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Dollar rises slightly in Asian session today, as markets await non-farm payrolls report from the US. Commodity currencies are generally lower despite to strong rebound in US stocks overnight. As for the week, Swiss Fran and Yen remain the strongest ones followed by Dollar. Aussie and Kiwi are the weakest. We'll see how NFP would adjust market expectations on Fed tapering and rate hike, and thus trigger the movements in all financial markets.

Technically, a major focus for today and whether EUR/USD would break through 1.1382 resistance firmly to confirm short term bottoming. Or, it would break through 1.1185 support will resume larger down trend. At the same time, we'd all watch the action in USD/JPY, on whether it would break though 112.71 support, or rebound to retest 115.51 high.

In Asia, at the time of writing, Nikkei is up 0.58%. Hong Kong HSI is down -0.80%. China Shanghai SSE is up 0.66%. Singapore Strait Times is up 0.10%. Japan 10-year JGB yield is down -0.0033 at 0.056. Overnight, DOW rose 1.82%. S&P 500 rose 1.42%. NASDAQ rose 0.83%. 10-year yield rose 0.014 to 1.448.

NFP Eyed as Dollar index holds above 95.51 support

US non-farm payroll report is back as a major focus for today, in particular with talk of faster Fed tapering in the background. Markets are expecting 525k job growth in November. Unemployment rate is expected to drop from 4.6% to 4.5%. Average hourly earnings are expected to have another solid 0.4% mom growth.

Looking at related data, ISM manufacturing rose slightly from 52.0 to 53.3. ADP private job grew 534k, just slightly down from prior month's 570k. Four-week moving average of initial jobless claims dropped notably from 285k to 239k. Consumer confidence edged down from 111.6 to 109.5. Overall, the data point to a solid NFP report today.

Dollar index is still holding above 95.51 near term support despite a correction in the past two weeks. Technically speaking, consolidation from 96.93 should be relatively brief and larger rise from 89.53 is likely to resume sooner rather than later. However, firm break of 95.51 could bring deeper pull back to 55 day EMA (now at 94.68) before DXY finds a bottom.

Fed Bostic: Finishing tapering before end of Q1 is in our interest

Atlanta Fed President Raphael Bostic said yesterday that with robust growth, an improving job market and inflation more than twice Fed target, having tapering finished "some time before the end of the first quarter" would be "in our interest".

Bostic also referred to OECD's projection that inflation in the US could be above 4% for the year of 2022. He said, "if it is at that kind of level, I think there is going to be a good case to be made that we should be pulling forward more interest-rate increases and perhaps do even more than the one I have penciled in."

Fed Daly: Might need to start crafting a plan on rate hike

San Francisco Fed President Mary Daly said, "if we didn't have higher inflation readings, you might let the economy go a little bit more to see if we can get through COVID and have those individuals come back."

However, "right now, we're dealing with inflation that's above our target and inconsistent in its current readings with our longer run views on price stability," she added. "We have to deal with that."

Fed might need to start dialing down some of the extra policy accommodation and "start crafting a plan to, at least, you know, think about raising the interest rate," she said.

China PMI composite dropped to 51.2, inflationary pressure remained

China Caixin PMI Services dropped from 53.8 to 52.1 in November, above expectation of 51.2. PMI Composite dropped from 51.5 to 51.2.

Wang Zhe, Senior Economist at Caixin Insight Group said: "Overall, conditions in the manufacturing sector remained stable in November, while for the service sector, expansion occurred at a slightly slower pace. The downward pressure to the economy grew, and inflationary pressure was partly eased....

"The government's measures to stabilize commodity supplies and prices significantly eased cost pressures on manufacturing enterprises, but had a limited impact on the reduction of costs to service enterprises. Overall, inflationary pressure remained."

Looking ahead

Eurozone retail sales and PMI services final will be released in European session. UK will release PMI services final too. Later in the day, Canada will release job data. US will release non-farm payrolls, ISM services and factory orders.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1281; (P) 1.1314; (R1) 1.1334; More...

Intraday bias in EUR/USD remains neutral for the moment. 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 1.1495). 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.

Economic Indicators Update

Daily Pivots: (S1) 1.1281; (P) 1.1314; (R1) 1.1334; More...

Intraday bias in EUR/USD remains neutral for the moment. 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 1.1495). 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.

STOCKS

Equities are mixed. While Dow has recovered the previous day’s fall along with a rise seen in shanghai, Nifty and Sensex. Dax and Nikkei have declined sharply but could soon recover to rise back while supports hold.

Dow (34639.79, +617.75, +1.82%) has bounced back sharply from 34000, almost recovering the losses seen in the previous session. The view is bullish to see a rise towards 35000/35500 while above 34500/600.

DAX (15263.11, -209.56, -1.35%) has fallen. The view is still bullish to see a rise towards 15900 while the index holds above 15100.

Nikkei (27692.34, -61.03, -0.22%) has come down slightly today. A fall towards 27000 is possible before we see a bounce from there.

Shanghai (3583.36, +9.53, +0.27%) has broken the interim resistances at 3575 and is now slowly headed towards 3600. A strong break above 3600 is needed to see 3650/3700 in the medium term. Else a pullback towards 3500 is possible from 3600.

Nifty (17401.65, +234.75, +1.37%) rose sharply yesterday and closed above 17400. A rise towards 17600/800 can be seen while above 17400 that can negate the bearish view of seeing a fall towards 17000 and 16800 on the downside again. Watch price action near 17400.

Sensex (58461.29, +776.50, +1.35%) has broken the resistance at 58000 and has closed at 58461.29. The view is bullish to see a rise towards 59000/59500 in the coming sessions.

COMMODITIES

Brent and WTI fell sharply towards 65 and 61 after OPEC+ decided to hike production by 400,000 barrels per day in Jan’22. However, the crude prices recovered the fall seen yesterday and while above immediate supports at 64/65 (brent ) and (WTI), the prices can rise in the very near term. Gold is falling on a stronger US Dollar. If it breaks below 1770, it can fall to 1760/40. Silver is ranged within 22-24. Copper is bullish towards 6.45/50/60 while above 4.20/25.

Brent (70.39) is holding above 64/65 and WTI (67.28) is holding above 61. There can be some short upmove for the near term before a fall is seen in the longer run towards the mentioned support levels.

Gold (1773.20) is testing the lower end of the 1770-1820 range and needs to bounce back in order to move up further. But while the Dollar Index trades high, Gold can come off below 1770 towards 1760/40 on the downside. Watch price action near 1770 today.

Silver (22.35) is likely to remain ranged within 22-24 region for now.

Copper (4.2830) has risen slightly from lower levels seen yesterday. The price needs to bounce from 4.20/25 to hold higher and head towards 4.45/50/60 eventually on the upside.

FOREX

Dollar Index has bounced again to levels above 6 and if it sustains above support near 95.50, there is scope for a rise towards 97-98 eventually. Euro is falling towards 1.12. Aussie is strongly bearish towards 0.70-0.6950 while Pound is also set to fall towards 1.32-1.3190. EURJPY has broken below 128 and if it sustains, it can fall towards 125 on the downside in the medium term. Dollar Yen may trade within 112-114 while USDCNY is bearish while below 6.43/40. USDINR is likely to be ranged within 74.60/80-75.20/25 for now.

Dollar Index (96.1750) is holding above 95.50 over the past few sessions and has scope to rise back towards 97 or higher with mild interim corrective dips. Overall broadly a rise towards 97.50-98 is still on the cards before a reversal is seen.

Euro (1.1295) is holding below 1.14-1.1380 and has been falling over the past 3-sessions. We may look for a fall towards 1.1250-1.12 again in the next few sessions.

EURJPY (127.76) has again broken below 127. As warned earlier, continuous attempts to break below 128 may eventually give way a trigger a fall towards 125 on the downside. An immediate pull back from current levels is needed for EURJPY to rise back. A rise above 128.50, if seen and sustained can again take the cross towards 129-130. Else bearishness looks more prominent just now.

Aussie (0.7068) continues its fall and is expected to decline further towards 0.70-0.6950. View is strongly bearish.

Pound (1.3287) has broken below 1.33 and if it manages to break 1.3267/60 it can fall further towards 1.32-1.3190. View is bearish while below 1.33.

Dollar-Yen (113.11) tested 112.65 yesterday but has again risen back from there. A possible sideways range of 112.50-114 (revised from 113-114) may hold for the next few sessions.

USDCNY (6.3743) tested 6.3770 after bouncing from 6.3596 over the past 2-days. While below 6.40/43, view remains bearish and if the pair manages to sustain trade below 6.37, it will confirm a possible fall towards 6.36/35 soon.

{USDINR (75.00) traded within 74.88-75.07 yesterday. We continue to expect a narrow range of 75.15-74.80 and a broad range of 75.20/25-74.60 to hold for now before a break on either side of the range is seen.

INTEREST RATES

The US Treasury yields at the far-end (10Yr and 30Yr) continue to remain lower and stable above their crucial supports. The price action in the coming days will need a close watch to see if they can bounce-back and keep the broader sideways range intact. The US jobs data today will need close watch to see what does it have on plate for the yields. The German yields remain lower and keep our bearish view intact of seeing a further fall from here. The 10Yr and 5Yr GoI remain stable within their expected narrow sideways range. A rise to test the upper end of their range is possible in the near-term.

The US 2Yr (0.60%) and the 5Yr (1.19%) have inched up slightly while the 10Yr (1.43%) and the 30Yr (1.75%) remain lower and stable. We reiterate that 1.4%-1.35% on the 10Yr and 1.75%-1.70% (changed from 1.75% mentioned yesterday) on the 30Yr are crucial supports. A bounce from here will keep the broader 1.35%-1.75% (10Yr) and 1.75%-2.1%/2.2% (30Yr) range intact. On the other hand, a break below these supports will be very bearish. It is a wait and watch for now.

The German 2Yr (-0.76%), 5Yr (-0.64%), 10Yr (-0.37%) and 30Yr (-0.07%) have dipped across tenors and are keeping our bearish view intact. We expect to see a fall to -0.45% / -0.5% on the 10Yr and -0.1% / -0.2% on the 30Yr.

The Indian 10Yr (6.3520%) and the 5Yr (5.6810%) remained stable yesterday. The 6.3%-6.38% range on the 10Yr and 5.62%-5.7% range on the 5Yr is intact. A rise to the upper end of these ranges is possible in the near-term before a reversal is seen.

Elliott Wave view in CADJPY suggests cycle from October 21, 2021 peak is in progress as a zigzag structure. Down from October 21 peak, wave (A) ended at 90.40, and rally in wave (B) ended at 91.70. Pair is about to complete wave C with internal subdivision as 5 waves impulse as the 1 hour chart below shows. Down from wave (B), wave 1 ended at 89.69 and bounce in wave 2 ended at 91.27. Pair then resumes lower in wave 3 towards 88.38, and bounce in wave 4 ended at 89.43.

Wave 5 of (C) remains in progress as a diagonal with overlapping 5 waves. Down from wave 4, wave ((i)) ended at 88 and wave ((ii)) ended at 89.26. Wave ((iii)) ended at 87.81, and rally in wave ((iv)) ended at 88.67. Near term, as far as pivot at 89.43 remains intact, expect pair to make 1 more low to end wave ((v)) of 5 of (C). This should then complete wave ((W)) in higher degree. Afterwards, pair should be doing at least a 3 waves rally in wave ((X)) to correct cycle from October 21 peak before turning lower again. Alternatively, pair might be ending wave (3) instead of wave (C), and then bounce in wave (4) before going down again in wave (5) to end wave ((A)).

CADJPY Minutes Elliott Wave Chart

Or is it up from here?

Brent crude has been tumbling in recent weeks, forced lower by slowing growth, a coordinated SPR release and this past week, the new Omicron variant.

OPEC+ had an opportunity to arrest the slump today and at first, it appeared they’d passed it up. But the decision to maintain not change their planned increases each month came with an important caveat, that they would do so at any point if they think it’s warranted.

In other words, they didn’t have enough data to hand today but if that arrives at any point between now and the next meeting and warrants an adjustment, they’ll do so immediately.

With crude off its lows and higher on the day, has it bottomed out? Possibly. But that will depend on the information that appears over the coming weeks and how bad it is for the global economy.

In the meantime, the price had been falling prior to the announcement but as you can see on the 4-hour chart, it was losing momentum all the time. So the caveat provided the excuse the market was already hoping for.

If it has bottomed for now, how big a correction can we expect? Or can we expect it to rally from here?

While we may see some tests around the 38.2 and 50 fib levels on the way up, the big test above here lies around $76.50 where the 61.8 fib on the 4-hour chart coincides with the bottom of the channel, 55/89-period SMA band and a major prior level of support and resistance . A move above here could put us back into more bullish territory.

Key Highlights

• USD/JPY started a fresh decline below the 113.50 support.
• It traded below a major bullish trend line with support near 114.20 on the 4-hours chart.
• EUR/USD is still facing resistance near 1.1400, and GBP/USD is struggling near 1.3400.
• Crude oil price extended decline below the $65.00 support zone.

USD/JPY Technical Analysis

The US Dollar started a fresh decline from well above 115.00 against the Japanese Yen. USD/JPY even broke the 114.20 support to enter a bearish zone.

Looking at the 4-hours chart, the pair even extended decline below 113.50 support. Finally, there was a close below the 113.20 level, the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

The pair traded as low as 112.53 and is currently consolidating losses. On the upside, an initial resistance is near the 113.25 level.

The next major resistance is near 114.00 and the 100 simple moving average (red, 4-hours). It is near the 50% Fib retracement level of the downward move from the 115.52 swing high to 112.53 low. A clear break above the 114.00 zone could lead the pair towards 114.80 or 115.00.

If not, there could be more losses below the 112.50 and 112.40 support levels. In the stated case, the pair may possibly decline towards the 111.50 level.

Looking at EUR/USD, the pair is now facing a major resistance near the 1.1400 level. Besides, GBP/USD must clear 1.3400 for a fresh increase in the near term.

Economic Releases

• Germany’s Services PMI for Nov 2021 - Forecast 53.4, versus 53.4 previous.
• Euro Zone Services PMI for Nov 2021 – Forecast 56.6, versus 56.6 previous.
• UK Services PMI for Nov 2021 – Forecast 58.6, versus 58.6 previous.
• US Services PMI for Nov 2021 – Forecast 57.0, versus 57.0 previous.
• US nonfarm payrolls for Nov 2021 – Forecast 550K, versus 531K previous.
• US Unemployment Rate for Nov 2021 - Forecast 4.5%, versus 4.6% previous.

US non-farm payroll report is back as a major focus for today, in particular with talk of faster Fed tapering in the background. Markets are expecting 525k job growth in November. Unemployment rate is expected to drop from 4.6% to 4.5%. Average hourly earnings are expected to have another solid 0.4% mom growth.

Looking at related data, ISM manufacturing rose slightly from 52.0 to 53.3. ADP private job grew 534k, just slightly down from prior month's 570k. Four-week moving average of initial jobless claims dropped notably from 285k to 239k. Consumer confidence edged down from 111.6 to 109.5. Overall, the data point to a solid NFP report today.

Dollar index is still holding above 95.51 near term support despite a correction in the past two weeks. Technically speaking, consolidation from 96.93 should be relatively brief and larger rise from 89.53 is likely to resume sooner rather than later. However, firm break of 95.51 could bring deeper pull back to 55 day EMA (now at 94.68) before DXY finds a bottom.

China Caixin PMI Services dropped from 53.8 to 52.1 in November, above expectation of 51.2. PMI Composite dropped from 51.5 to 51.2.

Wang Zhe, Senior Economist at Caixin Insight Group said: "Overall, conditions in the manufacturing sector remained stable in November, while for the service sector, expansion occurred at a slightly slower pace. The downward pressure to the economy grew, and inflationary pressure was partly eased....

"The government's measures to stabilize commodity supplies and prices significantly eased cost pressures on manufacturing enterprises, but had a limited impact on the reduction of costs to service enterprises. Overall, inflationary pressure remained."

Full release here.

San Francisco Fed President Mary Daly said, "if we didn't have higher inflation readings, you might let the economy go a little bit more to see if we can get through COVID and have those individuals come back."

However, "right now, we're dealing with inflation that's above our target and inconsistent in its current readings with our longer run views on price stability," she added. "We have to deal with that."

Fed might need to start dialing down some of the extra policy accommodation and "start crafting a plan to, at least, you know, think about raising the interest rate," she said.

Atlanta Fed President Raphael Bostic said yesterday that with robust growth, an improving job market and inflation more than twice Fed target, having tapering finished "some time before the end of the first quarter" would be "in our interest".

Bostic also referred to OECD's projection that inflation in the US could be above 4% for the year of 2022. He said, "if it is at that kind of level, I think there is going to be a good case to be made that we should be pulling forward more interest-rate increases and perhaps do even more than the one I have penciled in."