Sample Category Title

Daily Pivots: (S1) 113.54; (P) 113.65; (R1) 113.87; More...

USD/JPY is still bounded in range of 112.52/113.94 and intraday bias remains neutral for the moment. On the downside, sustained break of 112.71 will argue that it's already correcting whole rise from 102.58. Deeper fall would be seen to 38.2% retracement of 102.58 to 115.51 at 110.57. On the upside, break of 113.94 minor resistance will turn bias back to the upside for retesting 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.

Daily Pivots: (S1) 0.9206; (P) 0.9225; (R1) 0.9262; More....

Outlook in USD/CHF remains unchanged as range trading continues. Intraday bias stays neutral. On the upside, break of 0.9274 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.

Dollar is trading mixed in early US session after weaker than expected retail sales data. The greenback is extending recent rally against Canadian, but pulls back against Australian. European majors are mixed while Yen is also trading a touch weaker. Other markets are quite too with Gold's selloff taking a breather at around 1770. Traders are holding their bets for now, awaiting FOMC decision on quickening the tapering pace, and new economic projections.

Technically, we'd monitor the actions in EUR/USD, GBP/USD, USD/CHF and USD/JPY together to confirm the moves of each other. 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.

In Europe, at the time of writing, FTSE is down -0.20%. DAX is up 0.39%. CAC is up 0.68%. Germany 10-year yield is up 0.0102 at -0.356. Earlier in Asia, Nikkei rose 0.10%. Hong Kong HSI dropped -0.91%. China Shanghai SSE dropped -0.38%. Japan 10-year JGB yield dropped -0.0010 to 0.049.

Some previews on FOMC:

• FOMC Preview – Fed to Double Size of QE Tapering
• Fed Meeting: Faster Taper Looms But What Will The Dot Plot Reveal?
• What To Expect From The Fed's Final 2021 Meeting?

US retail sales rose 0.3% mom in Nov ex-auto sales up 0.3% mom

US retail sales rose 0.3% mom to USD 639.8B in November, below expectation of 0.8% mom. Ex-auto sales rose 0.3% mom, below expectation of 1.0% mom. Ex-gasoline sales rose 0.1% mom. Ex-auto, ex-gasoline sales rose 0.2% mom. Total sales for September through November period were up 16.2% yoy from the same period a year ago.

Also released, import price index rose 0.7% mom in November, matched expectations. Empire State Manufacturing index rose from 30.9 to 31.9 in December, above expectation of 27.0.

From Canada, CPI was unchanged at 4.7% yoy in November. CPI common rose from 1.8% Yoy to 1.9% yoy. CPI media dropped from 2.9% yoy to 2.8% yoy. CPI trimmed rose from 3.3% yoy to 3.4% yoy.

UK CPI rose to 5.1% yoy in Nov, highest since 2011

UK CPI accelerated further to 5.1% yoy in November, up from 4.2% yoy, above expectation of 4.7% yoy. That's also the highest level since September 2011, when it stood at 5.2%. CPI core rose to 4.0% yoy, up from 3.4% yoy, above expectation of 3.8% yoy.

PPI input rose from 13.7% yoy to 14.3% yoy, above expectation of 11.0% yoy. PPI output rose from 8.6% yoy to 9.1% yoy, above expectation of 7.3% yoy. PPI core output also rose from 7.1% to 7.9%, above expectation of 7.1% yoy.

ONS Chief Economist Grant Fitzner said: "A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade. The price of fuel increased notably, pushing average petrol prices higher than we have seen before. Clothing costs - which increased after falling this time last year - along with prices for good, second-hand cars and increased tobacco duty all helped drive up inflation this month."

"The costs of goods produced by factories and the price of raw materials have continued to increased significantly to their highest rate for at least twelve years."

Australia Westpac consumer sentiment dropped to 104.3, different responses between states

Australia Westpac-Melbourne Institute consumer sentiment dropped -1.0% to 104.3 in December, staying in positive territory where optimists outnumber pessimists. Nevertheless, responses from states are rather different, with both NSW and Victoria posted significant falls (down 3.6% and 3.5% respectively) while sentiment was up in Queensland (3.4%), WA (3.2%) and SA (7.1%).

Westpac added that RBA's meeting on February 1 will be a very important one with new economic forecasts. No action or commitment on interest rate is expected at the meeting yet. But RBA would lower the bond purchase pace from AUD 4B per week to AUD 2B per week.

BoJ Kuroda: Consumer inflation will approach target through various channels

BoJ Governor Haruhiko Kuroda told parliament today, "it's true there's a chance consumer inflation will approach 2% through various channels."

"But what's desirable is for the economy to recover steadily and push up corporate profits, thereby leading to higher wages and inflation," he added. "We'll patiently maintain ultra-easy policy to achieve this at the earliest date possible."

Kuroda also said Japan is not in a state of "stagflation".

China industrial production rose 3.8% yoy in Nov, retail sales rose 3.9% yoy

China industrial production rose 3.8% yoy in November, matched expectations. That's a slightly faster growth rate than October's 3.5% yoy. Retail sales rose 3.9% yoy, below expectation of 4.9% yoy, and slowed from prior month's 4.9% yoy. Fixed asset investment rose 5.2% ytd yoy, slightly below expectation of 5.3%.

"Generally speaking, the national economy maintained the recovery momentum in November, and the major macro indicators stayed within a reasonable range," the NBS said in its statement. "However, we must note that the international environment is increasingly complex and severe, and there are still many constraints on the domestic economic recovery."

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9206; (P) 0.9225; (R1) 0.9262; More....

Outlook in USD/CHF remains unchanged as range trading continues. Intraday bias stays neutral. On the upside, break of 0.9274 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.

Economic Indicators Update

US retail sales rose 0.3% mom to USD 639.8B in November, below expectation of 0.8% mom. Ex-auto sales rose 0.3% mom, below expectation of 1.0% mom. Ex-gasoline sales rose 0.1% mom. Ex-auto, ex-gasoline sales rose 0.2% mom.

Total sales for September through November period were up 16.2% yoy from the same period a year ago.

Full release here.

The Australian dollar has reversed directions on Wednesday, as the currency trades around 0.7130. We could see some volatility from the currency following the releases of the FOMC policy decision and Australian employment data.

FOMC in the spotlight

All eyes are the FOMC policy meeting later today. We could see some dramatic announcements, the primary one being that starting in January, the Fed will double the pace of its monthly taper from USD 15 billion to 30 billion. This means that the Fed’s bond purchase scheme would end in March instead of July, setting the stage for a Fed rate hike soon afterwards. The dot plot at today’s meeting should reflect a hawkish pivot by the Fed. The markets love using the dot plot as a forecast of monetary policy, and expectations are that the Fed plans to raise rates two or three times in 2022, with another three or four hikes in 2023. We could see the FOMC also state that it will no longer refer to inflation as ‘transitory’, echoing what Fed Chair Jerome Powell stated in testimony on the Hill in November.

Australia is expected to post banner employment numbers for November, with a consensus of 205 thousand new jobs, after a reading of -46 thousand beforehand. This surge would reflect the surge in growth due to the lifting of the lockdowns in Sydney and Melbourne. A huge gain in the number of new jobs could provide a boost for the Australian dollar.

A strong employment report would point to a stronger recovery, but it likely won’t change the accommodative monetary stance of the RBA. Governor Philip Lowe has stated that the bank will maintain rates at the ultra-low level of 0.10% until inflation remains “sustainably” within the bank’s target band of 1-3%. At the last RBA policy meeting, the bank said that Omicron was a new source of uncertainty but added that it should not derail the recovery. Still, Lowe may use the Omicron crisis to dampen market expectations of a rate hike, as investors have been more hawkish than Lowe, with several rate hikes priced in for 2022.

AUD/USD Technical

• There are support levels at 0.7052 and 0.6933
• AUD/USD faces resistance at 0.7239. The next resistance line is 0.7307

Notes/Observations

• UK Nov CPI above target for the 4th straight month and at decade high ahead of Thurs BOE rate decision.
• Awaiting over a dozen rate decisions in the coming 48 hours; highlighted by Fed.

Asia

• China Nov Retail Sales Y/Y: 3.9% v 4.7%e.
• China Nov Industrial Production Y/Y: 3.8% v 3.7%e.
• China Nov YTD Fixed Urban Assets Y/Y: 5.2% v 5.4%e.
• China Nov Surveyed Jobless Rate: 5.0% v 4.9%e.
• China Nov New Home Prices registered its 3rd straight decline (YoY: -0.3% v -0.3% prior.
• China PBoC conducted its 1-year Medium Term Lending (MLP) with rate maintained at 2.95% for the 20th consecutive time.
• Japan PM Kishida stated that Japan's use of overstated construction data had been used in GDP calculation.
• US expected to add additional China companies (including DJI) to Investment Blacklist.

Europe

• ECB projections continued to show inflation below 2% target for both 2023 and 2024 period.
• France Stats Agency (Insee) raised its 2021 GDP growth forecast from 6.25% to 6.7%. It saw the domestic economy expanding by 0.4% in Q1 2022, and 0.5% in Q2.
• UK MPs voted 441 to 41 in favor to expand use of face coverings; voted 369 to 126 in favor of covid passes for some venues and large events (as expected) Note: nearly 100 Conservative MPs voted against plans for Covid passes and some of them openly questioned his future.

Americas

• US Senator voted 50-49 to raise the debt ceiling by $2.5T; bill will now be sent to the House.
• Houses passed bill that would ban all imports from the Chinese region of Xinjiang unless the US government determines that the products were not produced with forced labor. Bill heads to the Senate.

Energy

• Weekly API Crude Oil Inventories: -0.8M v -3.1M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.26% at 470.76, FTSE -0.44% at 7,186.79, DAX +0.28% at 15,496.65, CAC-40 +0.45% at 6,932.16, IBEX-35 -0.60% at 8,328.47, FTSE MIB +0.42% at 26,667.00, SMI +0.42% at 12,463.96, S&P 500 Futures 0.00%].
• Market Focal Points/Key Themes: European indices open with a trend towards the upside; sectors leading to upside include technology, industrials; consumer energy; focus in FOMC meeting and EU Summit later in the day.

Equities

• Consumer discretionary: H&M [HMB.SE] -2% (sales), Cineworld [CINE.UK] -26% (court verdict), Currys [CURY.UK] -11% (earnings), Inditex [ITX.ES] -3% (earnings).
• Financials: Generali [G.IT] +1% (CMD).
• Healthcare: Sanofi [SAN.FR] +1%, GSK [GSK.UK] -1% (vaccine data).
• Utilities: Veolia Environnement [VE.FR] +1.5% (EU approves acquisition of Suez).

Speakers

• German Chancellor Scholz presented his 1st speech in Parliament and stated that the country had no time to lose in govt challenges. Pledge to overcome the pandemic and was still targeting 30M vaccinations by end-2021.
• Italy PM Draghi stated that was prepared to provide more funds to limit household energy bills. To spend €3.8B to help consumers with poser bills. Uncertainty meant expansionary fiscal policy was still needed. EU should continue discussing the possibility of joint strategic stockpiling of gas.
• EU Commission President Von Der Leyen stated that Russia was choosing an aggressive stance; prepared for an expansion of sanctions against the country.
• Austria WIFO Institute (think tank) Quarterly Economic Forecasts cut the 2021 GDP growth forecast from 4.4% to 4.1% while raising the 2022 GDP growth from 4.8% to 5.2%.
• South African High Court ruled medical parole of former president Jacob Zuma was not lawful and that he should return to prison.

Currencies/Fixed income

• FX market was generally range bound ahead of the numerous rate decisions over the coming two days.
• USD was steady with focus on the Fed rate decision later today. Market awaiting to see id the FOMC reinforces growing market expectations for earlier rate rises next year. Key focus is whether the Fed does accelerate tapering of their bond buying program and whether policymakers bring forward their projections for interest rate rises (aka "dot plot").
• EUR/USD steady at 1.1270 area ahead of Thursday’s ECB policy decision. The ECB likely to maintain its dovish stance as reports circulated that ECB Staff projections would continue to show inflation below 2% target for both 2023 and 2024 period. Focus will be on QE and when the PEPP ends and how any adjustment to the conventional APP QE program.
• GBP/USD was slightly higher at 1.3265following the decade high CPI data. The Thursday BOE rate decision is a live one with the market roughly spilt 50-50 on whether the MPC will pull the trigger with a 15bps rate hike. The Omicron virus variant was a new risk that could delay any policy action.

Economic data

• (FI) Finland Oct Final Retail Sales Volume Y/Y: +1.6% v -0.9% prelim.
• (FI) Finland Oct GDP Indicator Y/Y: 4.3% v 5.5% prior.
• (UK) Nov CPI M/M: 0.7% v 0.4%e; Y/Y: 5.1% v 4.8%e (4th month above target and highest annual pace since Sept 2011); CPI Core Y/Y: 4.0% v 3.7%e; CPIH Y/Y: 4.6% v 4.4%e.
• (UK) Nov RPI M/M: 0.7% v 0.3%e; Y/Y: 7.1% v 6.7%e; RPI-X (ex-mortgage interest payments) Y/Y: 7.2% v 6.8%e; Retail Price Index: 314.3 v 313.0e.
• (UK) Nov PPI Input M/M: 1.0% v 0.5%e; Y/Y: 14.3% v 13.2%e.
• (UK) Nov PPI Output M/M: 0.9% v 0.6%e; Y/Y: 9.1% v 8.2%e.
• (NO) Norway Nov Trade Balance (NOK): 78.7B v 83.6B prior.
• (ZA) South Africa Oct Leading Indicator: 125.2 v 125.0 prior.
• (FR) France Nov Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 2.8% v 2.8% prelim; CPI Index: # v 106.82e.
• (FR) France Nov Final CPI EU Harmonized M/M: 0.4% v 0.4% prelim; Y/Y: 3.4% v 3.4% prelim.
• (ES) Spain Nov Final CPI M/M: 0.3% v 0.4% prelim; Y/Y: 5.5% v 5.6% prelim.
• (ES) Spain Nov Final CPI EU Harmonized M/M: 0.2% v 0.3% prelim; Y/Y: 5.5% v 5.6% prelim.
• (ES) Spain Nov CPI Core M/M: 0.6% v 0.3%e; Y/Y: 1.7% v 1.5%e.
• (TR) Turkey Nov Central Gov't Budget Balance (TRY): +32.0B v -17.4B prior.
• (ZA) South Africa Nov CPI M/M: 0.5% v 0.5%e; Y/Y: 5.5% v 5.5%e (9th straight reading within target band).
• (ZA) South Africa Nov CPI Core M/M: 0.1% v 0.1%e; Y/Y: 3.3% v 3.3%e.
• (PL) Poland Nov Final CPI M/M: 1.0% v 1.0% prelim; Y/Y: 7.8% v 7.7% prelim (8th month above target and highest since 2001).
• (IT) Italy Nov Final CPI M/M: 0.6% v 0.7% prelim; Y/Y: 3.7% v 3.8% prelim.
• (IT) Italy Nov Final CPI EU Harmonized M/M: 0.7% v 0.8% prelim; Y/Y: 3.9% v 4.0% prelim; CPI Index (ex-tobacco): 105.7 v 105.1 prior.
• (UK) Oct ONS House Price Index Y/Y: 10.2% v 11.2%e.
• (IT) Italy Oct General Government Debt: €2.710T v €2.706T prior.
• (ZA) South Africa Nov PPI M/M: 1.4% v 0.7%e; Y/Y: 9.6% v 8.7%e.
• (ZA) South Africa Q3 Non-Farm Payrolls Q/Q: +0.6% v -1.6%e; Y/Y: 0.5% v 0.7% prior.
• (GR) Greece Oct Unemployment Rate: % v 13.0% prior.

Fixed income issuance

• (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.
• (DK) Denmark sold total DKK1.2B in 3-month, 6-month, 9-month and 12-month Bills.

Looking ahead

• (NG) Nigeria Nov CPI Y/Y: 15.3%e v 16.0% prior.
• (PE) Peru Oct Economic Activity Index (Monthly GDP) Y/Y: 5.9%e v 9.7% prior.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) switch auction.
• 06:00 (IE) Ireland Oct Trade Balance: No est v €5.7B prior.
• 06:00 (IE) Ireland Oct Property Prices M/M: No est v 1.6% prior; Y/Y: No est v 12.4% prior.
• 06:00 (BR) Brazil Dec FGV Inflation M/M: -0.5%e v +1.2% prior.
• 06:00 (EU) EU Commission to sell 3-month and 6-month Bills.
• 06:00 (RU) Russia combined RUB50B in 2029 and 2036 OFZ Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (US) MBA Mortgage Applications w/e Dec 10th: No est v 2.0% prior.
• 07:00 (BR) Brazil Oct Economic Activity Index (Monthly GDP) M/M: -0.2%e v -0.3% prior; Y/Y: -0.4%e v +1.5% prior.
• 07:00 (UK) Weekly PM Question time in House.
• 07:00 (CL) Chile Central Bank (BCCh) Monetary Policy Report.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:15 (CA) Canada Nov Annualized Housing Starts: 235.0Ke v 236.6K prior.
• 08:30 (US) Dec Empire Manufacturing Index: 25.0e v 30.9 prior.
• 08:30 (US) Nov Advance Retail Sales M/M: 0.8%e v 1.7% prior; Retail Sales (ex-auto) M/M: 0.9%e v 1.7% prior; Retail Sales (ex-auto/gas): 0.8%e v 1.4% prior; Retail Sales (control group): 0.8%e v 1.6% prior.
• 08:30 (US) Nov Import Price Index M/M: 0.7%e v 1.2% prior; Y/Y: 11.5%e v 10.7% prior; Import Price Index (ex-petroleum) M/M: 0.4%e v 0.5% prior.
• 08:30 (US) Nov Export Price Index M/M: 0.5%e v 1.5% prior; Y/Y: No est v 18.0% prior.
• 08:30 (CA) Canada Nov CPI M/M: 0.2%e v 0.7% prior; Y/Y: 4.7%e v 4.7% prior; Consumer Price Index: 144.2e v 143.9 prior; CPI Core- Common Y/Y: 1.9%e v 1.8% prior; CPI Core- Median Y/Y: 2.9%e v 2.9% prior; CPI Core- Trim Y/Y: 3.3%e v 3.3% prior.
• 08:30 (CA) Canada Oct Manufacturing Sales M/M: +4.1%e v -3.0% prior.
• 09:00 (CA) Canada Nov Existing Home Sales M/M: -0.1%e v +8.6% prior.
• 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (7-20 years).
• 10:00 (US) Dec NAHB Housing Market Index: 84e v 83 prior.
• 10:00 (US) Oct Business Inventories: 1.1%e v 0.7% prior.
• 10:00 (CO) Colombia Oct Manufacturing Production Y/Y: 13.0%e v 15.5% prior; Industrial Production Y/Y: No est v 13.7% prior.
• 10:00 (CO) Colombia Oct Retail Sales Y/Y: 13.5%e v 15.3%prior.
• 10:00 (PE) Peru Nov Unemployment Rate: No est v 9.6% prior.
• 10:30 (US) Weekly DOE Oil Inventories.
• 11:00 (RU) Russia Q3 Preliminary GDP (2nd reading) Y/Y: 4.4%e v 4.3% prior.
• 11:30 (IL) Israel Nov CPI M/M: 0.0%e v +0.1% prior; Y/Y: 2.5%e v 2.3% prior.
• 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged between 0.00-0.25% range; Expected to leave Interest on Reserve Balances Rate (IOER) unchanged at 0.15%.
• 14:30 (US) Fed Chair Powell post rate decision press conference.
• 16:00 (US) Oct Total Net TIC Flows: No est v -$26.8B prior; Net Long-term TIC Flows: No est v $26.3B prior.
• 16:45 (NZ) New Zealand Q3 GDP Q/Q: -4.1%e v +2.8% prior; Y/Y: -1.4%e v +17.4% prior.
• 17:00 (AU) Australia Dec Preliminary Manufacturing PMI: No est v 59.2 prior.
• 18:00 (AU) RBA Hearns.
• 18:30 (AU) RBA Gov Lowe.
• 18:50 (JP) Japan Nov Trade Balance: -¥600.3B v -¥68.5B prior (revised from -¥67.4B); Adjusted Trade Balance: -¥320.8Be v -¥320.8B prior; Exports Y/Y: 21.0%e v 9.4% prior; Imports Y/Y: 40.0%e v 26.7% prior.
• 19:00 (AU) Australia Dec Consumer Inflation Expectation Survey: No est v 4.6% prior.
• 19:30 (AU) Reserve Bank of Australia (RBA) Bulletin.
• 19:30 (AU) Australia Nov Net Employment Change: +200.0Ke v -46.3K prior; Unemployment Rate: 5.0%e v 5.2% prior; Full Time Employment Change: No est v -40.4K prior; Part Time Employment Change: No est v -5.9K prior; Participation Rate: 65.5%e v 64.7% prior.
• 19:30 (JP Japan Dec Preliminary PMI Manufacturing: No est v 54.5 prior; PMI Services: No est v 53.0 prior; PMI Composite: No est v 53.3 prior.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1283
Prev Close: 1.1258
% chg. over the last day: -0.22%

Despite rising inflation in the region, the ECB is accelerating its balance sheet expansion ahead of this week's meeting and forecasting lower inflation. Total assets increased by another 26.7 billion Euros to nearly 8.5 trillion Euros. The ECB's balance sheet is now equal to 81.5% of eurozone GDP compared to the Fed's 37.4% and the Bank of Japan's 135.4%.

Trading recommendations

Support levels: 1.1265, 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 price is trading in the corridor, while there is an expansion of borders in the form of false breaks. The MACD indicator has become inactive. Under such market conditions, traders should consider sell positions from the resistance level of 1.1323. Buy trades can be considered from the false breakdown zone, 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 2021.12.15:

• US Retail Sales (m/m) at 15:30 (GMT+2);
• US FOMC Economic Projections at 21:00 (GMT+2);
• US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
• US FOMC Statement at 21:00 (GMT+2);
• US FOMC Press Conference at 21:30 (GMT+2).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3212
Prev Close: 1.3227
% chg. over the last day: +0.11%

According to CitiBank, inflation expectations in the United Kingdom for December are 4%, and inflation will peak in the spring of 2022 at 5.5%. Today, the UK will report its inflation rate for November. Analysts expect consumer prices to rise to 4.8% (current 4.2%) in annual terms. A rise in inflation may provoke investors to buy the British pound on expectations of a future interest rate hike. The UK unemployment rate fell from 4.3% to 4.2%.

Trading recommendations

Support levels: 1.3188
Resistance levels: 1.3252, 1.3321, 1.3434, 1.3507, 1.3575, 1.3685

On the hourly time frame, the trend on GBP/USD is bearish. The MACD indicator is negative again. Under such market conditions, traders should consider sell positions from the resistance levels around the moving average. Buy trades should be considered from the support levels on lower time frames, but only with additional confirmation.

Alternative scenario: if the price breaks out through the 1.3321 resistance level and consolidates above, the bullish scenario will likely resume.

News feed for 2021.12.15:

• UK Consumer Price Index (m/m) at 09:00 (GMT+2);
• US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
• US FOMC Statement at 21:00 (GMT+2).

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 113.48
Prev Close: 113.74
% chg. over the last day: +0.23%

The situation with the Japanese Yen remains the same. Against the background of a large-scale economic stimulation by the central bank of Japan, the fundamental outlook for the yen looks gloomy. The US central bank will hold a meeting today. If the Fed accelerates reduction of the QE program, the USD/JPY may grow sharply against the background of the dollar index strengthening.

Trading recommendations

Support levels: 113.30, 112.62, 112.30
Resistance levels: 113.94, 114.17, 115.15, 115.50

The global trend on the USD/JPY currency pair is bearish. The price is trading in a wide corridor. The pressure of buyers is slowly increasing and the price is approaching priority change level. Under such market conditions, traders are better to look for sell positions from the priority change level, but with additional confirmation. Buy positions should be considered from the lower border of the corridor, but with additional confirmation in the form of a buyers' initiative or after the price breakout the priority change level.

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

News feed for 2021.12.15:

• US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
• US FOMC Statement at 21:00 (GMT+2).

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2807
Prev Close: 1.2862
% chg. over the last day: +0.43%

Crude oil prices continue to decline ahead of the Fed meeting and because of the uncertainty in oil demand due to the Omicron strain. The Canadian dollar is a commodity currency, so the USD/CAD is rising amid falling oil prices and a rising dollar index. Canada will report on inflation today. Analysts expect inflation to rise to 4.9% (current 4.7%) in annual terms.

Trading recommendations

Support levels: 1.2828, 1.2776, 1.2721, 1.2677, 1.2638
Resistance levels: 1.2891, 1.2951

From a technical point of view, the trend of the USD/CAD currency pair has changed to bullish. The price is confidently growing. The MACD indicator is positive, but the first signs of divergence appear. Under such market conditions, it is better to look for buy deals from the support levels near the moving average. It is best to look for sell deals from the resistance levels of higher time frames.

Alternative scenario: if the price breaks down through the 1.2721 support level and fixes below, the downtrend will likely resume.

News feed for 2021.12.15:

• Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• Canada BoC Gov Macklem’s Speech at 19:00 (GMT+2);
• US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
• US FOMC Statement at 21:00 (GMT+2).

• Fed meeting today will be critical - all eyes on taper speed and dots
• Dollar climbs, stocks dive after US producer prices surge
• UK inflation spike revives BoE rate bets, gold rolls over

Fed in the spotlight

The Federal Reserve is widely expected to accelerate the pace at which it dials back its asset purchases today, opening the door for raising interest rates earlier. An onslaught of impressive economic data and intensifying inflationary pressures have left policymakers little choice but to take their foot off the gas, to avoid having to slam on the brakes later and risk shocking markets.

With an expedited taper looking like a done deal, the real questions heading into this meeting are exactly how much faster asset purchases will be wound down and how many rate increases the FOMC will signal for next year. Back in September, the ‘dot plot’ of rate projections pointed to 50-50 chances for just a single rate hike in 2022.

Money markets are currently pricing in almost three hikes, so it is almost certain the ‘dots’ will be revised sharply higher to reflect economic reality. Considering the strength of recent data, from the labor market to consumption to inflation, the most realistic outcome is the Fed roughly doubling the speed of tapering and signaling two hikes for next year.

That combination would likely be enough to put the shine back into the dollar, especially if Chairman Powell strikes a concerned tone on inflation during his press conference. For the dollar, it’s not only that the Fed has its finger on the rate-hike trigger, but also that central banks in Europe and Japan are nowhere close to that point.

US producer prices soar, markets shiver

Traders got a taste of how markets might react to the Fed yesterday after US producer prices rose at the fastest clip since records began a decade ago. The risk is that omicron pours more fuel on this cost-push inflationary fire, by reviving lockdowns in manufacturing centers like China and keeping supply chains under duress.

Markets reacted swiftly, with the dollar racing higher alongside Treasury yields while stocks took a hit as investors positioned for a more hawkish Fed, although some of these moves retraced later on.

Stock markets feel increasingly unstable as the tech generals have also started to roll over lately, eroding the final pillar of support that was holding the indices standing. The training wheels are coming off now that the powerful forces of monetary and fiscal policy are fading, leaving equities to rely mostly on earnings growth heading into next year. With valuations stretched, that’s a real risk.

Gold takes a hit, pound jumps

Gold suffered some serious injuries as the dollar and Treasury yields charged higher in the wake of the spike in producer prices, which cemented expectations of a hawkish twist from the Fed. In general, bullion has fallen out of favor again now that real yields have started to creep up from depressed levels. This could be a prelude for next year.

The British pound found some relief after the nation’s inflation stats for November exceeded forecasts, reinvigorating bets that the Bank of England might raise rates this week. That said, the Bank doesn’t seem in a hurry to act now that omicron has entered the equation, so this data might have simply set the pound up for a bigger fall tomorrow.

Finally, US retail sales will hit the markets ahead of the Fed meeting, alongside Canada’s latest inflation numbers. In China, the batch of data released overnight was very disappointing, highlighting that the slowdown in the property sector has already started to infect the broader economy.

The US Producer Price Index, which shows the rate of inflation between factories, jumped to 9.6% year-over-year (9.2% was expected), the highest level since 2010. Major US stock indices are reduced ahead of the Fed's decision, while Omicron is again fueling investor worries about the imposition of restrictions in several countries. This will surely lead to a drop in business activity as well as a delayed labor market recovery and supply chain issues pushing up inflation. By market close yesterday, the Dow Jones Industrial Average (US30) decreased by 0.3%, the S&P 500 (US500) decreased by 0.75%, and the Nasdaq Composite (US100) lost 1.14%.

Analysts expect the Federal Reserve to announce an acceleration of QE program cuts today. This will allow the central bank to begin raising interest rates as early as next spring. Fed officials are expected to release a new forecast showing two or three interest rate hikes in 2022 and three or four more in 2023.

American Airlines plans to hire 18,000 people next year as it predicts a recovery in travel.

The WHO says that 77 countries have already reported cases of the Omicron variant, which is spreading faster than any other strain.

Yesterday, European stock indexes traded without a single trend. German DAX (DE30) decreased by 1.08%, French CAC 40 (FR40) decreased by 0.69%, British FTSE 100 (UK100) lost 0.18%. At the same time, Spain's IBEX 35 (ES35) added 0.67%. According to CitiBank, inflation expectations in the United Kingdom for December are 4%, while inflation will peak at 5.5% in spring 2022. November’s UK consumer price was 5.1% in annual terms (4.8% was expected). Analysts believe that the Bank of England should immediately tighten its quantitative easing program and seek to raise interest rates. Sweden saw record-high inflation. The European Central Bank (ECB) and the Bank of England will release their monetary policy decisions on December 16.

Crude oil prices continue to decline ahead of the Fed meeting and because of uncertainty in oil demand due to the Omicron option. Yesterday, the International Energy Agency (IEA) lowered oil demand estimates for the current and next year by 100 thousand barrels per day, noting that the emergence of a new strain of COVID-19 will slow but not stop the recovery in fuel demand.

Asian stock indexes are also declining as Omicron fears intensify and after China reported its first case of infection with the Omicron strain. China's industrial production increased by 3.8% in annual terms in November, while analysts had expected a 3.6% increase. However, new restrictions to combat the rise in the disease hit retail sales. China's retail sales increased by 3.9% last month compared to an increase of 4.9% in October. In Hong Kong, the government announced last weekend that those returning from the US must spend a week quarantined in a government facility. Hong Kong's Hang Seng Index (HK50) decreased by 1.09%, Australia's ASX 200 Index (AU200) decreased by 0.7%, while Japan's Nikkei 225 Stock Index (JP225) added 0.10%.

Main market quotes:

• S&P 500 (F) (US500) 4,634.09 −34.88 (−0.75%)
• Dow Jones (US30) 35,544.18 −106.77 (−0.30%)
• DAX (DE40) 15,453.56 −168.16 (−1.08%)
• FTSE 100 (UK100) 7,218.64 −12.80 (−0.18%)
• USD Index 96.57 +0.25 (+0.26%)

Important events for today:

• China Retail Sales (m/m) at 04:00 (GMT+2);
• China Industrial Production (m/m) at 04:00 (GMT+2);
• China Unemployment Rate (m/m) at 04:00 (GMT+2);
• UK Consumer Price Index (m/m) at 09:00 (GMT+2);
• Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• US Retail Sales (m/m) at 15:30 (GMT+2);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• Canada BoC Gov Macklem’s Speech at 19:00 (GMT+2);
• US FOMC Economic Projections at 21:00 (GMT+2);
• US FOMC Fed Interest Rate Decision at 21:00 (GMT+2);
• US FOMC Statement at 21:00 (GMT+2);
• US FOMC Press Conference at 21:30 (GMT+2);
• New Zealand GDP (q/q) at 23:45 (GMT+2).

Eventually, the USD/CAD pair reached above the December high level zone and the weekly R1 simple pivot point at 1.2835/1.2853. On Wednesday morning, the rate confirmed the zone as support. Meanwhile, the rate has confirmed that it is trading in a channel up pattern, which has guided the USD against the CAD since December 8.

A continuation of the surge of the pair might find resistance in round exchange rate levels like the 1.2900 and 1.2950 and the upper trend line of the channel up pattern. A passing of the round levels could eventually result in the USD/CAD reaching the weekly R2 simple pivot point at 1.2965.

Meanwhile, a decline would have to pass the 1.2835/1.2853 zone's support, before reaching the 50-hour simple moving average at 1.2820 and the 1.2800 level.