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On Thursday, the EUR/JPY currency exchange rate found resistance in the 128.20 level. The 128.20 mark's resistance was tested two times, before a decline of the pair began. On Friday morning, the rate was being pushed down by the 50-hour simple moving average.

If the pair continues to decline, it would most likely once again look for support in the 127.50 mark and the weekly S1 simple pivot point at 127.53 This week, the rate found support in these levels two times. Below these levels, there is no technical support as low as the weekly S2 simple pivot point at 126.76. However, take into account that the 127.00 mark might act as support.

Meanwhile, a passing of the resistance of the 50-hour simple moving average and the 128.20 mark, could result in the rate reaching the resistance of the weekly simple pivot point and the 200-hour simple moving average at 128.56.

The price of crude oil declined slightly after the latest meeting by OPEC and its allies. The cartel decided to continue increasing monthly crude production by about 400k barrels. Before the meeting, some analysts were expecting that the cartel will slow the reduction because of the new Covid-19 variant. In an unusual move, the cartel added that its meeting would remain in session. This means that members will continue watching developments in the industry and intervene if needed. The OPEC decision came two weeks after the US agreed to release its strategic petroleum reserves.

American stocks rose as investors shrugged the new virus. The Dow Jones and Nasdaq 100 index rose by more than 1%. This rally was likely because of a deal in the House of Representatives that will avert the government shut down until February 2018. It is unclear whether the Senate will agree to the deal. They also rose after a positive report by GlaxoSmithKline, which said that its anti-body treatment was effective against the Omicron in early lab testing. Shares of Grab, the giant Southeast Asian ride-hailing company declined by more than 10% after it went public.

The economic calendar will have some important events today. The most important will be the non-farm payroll (NFP) data from the United States. Analysts expect the data to show that the economy added more than 550k jobs in November while the unemployment rate fell to 4.5%. In Canada, the country’s statistics agency will also publish its latest employment numbers. In Europe, Eurostat will release the latest retail sales while in October. And in Turkey, the statistics agency will publish November’s inflation data. These numbers will be watched closely since the country’s central bank has slashed interest rates three times this year.

XAUUSD

The XAUUSD pair declined sharply ahead of the latest US jobs numbers. It is trading at 1,764, which was the lowest level since November 2. The pair managed to move below the lower side of the bearish flag pattern. It also managed to move below the 25-day moving average. The pair has also moved to the lower side of the Bollinger Bands. It also moved below the 61.8% Fibonacci retracement level. Therefore, the pair will likely keep falling with the next reference point being at 1,700.

EURUSD

The EURUSD pair tilted lower ahead of the US nonfarm payroll numbers. The pair dropped to a low of 1.1300. On the four-hour chart, the pair is along with the 25-day moving average. It has also formed an inverted head and shoulders pattern. It is also slightly below the 61.8% Fibonacci retracement level. The Relative Strength Index (RSI) has also moved below the overbought level. Therefore, the pair will likely bounce back today.

SPX500

The S&P 500 bounced back after the progress on government lockdown. The index rose to a high of $4585, which was higher than this week’s low of $4,500. On the four-hour chart, the index moved above the 38.2% Fibonacci retracement level. It is also below the Ichimoku cloud while the Relative Strength Index (RSI) has moved from the oversold level. Therefore, the index will likely keep rising today.

Asian equities refuse to follow the US lead

The perpetual mega-bulls of the US stock market had their day in the sun finally overnight as US indexes moved sharply higher as the armchair epidemiologists of day trading decided that omicron, while contagious, will be mild symptomatically. The S&P 500 jumped 1.42% higher, with the Nasdaq rising by 0.83%, while the Dow Jones leapt by 1.83%. In Asia, some short-term profit-taking is evident as the news wires turn slightly sour in Asia, futures on all three indexes edging around 0.15% lower.

With US equity futures markets unable to maintain upward momentum today, tier-1 US data due this evening, virus nerves and concerns reappearing around China property and China US-delisting worries, Asian markets have mostly rallied, but only modestly so. The Nikkei 225 has climbed by 0.35%, with the Kospi climbing by 0.45%. Mainland China sees the Shanghai Composite 0.55% higher, with the CSI 300 rising by 0.35%. Hong Kong is in the red, though, as China property nerves sap sentiment. The Hang Seng has fallen by 0.65%.

Across the region, Singapore is 0.25% higher, with Kuala Lumpur up 0.30%, while Jakarta has fallen by 0.30%. Manila has jumped by 1.05%, with Bangkok down 0.15% and Taipei unchanged for the session. Australian markets have recorded cautious gains, the All Ordinaries edging 0.10% higher and the ASX 200 gaining 0.20%.

European markets will likely unwind some of yesterday’s losses, but gains will be limited ahead of the US Non-Farm Payrolls. As ever this week, the street is one negative omicron headline away from turning sharply lower en masse. If the virus news ticker stays quiet, a higher US Non-Farm Payrolls print could see equity gains capped, with a slightly lower or on target print of 550K, not enough to entirely remove faster Fed-taper fears.

Daily Pivots: (S1) 149.08; (P) 150.26; (R1) 150.89; More...

Intraday bias in GBP/JPY is turned neutral again. On the downside, break of 149.52 will resume fall from 158.19 to 100% projection of 158.19 to 152.35 from 154.70 at 148.86 next, which is close to 148.93 key structural support. Decisive break there will carry larger bearish implication and target 161.8% projection at 145.25 next.

In the bigger picture, the break of medium term channel support, and bearish divergence condition in week MACD are raising the chance of medium term topping at 158.19. Firm break of 148.93 support will argue that GBP/JPY is at least correcting the whole rise from 123.94 (2020 low). In this case, deeper fall would be seen to 38.2% retracement of 123.94 to 158.19 at 145.10. Nevertheless, strong rebound from 148.93 will retain medium term bullishness for another rise through 158.19 at a later stage.

Daily Pivots: (S1) 127.60; (P) 127.92; (R1) 128.21; More....

Intraday bias in EUR/JPY is neutral for the moment, but further decline is expected as long as 129.58 resistance holds. Break of 127.47 will target 126.58 medium term fibonacci level next. On the upside, however, break of 129.58 resistance will indicate short term bottoming, and turn bias back to the upside for rebound back to 55 day EMA (now at 130.02) first.

In the bigger picture, as long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of medium term bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

Daily Pivots: (S1) 0.8482; (P) 0.8505; (R1) 0.8521; More...

Intraday bias in EUR/GBP is turned neutral with current retreat. On the upside, above 0.8537 will resume the rebound from 0.8379 to 0.8593 resistance. Sustained break there will be the first sign of larger bullish reversal and target 0.8656 resistance next. On the downside, however, break of 0.8444 minor support will turn bias back to the downside for retesting 0.8379 low.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8593 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8593 will now be an early sign of medium term bottoming. However, sustained break of 0.8276 will be a sign of long term bearish reversal.

Daily Pivots: (S1) 1.5894; (P) 1.5950; (R1) 1.5990; More...

No change in EUR/AUD's outlook as further rise is expected with 1.5743 support intact. Rebound from 1.5354 will target 161.8% projection of 1.5354 to 1.5743 from 1.5446 at 1.6075 next. On the downside, however, break of 1.5743 resistance turned support will mix up the near term outlook and turn intraday bias neutral first.

In the bigger picture, the strong rebound from 1.5354 invalidates the case of imminent downside breakout, and turn medium term outlook neutral again. Such rise is seen as the third leg of the corrective pattern from 1.5250. Further rally could be seen through 1.6434 resistance. On the downside, however, break of 1.5446 support will turn focus back to 1.5250 low.

Wall Street jumps, Asia cautious

US stock markets roared higher overnight as omicron nerves settled on initial indications that the new variant is very contagious, but less severe symptom-wise. Whether that is the case or not remains to be seen and omicron sentiment will continue driving swings in market direction into next week. It was enough to flush the FOMO gnomes of Wall Street into action though, with stock markets rallying impressively on Wall Street.

Believe it or not, there are other things going on in the world, however. Most immediately, the US releases Non-Farm Payrolls this evening and assuming the omicron news remains less end of the world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself. That may nip the equity rally in the bud, while the US Dollar and US yields could resume rising.

Asian markets are subdued today across asset classes and even US equity futures have edged lower this morning. There is a fair bit of negative news floating around this morning, and Asia as a whole, after a tumultuous week, looks ready to sit out today’s session on the sidelines. The US Non-Farm Payrolls is as good a reason to be cautious as any. Additionally, the US Congress has passed a bill to temporarily fund the US government into mid-February, but no progress has yet been made on lifting the overall debt limit, which could be hit as early as next December 15th.

Staying with the US, the US SEC has announced a tightening of listing requirements surrounding ownership and the certifying of auditors in overseas territories who audit foreign companies listed on US exchanges. That is directly aimed at China of course, which has no intention of allowing any such thing. Markets are speculating today that the requirements will see an exodus of Chinese companies from the US exchanges. China ride-hailing giant, Didi Global, has announced it will delist from the US after a troubled IPO that also angered the Chinese government, never a smart business move. It comes after the Grab SPAC IPO flopped yesterday, with a classic stagging of the IPO occurring. Buying the IPO and dumping into the initial rally. That saw Grab finish 20% lower on the first day of trading. Time will tell if Grab’s “patriotic” listing in the US will remotely justify its USD 40 billion valuation. I suspect not, and that the only winners will be the pre-IPO shareholders.

Nerves continue to swirl in the China property space as well today, with troubled developer Kaisa failing to gain the 95% approval to swap out its maturing USD 400 million, note due next week, for longer maturities. Default risks have now reached deafening levels for Kaisa who have until December 7th to pay. Additionally, a 30-day grace period on an USD 82.50 million coupon for Evergrande falls on 6th December next week.

China’s Caixin Services PMI for November fell unexpectedly to 52.1 this morning from 53.8 in October, raising fears that domestic consumption is fading on the mainland on rising labour and energy costs, as well as selective virus restriction. That has overshadowed improved services PMI data from Japan, Australia, Singapore and Hong Kong. South Korean markets are struggling as well, with virus cases surging, capping gains on the Kospi and also the won.

Add in the danger of being whip-sawed on random omicron headlines, it’s hardly surprising Asia wants to sit the rest of today out. I expect a similar response from Europe as well. Next week, we see a lot of CPI releases from the region, including China, as well as the Reserve Bank of Australia and Reserve Bank of India policy decisions, plus China trade data. The week after will see a central bank policy meeting frenzy, including the US FOMC, and depending on where the world is with omicron, a number of central banks will struggle to hit the W for Wimp button, regarding their inflation outlook. Volatility has been the winner this week, and I fully expect it to continue to do so through the rest of December.

Daily Pivots: (S1) 1.0388; (P) 1.0412; (R1) 1.0424; More....

Further decline is expected in EUR/CHF with 1.0511 resistance intact. Current down trend from 1.1149 should target 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next. On the upside, though, break of 1.0511 resistance will now indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, long term down trend from 1.2004 (2018 high) is now extending. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. On the upside, break of 1.0694 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.

Markets

European dealings parted ways with the US session once more yesterday. European equities opened significantly lower in a catch-up move to WS's losses on Wednesday and never really managed to overturn that sluggish start. Main indices ended 1%-1.5% lower. German Bunds also outperformed US Treasuries. News that Germany would install a fresh lockdown for the unvaccinated triggered a technical break of the German 10-yr yield below key support at -0.35%. Technical selling accelerated the move which also coincided with a Pavlov-like spike lower in oil prices after Saudi Arabia/OPEC+ decided at its monthly meeting to continue reversing production cuts at the planned monthly pace of 400k barrels a day. Given that OPEC+ forecasts suggest that supply is expected to overtake demand in coming months, we wouldn't be surprised if the cartel at one of its next meetings nevertheless hits the brakes. Brent crude temporarily fell from $70/b to $66/b, but erased all of those losses during the rest of the US session to currently trade near $71/b. German yields closed the day 1.6 bps (30-yr) to 3.3 bps (5-yr) lower. The US yield curve bear flattened with yields adding 7.7 bps (3-yr) to 2.3 bps (30-yr). US Treasuries have been underperforming ever since Fed Chair Powell made his U-turn on the inflation treat to the US economy. More Fed governors unleashed the shackles yesterday, supporting the call to speed up the taper process and create room for rate hikes. The US 10-yr yield did manage to hold above 1.41% support for now. The rebound of US stock markets (close +0.83% to +1.83%) helped hold US Treasuries under pressure. The dollar ended the day stronger (DXY>96, EUR/USD<1.13), but we admit that gains could have been bigger. The USD's disproportional November frontrunning could be an argument, while EUR investors probably gradually eye the December 16 ECB meeting. Pressure on the Lagarde and co to change tack on inflation and prepare/present an exit strategy is growing bigger every day with record high core EMU CPI prints and the Fed's U-turn being the latest high level events. In a daily perspective, we are inclined to continue giving the advantage to the greenback though. Today's eco calendar contains US payrolls and non-manufacturing ISM. Previous Q4 data all bode well for strong outcomes which would continue the underperformance of US Treasuries vs German Bunds and thus help the dollar. Regarding German Bunds, the jury remains out whether yesterday's partly technically inspired break below -0.35% will hold in a context of rising US yields. EUR/GBP followed the move south of EUR/USD and returned below 0.85. Any EUR-rebound potential remains limited going into this month's BoE meeting (UK policy rate lift-off).

News headlines

The US Senate approved a bill that will keep the US Government funded through 18 February, averting a government shutdown as funding would run out at midnight on Friday. The bill was approved by 69-28 after the House of Representatives already gave its approval (221-212). Senate Democrats overcame an attempt of some Republicans to attach an amendment to the bill that would have blocked President Biden's coronavirus vaccine mandate. However, even after the approval of the funding bill, US Congress still has to address several key issues including raising the federal government borrowing limit of $28.9tn which the US Treasury expects to be reached around December 15. Also, the annual defense policy bill still needs to be approved and Democrats still look for approval of president Biden's $1.75tn spending package.

The Polish zloty put in a remarkably strong performance yesterday even as sentiment on European markets was very much risk off. The zloty outperformance came after NBP governor Glapinski made a U-turn on his assessment with respect to the temporary nature of inflation. In a move similar to Fed Chair Powell he said that 'inflation is not transitory, but burdensome'. Polish inflation printed at 7.7% Y/Y in November. Earlier this week, governor Glapinski already changed his view on the merits of a weak zloty. Other MPC members also advocated for a strong(er) zloty to slow inflation. EUR/PLN currently trades near 4.60 compared to 4.70+ levels last week.