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Daily Pivots: (S1) 1.5808; (P) 1.5889; (R1) 1.5990; More...

Further rise is still in favor in EUR/AUD despite loss of upside moment. 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.

Technical analysis

The RSI is above level 50 and headed downwards.

The Stochastics left the overbought zone and headed downwards to level 50.

Most likely scenario – SELL

Target prices: 1,783.30 1,777.86

Alternative scenario – BUY

Target prices: 1,794.16 1,801.93

Key levels

Support 1,783.30 1,777.86

Resistance 1,794.16 1,801.93

Daily Pivots: (S1) 1.0388; (P) 1.0416; (R1) 1.0442; More....

No change in EUR/CHF's outlook as down trend from 1.1149 is in progress. Intraday bias stays on the downside for 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.

BoJ board member Seiji Adachi said in a speech, the number of new coronavirus case in Japan is seeing "great improvement", with weekly average decline to a "considerable extent recently". However, "the situation warrants careful attention, as concern over the spread of a new variant is increasing at the moment."

He added BoJ will "closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary, with a view to supporting firms' ability to sustain their businesses",

"If the number of COVID- 19 cases resurges and it once again becomes inevitable to have public health measures in place, for example, it could become necessary to support corporate financing."

"The role of the COVID-19 Special Operations largely depends on developments relative to the pandemic, so it is necessary to assess such developments and their impact on corporate financing when deliberating on the next steps."

Full speech here.

Inflation is 'not transitory' said the Federal Reserve (Fed) Chair Jerome Powell at his testimony before the Senate yesterday, and the stock markets took the 'no transitory' phrase as a slap in the face. Most equities dived yesterday, as many didn't expect to hear a hawkish Powell at a time the new omicron wave threatens the economic recovery.

We now know that Jerome Powell thinks 'it's appropriate to discuss whether it will be appropriate to wrap up the QE purchases a few months earlier', at the next FOMC meeting which is a couple of weeks from now, and an earlier end of the QE program would also mean an earlier hike of interest rates, even though Powell wants investors to dissociate the link between the timing of the QE taper and the first-rate hike.

The kneejerk reaction from the market was strong. The S&P500 and the Dow closed the session near 2% down, as Nasdaq dropped 1.50%. The US 2-year yield rebounded dramatically, and the US yield curve flattened to the levels last seen in March 2020, since the onset of the pandemic. But the US equity futures rebounded as fast as they dived in the overnight trading session. Nasdaq futures are up by 1.30% at the time of writing.

And what about omicron? Well, Jerome Powell didn't seem too concerned about omicron, or the near-term impact of the virus on the economy, meanwhile a day before his testimony, he had said that the virus adds up to the economic risks. It's hard to drive clear conclusions.

The problem is, Jerome Powell may not be concerned with the new omicron strain, but investors are, and watching the Fed support fade away is certainly not the best news and the news doesn't come at the ideal time. This is what I think, and this is what reinforces the risk of a more persistent selloff in the equities space to the year end. So, the Santa rally may not be happening this December.

And Bitcoin in all this?

Now for the crypto market, it's a bit tricky. The inflation hedging properties of Bitcoin are not granted, really, and the fact that the Fed would pull away the cheap liquidity could actually hit the appetite in cryptocurrencies. This is what Mike Novogratz, who is a billionaire crypto investor said following Jerome Powell's comments yesterday. He said the hawkish shift in the Fed policy could lead to a crypto meltdown in 2022. The thing with the cryptocurrencies is that: we don't know. As we don't have enough data in hand, and as it is not fundamentally linked to anything we have, we can't really predict what will be next. So your guess is as good as mine, or as Mike Novogratz'. For now Bitcoin is consolidating at about the $56K level, the downside potential is big, but the upside potential could be even bigger, inflation or not, a tighter Fed or not. But no one, at this point could establish a strong relationship between cryptocurrencies and economic fundamentals. There is simply none for now.

Christine?

Inflation in the Eurozone jumped from 4.1% to 4.9% in November, versus the expectation of 4.5% by analysts. That's a big, big number for the eurozone. It doesn't look transitory, and it seems to be accelerating as well. Therefore, I am increasingly convinced that we will soon see Christine Lagarde raising the white flag soon and announcing that, finally, inflation is not all that transitory.

The EURUSD rebounded from the 1.12 mark last week. The significant rise in European inflation should encourage a certain bullish repositioning for the euro, but the upside could remain limited into the 1.15 mark, limited by the hawkish shift on the Fed front.

Jerome Powell will speak at the second day of his testimony, but the major take is pretty much clear: inflation is not transitory, and even a weak ADP report at today's release won't change that take.

After forming the peak on February 1, 2021 at 39.09, Silver (XAGUSD) has been in multi-month pullback. The decline from February 1 peak is unfolding as a 5 waves diagonal Elliott Wave structure. Down from there, wave (1) ended at 23.78 and rally in wave (2) ended at 28.74. Silver then resumes lower in wave (3) towards 21.42. Wave (4) is proposed complete at 25.41 as the 1 hour chart below shows.

Wave (5) is in progress as another 5 waves in lesser degree. Down from wave (4), wave ((i)) ended at 24.75 and rally in wave ((ii)) ended at 25.2. The metal resumes lower in wave ((iii)) towards 22.72 and bounce in wave ((iv)) ended at 23.30. Final leg lower wave ((v)) is expected to end soon and it should also end wave 1 of (5) in higher degree. Afterwards, expect the metal to turn higher in wave 2 to correct cycle from November 16 peak before the decline resumes. Near term, as far as pivot at 25.41 remains intact, expect rally to fail in the sequence of 3, 7, or 11 swing for further downside in wave 3 of (5).

Silver 60 Minutes Elliott Wave Chart

General trend

• USD rises versus JPY, EUR and CHF; Commodity currencies gain.
• Hang Seng index has outperformed and extended gains; Financial, Property and TECH indices rise; Casino names continued to be weighed down amid concerns related to SunCity.
• Nikkei 225 has traded modestly higher after the volatility seen earlier during the session.
• Little action seen for the Shanghai Composite during morning trading.
• S&P ASX 200 pared some of decline; Energy index rebounded, Resources index moved higher; Travel names lagged.
• Little reaction seen from the surprise contraction in the CN Caixin Mfg PMI.
• US ADP data due later today.
• Companies due to report during the NY morning include Donaldson, G-III Apparel, RBC.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened -0.2%.
• (AU) AUSTRALIA Q3 GDP Q/Q: -1.9% V -2.5%E; Y/Y: 3.9% V 3.0%E.
• (AU) Australia Nov Final PMI Manufacturing: 59.2 v 58.5 prior (confirms 18th month of expansion).
• (AU) Australia sells A$1.0B v A$1.0B indicated in 4.50% Apr 2033 bonds, Avg Yield: 1.7480%, bid-to-cover 2.75x.
• (AU) Australia Treasurer Frydenberg: Omicron not likely to be the last variant to be confronted, midyear budget review to show budget repair ahead of schedule.

Japan

• Nikkei 225 opened +0.2%.
• (JP) JAPAN Q3 CAPITAL SPENDING (CAPEX) Y/Y: 1.2% V 1.5%E; CAPITAL SPENDING EX-SOFTWARE: 2.2% V 3.0%E.
• (JP) Japan Nov Final PMI Manufacturing: 54.5 v 54.2 prelim (highest since Jan 2018, 10th consecutive expansion).
• (JP) Bank of Japan (BOJ) Board Member Adachi: BOJ will scrutinize COVID developments and impact on corp finance in deciding fate of pandemic relief loan programs.
• (JP) Japan Chief Cabinet Sec Matsuno: Symptomatic contact of Omicron case has tested negative, no other issues have been reported from close contacts.
• (JP) Former Japan PM Abe: A China Military adventure would be economic suicide, a crisis in Taiwan would involve the US-Japan Alliance.

Korea

• Kospi opened +0.7%.
• 005490.KR Said to be considering splitting into a holding company and an operating company - Korean press.
• (KR) South Korea Nov Trade Balance: $3.1B v $2.0Be.
• (KR) The man who tested positive for coronavirus Omicron Variant in Japan had a layover in South Korea - Yonhap.
• (KR) South Korea has been asked to increase tax and R&D benefits for chip industry – press.
• (KR) South Korea Nov PMI Manufacturing: 50.9 v 50.2 prior (13th straight expansion).
• (KR) South Korea confirms record high 5,123 daily coronavirus cases.

China/Hong Kong

• Hang Seng opened +0.5%; Shanghai Composite opened -0.1%.
• (CN) CHINA NOV CAIXIN PMI MANUFACTURING: 49.9 V 50.5E (1st contraction in 3 months).
• (HK) Macau Nov Casino Rev (MOP) 6.75B v 4.37B prior; Y/Y 0.0% v 2.0%e.
• (CN) China Vice Premier Liu: 2021 GDP growth will exceed targets; China will keep continuity and stability of macro policies - Hamburg Summit video conference.
• 9899.HK Prices 16M share Hong Kong IPO at HK$205/shr v HK$190-220/shr indicated range.
• USD/CNY (CN) China PBOC sets Yuan reference rate: 6.3693 v 6.3794 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY100B prior; Net drain CNY90B v Net inject CNY50B prior.
• 1383.HK Said to have closed all VIP gaming rooms in Macau after the Chairman was arrested - Press.

North America

• TSLA Denies press report that production goal in Shanghai is 500K vehicles this year, confirms plan to localize more than 90% of its supply chain in Shanghai.
• (US) Weekly API Crude Oil Inventories: -0.7M v +2.3M prior.
• MRK US FDA panel votes (13 Yes; 10 No; 0 Abstain) in favor of approval of molnupiravir oral capsules for treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe COVID-19 and/or hospitalization - AMDAC Meeting.

Europe

• (UK) Nov BRC Shop Price Index Y/Y: +0.3% v -0.4% prior.
• (FR) France New Car Registrations 122.0K vehicles, -29.4% y/y.

Levels as of 00:15ET

• Hang Seng +1.5%; Shanghai Composite +0.1%; Kospi +2.2%; Nikkei225 +0.7%; ASX 200 -0.1%.
• Equity Futures: S&P500 +0.9%; Nasdaq100 +1.4%, Dax +0.7%; FTSE100 +0.6%.
• EUR 1.1343-1.1317; JPY 113.56-113.08; AUD 0.7169-0.7119; NZD 0.6859-0.6813.
• Commodity Futures: Gold +0.2% at $1,780/oz; Crude Oil +2.6% at $67.91/brl; Copper +0.8% at $4.35/lb.

Daily Pivots: (S1) 1.1256; (P) 1.1320; (R1) 1.1403; More...

EUR/USD breached 1.1373 minor resistance briefly but dropped back into established range. Intraday bias remains neutral first. On the upside, firm break of 1.1373 will indicate short term bottoming at 1.1185. Intraday bias will be turned back to the upside for 55 day EMA (now at 1.1510). 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) 1.3209; (P) 1.3289; (R1) 1.3384; More...

GBP/USD's fall resumed after brief consolidation and hit as low as 1.3193. While further decline cannot be ruled out, 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) 0.9139; (P) 0.9203; (R1) 0.9248; More....

Some volatility was seen in USD/CHF but for now further decline is expected as long as 0.9271 minor resistance holds. Decline from 0.9372 would target 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.