Sample Category Title

Daily Pivots: (S1) 1.3239; (P) 1.3296; (R1) 1.3329; More...

Intraday bias in GBP/USD remains neutral and 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.

Daily Pivots: (S1) 112.43; (P) 113.03; (R1) 113.39; More...

Intraday bias in USD/JPY remains neutral for the moment. 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.

Commodity currencies are turning weaker again in otherwise range trading markets. As for today, European majors are the stronger ones, as lead by Sterling. But there is no clear sign of follow through movements. Omicron seems to have slipped to the backstage. Traders are probably looking through to tomorrow's non-farm payroll report to gauge how Fed would quicken its tapering.

Technically, Euro appears to be making some progress against Aussie and Canadian. Despite some unconvincing momentum, EUR/AUD is still on track to 1.6075 near term projection level. EUR/CAD's rebound from 1.4162 short term bottom is also extending. Immediate focus will be on 1.4580 support turned resistance. Firm break there would bring stronger rise back to medium term falling trend line resistance at 1.4898.

In Europe, at the time of writing, FTSE is down -0.95%. DAX is down -1.76%. CAC is down -1.55%. Germany 10-year yield is down -0.0408 at -0.381. Earlier in Asia, Nikkei dropped -0.65%. Hong Kong HSI rose 0.55%. China Shanghai SSE dropped -0.09%. Singapore Strait Times dropped -0.20%. Japan 10-year JGB yield dropped -0.075 to 0.059.

US initial jobless claims rose to 222k, continuing claims dropped to 1.96m

US initial jobless claims rose 28k to 222k in the week ending November 27, better than expectation of 250k. Four-week moving average of initial claims dropped -12k to 239k, lowest since March 14, 2020.

Continuing claims dropped -107k to 1956k in the week ending November 20, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -36k to 2084k, lowest since March 21, 2020.

Eurozone PPI at 5.4% mom, 21.9% yoy in October, well above expectations

Eurozone PPI came in at 5.4% mom, 21.9% yoy in October, well above expectation of 3.2% mom, 19.0% yoy. For the month, industrial producer prices increased by 16.8% mom in the energy sector, by 1.4% mom for intermediate goods, by 0.5% mom for durable and for non-durable consumer goods and by 0.4% mom for capital goods. Prices in total industry excluding energy increased by 0.8% mom.

EU PPI rose 5.0% mom, 21.7% yoy. The highest monthly increases in industrial producer prices were recorded in Belgium (+11.2%), Italy (+9.4%) and Romania (+8.6%), while the only decreases were observed in Estonia (-2.1%), Luxembourg (-0.3%) and Sweden (-0.2%).

Eurozone unemployment rate dropped to 7.3% in Oct, EU unchanged at 6.7%

Eurozone unemployment rate dropped to 7.3% in October, down from 7.4%, matched expectations. EU unemployment rate was unchanged at 6.7%.

Eurostat estimates that 14.312 million men and women in the EU, of whom 12.045 million in Eurozone, were unemployed in October 2021.

BoJ Suzuki: Effective and sustainable monetary easing to persistently continue

BoJ board member Hitoshi Suzuki said in a speech, "to achieve the price stability target of 2 percent, the Bank is expected -- even after COVID-19 subsides -- to persistently continue with further effective and sustainable monetary easing".

However, it's also necessary to "pay attention to the possibility that credit costs will increase due to a delay in economic recovery at home and abroad". Also, "downward pressure on financial institutions' core profitability is likely to persist as a trend even after COVID-19 subsides".

"My view is that the Bank should pay due attention to the fact that side effects of monetary easing will accumulate over time," he added. "The Bank will continue to conduct monetary policy in an appropriate manner so as to fulfill the two missions of achieving price stability and ensuring the stability of the financial system."

From Japan too, monetary base rose 9.3% yoy in November, below expectation of 10.3% yoy.

Australia trade surplus narrowed to AUD 11.22B in Oct

Australia exports of goods and services dropped -3% mom to AUD 43.05B in October, driven by falls in iron ore prices. Goods and services imports dropped -3% mom to AUD 31.83B, by fall in imports of capital goods. Trade surplus narrowed to AUD 11.22B, slightly higher than expectation of AUD 11.00B.

Retail sales rose 4.9% mom, 5.9% yoy to AUD 31.13B.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 112.43; (P) 113.03; (R1) 113.39; More...

Intraday bias in USD/JPY remains neutral for the moment. 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.

Economic Indicators Update

US initial jobless claims rose 28k to 222k in the week ending November 27, better than expectation of 250k. Four-week moving average of initial claims dropped -12k to 239k, lowest since March 14, 2020.

Continuing claims dropped -107k to 1956k in the week ending November 20, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -36k to 2084k, lowest since March 21, 2020.

Full release here.

Technical analysis

The RSI is above level 50.

The RSI is at the overbought zone.

Most likely scenario – BUY

Target prices: 1.13521 1.13764

Alternative scenario – SELL

Target prices: 1.13220 1.13026

Key levels

Support 1.13220 1.13026

Resistance 1.13521 1.13764

Another volatile night for oil

It was another night of wild tail-chasing moves in oil trading with very wide ranges as markets were buffeted by omicron sentiment and headlines. Oil has become strictly a day traders’ market now. Markets ignored the US official crude inventory data, focusing on the California omicron case and oil finished lower for the day. Brent crude fell 1.70% to USD 68.95 a barrel, and WTI retreated 1.90% to USD 65.70 a barrel.

Today, some soothing comments by Dr Anthony Fauci have lifted US equity futures and seen FOMO buyers emerge in Asian oil markets. Brent crude and WTI rising 1.10% to USD 69.70 and USD 66.40 a barrel. We are but one negative headline on omicron wiping that gain out as quickly as it appeared, though.

With panicked tail-chasing blowing out volatility this week, the full OPEC+ meeting tomorrow has not come soon enough, with oil’s intraday price action now bordering on juvenile, and fair-weather algo “market-maker” liquidity doing what it always does in financial markets when volatility spikes, disappearing. Yesterday’s first day of OPEC+ was a strictly administrative one, with the main event coming later today. I believe that the collapse in oil prices, and the great unknowns surrounding meaningful facts and omicron, will see OPEC+ call a temporary halt to production increases. That may restore a modicum of stability to oil markets.

Technical levels and indicators are fairly useless in markets such as this, driven by panicked swings in investor sentiment and low liquidity. However, for what it is worth, the relative strength indexes (RSIs) on both Brent and WTI are now heavily oversold, indicating markets are vulnerable to a short squeeze. The week’s lows at USD 67.50 and USD 64.50 mark the first decent technical support.

Gold has another underwhelming day

Gold’s price action continues to be unimpressive. Despite trading in a USD 22.0 an ounce range, gold finished the day just 0.40% higher at USD 1782.00. There are zero signs of any safe-haven bids emerging to shelter from virus volatility, and it is falling despite both US yields and the US dollar also falling. Gold has now recorded its 4th successive daily close below its 50,100 and 200 DMAs clustered between USD 1791.00 and USD 1792.20 an ounce, yet another bearish signal.

Gold tested and failed ahead of USD 1800.00 overnight, with the moving averages and USD 1815.00 forming plenty of resistance levels. The week’s low at USD 1770.00 an ounce, has traced out a double bottom support level. Failure of USD 1770.00 now signals a retest of USD 1760.00 and USD 1740.00 an ounce. I do not rule out a move lower to USD 1720.00 this week, especially if the Non-Farms puts the Fed taper front and centre.

US dollar shows mixed results

The US dollar staged an uneven rally overnight, recouping some losses in the EM space as the Turkish lira had another horrific session, and maintaining downward pressure on the euro and Commonwealth currencies while losing versus fellow havens, the Japanese yen and the Swiss franc.

The British Pound, Canadian, Australian and New Zealand collars remain under pressure as proxies for the commodity space and investor risk sentiment. Sterling is trading in the middle of a wider 1.3200 to 1.3350 range with USD/Cad looking likely to test 1.2850 this week. Both the Australian and New Zealand dollars continue to threaten their 2021 lows at 0.7100 and 0.6800. The euro rally appears to have run out of steam above 1.1350 as virus fears, looming tighter restrictions, and a divergence in monetary policy direction combine to cap gains. Trading at 1.3130 today, key levels at 1.1370 and 1.1200, with failure of 1.1200 heralding further losses to 1.1000.

A rise in US equity index futures today sees USD/JPY rise 0.25% to 113.25. The yen’s rally has been powered by easing long-dated US yields, and omicron fears spurring huge amounts of yen haven buying. A retest of 112.50 cannot be ruled out, especially if the omicron news tickers get more negative. Given that the Federal Reserve has tilted notably to the hawkish side, one cannot help but feel that a fall by USD/JPY to between 111.50 and 112.50 could represent very good value for buyers on a medium-term basis. The extreme nature of the Japan border closure could also weigh on the yen over the next few weeks.

Asian currencies gave back some of their gains overnight, as expected, as the omicron news ticker turner negative. The exception was the Korean won, which seems to be finding support from rising Bank of Korea tightening expectations and a booming export market. Elsewhere, the PBOC set a weaker yuan fixing versus the US dollar today, and that has fed through to more weakness in Asian currencies versus the greenback. The Turkish lira is 1.70% lower in Asia after President Erdogan sacked his finance minister and the central bank intervened to buy lira yesterday. The situation there becomes more farcical by the day, but any spillover into the wider EM space is limited to non-existent. The short-term direction in Asian FX will continue to be driven by omicron headlines.

EURJPY is fluctuating within the one-month-old falling channel, testing resistance from the falling lines of the Ichimoku indicator and the 20-period simple moving average (SMA) near 128.15. The price rebounded off the 127.45 support level, with the technical indicators endorsing/backing the ongoing upside move. The MACD is holding above its trigger line in the negative region, while the RSI is approaching its neutral threshold of 50.

In the positive scenario, where the price snaps the 128.15 barrier and closes above the cloud's lower boundary and the descending trend line, the next target could be the 128.80 hurlde. Running higher, the bulls will need to drive beyond 129.50 to access the 130.00 psychological mark.

Should the bears come into play, the price could initially test the 127.45 and 127.30 support levels before heading towards the return line around 126.70. Not far below, some consolidation could take place near 126.40, registered on February 9.

In brief, despite its resilience above 127.45, EURJPY has yet to show any clear bullish signals, remaining trapped within a downside channel. A move above 128.80 would switch the short-term picture to neutral.

Cable gained traction in early Thursday and edges above 1.33 mark, after spike to new 2021 low (1.3194) was short-lived.

Larger bears faced strong headwinds at 1.3275/50 zone Fibo 61.8% of 1.2675/1.4249 upleg/weekly cloud base), with hammer forming on a weekly chart that could be an initial positive signal.

On the other side, overall picture on daily chart is bearish, although north-heading RSI and stochastic suggest there might be some room for bounce.

Recovery faces initial requirements on break above falling 10/20DMA’s 1.3340/1.3401) to ease bearish pressure, but upticks under 1.3513 (Nov 18 lower top) would provide better levels to re-enter bearish market, for renewed attack at weekly cloud base and attempt towards 1.3164/1.3154 (Fibo 38.2% of 1.1409/1.4249 / 200WMA).

Only sustained break above 1.3500 zone would provide relief and allow for stronger correction.

Res: 1.3340, 1.3370, 1.3401, 1.3438.
Sup: 1.3276, 1.3250, 1.3194, 1.3164.

FX market was slow yesterday as Powell did not bring anything new in his testimony, so it appears that traders are waiting on Friday's jobs data. So for now EURUSD remains consolidating, ideally still in wave 4 that can at some point test higher resistance levels, but overall, we think that upside can be limited if lockdowns will spread in Europe, and a threat on a potential new protests as EU has mentioned that it might be a time to start discussing mandatory vaccination.

EUR/USD 4h Elliott Wave analysis