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Friday has seen a certain selloff in the US equities, with Dow Jones losing the most among the three major indices. Nasdaq was hit the less with just a slight 0.07% loss into the close as investors weighed the rising omicron threat, and the risk of a bigger negative impact on the global economic recovery than first thought. Meanwhile the Federal Reserve (Fed) has little alternative but to tighten its policy fast enough to fight the overheating inflation and hope of seeing Joe Biden’s hope $2 trillion dollar economic package see the daylight one day is evaporating. So, the market mood is not great into the Xmas holidays. Plus, it will be a slow trading week, where we will see the trading volumes thinning, which could bring along some more volatility in asset prices.

US crude is down by almost 4% this morning, on news that the rising omicron cases could result in further travel restrictions, and even lockdown measures which would dent the oil demand in the coming weeks. The IEA warned last week that the global oil glut is set to surge in 2022, and a rising glut would result in lower oil prices in the short-medium run.

From a price perspective, if the price of US crude is unable to gain back the 200-DMA, which is a touch above the important psychological level of $70, we could see the selloff extend toward the $60 mark in the coming weeks. And the weakness in oil prices could well continue weighing on energy stocks. BP for example is feeling the pinch of Covid-related restrictions since a couple of weeks, and will likely test the 315-320p support to its actual positive trend.

Energy selloff should weigh on the FTSE 100 at the start of the week. Activity in FTSE futures hint at a decent selloff at the start.

In cryptocurrencies, the picture is as ugly as the overall market mood. Bitcoin bulls are bears are battling around the 200-DMA, and the overall lack of risk appetite is giving a hand to the bears. Cryptocurrencies are trading in parallel to the risk appetite right now, and in the absence of breaking news or impactful tweets, we could expect the negative pressure to continue. The next important technical level to watch in Bitcoin is $45000, a touch below this level, there is another major Fibonacci support on July-November rally, which could further call the death of the latest rebound.

With all the uncertainty, there is a certain safe-haven appetite in gold. The yellow metal is now testing the $1800 per ounce to the upside. I am still little convinced to see a sudden rebond in gold appetite, as the very low yields and the exploding inflation expectations couldn’t boost the gold demand over the past year. However, if there is a significant erosion in the risk sentiment and a further selloff across the risk assets, we could see gold cough back to life.

But the safest safe-haven is still the US dollar where the tighter Fed and the rising US yields support a positive divergence in greenback against other major central bank currencies, and some investors could find interesting to convert back to the US dollars to navigate the actual uncertainties.

Daily Pivots: (S1) 0.9197; (P) 0.9221; (R1) 0.9268; More....

Intraday bias in USD/CHF remains neutral at this point. On the downside, below 0.9156 will target 0.9084 support. Firm break there should confirm that choppy rise from 0.8925 has completed, and suggests that fall from 0.9471 is resuming. Deeper decline would be seen through 0.8925. On the upside, break of 0.9293 will suggest that the pull back from 0.9372 is finished. Intraday bias will be turned back to the upside for 0.9372.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We'd pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Daily Pivots: (S1) 113.30; (P) 113.57; (R1) 114.00; More...

Intraday bias in USD/JPY remains neutral first. On the downside, break of 112.52 will resume the fall from 115.51, as a correction to up trend from 102.57, and target 100% projection of 115.51 to 112.52 from 114.26 at 111.27. On the upside, above 114.26 will target a test on 115.51 high instead.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high) on resumption. However, firm break of 109.11 structural support will argue that the trend might have reversed and bring deeper fall to 107.47 support and possibly below.

Market movers today

• A quiet start to a quiet week ahead of Christmas and year-end approaching, where no key events are scheduled for today.
• Later this week, Euro Area December flash consumer confidence will be released on Tuesday, and although the index has remained at relatively high levels through the fall, a sharp fall in light of the latest Covid-19 developments could raise some warning bells for Q1 private consumption growth.
• On Thursday, we will keep an eye out for the US November private consumption data, as the elevated goods consumption has been a key driver of the inflation pressure seen this year. Durable goods orders will be released at the same time.

The 60 second overview

Omicron: The spreading across the European continent has initiated renewed restrictions and renewed lockdowns. This weekend, the Netherlands entered national lockdown closing all non-essential shows until 14 January. In our COVID-19 update from last week (see below), we focus on omicron and what we know so far on vaccine efficacy (both after 2 and 3 doses), transmissibility, reinfection and breakthrough risks, projections, treatments etc. We still have limited data and all estimates and conclusions are subject to changes, as more data and studies become available. Most studies are preprints and not peer-reviewed. COVID-19 UPDATE: Omicron primer - what we know so far, 17 December.

Energy crisis in Europe: The European daily electricity prices are set to reach record highs today as both colder-than-usual weather, less wind and also some halted nuclear reactors in France are pushing prices higher. The higher energy prices are set to be a significant contributor to the high inflation prints in the coming month, but may also drag on growth as it is a 'tax' on disposable income.

Biden package: In the US, Biden's almost USD2trn tax-and-spending plan faced a surprising resistance when Senator Manchin said he wouldn't support it. Given the already narrow support for the package focusing on healthcare, climate had and child welfare, this jeopardizes the prospect of getting the plan through.

Economic chaos in Turkey: The Turkish currency continues to plummet this morning after President Erdogan reaffirmed his commitment to lower rates over the weekend. We think the Lira will continue to be under pressure as long as the government continues this rhetoric. In a note this morning we discuss the implications of the polices for the Turkish economy and three scenarios going forward, see Research Turkey - 'Catch me if you can' - no end in sight for lira's freefall.

Equities: Equities ended Friday on a lower note, logging a decline for the week with big rotations out of energy and long duration stocks taking place. Friday rotations not as clear as the previous days but still some flight to safety in defensives and VIX moving higher. Large cap and minimum volatility stocks making solid outperformance of small cap and momentum stocks in the current environment. In US Friday, Dow -1.5%, S&P 500 -1.0%, Nasdaq -0.1%) and Russell 2000 +1.0%. New challenges occurring over the weekend and Asian markets are painted in red this morning. European and US futures are indicating an negative opening of cash markets down 1-2%.

FI: On Friday, bond markets weakened on slightly hawkish comments from ECB governing council members in the morning, however, the underperformance was reversed on general weak market risk sentiment. BTPs was the main performer, almost reversing the lost grounds during Thursday's ECB meeting. We are now heading into the final stretch of the year with the global central bank meeting behind us, with rising COVID-19 cases that may dent risk sentiment, but also raises the risk of erratic moves on light flow.

FX: Last week once again proved how the global investment environment is key to get right when trading NOK. In our newly published,we stick with the view that dollar is set to strengthen further in the coming quarters.

Credit: Credit markets followed equities in red on Friday with iTraxx Xover widening almost 4bp (to 253.7bp) and Main 0.6bp (to 50.7bp). Cash bond moves were more modest, with HY widening 1.5bp and IG tightening 0.5bp.

Daily Pivots: (S1) 0.7104; (P) 0.7145; (R1) 0.7166; More...

Intraday bias in AUD/USD remains neutral first. On the downside, break of 0.7089 will bring another test on 0.6991 key support. Sustained break there will carry larger bearish implication, and resume larger down trend from 0.8006. On the upside, above 0.7223 will resume the rebound from 0.6992 to 55 day EMA (now at 0.7243).

In the bigger picture, strong rebound from 0.6991 key structural support will retain medium term bullishness. That is, whole up trend from 0.5506 is still in progress. Firm break of 0.7555 resistance will target 0.8006 high and above. However, sustained break of 0.6991 will argue that the whole up trend from 0.5506 might be finished at 0.8006, after rejection by 0.8135 long term resistance. Deeper decline would then be seen back to 61.8% retracement of 0.5506 to 0.8006 at 0.6461.

Daily Pivots: (S1) 1.2812; (P) 1.2857; (R1) 1.2941; More...

Intraday bias in USD/CAD remains neutral and outlook stays bullish with 1.2604 support intact. On the upside, break of 1.2935 will resume the rise from 1.2286 to 1.2947 and then 1.3022 key medium term fibonacci level. Sustained break of 1.3022 will carry larger bullish implications.

In the bigger picture, focus will be on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. On the downside, however, break of 1.2286 will turn focus back to 1.2005 low again.

Daily Pivots: (S1) 0.8476; (P) 0.8502; (R1) 0.8516; More...

Intraday bias in EUR/GBP remains neutral at this point. 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) 1.5735; (P) 1.5787; (R1) 1.5820; More...

Intraday bias in EUR/AUD remains neutral for the moment. At this point, we're slightly favoring the case the rebound from 1.5354 has completed with three waves up to 1.6168. Below 1.5655 will affirm this case and target 1.5354 and then 1.5250 low. However, above 1.5905 will turn bias back to the upside for retesting 1.6168 instead.

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) 1.0374; (P) 1.0397; (R1) 1.0409; More....

Intraday bias in EUR/CHF remains neutral as consolidation from 1.0365 is still extending. Further decline is expected as long as 1.0511 resistance holds. 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.

Daily Pivots: (S1) 150.05; (P) 150.89; (R1) 151.34; More...

GBP/JPY's rebound from 148.94 should have completed at 152.60. Intraday bias is mildly on the downside for 148.94 first. Break there will resume larger fall from 158.19 to 145.10 medium term fibonacci level next. On the upside, break of 151.06 will delay the bearish case and turn intraday bias neutral first.

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