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Gold could not find enough buyers to overcome the 1,800 level during the previous sessions, with the spotlight shifting again towards the 1,784 support zone and the Ichimoku cloud.

The RSI and the MACD continue to flatten, while the former has also slipped back below its neutral threshold of 50, feeding pessimism that the bulls may gave up the battle.

An extension below 1,784 could activate a stronger bearish wave towards the 1,7661 level. Failure to hold above that floor could see a continuation towards the 1,745-1,750 restrictive region.

The 1,800 round number, could challenge any bullish attempts towards the 200-day SMA, which stands near the 1,809 barrier. Any breakout above this region may gather extra interest, with the price likely speeding up to 1,815. Yet, only a rally above 1,850 would violate the neutral trajectory and hence add credence to the bullish run.

In brief, despite the latest rebound off 1,750, dowside risks continue to linger in the background for gold. A break below 1,784 could trigger the next bearish round.

The price for gold passed the support of the 100-hour simple moving average near 1,790.00 on Tuesday afternoon. However, the price almost immediately found support in the 200-hour simple moving average, which kept the rate up until the middle of Wednesday. At mid-day on Wednesday, the price was approached by the resistance of the 50-hour SMA.

If the 50-hour SMA causes a decline, the price would need to pass the 200-hour simple moving average near 1,787.00, before aiming at the lower trend line of a channel down pattern near 1,775.00.

On the other hand, a recovery of the bullion would have to reach above the 50-hour SMA near 1,792.00. Afterwards, the upper trend line of the channel down pattern could act as resistance near 1,793.50. Close nearby, note the 100-hour simple moving average at 1,795.70.

The USD/JPY succeeded at its second attempt to reach a new December high level. By the middle of Wednesday's European trading hours, the rate had reached above the 114.30 level.

If the USD continues to gain against the Japanese Yen, the pair would have no technical resistance as high as the weekly R2 simple pivot point at 114.86. However, the pair needs to clearly pass the weekly R1 simple pivot point at 114.30.

A potential decline of the rate might look for support in the 114.00 mark and the zone at 113.88/113.95. Slightly below, take into account the 50, 100 and 200-hour simple moving averages and the weekly simple pivot point at 113.85/113.72.

The GBP/USD currency exchange rate has continued to move higher. At mid-day on Wednesday, the rate left below it the hourly simple moving averages, the weekly simple pivot point and the high level resistance zone near 1.3280. By 12:00 GMT, the GBP had reached the 1.3320 mark against the USD.

A continuation of the surge of the Pound against the US Dollar could result in the rate reaching the weekly R1 simple pivot point at 1.3357 and the December high level at 1.3375.

Meanwhile, a decline of the pair might look for support in the previously passed technical levels. Namely, note the 50, 100 and 200-hour simple moving averages, the weekly simple pivot point and the previous high level zone. All of these levels and indicators are located in the 1.3240/1.3290 zone.

During late Tuesday hours and early Wednesday's trading, the EUR/USD reached both below support and above resistance. The pair reached two times below the support of the weekly simple pivot point at 1.1276. At mid-day on Wednesday, the pair had recovered and moved above the 1.1302/1.1305 resistance zone.

In the case that the pair surges, it could reach for the resistance of the weekly R1 simple pivot point at 1.1329. Above the pivot point, note the December high level resistance zone near the 1.1360 level.

On the other hand, a potential decline of the Euro against the USD would need to pass the recent low levels and the 1.1260 mark, before aiming at the December low level zone at 1.1228/1.1236.

Cable keeps bullish tone for the second straight day and hit weekly high above 1.33 mark, following minor negative impact from weaker than expected.

UK GDP and improved sentiment on expectations that Omicron may cause limited damage to the economy that revived risk appetite.

Fresh bulls eye pivotal barrier at 1.3337 (50% retracement of 1.3513/1.3161 bear-leg/Daily Kijun-sen), close above which would sideline larger bears and open way for a stronger correction.

Broken 20DMA offers solid support at 1.3266, with close above here required to keep near-term bias with bulls.

Rising 14-d momentum is breaking into positive territory and supporting the action.

Res: 1.3337, 1.3353, 1.3379, 1.3430.
Sup: 1.3266, 1.3240, 1.3197, 1.3164.

UK GDP revised downwards

The UK economy grew 1.1% in the third quarter, revised downwards from the initial estimate of 1.3%. The expansion was led by robust consumer spending, which beat expectations with a gain of 2.7% as lockdowns were lifted in July.

Investors didn’t seem perturbed from the downward revision, as the British pound has moved higher today. Still, it’s doubtful that fourth-quarter growth will be as strong as Q3. The explosion in cases of the Omicron variant in December has prompted the government to implement plan B, which has dampened the economy, especially the hospitality sector.

There was some light in the pre-Christmas gloom after Prime Minister Boris Johnson announced that it would not introduce new restrictions before Christmas. Still, Johnson warned that there could be further measures after the holiday. This would likely mean limits on the number of people meeting in indoor venues.

With the holiday season comes illiquid markets, which means that market direction will be dictated by headlines, which could translate into volatility. The government announcement of no further restrictions before Christmas certainly removes some uncertainty for market participants, but if infection rates continue to soar in the UK, investors could get jittery and seek the safety of the US dollar at the expense of the pound.

The newest vaccines and pills in the fight against Covid make the headlines daily, but a report about a super-vaccine could shake up the markets if confirmed. According to the report, researchers at Walter Reed Army Institute of Research are testing a vaccine that would protect against all Covid variants. Such a discovery would clearly be a game-changer, and would likely restore risk appetite, which has fallen sharply as Omicron rages across Europe and the US.

GBP/USD Technical Analysis

• GBP/USD has support at 1.3190 and 1.3116
• There is resistance at 1.3314 and 1.3364

Notes/Observations

• Focus remains on focusing on developments regarding Omicron; risk appetite trying to find fresh feet believing the virus has more bark than bite. Nonetheless Omicron variant threatening to force new restrictions.
• UK Q3 Final GDP revision mixed but show economy recovered from the pandemic faster than previously thought.

Asia

• BOJ Oct Meeting Minutes (2 decisions ago) noted that it discussed weak yen impact on economy; To continue to maintain favorable monetary policy until hitting 2.0% CPI target.
• Japan Govt said to be looking at a FY22/23 Budget of ~¥107.6T (Note: refers to the next fiscal year).

Coronavirus

• Israel government advisory panel of health experts recommends giving the 4th booster shot.
• South Korea Ministry Joint Statement: Coronavirus resurgence adding burden to economy; Korea faces economic uncertainties to stabilize prices.
• Portugal PM Costa announced new Covid measures with work from home becoming mandatory on Dec 25th; Bars and nightclubs to close starting Dec 25th.
• Germany govt announced new covid restrictions that would begin after Christmas. To limits private gatherings to 10 people, closed nightclubs nationwide and large events like soccer matches to be held without an in-person audience, restrictions to go into effect nationwide on Dec 28th.
• President Biden stated that the US was not going back to March of 2020 in terms of lockdowns; Called on Americans to get vaccinated. Had more resources now to keep schools open.

Americas

• Mexico Central Bank (Banxico) Gov De Leon (outgoing) noted that Rate hikes showed commitment to bringing inflation back to 3.0% target. Its Baseline scenario saw CPI elevated for 2022 but with it declining near end of year or beginning 2023.

Energy

• Weekly API Crude Oil Inventories: -3.7M v -0.8M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +1.46% at 474.20, FTSE -0.13% at 7,287.56, DAX +0.04% at 15,454.35, CAC-40 +0.03% at 6,967.11, IBEX-35 +0.37% at 8,418.81, FTSE MIB -0.23% at 26,593.00, SMI -0.42% at 12,629.61, S&P 500 Futures -0.20%].
• Market Focal Points/Key Themes: European indices open modestly higher but later traded mixed; sectors among those trending higher are technology and materials; while sectors trending lower include financias and industrials; Delivery Hero to scale down German operations; Maersk buys LF Logistics; Wizz Air acquires 15 Gatwick slots from NAS; Novartis acquires Gyroscope Therapeutics; earnings expected during the upcoming US session include CarMax, Cintas and Paychex.

Equities

• Consumer discretionary: Delivery Hero [DHER.DE] +5% (divestments), Camellia [CAM.UK] +6% (trading update).
• Healthcare: Avacta [AVCT.UK] +19% (receives CE mark), Astrazeneca [AZN.UK] -1% (to develop Omicron-specific vaccine; Walter Reed Army researchers said to expect to announce that human trials show success against Omicron and future COVID-19 strains).
• Industrials: Maersk [MAERSKB.DK] +1% (acquisition).

Speakers

• ECB's Schnabel (Germany) stated that Council knows that inflation would be elevated for a certain period but would decline over the course of 2022. Inflation amplifying factors likely to ease in 2022 but saw upside risks to projections. ECB monitoring wage developments very closely.
• ECB’s Holzmann (Austria) noted that there was differing views within ECB Council on upside risks to inflation.
• Italy PM Draghi noted that the govt had fulfilled all commitments for EU Recovery Funds; prepared to support economy if growth slowed down. Could raise rates in 2022 under an extreme condition.
• UK Govt scientists said to conclude that those stricken with Omicron virus variant would be less likely to become severely ill compared to the Delta strain. Omicron might not be mild enough to avoid a large number of hospitalizations.
• Austria Central Bank (ONB) updated its outlook and noted that Q4 GDP could contract due to lockdown measures.
• Russia’s Yamal-Europe pipeline said to be running in reverse for a 2nd straight day. Flows at the Mallnow metering point on the German-Polish border were going east from Germany into Poland.
• Turkey President Erdogan noted that speculative financial games tried to bring the country down but pledge it would emerge victorious from the economic battle. Reiterated view that would not allow the country to be crushed by interest rates and inflation.
• Russia Foreign Min Lavrov saw the US response to its recent security proposals as "businesslike" and was ready to consider US proposals.
• Russia govt spokesperson Peskov: US willingness to hold security talks is positive; would like to see US proposals on issues.
• Thailand Central Bank (BOT) Policy Statement noted that the decision to keep policy steady was unanimous. Monetary policy to remain accommodative. Reiterated view to focus on economic recovery and that fiscal measures should support recovery. Omicron virus variant was a key risk to outlook and would impact economy in early 2022. Reiterated stance that was prepared to use all tools as appropriate and also closely monitor the THB currency (Baht).

Currencies/Fixed income

• USD was relative steady in quiet trading on Wed. Dealers noted that weeks on either side of Christmas were typically low in volatility for currencies.
• The pause in volatility to allow market participants to process key central bank decision from earlier in the month.
• GBP/USD was drifting higher as UK Q3 GDP suggested that the economy had recovered from the pandemic faster than previously thought. Cable approaching 1.33 by mid-day.
• TRY currency (Lira) remained steady after a bout of volatile and record lows. USD/TRY at 12.55 by mid-session.

Economic data

• (FI) Finland Nov Preliminary Retail Sales Volume Y/Y: -1.9% v +1.6% prior.
• (UK) Q3 Final GDP Q/Q: 1.1% v 1.3% prelim; Y/Y: 6.8% v 6.6% prelim.
• (UK) Q3 Final Private Consumption Q/Q: 2.7% v 2.0% prelim; Government Spending Q/Q: -0.5% v +0.9% prelim; Gross Fixed Capital Formation Q/Q: -0.9% v +0.8% prelim; Exports Q/Q: -3.5% v -1.9% prelim; Imports Q/Q: 1.1% v 2.5% prelim.
• (UK) Q3 Final Total Business Investment Q/Q: -2.5% v +0.4% prelim; Y/Y: 2.6% v 0.8% prelim.
• (UK) Q3 Current Account Balance: -£24.4B v -£15.6Be.
• (TH) Thailand Central Bank (BoT) left Benchmark Interest Rate unchanged at 0.50% (as expected).
• (MY) Malaysia mid-Dec Foreign Reserves: $116.3B v $116.7B prior.
• (FR) France Nov PPI M/M: 3.5% v 2.9% prior; Y/Y: 17.4% v 15.2% prior.
• (TW) Taiwan Nov Unemployment Rate: 3.7% v 3.8%e.
• (HU) Hungary Oct Final Trade Balance: -€0.3B v -€0.3B prelim.
• (ES) Spain Oct Total Mortgage Lending Y/Y: 30.3% v 57.9% prior; House Mortgage Approvals Y/Y: 27.9% v 57.7% prior.
• (ES) Spain PPI M/M: 1.8% v 6.1% prior; Y/Y: 33.1% v 32.0% prior.
• (SE) Sweden Nov Retail Sales M/M: 0.9% v 0.4% prior; Y/Y: 6.0% v 5.2% prior.
• (SE) Sweden Nov PPI M/M: 1.3% v 0.1% prior; Y/Y: 18.1% v 16.8% prior.
• (SE) Sweden Oct Non-Manual Workers Wages Y/Y: 3.0% v 3.1% prior.
• (PL) Poland Dec Consumer Confidence: -27.3 v -24.5e.

Fixed income issuance

• (IN) India sold total INR200B vs. INR200Bindicated in 3-month, 6-month and 12-month bills.
• (SE) Sweden sold SEK10.0B vs. SEK10B indicated in 3-month Bills; Avg Yield: -0.4582% v -0.4381% prior; bid-to-cover: 1.59x v 1.49x prior.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 06:00 (IE) Ireland Nov PPI M/M: No est v 0.2% prior; Y/Y: No est v -2.6% prior.
• 06:00 (IL) Israel Oct manufacturing Production M/M: No est v -0.2% prior.
• 06:00 (CA) Canada Nov CFIB Business Barometer: No est v 62.2 prior.
• 06:00 (BR) Brazil Dec FGV Consumer Confidence: No est v 74.9 prior.
• 06:00 (RU) Russia to sell combined RUB40B in 2031 and 2041 OFZ bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (US) MBA Mortgage Applications w/e Dec 17th: No est v -4.0% prior.
• 07:00 (MX) Mexico Oct Retail Sales M/M: 0.5%e v 0.2% prior; Y/Y: 5.8%e v 5.9% prior.
• 07:00 (UK) Weekly PM Question time in House.
• 07:30 (BR) Brazil Nov Current Account Balance: -$6.2Be v -$4.5B prior; Foreign Direct Investment (FDI): $3.8Be v $2.5B prior.
• 07:30 (IS) Iceland to sell 3-month and 6-month Bills.
• 08:00 (PL) Poland Nov M3 Money Supply M/M: 0.8%e v 1.1% prior; Y/Y: 9.0%e v 8.6% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Q3 GDP Annualized (3rd reading) Q/Q: 2.1%e v 2.1% prelim; Personal Consumption: 1.7%e v 1.7% prelim.
• 08:30 (US) Q3 GDP Price Index: 5.9%e v 5.9% prelim ; Core PCE Q/Q: No est v 4.5% prelim.
• 08:30 (US) Nov Chicago Fed National Activity Index: 0.40e v 0.76 prior.
• 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise 2-Week Repurchase Rate by 75bps to 3.50%.
• 10:00 Czech Central Bank (CNB) Gov Rusuk post rate decision press conference.
• 10:00 (US) Dec Consumer Confidence: 111.0e v 109.5 prior.
• 10:00 (US) Nov Existing Home Sales: 6.53Me v 6.34M prior.
• 10:30 (US) Weekly DOE Oil Inventories.
• 11:00 (RU) Russia Nov Industrial Production Y/Y: 5.8%e v 7.1% prior.
• 11:00 (RU) Russia Nov PPI M/M: 0.6%e v 0.4% prior; Y/Y: 27.0%e v 27.5% prior.
• 11:00 (RU) Russia Q4 Consumer Confidence Index: No est v -19 prior.
• 19:01 (IE) Ireland Dec Consumer Confidence Index: No est v 83.1 prior.
• 20:00 (CN) China Nov Swift Global Payments (CNY): No est v 1.85% prior.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1277
Prev Close: 1.1285
% chg. over the last day: +0.07%

The ECB balance sheet continues to grow steadily. Yesterday, the balance reached a new absolute record of €8,511.5 trillion. However, it should be noted that the increase was by €14.8 billion against the increase of €26.7 billion a week earlier, which indicates a temporary volume contraction. This could provide short-term support for the European currency.

Trading recommendations

Support levels: 1.1243, 1.1230, 1.1168
Resistance levels: 1.1323, 1.1360, 1.1436, 1.1535, 1.1613, 1.1667, 1.1717

From a technical point of view, the EUR/USD on the hour time frame is still bearish. The MACD indicator has become inactive. The price is trading in the corridors, both on the higher time frames and on the lower ones. These are complex conditions for trading. It is better to consider sell deals from the resistance level of 1.1323. Buy trades can be considered on the lower time frames from the support level of 1.1243, but only with additional confirmation.

Alternative scenario: if the price breaks out through the 1.1360 resistance level and fixes above, the mid-term uptrend will likely resume.

News feed for 2021.12.22:

• US GDP (q/q) at 15:30 (GMT+2);
• US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• US Existing Home Sales (m/m) at 17:00 (GMT+2);
• US Crude Oil Inventories (m/m) at 17:30 (GMT+2).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3207
Prev Close: 1.3268
% chg. over the last day: +0.46%

The British currency is supported by rising oil prices as well as the monetary policy of the Bank of England, which has already raised the interest rate and intends to start reducing its stimulus program as the wave of "Omicron" decreases.

Trading recommendations

Support levels: 1.3220
Resistance levels: 1.3272, 1.3301, 1.3365, 1.3434, 1.3507, 1.3575, 1.3685

On the hourly time frame, the trend on GBP/USD is still bullish. The price is trading near the moving average. The MACD indicator is in the positive zone with no signs of reversal. Under such market conditions, traders should consider buy positions from the 1.3220 support level but only with additional confirmation in the form of a buyers' initiative. Sell trades can be considered from the resistance level of 1.3301.

Alternative scenario: if the price breaks down through the 1.3189 support level and consolidates below, the bearish scenario will likely resume.

News feed for 2021.12.22:

• UK GDP (q/q) at 09:00 (GMT+2).

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 113.54
Prev Close: 114.08
% chg. over the last day: +0.47%

The minutes of the monetary policy meeting of the Bank of Japan showed that, in general, the weakening yen is having a positive effect on the Japanese economy. From a fundamental point of view, the situation on the USD/JPY currency pair remains the same. The monetary policy of the Bank of Japan is aimed at active economic stimulation, while the US Federal Reserve, on the contrary, accelerated the reduction of the quantitative easing program last week. Such a situation is in favor of further growth of USD/JPY quotes.

Trading recommendations

Support levels: 113.95, 113.76, 113.30, 112.62, 112.30
Resistance levels: 114.17, 115.15, 115.50

The global trend on the USD/JPY currency pair is bearish. But the price has once again reached the priority change level, and this time the sellers' reaction is much weaker. The probability of breakout is increasing. Buy positions should be considered from the 113.30 support level, but with additional confirmation in the form of a buyers' initiative or after the price breaks out the priority change level. Sell positions should be considered if the price makes a false breakout of 114.17 level and returns back to the wide corridor with the 113.30-114.17 price range.

Alternative scenario: if the price rises above 114.17, the uptrend will likely resume.

News feed for 2021.12.22:

• Japan BoJ Monetary Policy Statement at 01:50 (GMT+2).

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2936
Prev Close: 1.2912
% chg. over the last day: -0.19%

Positive retail sales data and rising oil prices are now supporting the Canadian currency. Currently, the dollar index is stable as concerns about the Omicron strain are easing. From the fundamental point of view, this situation leads to the fact that the USD/CAD quotes do not have a single dynamic.

Trading recommendations

Support levels: 1.2828, 1.2721, 1.2677, 1.2638
Resistance levels: 1.2918, 1.2951

From a technical point of view, the USD/CAD currency pair trend is bullish. The MACD indicator has become inactive. Under such market conditions, it is better to look for buy deals from the support levels near the moving average on the lower time frames. Sell deals should be considered from the resistance level of 1.2918, but with additional confirmation in the form of a sellers' initiative.

Alternative scenario: if the price breaks down through the 1.2783 support level and fixes below, the downtrend will likely resume.

News feed for 2021.12.22:

• US Crude Oil Inventories (m/m) at 17:30 (GMT+2).

• Optimism returns as US prepares to approve covid-fighting pills
• Biden also promises to get a spending deal done next year
• Stocks and oil prices cheer, FX market remains hostage to risk tone

Good news at last

After a dismal start to the week, financial markets are back in a cheerful mood. All it took to turn the tide was some encouraging news around public health and promises of more stimulus spending.

Risk appetite returned with a vengeance after reports that US regulators are about to authorize the covid treatment pills from Pfizer and Merck, while President Biden sweetened the pie by pledging to “get something done” on his Build Back Better bill.

With the prospect of effective treatments negating the Omicron outbreak and newfound hopes that the multi-trillion spending deal may ultimately get pushed through Congress, market participants got the green light to load up on riskier assets again.

Comeback

The relief rally was felt across every asset class. US equities came back swinging to erase all their losses for the week and trade even higher, with the energy sector leading the charge thanks to a similar comeback in oil prices.

Treasury yields edged higher as well, helping the US dollar to stabilize. But the spike in yields inflicted some damage on the Japanese yen, which tends to underperform in an environment where foreign yields are rising due to the Bank of Japan’s yield curve control strategy.

Gold suffered the same fate. The yellow metal has been a peculiar case this year, unable to capitalize on its reputation as an inflation hedge and instead trading almost entirely as a mirror reflection of real yields. This is an ominous sign because if bullion couldn’t shine with real yields floored at record low levels, it could be in real trouble next year when the Fed stops asset purchases and those yields start to creep up.

Quiet days ahead

Excluding the swings in the yen, the FX market has been uncharacteristically quiet lately. Most major pairs remain confined in relatively narrow trading ranges, with the minor moves that do occur merely reflecting the shifts in risk sentiment.

Euro/dollar for instance has been trapped within a range of 140 pips this entire month despite the Fed taking markets by storm with signals for three rate increases next year, uncertainty around fiscal spending, and lockdowns in Europe.

Hence, the FX complex remains a prisoner to risk appetite and it may take some big piece of news to break it out. Seismic news is unlikely over the next few days as everything winds down for the holidays, but equally, if anything does hit the markets it could have an oversized impact because of poor liquidity conditions.

There isn’t much on the agenda for today, so the spotlight will remain on the usual suspects - Omicron and the risk of new restrictions in Europe, as well as any updates on Biden’s spending ambitions.