Sample Category Title

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

USD/JPY continues to trade in established range and intraday bias remains neutral at this point. 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) 0.7085; (P) 0.7111; (R1) 0.7131; More...

Intraday bias in AUD/USD is mildly on the downside at this point. Rebound from 0.6992 could have completed at 0.7185. Deeper fall would be seen back to retest 0.6992 low. Sustained break of 0.6991 key medium term structural support will carry larger bearish implication and resume the fall from 0.8006. On the upside, though, above 0.7185 will resume the rebound from 0.6992 to 4 hour 555 EMA (now at 0.7259).

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.

Daily Pivots: (S1) 1.2820; (P) 1.2842; (R1) 1.2887; More...

USD/CAD's break of 1.2852 confirms resumption of rise from 1.2286. Intraday bias stays on the upside for 1.2947 resistance next. Firm break there will target 1.3022 key medium term fibonacci level. On the downside, below 1.2781 minor support will turn intraday bias neutral first. But near term outlook will stay mildly bullish as long as 1.2604 support holds, in case of retreat.

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.

While Dollar is so far the strongest one for the week, there is clearly no follow through buying. The greenback is stuck in range against most others with traders on the sideline ahead of FOMC. Canadian and New Zealand Dollars are the two exceptions, which are already breaking through near term support against Dollar. We'll see if other pairs would finally follow with breakouts.

Technically, as with Dollar's move today, 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 Japan, at the time of writing, Nikkei is up 0.05%. Hong Kong HSI is down -0.04%. China Shanghai SSE is down -0.15%. Singapore Strait Times is down -0.26%. Japan 10-year JGB yield is down -0.0007 at 0.050. Overnight, DOW dropped -0.30%. S&P 500 dropped -0.75%. NASADAQ dropped -1.14%.

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."

Fed to speed up tapering, publish new dot plot

Fed Chair Jerome Powell has clearly indicated that there will be a discussion about accelerating the tapering pace, and ending the asset purchases a a few months early. We'd expect Fed to announce a decision today, probably a double in the size of tapering to USD 30B per month.

The main focus will be more on the new economic projections, in particular the dot plot. Back in October, nine policy makers penciled in one rate hike or more in 2022 (six expected one hike and three expected two hikes), while nine expected no change. We'd probably see the interest rate projections shift even more towards the hawkish side.

Here are some suggested previews:

• 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?

Looking ahead

UK CPI and PPI are the main focus in European session. Later in the day, Canada will also released CPI. US will release Empire State manufacturing, retail sales, import prices, business inventories and NAHB housing index. But of course, all focuses will be on FOMC.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2820; (P) 1.2842; (R1) 1.2887; More...

USD/CAD's break of 1.2852 confirms resumption of rise from 1.2286. Intraday bias stays on the upside for 1.2947 resistance next. Firm break there will target 1.3022 key medium term fibonacci level. On the downside, below 1.2781 minor support will turn intraday bias neutral first. But near term outlook will stay mildly bullish as long as 1.2604 support holds, in case of retreat.

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.

Economic Indicators Update

General trend

• NZ bond yields declined after the NZ Treasury commented on bond issuance and GDP; RBNZ Gov also spoke.
• NZ Q3 GDP data is due on Dec 16th (Thurs.).
• AU bond yields rise, RBA Gov Lowe is due to speak on Thurs at 11:30 PM GMT [Keynote speech by Philip Lowe, Governor – The RBA and the Australian Economy – to CPA Australia Riverina Business Conference – Wagga Wagga].
• Aussie jobs data is also due tomorrow.
• Australia Dec Westpac Consumer Confidence: found a sharp increase in awareness of inflation; there appears to be a heightened sensitivity to virus developments in those states where there is likely more concern about the newly emerging Omicron strain.
• AUD/NZD rises.
• PBOC MLF operation was less than the maturing funds, previously announced RRR cut took effect today.
• China Nov New Home Prices had largest m/m drop since early 2015 [3rd straight decline].
• South Korea bond yields rise; Bank of Korea (BOK) Gov Lee to hold briefing on Thursday Dec 16th on H2 CPI.
• Little seen in terms of fresh omicron news.
• Japan press said the gov't overstated construction orders data for 'years’.
• WTI Crude Futs move below $70/bbl.
• US equity FUTs trade generally flat ahead of Fed.
• Shanghai and Hong Kong property indices rise after prior declines, more caution seen regarding property developers’ bonds.
• Aussie REITs decline amid higher bond yields.
• BeiGene declines 15% in Shanghai debut.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened -0.2%.
• (NZ) Reserve Bank of New Zealand (RBNZ) Gov Orr: Expect further reduction in stimulus over time; House prices are above sustainable level and vulnerable for a correction; reiterates will eventually raise cash rate above neutral level; Neutral rate for OCR is ~2% - speaking at Select Committee.
• (AU) Bain Capital said to be considering IPO for Virgin Australia by mid-2022 - Aussie press.
• (AU) Australia Dec Westpac Consumer Confidence: 104.3 v 105.3 prior; M/M: -1.0% v +0.6% prior.
• (NZ) New Zealand Treasury publishes Half Year Fiscal Update, cuts bond program by NZ$31B over 4 years, updates GDP and CPI outlook.
• (AU) Reserve Bank of Australia (RBA) offers to buy A$800M in Semi Govt Bonds v A$800M prior.

Japan

• Nikkei 225 opened -0.3%.
• (JP) Bank of Japan (BOJ) Gov Kuroda: Domestic corporate goods prices rising significantly; Economy not in state of stagflation.
• (JP) Japan reportedly sees FY22 tax revenue over ¥60T - Japanese press.
• (JP) Japan expected to hold the 2 + 2 meeting with the US in early Jan – press.
• (JP) Japan Land Min: Asahi report that overstates construction orders is true, extremely regrettable, will ensure it will never happen again.
• (JP) Bank of Japan (BOJ) to buy ¥2.0T in bonds via repurchase agreements (3rd consecutive operation, follows rise in Japanese repo rates).
• (JP) Japan LDP Official Amari: Do not want Japan's involvement to stop at just 20NM chips; Wants 10NM chips developed in Japan.
• (JP) Japan PM Kishida: Japan's use of overstated construction data has been used in GDP calculation.

Korea

• Kospi opened -0.3%.
• (KR) South Korea Nov Unemployment: 3.1% v 3.3%e.
• (KR) South Korea reports record 7,850 coronavirus cases, to return to restaurant and cafe hour restrictions under coronavirus containment procedures.
• (KR) Bank of Korea (BOK) issues report on introduction of robots in industries and the impact on employment from 2010-2019: The use of robots results in 'meaningful' decline in human labor demand in manufacturing.

China/Hong Kong

• Hang Seng opened +0.1%; Shanghai Composite opened -0.2%.
• (CN) CHINA NOV INDUSTRIAL PRODUCTION Y/Y: 3.8% V 3.7%E; YTD Y/Y: 10.1% V 10.4%E.
• (CN) CHINA NOV RETAIL SALES Y/Y: 3.9% V 4.7%E; YTD Y/Y: 13.7% V 13.9%E.
• (CN) China National Bureau of Stats (NBS): Economic recovery facing many constraints, main Nov indicators are in reasonable range.
• (CN) CHINA NOV PROPERTY INVESTMENT YTD Y/Y: 6.0% V 6.1%E.
• (CN) CHINA NOV NEW HOMES PRICES M/M: -0.3% V -0.3% PRIOR (3RD STRAIGHT DECLINE); Y/Y: 2.4% V 3.4% PRIOR.
• (CN) China Nov Surveyed Jobless Rate: 5.0% v 4.9%e.
• (CN) CHINA NOV FIXED URBAN ASSETS YTD Y/Y: 5.2% V 5.4%E.
• (CN) Certain banks have cut first-home mortgage rates in Shenzhen to 4.95% (prior 5.10%) - China media.
• (CN) China Sec Times cites analysts: China may cut the Loan Prime Rate (LPR) before holiday season.
• (CN) China PBOC sets Yuan reference rate: 6.3716 v 6.3675 prior.
• (CN) CHINA PBOC CONDUCTS CNY500B V CNY1.0T MATURING IN 1-YEAR MEDIUM-TERM LENDING FACILITY (MLF) AT 2.95% V 2.95% PRIOR (20th consecutive rate hold).
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net CNY0B v Net CNY0B prior.
• (CN) China Nov Air Passenger Traffic 21.5M v 38.9M prior, -51.5% y/y.
• (CN) China CAAM sees 2021 vehicle sales 26.1M units, +3.1% y/y; 2022 vehicle sales at 27.5M units, +5.4% y/y.

North America

• (CA) Canada Govt Budget Update: Reports narrow budget deficits; To pare back bond issuance in FY21-22 by C$31B; cuts 2021 GDP, raises subsequent years.
• (US) House of Representatives has votes to raise debt ceiling by $2.5T to $31.4T cap avoiding default.

Europe

• (CH) Economist call for Swiss National Bank (SNB) to convert $1.0T foreign currency pile into sovereign wealth fund.
• (UK) Bank of England (BOE) said it does not favor major overhaul of cash system - financial press.

Levels as of 00:15ET

• Hang Seng -0.1%; Shanghai Composite -0.1%; Kospi -0.2%; Nikkei225 +0.0%; ASX 200 -0.7%.
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax -0.0%; FTSE100 -1.0%.
• EUR 1.1270-1.1254; JPY 113.80-113.67; AUD 0.7116-0.7099; NZD 0.6751-0.6726.
• Commodity Futures: Gold -0.1% at $1,769/oz; Crude Oil -1.3% at $69.81/brl; Copper -0.0% at $4.27/lb.

Short-term Elliott Wave view in USDCAD suggests the rally from October 21, 2021 low is unfolding as a zigzag structure. Up from October 21 low, wave (A) ended at 1.2845 and pullback in wave (B) ended at 1.26047 as expanded flat. Down from wave (A), wave A ended at 1.274, wave B ended at 1.2854, and wave C of (B) ended at 1.26047. Pair has then turned higher and broken above previous high, suggesting the next leg wave (C) has started. Up from wave (B), wave ((i)) ended at 1.2722 and pullback in wave ((ii)) ended at 1.2677. Pair then resumed higher in wave ((iii)) towards 1.2868.

Pullback in wave ((iv)) is in progress in 3, 7, or 11 swing with potential target of 23.6 – 38.2% fibonacci retracement of wave ((iii)) at 1.2794 – 1.2822. Pair should then resume higher 1 more leg in wave ((v)) to end wave 1 of (C). It should then pullback again in larger degree wave 2 to correct cycle from December 8 low (1.2604) before turning higher again. Near term, as far as December 8 pivot holds, expect dips to find support in 3, 7, or 11 swing for further upside within wave (C). Potential target higher in wave (C) comes at 100% – 123.6% fibonacci extension of wave (A) towards 1.316 – 1.33.

USD/CAD 1 hour Elliott Wave chart

Fed Chair Jerome Powell has clearly indicated that there will be a discussion about accelerating the tapering pace, and ending the asset purchases a a few months early. We'd expect Fed to announce a decision today, probably a double in the size of tapering to USD 30B per month.

The main focus will be more on the new economic projections, in particular the dot plot. Back in October, nine policy makers penciled in one rate hike or more in 2022 (six expected one hike and three expected two hikes), while nine expected no change. We'd probably see the interest rate projections shift even more towards the hawkish side.

Here are some suggested previews:

• 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?

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."

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.

Full release here.

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".