Sample Category Title

EUR/USD

Current level - 1.1295

Yesterday’s trading session was marked by low volatility and, at the time of writing this analysis, the sentiment remains rather negative. Today, investors will focus on the data for the non-farm payrolls change (13:30 GMT), as well as on the unemployment rate data for the U.S. (13:30 GMT), both of which could lead to relatively large swings in either direction. A successful violation of the resistance level at 1.1372 would pave the way for the pair towards the next resistance at 1.1461. In the downward direction, a breach of the support at 1.1260 would head the pair towards the local low at 1.1185.

USD/JPY

Current level - 113.15

After a couple of unsuccessful attacks on the critical support at 112.75, the currency pair is starting to consolidate just above the level at 113.00. In the more likely scenario, in which the bulls take control over the market, the pair should head towards a test of the resistance level at 113.80. Despite this, if the bears manage to overcome the critical support at 112.75, this could lead to a wave of sell-offs and an impulsive downward movement towards the support at 110.80.

GBP/USD

Current level - 1.3286

At the time of writing, the pair is testing the support level at 1.3285 and the forecasts for today’s trading session are for the pair to breach this level and to continue the downward movement towards the support at 1.3224. In the upward direction, an attack on the resistance at 1.3352 is still a possibility and, if this level is violated, the pair would most likely start a corrective move towards the resistance at 1.3400. Today, traders will be expecting higher volatility after the announcement of the non-farm payrolls change (13:30 GMT) and the unemployment rate data for the U.S. (13:30 GMT).

US indices recorded a strong rebound yesterday on expectation that omicron is more transmissible but less deadly, but the volatility remains high. That’s a sign that the stress in the market is not over just yet, because the root cause of the latest market selloff is not only omicron, it’s also the fear of seeing the markets left with less Federal Reserve (Fed) support due to Fed’s willingness to address the high inflation issue moving forward. And, that remains a major downside risk to the risky assets. The PE ratio for the S&P500 is at the highest levels in more than a decade, and the companies will have to fly with their own wings, or at least partly, when the Fed will be done giving out cheap liquidity. Also, the delta variant threatens the holiday activity, therefore a 2% jump in Boeing points that the latest gains may not be sustainable.

Chinese stocks

Chinese tech stocks will certainly have a bad day as there are news that they could be delisted from stock exchanges for not complying with Washington’s requirements to open up the books for scrutiny and tell the US regulators the percentage of share that are owned by a Chinese government entity, whether these entities have controlling financial interest and the name of each member of the Chinese Communist Party who sits on the board. It seems like if the Chinese tech giants like Alibaba and Tencent want to continue doing business in China, they may let go their American dream.

OPEC maintains supply hike, but warns it could change its mind at anytime

After days of speculation on what may come out of yesterday’s meeting, OPEC said it will go ahead with the supply hike as planned, meaning that they will continue adding 400’000 barrels of extra oil per day from January. But, they could revisit the decision at any moment if the omicron becomes a meaningful threat for global oil demand. US crude rebounded after hitting $62 per barrel yesterday, energy stocks jumped near 3% in the US, as well. The next important test for the short-term direction will be the $70-71 offers, where stands the 200-DMA and the major 38.2% Fibonacci retracement which should distinguish between the actual negative trend and a short-term bullish reversal.

At this point, it’s quite hard to tell where we go in terms of risk sentiment. We started the week with a terrible headache due to omicron, and now we hear less bad news regarding this latest strain, so the risk appetite is not restored, but it is clearly getting better. However, no one could rule out one bad news, and everything goes back to red. And there is another thing that the risk sentiment ignores since the arrival of omicron, it’s the fact that the delta cases are surging and remain the main problem of the moment. Therefore, no matter what omicron will become, the surge in delta cases could hit the activity for this holiday season, especially travels.

Is NFP still important?

Today’s NFP data is important, but it is not as important as when the Fed focused on improving the health of the US labour market. There is a chance that today’s data won’t matter much for the Fed expectations, unless we see a surprisingly weak number that the Fed could not ignore. But we also know that even with a weak number, the Fed can’t do much to improve the labour numbers, as it needs to deal with inflation; it has its hands tied.

So, the worst-case scenario for the market mood would be a meaningfully low NFP number combined with hawkish Fed expectations. But that’s not the consensus. The expectation is that the US economy added 550K new nonfarm jobs in November, slightly more than last month’s 530K. It is also in line with the ADP figure printed on Wednesday, which was around 530K.

A strong read on the other hand should be perceived as good news for stock prices, given that whether we see a soft or a strong NFP read, the Fed will need to pull back support in the coming months; a strong number would at least mean that the economy needs less help.

Technical analysis

The RSI is above level 50 and headed downwards.

The Stochastics is at the overbought zone.

Most likely scenario – SELL

Target prices: 1,769.66 1,764.84

Alternative scenario – BUY

Target prices: 1,779.03 1,784.23

Key levels

Support 1,769.66 1,764.84

Resistance 1,779.03 1,784.23

Market movers today

• Today, markets will tune in on US data releases, in particular the jobs report. We expect around 500,000 new jobs were created in line with the consensus estimate of 550.000. More than that will increase the probability that the Fed will increase the tapering pace. Also worth keeping an eye on will be wage growth and whether people are returning to the jobs market, which will give new indications on what we can expect of inflation going forward.
• In the afternoon we also get US ISM non-manufacturing.
• In Scandi, we get new Norwegian unemployment figures, see further in the Nordic section below.

The 60 second overview

FX Top Trades: Today we released our FX Top Trades 2022 - Our guide on how to position for the year ahead in FX markets. Among the 9 top trades are short EUR/USD, short NOK vs USD and EUR, and long EUR/DKK.

Oil: Oil prices have climbed back from the initial plunge yesterday following the OPEC+ surprise decision to go ahead with the planned 400kb/d output increase in January. Brent oil trades above USD70 per barrel again similar to the level prior to the decision. Throughout the pandemic OPEC+ has applied a cautious approach to output management, but today it abandoned it as it expects demand will hold amid fears of the impact of the new omicron variant. Should the omicron variant have lasting negative effect on demand OPEC+ will likely reverse course and start holding back output again. After a week of negative news for the oil market, we see a potential for a near-term rebound back towards USD75/bbl.

Inflation: While wage pressures are rising, we start to see an easing pressure from lower commodity prices and tentative signs that bottle necks are easing. Weekly freight rates released yesterday showed a further decline further with rates from Shanghai to LA now down to the lowest level since July and 20% below the peak. The line of ships outside LA ports has also been cut in half over the past month indicating the pressure is easing. Similarly, supplier delivery indices in Asian PMI (where bottle necks have dominated) also improved in November. In combination with the recent drop in oil prices as well as some metal prices, it suggests that the worse may be behind us on inflation from these channels and it normally feeds into lower headline inflation in US and Europe with a lag of 3-6 months.

COVID-19: Yesterday Germany imposed new restrictions with those unvaccinated barred from restaurants, cinemas, and many shops. Vaccinations could be made mandatory from February according to the chancellor, see BBC. Europe continues to struggle with new waves. For more on Covid and Omicron, see our COVID-19 Update: Omicron - more (breakthrough) infections but milder? Still too early to make firm conclusions released yesterday.

Equities: The risk-off sentiment in Europe turned into a rebound session in the US. Cyclical value stocks led the way, with energy, industrials and banks among the best sectors, and defensives underperformed. S&P500 even reversed Wednesday's pull-back, jumping 1.4%, Dow 1.8%, Nasdaq 0.8% and Russell 2000 2.7%. VIX edged lower but remains very elevated. Asian markets are mostly following this morning albeit Chinese tech stocks are getting hammered. US futures are pointing slightly upward.

FI: It has been some quite volatile days in recent weeks and yesterday was no different. Bunds yields ended 3bp lower on the day to the lowest since early September (-0.36%). Spreads were again volatile, where specifically Ireland has been unusually volatile in the past three trading sessions with 10y IRISH spreads first tightened then widening only to tighten again, all by 3bp each day from Tuesday to Thursday with no apparent trigger for the moves.

FX: EUR/USD slightly lower in overnight trading. The choppy SEK price action continues to reflect general risk sentiment. AUD outlook is weak. OPEC+ meeting in the headlines.

Credit: CDS indices came under slight pressure yesterday while cash bonds held up better. Xover widened 2.7bp and Main 1.1bp. HY bonds finished unchanged and IG tightened almost 2bp.

Nordic macro

Norway releases unemployment today. Unemployment has fallen steadily as the economy has reopened, and employment has risen. However, we are seeing abnormally high vacancies for the number of jobless, which could be a sign of growing matching problems in the labour market. This could slow the decline in unemployment, as it would mean that the normal level has risen. We nevertheless expect the seasonally adjusted jobless rate to drop to 2.4% in November.

General trend

• KRW declines, SK FX reserves dropped for the first time in 5 months.
• Commodity currencies trade lower.
• WTI Crude pared gains following reports of additional US omicron cases [later rebounded]; US equity FUTs also reversed gains.
• Modest equity moves have been seen in Asia.
• Hang Seng extended decline; TECH index dropped >2% amid DiDi’s comments on delisting, US SEC news; HK property sector in focus; Kaisa Group’s debt exchange failed; Debt concerns also weigh on Aoyuan Property.
• Nikkei has traded slightly higher; Index heavyweights decline [Fast Retailing drops after monthly sales figures; Softbank Group extends decline].
• Shanghai Composite ended morning trading higher (+0.6%).
• S&P ASX 200 pared gain.
• Musk continues to sell Tesla shares.
• Companies due to report during the NY morning include Big Lots, BMO, Genesco, Hibbett.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) Australia Nov Final PMI Services: 55.7 v 55.0 prelim (confirms 2nd consecutive expansion and highest since June).
• (AU) Australia sells A$1.5B v A$1.5B indicated in 2.75% Apr 2024 bonds, Avg Yield: 0.6718%, bid-to- cover 2.59x.

Japan

• Nikkei 225 opened +0.3%.
• (JP) Japan Nov Final PMI Services: 53.0 v 52.1 prelim (confirms 2nd straight month of expansion).
• (JP) Bank of Japan (BOJ) announcement related to daily bond buying operation: Unchanged.
• (JP) Japan Fin Min Suzuki: Believes cash handout expenditures aren't too high, will contribute to consumption.
• (JP) Japan Government Draft: Must restore economy first and then deal with fiscal reform.

Korea

• Kospi opened -0.3%.
• (KR) South Korea Govt confirms limiting gathering to 6 individuals in the greater Seoul region; to pursue social distancing measures for the next 4 weeks - Press.
• (KR) South Korea Nov Foreign Reserves: $463.9B v $469.2B prior.
• (KR) South Korea reports record number 736 critical condition coronavirus patients.
• (KR) South Korea Vice Fin Min: Inflation uncertainty is increasing; Govt will take steps to curb excessive inflation expectations.
• (KR) South Korea Parliament approves KRW607.7T 2022 budget (As expected); Projects debt to GDP at 50% during 2022.

China/Hong Kong

• Hang Seng opened -0.5%; Shanghai Composite opened +0.1%.
• (CN) China PBOC sets Yuan reference rate: 6.3738 v 6.3719 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net drain CNY90B v Net drain CNY90B prior.
• 1638.HK Kaisa Group Confirms exchange offer has lapsed; Existing $400M in 6.5% notes to mature Dec 7th; No guarantee of meeting repayment obligations.
• (CN) China should improve rules to develop junk bond market - Chinese press.
• (US) Issues joint statement with EU expressing strong concern regarding China's actions in South, East China seas and Taiwan Strait.
• (CN) China Ambassador to the US Qin Gang: to reduce approval times needed by US Business executives to at most 10 days [easing travel rules for US business execs]; affirmed call for the US to cancel tariffs on China - financial press.
• (CN) China Nov Caixin PMI Services: 52.1 V 53.0E [lowest since Aug].
• (HK) China to appoint National Security advisers in Macau.
• (CN) China to raise coal term contract benchmark prices - Press.
• (US) SEC adopts rule that would require US-listed foreign firms to disclose whether they're owned or controlled by a govt entity.
• (CN) China govt advisers said to have recommended lowering the official 2022 GDP growth target as headwinds are growing- press.
• (CN) China Ministry of Finance (MOF) sells 3-month and 6-month bills.
• (CN) China releases 5-year plan on green development for the industrial sector.

North America

• (US) New York Gov: 5 coroanvirus omicron variant cases identified in New York [Suffolk County, Queens and Brooklyn]; encourages the use of indoor masks.
• (US) Los Angeles County in California reports 1st omicron variant case.
• (US) Pres Biden to seek a code of conduct at the upcoming Summit for Democracy; Aims to rally partners behind a crackdown on surveillance technology.
• DIDI Begins prep for Hong Kong listing and working on delisting in the US.
• (US) As expected, Senate passes the short term funding bill funding the Govt through Feb 18th.

Europe

• (TR) Fitch revises Turkey sovereign rating outlook to Negative; affirms rating at BB.
• (EU) ECB’s Muller (Estonia): Omicron is not reason to shift PEPP end timeable.
• (IE) Ireland Nov PMI Services: 59.3 v 63.4 prior.
• (UK) Expected that Conservatives have retained seats in the Old Bexley and Sidcup by-elections, with a smaller margin compared to 2019 - UK media.

Other

• (SG) Singapore Nov PMI (Whole economy): 52.0 v 52.3 prior (12th consecutive expansion).
• (IN) India Strategic Petroleum reserve CEO Ahuja: Have yet to receive advise on releasing 5M barrels of oil from reserves; Expects to lease out some capacity by Jan.

Levels as of 00:20 ET

• Nikkei 225, +0.6%, ASX 200 +0.2% , Hang Seng -0.7%; Shanghai Composite +0.7% ; Kospi +0.8%.
• Equity S&P500 Futures: flat; Nasdaq100 -0.1%, Dax +0.2%; FTSE100 +0.3%.
• EUR 1.1307-1.1290 ; JPY 113.24-112.95 ; AUD 0.7102-0.7062 ;NZD 0.6827-0.6783.
• Gold +0.6% at $1,770/oz; Crude Oil +1.9% at $67.78/brl; Copper +0.2% at $4.2968/lb.

Daily Pivots: (S1) 1.2777; (P) 1.2807; (R1) 1.2836; More...

With 1.2639 support intact, further rise is expected in USD/CAD. Rally from 1.2286 would target 1.2894/2947 resistance zone. Break there will target 1.3022 long term fibonacci level next. However, break of 1.2639 will indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.2581).

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) 0.7078; (P) 0.7099; (R1) 0.7113; More...

Intraday bias in AUD/USD remains neutral for the moment. On the upside, above 0.7172 will resume the rebound from 0.7061 to 55 day EMA (now at 0.7308). On the downside, break of 0.7061 will extend the larger fall form 0.8006. But we'd look for support from 0.6991/7051 key support zone to bring rebound. However, sustained break there will carry larger bearish implications.

In the bigger picture, with 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051) intact, we're seeing price action from 0.8006 as a correction only. That is, up trend from 0.5506 low would resume after the correction completes. However, sustained break of 0.6991 will argue that the whole medium term trend has probably reversed. Deeper fall would be seen to 61.8% retracement at 0.6461.

Daily Pivots: (S1) 112.82; (P) 113.08; (R1) 113.44; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the downside, sustained break of 112.71 structural support will argue that fall from 115.51 is already correcting whole rise from 102.58. Deeper decline would then 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) 0.9181; (P) 0.9201; (R1) 0.9225; More....

Intraday bias in USD/CHF stays neutral at this point. With 0.9271 resistance intact, further decline is expected. Break of 0.9156 will resume the decline from 0.9372 to 0.9084 support. Firm break there will argue that choppy rise from 0.8925 has completed, and fall from 0.9471 is resuming. Deeper decline would be seen through 0.8925. Nevertheless, break of 0.9271 will turn bias back to the upside for retesting 0.9372.

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) 1.3270; (P) 1.3302; (R1) 1.3332; More...

Intraday bias in GBP/USD remains neutral and outlook is unchanged. Further fall could be seen, but we'd look for some support from 1.3164 fibonacci level to bring rebound. On the upside, break of 1.3369 minor resistance will suggest short term bottoming, and turn bias back to the upside for 1.3512 resistance first. However, sustained break of 1.3164 will carry larger bearish implication.

In the bigger picture, the structure of the fall from 1.4248 suggests that it's a correction to the up trend from 1.1409 (2020 low) only. While deeper fall cannot be ruled out yet, downside should be contained by 38.2% retracement of 1.1409 to 1.4248 at 1.3164, at least on first attempt, to bring rebound. On the upside, break of 1.3833 resistance will argue that the correction has completed and bring retest of 1.4248 high. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.