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Market movers today

• The US JOLTS data will provide more info on job openings and the quit rate. Both are elevated right now reflecting high labour demand.
• Bank of Canada (BoC) is set to leave monetary policy unchanged at today's interim meeting. In October BoC ended QE and indicated the first rate hike in the "middle quarters" of 2022. Since then data has beat expectations consistently and while Omicron has created some uncertainty we can no longer rule out a rate hike as early as January 2022 even if our base case remains April 2022.
• The Polish central bank is expected to deliver a 50bp hike.
• In Sweden, Riksbank vice governor Per Jansson will speak.

The 60 second overview

There has been a positive opening on the Asian equity markets this morning combined with a modest decline in 10Y US Treasury yields on the back of the Chinese authorities' support to markets in order to limit the potential negative impact from a fall-out in the property sector as well as some positive news on the Omicron variant.

The tensions between US and Russia over Ukraine continue despite the meeting between Biden and Putin yesterday, but so far the market impact has been modest as the markets are focused more on the potential negative impact from the new variant of coronavirus - Omicron.

We received some mixed news on Omicron yesterday, although data are still very premature. The bad news: New lab data shows that Omicron is indeed, as feared, better able to evade vaccine and infection-induced immunity. The evasion is "robust but not complete",Protection from the Pfizer vaccine is likely reduced 20-40-fold but scientists still expect protection holds up against severe illness. Another thing we still do not know is whether protection is higher for people who have received a third vaccine shot. The good news: Based on preliminary data from South Africa, Omicron seems less severe from a micro perspective. The share of people in ICU or on ventilators are 2-3x lower than at the same stage of the delta wave and the time between admissions and discharges seem shorter, One word of caution is that although the micro/individual risk is lower, the macro/societal risk may not be. If more people get infected due to higher infectiousness/worse immunity, more people on an absolute level may still get admitted to hospital, so countries may hit hospital capacity. We will continue to monitor the development.

Reserve Bank of Australia (RBA) stuck to the dovish inflation narrative but remained optimistic that the Omicron variant should not derail the recovery in Australian economy. AUD gained support from the positive RBA outlook, but also from the Chinese trade data, which showed surprisingly high iron ore import volumes in November. However, this was most likely due to stockpiling given the clear fall in prices recently, and despite the signs of China strengthening its stimulus measures, the final demand outlook in the construction sector remains weak, pointing towards further weakness in Australian terms-of-trade.

Equities: Strong rebound in equities Tuesday as the narrative that Omicron may be very infectious but less deadly got more attention. Risk-on sentiment assisting most sectors with the cyclical and long-duration plays in strong outperformance. Vol dropped sharply and VIX fell below 22. In US Dow +1.4%, S&P 500 +2.1%, Nasdaq +3.0%, and Russell 2000 +2.3% The risk-on sentiment carrying over to Asia this morning with most indices being higher despite some less positive news around property developers in China. European futures are flat while US futures are slightly higher driven by growth-heavy indices.

FI: There has been modest movements in the global bond markets. US Treasury yields have stabilized around the 1.45% level this morning. We are awaiting the US CPI data on Friday as well as string of central bank meetings next week.

FX: Commodity currencies continued to rally yesterday with AUD, NOK and CAD leading the way. Notably, EUR/NOK dropped below 10.20 again. EUR/USD hovered below 1.13.

Credit: Credit markets tightened substantially yesterday, with iTraxx closing 17bp tighter (in 263bp) and Main 3.5bp (in 53.4bp). HY bonds finished 9bp tighter and IG 2bp.

Nordic macro

Riksbank Vice Governor Per Jansson speaks on the subject "Is it time to review the division of roles in macroeconomic policy?". The speech will be published on the Riksbank website at 08:00 CET. The Minutes confirmed Jansson's position as ultra-dove - he had doubts about raising the repo rate path but in the end he refrained from entering a formal reservation. While the speech will probably be soft, the title suggests it is more about the framework, possibly how monetary and fiscal policies can be better synchronized.

Daily Pivots: (S1) 1.1232; (P) 1.1265; (R1) 1.1302; More...

Range trading continues in EUR/USD and intraday bias remains neutral first. On the upside, 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 1.1473). On the downside, break of 1.1185 will resume larger fall from 1.2348.

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.

Daily Pivots: (S1) 1.3204; (P) 1.3247; (R1) 1.3285; More...

Range trading continues in GBP/USD and intraday bias remains neutral. On the downside, sustained break of 1.3164 medium term fibonacci level will carry larger bearish implication, and target 161.8% projection of 1.4248 to 1.3570 from 1.3833 at 1.2736. Nevertheless, break of 1.3369 minor resistance will turn bias back to the upside for 1.3512 resistance first.

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, ahead rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493.

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

Intraday bias in USD/CHF remains neutral for the moment. 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) 113.38; (P) 113.58; (R1) 113.76; More...

Intraday bias in USD/JPY remains 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.

Daily Pivots: (S1) 0.7064; (P) 0.7094; (R1) 0.7147; More...

Intraday bias in AUD/USD stays neutral at this point. On the upside, firm break of 0.7172 will indicate short term bottoming. Intraday bias will be turned back to the upside for 55 day EMA (now at 0.7276). On the downside, firm break of 0.6991 key structural support will carry larger bearish implication. Next target is 100% projection of 0.7890 to 0.7105 from 0.7555 at 0.6770.

In the bigger picture, sustained break of 0.6991 cluster support will argue that the who 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.

General trend

• USD index declines.
• Yuan trades at strongest level since May 2018.
• AUD extends gain; Australian bond yields pared rise.
• US equity FUTs have remained modestly higher in Asia.
• Nikkei 225 has extended gains.
• Hang Seng has pared the opening rise; Kaisa Group was halted amid default concerns; Weibo declined in HK debut.
• Shanghai Composite extended gains during the morning session; Consumer firms rise ahead of inflation data; Property index lags after prior gains.
• S&P ASX 200 has extended gains; Consumer Discretionary and Resources indices outperform.
• RBA Gov Lowe is due to speak on Thurs at 10:05 PM GMT [Payments: the Future? – to Payments Summit 2021 – Online].
• Companies due to report during the NY morning include Brown-Forman, Campbell Soup, CooTek, Thor Industries, United Natural Foods, Vera Bradley

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened +0.6%.
• (AU) Australia Treasurer Frydenberg to announces reform to the "buy now, pay later", crypto and digital wallets business later today (follows RBA study launched in late summer).
• CBA.AU Subsidiary, Avanteos Investments, pleads guilty to 18 criminal charges for charging deceased superannuation members.

Japan

• Nikkei 225 opened +1.2%.
• (JP) JAPAN Q3 FINAL GDP Q/Q: -0.9% V -0.8%E; GDP ANNUALIZED Q/Q: -3.6% V -3.1%E.
• (JP) According to a former Bank of Japan (BOJ) official, the BOJ is likely to scale down longer COVID aid (narrow the scope) but keep this more limited version in place for longer term - Japan press.
• (JP) Japan Govt said to be considering tying tax incentives to wage increases, tax breaks for gas companies hit by reregulation - Press.
• (JP) Japan Oct Current Account: ¥1.18T v ¥1.03Te; Adj Current Account: ¥1.03B v ¥999.2Be; Trade Balance (BoP): ¥166.7B v ¥128.8Be.
• (JP) Japan PM Kishida: Capital gains tax revision is one option for distribution - speaking to parliament.
• (JP) Japan Nov Eco Watchers Current Survey: 56.3 v 57.4e (highest since Nov 2013); Outlook Survey: 53.4 v 57.7e.
• (JP) Japan Nov Bank Lending Y/Y: 0.6% v 0.9% prior; Bank Lending (ex-trusts) Y/Y: 0.5% v 0.8% prior.
• (JP) Bank of Japan (BOJ) Official Amamiya: Watching impact of virus infection closely; Unclear how coronavirus variant will impact domestic and overseas economies; In light of Japan's price situation, you can see the BOJ for now has no need to modify its massive monetary stimulus program.

Korea

• Kospi opened +1.0%.
• (KR) South Korea PM: South Korea to report >7.0K coronavirus cases (record high).
• (KR) South Korea Fin Min Hong: Housing prices have markedly stabilized on the back of housing supply measures.

China/Hong Kong

• Hang Seng opened +0.4%; Shanghai Composite opened +0.6%.
• 9898.HK Hong Kong IPO opens -6.1% at HK$256.20/shr v pricing of HK$272.80/shr.
• (CN) China companies' IPOs in US to slow in short term, due to SEC rules - China Economic Daily.
• (CN) China PBOC sets Yuan reference rate: 6.3677 v 6.3738 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net CNY0B v Net drain CNY90B prior.
• (CN) China MoF sells 2-year and 5-year bonds; Sells 2-year bond, avg yield 2.4576%; bid to cover 3.70x; Sells 5-year bond; avg yield 2.67%; bid to cover 3.33x.
• (CN) China 2022 local government bond supply might remain 'high' amid spending to support growth [in line] - Chinese press.
• (CN) Fitch: Sees mainland China 2022 GDP to slow to 4.8%, from 8.0% in 2021.

Other

• (TW) Taiwan Nov Trade Balance: $5.7B v $5.4Be; Exports Y/Y: 30.2% v 22.8%e (record high, yesterday after the close).
• (SG) Singapore Central Bank (MAS) Economist Survey: Raises 2021 GDP to 6.9% (prior 6.6%); Raises 2021 core CPI outlook 0.9% (prior 0.7%).

North America

• STT Blackrock to pull most of its $2.0T ETF assets in US from State Street and move them to Citigroup, JPMorgan, Bank of New York, to reduce its reliance on State Street’s custody services.
• (US) Commerce Sec Raimondo: US and UK have not yet agreed to begin formal talks on steel trade.
• (US) Senate Banking Panel to hold hearing on Stable Coins on Dec 14th.
• AAPL Reportedly has told suppliers to accelerate iPhone production in Nov-Jan period; Supply chain woes will leave Apple about 15M units short of its 230M iPhone production plan set at the start of 2021 – Nikkei.
• (US) House of Representatives passes bill to make passing debt limit bill quicker; the final vote was 222 to 212.

Europe

• (UK) Govt considering a work from home plan (due to Omicron variant) for Christmas and New Years and any economic impact that may have - UK press.
• NESN.CH Nestle cuts stake in L’Oreal to 20.1% at €400/shr; Initiates new CHF20B share buyback.

Levels as of 00:15ET

• Hang Seng -0.2%; Shanghai Composite +0.8%; Kospi +0.3%; Nikkei225 +1.3%; ASX 200 +1.4%.
• Equity Futures: S&P500 +0.4%; Nasdaq100 +0.5%, Dax +0.0%; FTSE100 -0.1%.
• EUR 1.1296-1.1264; JPY 113.62-113.36; AUD 0.7143-0.7115; NZD 0.6801-0.6769.
• Commodity Futures: Gold +0.3% at $1,790/oz; Crude Oil -0.3% at $71.81/brl; Copper -0.1% at $4.34/lb.

Daily Pivots: (S1) 1.2594; (P) 1.2681; (R1) 1.2726; More...

Immediate focus is now on 1.2639 in USD/CAD with the steep fall from 1.2852. Firm break there will argue that rebound from 1.2286 might be finished at 1.2852. Deeper fall would be seen back to 55 day EMA (now at 1.2592). Sustained break there will bring deeper fall 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.

Following return of risk-on sentiment, commodity currencies are currently the best performers for the week. On the other hand, Swiss Franc and Yen are trading broadly lower, followed by Euro and Dollar. The economic calendar is very light today and main focus will be on BoC policy decision. At the same time, we'll see if the strong stock market rally could continue to push major US indexes back to record highs.

Technically, the rebounds in Yen crosses are relatively disappointing so far, considering the strong rise in stocks. We'll continue to keep an eye on 113.94 minor resistance in USD/JPY, 128.77 minor resistance in EUR/JPY and 152.35 resistance in GBP/JPY to gauge if they're in a bullish turnaround.

In Asia, at the time of writing, Nikkei is up 1.19%. Hong Kong HSI is down -0.10%. China Shanghai SSE is up 0.73%. Singapore Strait Times is down -0.23%. Japan 10-year JGB yield is down -0.0011 at 0.054. Overnight, DOW rose 1.40%. S&P 500 rose 2.07%. NASDAQ rose 3.03%. 10-year yield rose 0.046 to 1.480.

BoJ Amamiya: No need to adjust large-scale monetary easing at present

BoJ Deputy Governor Masayoshi Amamiya said in a speech that Japan's inflation rate is still "far below the price stability target of 2 percent". CPI is projected to be just around 1% even in fiscal 2023, the end of the current projection period. Therefore, BoJ will "persistently continue with powerful monetary easing" under the current QQE with yield curve control.

While central banks in US and Europe have recently started adjusting their monetary policy, the situation is different in Japan. Amamiya said, "given the price developments in Japan I have described, I think it makes sense that the Bank does not actually need to adjust its large-scale monetary easing at present".

Also from Japan, GDP dropped -0.9% qoq in Q3, revised down from prior estimate of -0.8% qoq. GDP deflator dropped -1.2% yoy. Current account surplus widened to JPY 1.03T in October.

CAD/JPY in strong rebound as BoC in focus

With a light economic calendar, main focus will be on BoC monetary policy decision today. No change is expected as the central has just stopped asset purchases back in October. Also, at that statement, BoC had pushed forward the timing for the first rate hike to "sometime in the middle quarters of 2022", compared with previous estimate of "the second half of 2022". Given the uncertainty surrounding Omicron, the central bank will more likely keep the rhetoric unchanged than not.

Some previews on BoC:

• BOC Preview – Reiterating Rate Hike in First Half 2022 amidst Strong Economic Data
• Bank of Canada Meeting Preview: BOC Inching Closer to Rate Hikes
• Bank of Canada Meets as Omicron Hits Loonie
• Forward Guidance: Bank of Canada and Omicron Risks in the Spotlight Next Week

Canadian Dollar is in strong rebound this week, partly on return of risk-on sentiment, in tandem with rebound in oil prices. CAD/JPY's pull back from 93.00 could have completed at 87.68, after hitting 61.8% retracement of 84.65 to 93.00 at 87.83.

Sustained trading above 55 day EMA (now at 89.78) will affirm this case and pave the way for retesting 93.00 high next. Also, given that CAD/JPY has defended medium term trend line support and 55 week EMA very well, the whole up trend from 73.80 could be ready to resume through 93.00 in this case.

Nevertheless, another fall and sustained trading below 87.83 will turn focus back to 84.65 key medium term structural support.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2594; (P) 1.2681; (R1) 1.2726; More...

Immediate focus is now on 1.2639 in USD/CAD with the steep fall from 1.2852. Firm break there will argue that rebound from 1.2286 might be finished at 1.2852. Deeper fall would be seen back to 55 day EMA (now at 1.2592). Sustained break there will bring deeper fall 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.

Economic Indicators Update

With a light economic calendar, main focus will be on BoC monetary policy decision today. No change is expected as the central has just stopped asset purchases back in October. Also, at that statement, BoC had pushed forward the timing for the first rate hike to "sometime in the middle quarters of 2022", compared with previous estimate of "the second half of 2022". Given the uncertainty surrounding Omicron, the central bank will more likely keep the rhetoric unchanged than not.

Some previews on BoC:

• BOC Preview – Reiterating Rate Hike in First Half 2022 amidst Strong Economic Data
• Bank of Canada Meeting Preview: BOC Inching Closer to Rate Hikes
• Bank of Canada Meets as Omicron Hits Loonie
• Forward Guidance: Bank of Canada and Omicron Risks in the Spotlight Next Week

Canadian Dollar is in strong rebound this week, partly on return of risk-on sentiment, in tandem with rebound in oil prices. CAD/JPY's pull back from 93.00 could have completed at 87.68, after hitting 61.8% retracement of 84.65 to 93.00 at 87.83.

Sustained trading above 55 day EMA (now at 89.78) will affirm this case and pave the way for retesting 93.00 high next. Also, given that CAD/JPY has defended medium term trend line support and 55 week EMA very well, the whole up trend from 73.80 could be ready to resume through 93.00 in this case.

Nevertheless, another fall and sustained trading below 87.83 will turn focus back to 84.65 key medium term structural support.