Sample Category Title

Daily Pivots: (S1) 0.7119; (P) 0.7148; (R1) 0.7203; More...

Intraday bias in AUD/USD remains neutral at this point. On the upside, break of 0.7185 will resume the rebound from 0.6992, and turn bias back to the upside for 55 day EMA (now at 0.7255). Sustained trading above there will raise the chance that correction form 0.8006 has completed. On the downside, below 0.7089 minor support will turn bias back to the downside for 0.6991 key support again.

In the bigger picture, sustained break of 0.6991 structural support 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). For now, medium term outlook will stay bearish as long as 0.7555 resistance holds, in case of rebound.

Market movers today

• After the Fed meeting, we have another interesting central bank day ahead of us.
• We expect ECB to communicate a patient approach to rate hikes although calling an end of the PEPP programme as scheduled in March 2022. We expect new forecasts to show a marked upward revision in the near-term inflation outlook, but with HICP inflation falling back below 2% in 2023 and 2024.
• The big event in Scandi markets today is naturally the Norges Bank meeting. We still expect Norges Bank to deliver the hike but highlight that it has suddenly become a much closer call than expected not long ago as the latest Omicron-induced restrictions have suddenly shed doubt into markets as to whether we will get a hike and rates markets are pricing the hike at roughly 70%.
• In the UK, we expect the Bank of England (BoE) to stay put for the second meeting in a row although inflation is high and labour market is tight, but the possible impact of Omicron and new restrictions on the economy will in our view tie its hands. Markets are pricing in approximately 6-7bp, so around 50% probability of a 15bp rate hike.
• The Swiss National Bank (SNB) is set to leave the monetary policy rate unchanged at today's meeting. The SNB will also deliver new inflation and growth forecasts, where we expect a comment on the higher inflation with CPI for November reaching 1.5%. Risks are tilted towards SNB commenting on the recent level shift.
• In EM, the Turkish central bank decision is in focus after it cut rates in November and President Erdogan's call for lower rates despite high inflation and weakening of the exchange rate. Market is expecting another 100 basis point cut.
• In data releases, we get PMIs from the euro area and the US.

The 60 second overview

Fed is catching up to reality: The Fed doubled the tapering pace to USD30bn per month (up from USD15bn), implying QE bond buying ends in March. The Fed now signals three rate hikes in 2022 (up from 50% probability of one single rate hike in 2022 in the September projections). In other words, the Fed is catching up to market pricing and consensus among economists, as the economy is in good shape and inflation is high. As Fed Chair Jerome Powell hinted that he does not see an "extended wait" from the end of QE until the first rate hike, we now expect the Fed to hike already in May (June previously). We still expect the Fed to continue hiking in September and December (and additionally four times in 2023). For more details see Fed Research - Review: Catching up to reality - first rate hike likely in May.

Equities: Equities were in a rollercoaster session as investors digested the Fed meeting. The knee-jerk reaction from a more hawkish-than-expected Fed was sending up short end yields, some relief in equities overall, but growth/long duration stocks selling off. This turned out to be short lived. Nasdaq made a U-turn during the press conference, with growth and defensives abruptly taking the lead, value cyclicals selling off. Tech and health care best performers, banks and energy in the bottom. S&P500 closed up 1.6%, Nasdaq a massive 2.2%, Dow 1.1% and Russell 2000 1.7%. Asian markets less convinced, with mixed markets this morning. US futures point slightly higher.

FI: The European trading session was as uneventful as one may have anticipated as from early morning focus was on the FOMC meeting last night and the string of central bank meetings today. The initial response to Fed's accelerated taper (of USD30bn, bringing an end to net purchases in March), and the dots signalling three hikes, was a flattening of the curves, however, after Powell's press conference curves ended steeper on the day (both 2s10s and 10s30s up 2bp, respectively). The little market reaction through the FOMC decision and press conference suggest to us that Powell carefully guided markets ahead of the FOMC's blackout period, and that the Fed catches up to market pricing (and consensus among economists).

FX: The FOMC message drove a V-like price action in most currency pairs with USD initially gaining on the outlook for tighter US monetary policy but then more than erased gains amid risk performing. Consequently, EUR/USD is now back close to 1.13 while EUR/NOK has moved back below 10.20 and EUR/SEK back in the mid 10.20s.

Credit: The positive sentiment returned to credit markets yesterday where both CDS indices and ash bonds performed well. Itraxx Xover tightened 2.4bp and Main 0.4bp. Both HY and IG bonds tightened 1bp.

Nordic macro

New corona restrictions increase the risk of Norges Bank delivering a "hawkish unchanged" message today by keeping rates unchanged but maintaining a tightening bias. We still think a hike is more likely as the risk of Norges Bank falling behind the curve will be jeopardizing its "gradual" narrative.

Daily Pivots: (S1) 1.1244; (P) 1.1272; (R1) 1.1321; More...

EUR/USD is still bounded in sideway trading and intraday bias remains neutral. Downside breakout is mildly in favor with 1.1382 minor resistance intact. On the downside, break of 1.1185 will resume larger fall from 1.2348. Next target is 161.8% projection of 1.2265 to 1.1663 from 1.1908 at 1.0934. On the upside, however, 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 1.1438).

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.

A relief rally following the Federal Reserve (Fed) meeting is what’s in play right now, as yesterday’s decision, though hawkish was mostly priced in.

The Fed announced it will double the pace of QE tapering by buying $30 billion less Treasuries and MBS for the months ahead. It will be done with the asset purchases altogether sometime early 2022, then will come the first rate hike by spring. And according to the median forecast of the famous dot plot, the first spring rate hike won’t be the last; the Fed would proceed with two more rate hikes during the course of next year.

The abrupt change in the policy is obviously due to the rapidly rising, and sticky inflation, and the strong improvement achieved in the labour market.

Jerome Powell said yesterday that the US labour market is hotter than it ever was by many measures. Despite 4 million more jobless people compared to pre-pandemic times, the Fed did the best it could to improve the labour market conditions, yet its influence gets soft by the day. Therefore, it is now time to focus on things that it could influence: inflation.

The major US indices first fell then rebounded. And the rebound was rather strong. The US tech giants had a great session; the announcement that there will be a 75bp hike next year didn’t hit the investor appetite for these giant growth stocks. So, at this point, I am really wondering if we will ever see the reflation trade happen… The value stocks will sure progress well, but I am not sure they will outperform their tech peers.

Now it’s Europeans turn to announce their latest monetary verdicts

The inflation talk is heating up in Europe as well, and the latest inflation data in Britain showed that inflation exceeded the 5% mark in November, while the BoE was expecting to end the year somewhere near 4%.

Yet, no one expects to see a rate action from the BoE today. Nor from the ECB. And of course no action from the Swiss National Bank which swiftly follows the ECB in its decisions.

In the UK, the first rate hike is seen at the next meeting, and the chances are that we see a 20bp hike instead of a 10bp one. There is always a chance that we see a surprise hawkish action today, but the probability of such move remains quite low. Cable will likely extend losses in the coming sessions and the bears will aim an advance to the 1.30 mark in the coming weeks.

For the European Central Bank, it’s complicated. The ECB must deal with a many countries that have many different needs, so making a policy decision is hard, and takes time. But the rising inflation will heat up the discussions of a tighter policy as well, because the Germans, the Dutch and the Austrians are tenser by the day as inflation explodes.

Meanwhile, Christine Lagarde is still on ‘inflation is transitory’ rhetoric, and that must change. But the day that the T word is spelled out, the policy response should come fast. Yet, the delta is wreaking havoc in Europe this winter, and the omicron threat is real. Therefore, it could be another meeting Christine Lagarde turns a blind eye on inflation. This being said, the hawkish risks prevail, preventing the EURUSD from extending gains below the 1.13 mark. Now that the FED hawkishness is priced in, we are left with the ECB hawkishness to price in. That will happen sooner rather than later, and encourage a recovery to 1.15 mark at some point in the medium run.

Daily Pivots: (S1) 1.3196; (P) 1.3239; (R1) 1.3306; More...

GBP/USD is still bounded in sideway trading and intraday bias remains neutral first. Focus stays on 1.3164 medium term fibonacci level. Sustained break there will carry larger bearish implication, and target 161.8% projection of 1.4248 to 1.3570 from 1.3833 at 1.2736. On the upside, though, break of 1.3351 support turned resistance will indicate short term bottoming, and turn bias back to the upside for 1.3512 resistance next.

In the bigger picture, immediate focus is now on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, after rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493. However, strong rebound from current level will revive that case and up trend from 1.1409 is still in progress, and probably ready to resume.

Daily Pivots: (S1) 0.9221; (P) 0.9258; (R1) 0.9282; More....

USD/CHF edged higher to 0.9293 but quickly retreated. Initial bias remains neutral first. 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. 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.

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.

General trend

• Will the current pace of Aussie job gains be sustained going forward?
• RBA Gov Lowe commented on the 3 options for the central bank’s bond purchase program, also said would like to see full employment and 4.0% wage growth.
• Australia Treasury issued budget statement: Cut GDP forecasts, sees inflation within the RBA’s 2-3% target, sees FY24/25 wage growth above 3%.
• Australia New South Wales (highest population state) reports record 1,742 virus cases.
• Commodity currencies trade generally lower amid Australia events and US Fed.
• Bank of Korea (BOK) Gov held briefing on H2 CPI.
• Precious metals have remained higher in Asia.
• US equity FUTs trade slightly higher after gains on Wed.
• Nikkei 225 has remained higher by >1%.
• Hang Seng has remained lower; TECH index hit a fresh record low; Property index traded slightly higher during the morning session, China officials said to have met with certain property developers on Wed.
• Shanghai Composite traded slightly higher during the morning session (+0.3%).
• S&P ASX 200 has remained lower following the dip at the open; CSL weighed on the healthcare index; Resources and Energy indices also declined.
• Singapore property developers declined modestly on real estate curbs.
• Central banks in Taiwan, Philippines and Indonesia are expected to leave rates unchanged later today.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• BOJ decision is due on Fri (Dec 17th)
• Australia to release the annual weight update of the CPI and Living Cost Indexes on Fri.
• Companies due to report during the NY morning include Accenture, Jabil.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened +0.1%.
• (AU) Reserve Bank of Australia (RBA) Gov Lowe: Third option is to halt bond purchases in Feb if economic data better than expected; Underlying inflation expected to hit 2.5% during 2023; Conditions for rate hike will not be met in 2022- Speech "The RBA and the Australian Economy ".
• (AU) AUSTRALIA NOV EMPLOYMENT CHANGE: +366.1K V +200.0KE; UNEMPLOYMENT RATE: 4.6% V 5.0%E.
• (AU) AUSTRALIA DEC CONSUMER INFLATION EXPECTATION: 4.8% V 4.6% PRIOR (9-year high).
• (AU) Australia Treasurer Frydenberg issues Mid-Year Economic and Fiscal Outlook (MYEFO): Cuts GDP outlooks, raises CPI outlook, budget to remain in decreasing deficit for next few years.
• (NZ) NEW ZEALAND Q3 GDP Q/Q: -3.7% V -4.1%E; Y/Y: -0.3% V -1.4%E.
• QAN.AU Guides H1 (A$) EBITDA -300M to -250M, underlying EBIT great than -1.1B.
• (AU) Australia Council of Financial Regulators (CFR) Quarterly Statement: Key items of discussion included housing market risks and the Council's work on payments and crypto-assets, cyber security and the financial risks related to climate change.
• WSA.AU To be acquired by IGO at A$3.36/shr for A$1.1B.
• MSB.AU Announces FDAs OTAT agree to Primary Endpoint for Back Pain, to conduct an additional US Phase 3 trial which may support submissions for potential approval in both the US and EU.

Japan

• Nikkei 225 opened +1.4%.
• (JP) JAPAN DEC PRELIMINARY PMI MANUFACTURING: 54.2 V 54.5 PRIOR (11th consecutive expansion).
• (JP) Japan Econ Min Yamagiwa: No need to change GDP forecast after overstated construction data.
• (JP) Japan Nov Trade Balance: -¥954.8B v -¥600.3Be; Adj Trade Balance: -¥486.8B v -¥302.8Be.
• (JP) Japan Investors Net Buying of Foreign Bonds: +¥457.0B v -¥1.18T prior; Foreign Net Buying of Japan Stocks: -¥602.9B v +¥2.01T prior.
• (JP) Japan MoF sells ¥1.2T v ¥1.2T indicated in 0.500% 20-year JGBs, Avg Yield: 0.4520% v 0.4640% prior, bid-to-cover: 3.66x v 3.78x prior.

Korea

• Kospi opened +0.8%.
• (KR) Bank of Korea (BOK) Gov Lee: See CPI staying above 2% for quite some time amid a solid economic recovery and increasing price pressures from global supply bottlenecks - bi-annual inflation review.
• (KR) South Korea Fin Min Hong: Targeting low 3.0% GDP growth in 2022.
• (KR) Bank of Korea (BOK): $60B currency swap agreement with US to expire on Dec 31st, as scheduled; financial and economic situations at home and abroad remain stable.
• (KR) South Korea PM announces increased COVID restrictions, re-implements 9PM curfew on all restaurants and businesses, limits private gatherings to 4 people.

China/Hong Kong

• Hang Seng opened -0.6%; Shanghai Composite opened 0.0%.
• (CN) China Govt said to be increasing the number of minority stakes it is taking in private companies, especially those that have large amounts of key data – press.
• (HK) Hong Kong Monetary Authority (HKMA): Money markets in Hong Kong continue to operate smoothly.
• (CN) China PBOC sets Yuan reference rate: 6.3637 v 6.3716 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net CNY0B v Net CNY0B prior.
• Another press report saying China loan prime rates (LPRs) may be lowered during Dec, cites analysts - Chinese press.
• (CN) China State Planner (NDRC): Approved CNY261.5B in investments during Nov; Has created list of Special bond funded projects in 2022.

North America

• In Oct Japan Total Holdings of US Treasuries: $1.32T v $1.30T prior, China Total holding of US Treasuries: $1.065T v $1.05B prior.
• TCOM Reports Q3 (CNY) 0.81 v 2.32 y/y, Rev 5.3B v 5.5B y/y.
• (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% RANGE; AS EXPECTED; DOUBLES PACE OF TAPER TO $30B PER MONTH; OFFICIALS SEE THREE RATE HIKES IN 2022 - Officials see three rate increases in 2022, three more hikes in 2023.
• (US) Fed Chair Powell: Economic developments and outlook warranted faster bond taper; Elevated inflation was reason for accelerating taper - post rate decision press conference.

Europe

• (FR) France Pres Macron: It's entirely possible France introduces mandatory COVID vaccinations.

Levels as of 00:15ET

• Hang Seng -0.6%; Shanghai Composite +0.3%; Kospi +0.2%; Nikkei225 +1.9%; ASX 200 -0.4%.
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%.
• EUR 1.1299-1.1281; JPY 114.25-114.00; AUD 0.7181-0.7146; NZD 0.6791-0.6758.
• Commodity Futures: Gold +1.0% at $1,782/oz; Crude Oil +1.0% at $71.55/brl; Copper -0.1% at $4.24/lb.

Daily Pivots: (S1) 113.70; (P) 113.98; (R1) 114.33; More...

USD/JPY's rebound from 112.52 resumed by breaking 113.94 minor resistance and intraday bias is back on the upside for retesting 115.51 high. Firm break there will resume whole up trend from 102.58 and target 118.65 key long term resistance. On the downside, below 113.21 minor support will now likely resume the correction from 115.51 through 112.52 support.

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.

Dollar initially surged after Fed decided to double tapering pace and indicated there could be as many as three rate hikes next year. Nevertheless, the rally attempted was choked off by strong risk-on rally in stocks. Investors seemed to be relieved that firstly, Fed is still cautious on the developments with Omicron. Secondly, the uncertainty regarding pace of rate hike was removed. The greenback is still the strongest was for the week so far, but is kept inside last week's range except versus Yen and Canadian. Focus will turn to BoE and ECB policy decisions today. SNB will be featured too be it's more likely a non-event.

Suggested readings on Fed, ECB and BoE:

• Hawkish Fed Anticipates Three or More Rate Hikes Next Year
• FOMC Increases Tapering, Sees 3 Rate Hikes In 2022 AND 2023
• Fed Research Review: Catching Up to Reality – First Rate Hike Likely in May
• ECB Preview – Phase-Out of PEPP by March as Scheduled
• ECB Meeting: Shadow Tapering
• ECB Meeting: High Inflation Still Transitory Or Time To Talk Tapering?
• BOE Preview – Delaying Rate Hike to February 2022
• BoE Preview: Will The BoE Push Back To February?

Technically, USD/JPY's break of 133.94 minor resistance is sign a progress, as rebound from 112.52 is resuming towards 115.51 high. Yet, we'd maintain that the greenback will need to move out from near term ranges to confirm it's direction. To be specific, the ranges to breakout from are 1.1185/1.3820 in EUR/USD, 1.3158/1.3351 in GBP/USD, 0.9156/0.9372 in USD/CHF and 112.52/115.51 in USD/JPY.

Gold spiked lower after Fed, but quickly recovered

Gold spiked lower to 1752.32 after Fed decided to double tapering pace while the new projections indicated three rate hikes next year. Yet, Gold quickly recovered and there was no follow through buying in Dollar.

For now, further fall will remain in favor in Gold as long as 1792.94 resistance holds. Break of 1752.32 will resume the decline from 1877.05 to 1721.46 first. Break there will target key long term support zone at 1676.55/1682.60.

However, strong break of 1792.94 will now bring sustained trading above 55 day EMA. Considering bullish convergence condition in 4 hour MACD too, that would signal complete of fall from 1877.05 and bring stronger rise back towards this resistance.

Japan exports rose 20.5% yoy in Nov, imports surged 43.8% yoy to record

Japan's exports rose 20.5% yoy to JPY 7367B in November. That's the ninth straight months of increase, helped by 4.1% rise in auto shipments. Exports to China rose 155.0% yoy. Imports rose 43.8% yoy to JPY 8322B. That's the largest amount on record since 1979, jacked up by 144.1% yoy rise in fuels. Trade surplus came in at JPY 955B.

In seasonally adjusted terms, exports rose 5.3% mom to JPY 7385B. Imports rose 5.9% mom to 7872B. Trade balance reported a deficit of JPY -487B.

Japan PMI manufacturing dropped to 53.3, recovery sustained with softening momentum

Japan PMI Manufacturing dropped from 54.0 to 53.3 in December. PMI Services dropped from 53.0 to 51.1. PMI Composite dropped from 53.3 to 51.8.

Annabel Fiddes, Economics Associate Director at IHS Markit, said: "The latest Flash PMI data showed that the Japanese private sector recovery was sustained in December, rounding off the best quarterly performance since Q4 2018. However, both manufacturers and services companies signalled softer rates of output and new order growth compared to November, to suggest a softening of momentum."

Australia employment rose 366.1k in Nov, unemployment dropped sharply to 4.6%

Australia employment rose 366.1k in November, above expectation of 200k. Full-time employment rose 128.3k. Part-time employment rose 237.8k. Unemployment rate dropped sharply from 5.2% to 4.6%, better than expectation of 5.0%. Participation rate also jumped 1.4% to 66.1%. Monthly hours worked in all job rose 4.5% mom.

Also released, PMI manufacturing dropped from 59.2 to 57.4 in December. PMI Services dropped from 55.7 to 55.1. PMI Composite dropped from 55.7 to 54.9.

New Zealand GDP contracted -3.7% qoq in Q3, better than expectation

New Zealand GDP dropped -3.7% qoq in Q3, better than expectation of -4.3% qoq. For the year, GDP contracted -0.3% yoy, versus expectation of -1.6% yoy. Services industries dropped -2.7% qoq. Goods-producing industries dropped -7.3% qoq. Primary industries dropped -3.1% qoq.

USD/JPY Daily Outlook

Daily Pivots: (S1) 113.70; (P) 113.98; (R1) 114.33; More...

USD/JPY's rebound from 112.52 resumed by breaking 113.94 minor resistance and intraday bias is back on the upside for retesting 115.51 high. Firm break there will resume whole up trend from 102.58 and target 118.65 key long term resistance. On the downside, below 113.21 minor support will now likely resume the correction from 115.51 through 112.52 support.

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.

Economic Indicators Update

Gold spiked lower to 1752.32 after Fed decided to double tapering pace while the new projections indicated three rate hikes next year. Yet, Gold quickly recovered and there was no follow through buying in Dollar.

For now, further fall will remain in favor in Gold as long as 1792.94 resistance holds. Break of 1752.32 will resume the decline from 1877.05 to 1721.46 first. Break there will target key long term support zone at 1676.55/1682.60.

However, strong break of 1792.94 will now bring sustained trading above 55 day EMA. Considering bullish convergence condition in 4 hour MACD too, that would signal complete of fall from 1877.05 and bring stronger rise back towards this resistance.