/5254 support zone. On the upside, however, break of will turn bias back to the upside for retesting 1.6168 first. Break there will resume rise from 1.5354 to 1.6434 resistance.

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) 1.0410; (P) 1.0423; (R1) 1.0429; More....

Intraday bias in EUR/CHF remains neutral at this point. As long as 1.0511 resistance holds, deeper decline is still expected. On the downside, break of 1.0365 will resume larger down trend from 1.1149 to 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next.

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 1.0694 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.

Short-term Elliott wave view in GBPUSD suggests that a decline to $1.3160 low ended the cycle from October 20, 2021 peak in wave (A). Up from there, the pair is correcting that cycle in wave (B) bounce. The internals of that bounce is unfolding as Elliott wave flat correction with the sub-division of 3-3-5 structure before downtrend resume again. While the initial bounce in wave A unfolded as a lesser degree zigzag structure. Whereas the initial bounce to $1.3283 high ended wave ((a)). Wave ((b)) ended at $1.3169 low and wave ((c)) ended at $1.3375 high.

Down from there, the pair declined in another 3 swings within wave B where wave ((a)) ended at a $1.3300 low. Wave ((b)) ended at $1.3339 high and wave ((c)) ended at $1.3170 low. Since then, the pair has started the C leg in an impulse sequence. Near-term, as far as dips remain above $1.3170 low the pair is expected to reach $1.3389- $1.3513 blue box area. From there, the next leg lower is expected to take place looking for more downside ideally. Or the pair should fail lower for a 3 wave pullback at least.

GBP/USD 1 hour Elliott Wave chart

Market movers today

• A range of economic data releases from the US will be in focus ahead of Christmas, the most important being the November private consumption data. High goods demand has been a key driver of inflation pressures this year, and while the November data is backward-looking, the rising pandemic uncertainty points to little easing over the winter.
• Consensus looks for a high print for the Fed's preferred PCE inflation measure following the high CPI earlier. November durable goods orders and weekly jobless claims will also be released.

The 60 second overview

Risk sentiment: Markets are heading into Christmas in a positive spirit after studies give encouraging signals that omicron might be less dangerous than the delta variant. A more infectious but a less dangerous variant has the potential to eventually bring the pandemic to an end as herd immunity could be reached more broadly without overwhelming hospital systems. From an economy's viewpoint, a scenario like this would imply less need for severe restrictions and more normal economic activity leading to an eventual easing in supply-side bottlenecks as well as a normalisation in consumption patterns.

Omicron: A handful of studies regarding omicron now indicate that the variant could be less likely to cause a severe disease than its predecessor delta variant. Bloomberg refers to two studies from UK that indicate a significantly lower risk of hospitalisation from omicron. FT adds studies from Denmark and South Africa with similar findings. Despite early optimism, researchers continue to highlight that the results are indicative and while the variant could be less dangerous on an individual level it could still lead to overwhelming of hospital capacities if the overall caseloads rise to unprecedented levels. Also, several factors could skew the results: 1) not all studies control for earlier infection or vaccination status, which reduce the risk of a severe disease 2), sample demographics may not be generalised to all populations. For example, the South African population is younger than European populations and the Danish sample is also skewed since the recent outbreaks have been concentrated among younger groups. 3) It has been less than a month since omicron was labelled a variant of concern by the WHO and since there is a lag between a patient catching infection and requiring hospital treatment, data remains limited.

Further on COVID-19, the US has approved Pfizer's drug as the first oral and at-home treatment for people over 12 but the White House has warned that it will take months until the drug is available at large quantities. Also, Philippines has authorised Merck's pill for adult treatments. Meanwhile, new cases continue to rise in Europe with new daily cases in UK exceeding 100,000 for the first time yesterday.

Equities: Yesterday added to the big Tuesday rally with equities higher across the US and Europe. Risk on, with cyclicals and growth beating the tape. Tech and real estate one of the best sectors. The latter is also the sector that has managed best in the December volatility, on the back of its defensive nature and the depressed long end yields. In the US, Dow closed up 0.7%, S&P 500 1%, Nasdaq 1.2% and Russell 2000 0.9%. VIX dipped back below 20. Asian markets moderately higher this morning and US futures point slightly higher.

FI: Neutral risk sentiment yesterday with a modest rise in yields of 1.5bp in German 10Y bonds and 2bp rise in 5Y bonds that saw the highest rise in yields across the curve. ECB's Rehn (dove) said that ECB should react if inflation rises too much which could have added a bit more pressure on the shorter end of the curve fuelling the already ongoing rise in short yields from the morning with increasing French PPI announced.

FX: The CZK stands out among CEE peers (PLN and HUF) and will likely strengthen further versus peers and EUR.

Credit: Tuesday's positive sentiment extended into Wednesday where iTraxx Xover tightened a further 3bp and Main 0.3bp. Hence, Xover and Main have now almost entirely reversed the widening from the second half of November and are now both tighter than where they opened after the roll in September. HY bonds closed 2bp tighter and IG 0.5bp tighter.

General trend

• USD trades generally firmer.
• Hang Seng has traded modestly higher; JD.com declines by >10% on Tencent stake sale news, Tencent rises by over 4%; Alibaba drops amid continued regulatory concerns.
• Shanghai Composite lagged during the morning session; Property index declined.
• Nikkei 225 has remained slightly higher.
• S&P ASX 200 also saw slight rise.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened +0.0%.
• SYR.AU Executes offtake agreement with Tesla (shares +23%).
• BGA.AU Guides FY22 (A$) EBITDA 195-215M v 142M y/y; Sees upward pressure on farm gate milk prices to remain for the year (shares -11%).
• EVN.AU Withdraws from Murchison JV; Effective Jan 17th; Enterprise Metals to retain the project (shares +11%).
• (AU) Australia Nov Private Sector Credit M/M: 0.9% v 0.5% prior; Y/Y: 6.6% v 5.7% prior.
• (NZ) Reserve Bank of New Zealand (RBNZ) Nov Housing Lending growth slowed to 0.8% m/m, and increased 11.0% y/y; Annual growth below the peak in July.

Japan

• Nikkei 225 opened +0.5%.
• (JP) Japan PM Kishida: Aiming for a V shaped recovery from pandemic.
• (JP) Japan Govt confirms that it expects FY22/23 new bond issuance at ¥36.9T, down ~¥6.7T vs initial est for FY21/22 ; Revenues at ¥65.2T; Confirms size of budget at ¥107.6T, largest budget in history ( Size in line with speculation).
• (JP) Experts continue to puzzle over why Japan has seen a sudden drop in COVID cases and deaths recently, -99% from peak, while the rest of the world is spiking.
• (JP) Japan Investors Net Buying of Foreign Bonds: -¥1.6T v +¥457.0B prior; Foreign Net Buying of Japan Stocks: -¥841.3B v -¥602.9B prior.
• 4523.JP Confirms Japan’s First Committee on New Drugs of The Pharmaceutical Affairs and Food Sanitation Council seeks additional data; Aducanumab remains under review.
• (JP) Japan Govt confirms real FY22 GDP Estimates at 3.2%, up from 2.2% - (JP) Japan Chief Cabinet Sec Matsuno: Not thinking of easing coronavirus restrictions now; Expects economic outlook to return to pre coronavirus levels by Mar (In line).
• (JP) Japan Industry Ministry (METI): Expects Jan quarter [Q1] crude steel production -1.4% q/q.
• (JP) Bank of Japan (BOJ) Gov Kuroda: monetary Policy played key role in early recovery from pandemic; Interest rates most important tools for monetary policy, have indrect impact on economy on FX moves and Equities.

Korea

• Kospi opened +0.5%.
• (KR) South Korea Unification Min Lee In-young: Korean peninsula is at an "extremely critical juncture" between peace and tensions"; next year uncertainties could increase if the current deadlock in nuclear negotiations and lack of dialogue continue.
• (KR) Bank of Korea (BOK) notes that Housing prices and household debt are major risks to financial stability - Yonhap.
• (KR) Bank of Korea (BOK) To join US Fed FIMA Repo Facility that was created in Mar 2020.

China/Hong Kong

• Hang Seng opened +0.2%; Shanghai Composite opened +0.1%.
• (CN) China PBOC sets Yuan reference rate: 6.3651 v 6.3703 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior and CNY10B in 14-day reverse repos v CNY10B prior; Net inject CNY10B v Net inject CNY10B prior.
• (CN) China Sec Journal: PBOC expected to maintain ample liquidity through early next year.
• 700.HK Declares interim special dividend payable in JD.com shares; To pay 1 Class A share of JD.com for every 21 shares held by shareholders.
• 941.HK Completes 422M share strategic placement and upsized 436.0M (prior 253.7M) online offering subscription at CNY57.58/shr.
• (CN) China announces Lockdown in Xi'an City [capital of Shaanxi Province in central China] due to increasing coronavirus cases.
• (CN) Follow Up: China City Xi'an has cancelled all domestic flights after locking down the city over coronavirus.
• (CN) China Nov Swift Global Payments (CNY): 2.14% v 1.85% prior.

Other

• (TW) Taiwan Cabinet planning to advance an additional NT$430B of loans under the three “Invest Taiwan” programs for private businesses to encourage local investment - local press.

North America

• INTC China regulator approves Intel Hynix deal with conditions – press.
• (US) Supreme Court to hear arguments on Coronavirus vaccine mandates on Jan 7th.
• (US) Biden administration to extend pause on student loan payments through May 2022 (set to expire early 2022).

Europe

• (UK) Nov Car Manufacturing 75.8K unit, -28.7% y/y; YTD car manufacturing 797.3K units, -6.2% y/y - SMMT.

Levels as of 00:20 ET

• Nikkei 225, +0.6%, ASX 200 +0.3% , Hang Seng +0.2%; Shanghai Composite flat ; Kospi +0.2%.
• Equity S&P500 Futures: +0.1%; Nasdaq100 flat, Dax -0.1%; FTSE100 +0.5%.
• EUR 1.1342-1.1318 ; JPY 114.21-114.07 ; AUD 0.7221-0.7195 ;NZD 0.6822-0.6795.
• Gold % at $/oz; Crude Oil +0.3% at $72.96/brl; Copper -0.2% at $4.3795/lb.

Daily Pivots: (S1) 1.1281; (P) 1.1312; (R1) 1.1359; More...

Intraday bias in EUR/USD remains neutral as range trading continues. Further decline is still in favor as long as 1.1382 resistance holds. Break of 1.1185 will resume larger decline from 1.2348. Next target is 161.8% projection of 1.2265 to 1.1663 from 1.1908 at 1.0934. On the upside, firm break of 1.1382 resistance should confirm short term bottoming at 1.1186. Intraday bias will be turned back to the upside for 55 day EMA (now at 1.1415) and above.

In the bigger picture, there are various ways of interpreting the fall from 1.2348 (2021 high). It could be a correction to rise from 1.0635 (2020 low), the fourth leg of a sideway pattern from 1.0339 (2017 low), or resuming long term down trend. In any case, outlook will now stay bearish as long as 1.1703 support turned resistance holds. Sustained break of 61.8% retracement of 1.0635 to 1.2348 at 1.1289 would pave the way back to 1.0635.