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Daily Pivots: (S1) 0.9228; (P) 0.9251; (R1) 0.9272; More....

Intraday bias in USD/CHF remains neutral as range trading continues. On the upside, break of 0.9271 minor resistance 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.

Daily Pivots: (S1) 113.36; (P) 113.65; (R1) 114.00; More...

Intraday bias in USD/JPY stays neutral as range trading continues. 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.

The US indices gained on Wednesday, but the gains were more contained compared to the prior sessions, as the European indices posted losses. The S&P500 added 0.30% and the Dow was up 0.10%. Nasdaq led gains thanks to the rally in Apple (+2.28%).

European indices are set to open slightly higher.

Small gains are good news as they show that a consolidation is underway. The easing volatility is a sign that the gains are more sustainable than what they appeared to be a couple of sessions ago.

Of course, that does not mean that tomorrow’s US inflation data will be piece of cake, but a part of the risk of a bad surprise is probably digested, as the expectation that the Federal Reserve (Fed) will taper quickly to fight back the rising price pressures in the US is broadly priced in.

Does that mean that we will still see the Santa rally? It’s better to wait until the US inflation data is announced before uncorking the champagne. The latest data showed that inflation in China hit a 15-month high, while the producer prices eased from a 26-year high. Cool down in Chinese factory gate prices is good news, but it may not prevent the US CPI from advancing to the strong 6.7% level expected by analysts in November data.

Newer than Omicron

Worries that omicron will cause trouble are waning, but a new strain is found in Australia, and it is harder to detect with a PCR test.

The latter news call for caution with the airline and travel stocks, and not only because of the new strains of coronavirus weigh on the investor mood, but also because the fuel prices are under a decent positive pressure and the airline companies had already warned that the higher energy prices would eat into their profits. Add to that the fact that they will make less money because of the travel restrictions in play, the risks are clear.

Speaking of energy prices, US crude continues pushing higher, and even yesterday’s EIA data, which showed that the US crude inventories fell much less than expected didn’t prevent oil prices from pushing higher. The barrel of US crude is trading just below the $73 mark this morning and we see a clear positive momentum building, which should pave the way for a further rise toward the $74-75 per barrel, (100-DMA and the prior support), then toward the $78pb (50-DMA). The persistence in the energy price rally is another headache for inflation of course, and higher they go, more hawkish I get in my expectation of what the Fed will be doing next!

Daily Pivots: (S1) 1.2618; (P) 1.2643; (R1) 1.2676; More...

Immediate focus stays on 1.2639 support in USD/CAD. Firm break there will argue that rebound from 1.2286 might be finished at 1.2852. Deeper fall would be seen back to 1.2286 support. Nevertheless, rebound from the current level and break of 1.2742 minor resistance will retain near term bullishness and bring retest of 1.2852.

In the bigger picture, medium term outlook is neutral for now. The pair drew support from 1.2061 cluster and rebounded. Yet, upside was limited below 38.2% retracement of 1.4667 to 1.2005 at 1.3022. On the upside, firm break of 1.3022 should affirm the case of medium term bullish reversal. However, break of 1.2286 will turn focus back to 1.2005 low again.

Daily Pivots: (S1) 0.7129; (P) 0.7157; (R1) 0.7198; More...

Immediate focus is now on 0.7172 resistance in AUD/USD. Sustained break there should confirm short term bottoming at 0.6992. More importantly, whole corrective fall from 0.8006 might be finished too after defending 0.6991 key structural support. Stronger rise should then be seen to 55 day EMA (now at 0.7275). Firm break there will target 0.7555 resistance to confirm this bullish case. On the downside, however, firm break of 0.6991 will carry larger bearish implication and extend the down trend from 0.8006.

In the bigger picture, focus stays on 0.6991 key support level. Strong rebound from there will argue that up trend from 0.5506 is still intact for another rise through 0.8006 at a later stage. However, sustained break of 0.6991 will argue that the up trend is over, 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.

Market sentiment is generally positive in Asian session today. Australian and New Zealand Dollar are extending near term rebound. Other currencies are mixed, though. Canadian Dollar is paring some gains, after the non-eventful BoC rate decision. Sterling is trying to recover from yesterday's selloff. Dollar and Yen are mixed.

Technically, we'll pay attention to both AUD/USD and USD/CAD today. AUD/USD is now trying to break through 0.7272 minor resistance. Sustained trading above there should confirm short term bottoming at 0.6992, just after drawing support from 0.6991 medium term support level. Stronger rise should at least be seen back to 55 day EMA (now at 0.7278, with prospect of bullish reversal.

Meanwhile, sustained break of 1.2639 support in USD/CAD would argue that rebound from 1.2286 is completed at 1.2852, and deeper fall would be seen back to 1.2286 support. Both developments, if happen, could affirm that risk-on sentiment is fully back in the markets.

In Asia, Nikkei closed down -0.47%. Hong Kong HSI is up 0.97%. China Shanghai SSE is up 1.24%. Singapore Strait Times is up 0.29%. Japan 10-year JGB yield is up 0.0034 at 0.053. Overnight, DOW rose 0.10%. S&P 500 rose 0.31%. NASDAQ rose 0.64%. 10-year yield rose 0.029 to 1.509.

Japan business conditions improved sharply as led by non-manufacturers

According to the Japanese government's Business Outlook Survey, conditions for all large corporations improved notably from 3.3 to 9.6 in Q4. That's the second quarter of positive reading. Conditions for large non-manufacturing jumped sharply from 1.5 to 10.4. Meanwhile, conditions for large manufacturers improved slightly from 7.0 to 7.9.

Conditions for mid-sized companies also rose sharply from 0.2 to 10.7. Conditions for small companies rose from -18.0 to -3.0, but stayed negative for the 31st successive quarter.

"With the severe situation caused by the impact of virus infections gradually easing, the survey results showed that (the economy) has been picking up, although some fields remain weak," a government official told reporters.

China CPI rose to 2.3% yoy in Nov, PPI slowed from 26-yr high to 12.6% yoy

China CPI accelerated to 2.3% yoy in November, up from 1.5% yoy, but below expectation of 2.5% yoy. That's nonethless the highest level since August 2020. PPI slowed to 12.9% yoy, down from October's 26-year high of 13.5% yoy, above expectation of 12.6%.

"As policies to stabilise prices and ensure supply have stepped up, the rapid surge in coal, metal and other energy and raw material prices has been initially contained, leading to a slowdown in PPI," NBS senior statistician Dong Lijuan said in a statement accompanying the release.

New Zealand manufacturing sales dropped -2.2% qoq in Q3

New Zealand Manufacturing sales dropped -2.2% qoq, or NZD 674m in Q3. When adjusted for seasonal effects, 10 of the 13 manufacturing industries had lower volumes of sales in the quarter.

The largest industry movements were: metal products (-17%), petroleum and coal products (-13%), transport equipment, machinery, and equipment (-8.8%).

"Despite sales falls in several construction related manufacturing industries, increased prices for meat and dairy cushioned the blow for total manufacturing values," business statistics manager Evie Rolinson-Purchase said.

Looking ahead

Germany trade balance and Swiss SECO economic forecasts will be release in European session. Later in the day, US will release jobless claims and wholesale inventories.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7129; (P) 0.7157; (R1) 0.7198; More...

Immediate focus is now on 0.7172 resistance in AUD/USD. Sustained break there should confirm short term bottoming at 0.6992. More importantly, whole corrective fall from 0.8006 might be finished too after defending 0.6991 key structural support. Stronger rise should then be seen to 55 day EMA (now at 0.7275). Firm break there will target 0.7555 resistance to confirm this bullish case. On the downside, however, firm break of 0.6991 will carry larger bearish implication and extend the down trend from 0.8006.

In the bigger picture, focus stays on 0.6991 key support level. Strong rebound from there will argue that up trend from 0.5506 is still intact for another rise through 0.8006 at a later stage. However, sustained break of 0.6991 will argue that the up trend is over, 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.

Economic Indicators Update

Market movers today

• A quiet day today ahead of the US CPI inflation day tomorrow.
• This morning Germany releases data on trade balance and this afternoon US jobless claims are due.
• Any news on the Omicron covid variant will also continue to be in focus.
• In Norway the monthly GDP for October will be released this morning.

The 60 second overview

We have seen a rise in most Asian stock markets this morning as it is expected that the global recovery will be resilient to the new Omnicron variant. Hence, the Asian markets follow the positive sentiment from yesterday, where we also saw decent gains in the global equity markets.

A new study shows that a third shoot of the Pfizer vaccine could neutralise the omicron virus. If this is case, focus in the markets should move back to the monetary policy. We did see a big jump in yields yesterday, where 10Y Treasuries moved above 1.50%, and Bunds tested -30bp while the BTPS-Bund spread widened. This morning we have seen a bit of stabilisation of US Treasuries in the Asian markets, as the 10Y yield did not rise further.

Germany: Yesterday Olaf Scholz was elected Germany's new chancellor and head of the country's first centrist 'traffic-light' coalition. Near-term, dealing with a rapidly worsening Covid-19 situation will probably top the list of priorities, not least as the German economy has shown signs of weakness lately. But tricky foreign policy issues also await, with the US again pushing for a blockage of North Stream 2 approval should Russia invade Ukraine (see FT). Over the coming years, the new government is planning an ambitious investment offensive, but financing remains the Achilles' heel of the coalition deal. Read more in German Politics Monitor - Traffic light is flashing green.

Equities: Global equities ended higher yesterday as the US session went from flat to solid gains, closing near day-high. European stocks underperformed and sector moves very different across the Atlantic. Health care the biggest winner yesterday resulting in slight defensive outperformance despite the positive sentiment and VIX running below 20. In US Dow +0.1%, S&P 500 +0.3%, Nasdaq +0.6% and Russell 2000 +0.8%. Asian markets mixed this morning with Japanese stocks underperforming. European futures are slightly positive while US futures are slightly negative this morning.

FI: There was a significant rise in global bond yields as the on the back of a study from Pfeizer-Biontech, that a third injection will improve the effect significantly against the new corona variant, Omicron. If this is the case the bond market should begin focus on the Federal Reserve, ECB and the tapering process in the US and EU.

FX: Scandi currencies rallied yesterday, where USD lost out to most of G10 currencies. EUR/NOK fell below 10.10, while EUR/SEK hovered close to 10.25. EUR/USD rose back above 1.13 level.

Credit: Following the last few days' very storng performance, credit markets took a breather yesterday. iTraxx Xover widened 0.5bp and Main closed unchanged. HY bonds tightened an additional 3bp and IG widened 0.5bp.

Nordic macro

Today brings Norwegian GDP data for October, and we expect mainland growth to slow to 0.2%. This would still be on course for mainland GDP growth of more than 4% for 2021, but is less important after the regional survey earlier this week.

General trend

• China’s Nov inflation data was mixed; PPI slowed less than expected, CPI rose at slower than expected pace.
• Japan’s Q4 BSI survey rose; Some BOJ officials are focusing on the upcoming quarterly Tankan survey [Dec 13th].
• Japan’s M2 had slowest annual rise since Apr 2020 [BOJ’s Amamiya commented on the monetary base earlier this week].
• BOK commented on omicron, Korea 3-yr yield declines.
• USD Index rises after prior decline.
• Quiet session for CNH after prior rally.
• US equity FUTS have traded slightly lower.
• Nikkei 225 and S&P ASX 200 have also traded slightly down.
• Shanghai Composite rose by 1% during the morning session; Gainers included the Consumer and Property indices.
• Hang Seng rose by over 1% then pared gain; TECH index has moved higher; Property developer to sell convertibles (Hopson Development), Fantasia Holdings said to enter receivership.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• Japan Ruling Parties expected to complete tax plan by Dec 10th (Fri).
• Companies due to report during the NY morning include Ciena Corp, Hooker Furniture, Hovnanian, Hormel Foods.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened -0.1%.
• (AU) Reserve Bank of Australia (RBA) Board member Harper: Economy can run strong without high inflation; Labor participation is holding back wage growth.
• LHC.AU EBOS acquires acquire 100% of LifeHealthcare’s Australian & New Zealand subsidiaries and 51% of LifeHealthcare’s Asian subsidiary for A$1.2B.
• (AU) Reserve Bank of Australia (RBA) Gov Lowe: Regulators contine to review treatment of crypto assets and stablecoins, can see advantages in digital tokens backed by RBA - Payments: The future?
• (NZ) Reserve Bank of New Zealand (RBNZ) Deputy Gov Bascand: Warned Fin Min Robertson in August that if mortgage interest rates rose to 6% then about half of recent first-home buyers would struggle to service their loans.
• (NZ) New Zealand sells NZ$500M v NZ$500M indicated in 2024, 2032, and 2051 nominal bonds.
• (AU) Australia Total Weekly Payroll Jobs change Nov 13th: 0.2% v +1.3% prior; Wages Paid 0.0% v -0.9% prior.
• (AU) Port Hedland Exports Port Hedland Iron Ore Exports 43.4Mt v 46.7Mt prior.

Japan

• Nikkei 225 opened -0.1%.
• (JP) JAPAN Q4 BSI LARGE ALL INDUSTRY Q/Q: 9.6 V 5.0E; LARGE MANUFACTURING Q/Q: 7.9 V 7.0 PRIOR.
• (JP) Japan MoF sells ¥2.5T v ¥2.5T indicated in 0.005% 5-year JGBs; Avg Yield: -0.0860% v -0.077% prior, bid-to-cover 3.63x v 4.54x prior.
• (JP) Japan Nov M2 Money Supply Y/Y: 4.0% v 4.1%e (slowest rise since Apr 2020); M3 Money Supply Y/Y: 3.6% v 3.7%e.

Korea

• Kospi opened +0.2%.
• (KR) South Korea reports additional 7,102 coroanvirus cases (2nd consecutive day above 7.0K); Record number of Critical Care patients.
• (KR) Bank of Korea (BOK) Gov Lee to hold briefing on Dec 16th on H2 CPI.
• (KR) Bank of Korea (BOK) monetary policy report: Will adjust the extent of its loose monetary policy stance "appropriately" in consideration of inflation the pandemic and monetary policy directions of major economies - issued to lawmakers.

China/Hong Kong

• Hang Seng opened +0.7%; Shanghai Composite opened +0.1%.
• (CN) CHINA NOV CPI M/M: 0.4% V 0.3%E; Y/Y: 2.3% V 2.5%E (fastest pace since Aug 2020); PPI Y/Y: 12.9% v 12.1%e; Food CPI y/y: +1.6% v -2.4% prior.
• (CN) China Securities Journal: Analysts see further yuan strength in the short term; Yuan's two-way move trend remains unchanged – press.
• (CN) China PBOC said to see its special status starting to erode, with Govt starting to push its influence on the central bank.
• (CN) China Sec Journal: China could see 2022 CPI speeding up, while producer price index’s (PPI) gain may slow down due to a higher base and lower commodity prices; modest price increases will have limited impact on monetary policy.
• (CN) China PBOC sets Yuan reference rate: 6.3498 v 6.3677 prior.
• (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 State Planner (NDRC) Official Wu Xiao: Supports measures to boost consumption in rural areas, including subsidies for furniture and autos.

North America

• RETA CRDAC Panel (Yes 0; No 13; Abstain 0) votes Not in favor of support for bardoxolone methyl as effective in slowing progression of chronic kidney disease in Alport syndrome and benefits do not outweigh risk - CRDAC Meeting.
• (US) Trade Agency: Recommends maintaining solar tariffs for 4 years, with 0.25% annual decline.

Europe

• (UK) Nov RICS House Price Balance: 71% v 70%e.

Levels as of 00:15ET

• Hang Seng +1.0%; Shanghai Composite +1.2%; Kospi +0.4%; Nikkei225 -0.3%; ASX 200 -0.3%.
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.2%, Dax -0.1%; FTSE100 +0.1%.
• EUR 1.1347-1.1329; JPY 113.82-113.29; AUD 0.7177-0.7158; NZD 0.6816-0.6802.
• Commodity Futures: Gold +0.1% at $1,787/oz; Crude Oil +1.0% at $73.08/brl; Copper -0.2% at $4.37/lb.

China CPI accelerated to 2.3% yoy in November, up from 1.5% yoy, but below expectation of 2.5% yoy. That's nonethless the highest level since August 2020. PPI slowed to 12.9% yoy, down from October's 26-year high of 13.5% yoy, above expectation of 12.6%.

"As policies to stabilise prices and ensure supply have stepped up, the rapid surge in coal, metal and other energy and raw material prices has been initially contained, leading to a slowdown in PPI," NBS senior statistician Dong Lijuan said in a statement accompanying the release.

According to the Japanese government's Business Outlook Survey, conditions for all large corporations improved notably from 3.3 to 9.6 in Q4. That's the second quarter of positive reading. Conditions for large non-manufacturing jumped sharply from 1.5 to 10.4. Meanwhile, conditions for large manufacturers improved slightly from 7.0 to 7.9.

Conditions for mid-sized companies also rose sharply from 0.2 to 10.7. Conditions for small companies rose from -18.0 to -3.0, but stayed negative for the 31st successive quarter.

"With the severe situation caused by the impact of virus infections gradually easing, the survey results showed that (the economy) has been picking up, although some fields remain weak," a government official told reporters.

Full release here.