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Daily Pivots: (S1) 112.49; (P) 113.19; (R1) 113.84; More...

USD/JPY breached 112.71 structural support briefly but quickly recovered. Intraday bias is turned neutral first. On the upside, break of 113.94 minor resistance will turn bias back to the upside for retesting 115.51 high. however, sustained break of 112.71 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.

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) 1.2730; (P) 1.2783; (R1) 1.2836; More...

USD/CAD is losing upside momentum again as seen in 4 hour MACD. But further rise remains in favor as long as 1.2639 minor support holds. 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 1.2561).

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) 0.7071; (P) 0.7121; (R1) 0.7179; More...

AUD/USD's break of 0.7158 minor resistance argues that a short term bottom might be formed at 0.7061, on bullish convergence condition in 4 hour MACD. Intraday bias is back on the upside for stronger rebound, possibly towards 55 day EMA (now at 0.7318). In case of another fall, we'd look for support from 0.6991/7051 key support zone to bring rebound. But 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.

Dollar attempted for a rally overnight after hawkish comments from Fed Chair Jerome Powell, but momentum quickly faded. Instead, the greenback was dragged down by extended weakness in benchmark treasury yields. Overall market sentiment is stable in Asian session, helping commodity currencies rebound. Aussie is additionally lifted by better than expected GDP data. But then, any news regarding Omicron could trigger volatility again.

Technically, it looks like Aussie has at least found a temporary bottom, with AUD/USD's break of 0.7158 minor resistance. we'd keep an eye on AUD/JPY today. Break of 81.39 will bring bring stronger recovery back to 4 hour 55 EMA (now at 82.02), and possibly further to 38.2% retracement of 86.24 to 80.09 at 82.43. We'll see if overall risk sentiment could give Aussie a hand.

In Asia, at the time of writing, Nikkei is up 0.84%. Hong Kong HSI is up 1.40%. China Shanghai SSE is up 0.11%. Singapore Strait Times is up 1.29%. Japan 10-year JGB yield is up 0.0087 at 0.067. Overnight, DOW dropped -1.86%. S&P 500 dropped -1.90%. NASDAQ dropped -1.55%. 10-year yield dropped -0.087 to 1.443.

S&P 500 tumbled on hawkish Powell, pressing 55 D EMA

US stocks dropped sharply overnight following surprisingly hawkish comments from Fed Chair Jerome Powell. In short, he said that "the threat of persistently higher inflation has grown". More importantly, Fed is "going to have a conversation at our next meeting about accelerating the taper and ending our asset purchases a few months early".

More on Fed: Hawkish Powell Expects Fed to End QE Tapering a Few Months Earlier than Previously Anticipated

S&P 500 dropped -1.90% to close at 4567.0 and it's now pressing 55 day EMA (now at 4564.0). Sustained break there will align the outlook with DOW, and indicates that 4743.83 is a medium term top.

In this case, SPX could have already started a correction to whole up trend from 3233.94. Deeper decline could then be seen back to 38.2% retracement of 3233.94 to 4743.83 at 4167.05. For now, risk will stay on the downside as long as 4743.83 resistance holds, in case of recovery.

Australia GDP contracted -1.9% qoq in Q3, back below pre-pandemic level

Australia GDP contracted -1.9% qoq in Q3, better than expectation of -2.7% qoq. Through the year, GDP was up 3.9%.

Acting Head of National Accounts at the ABS, Sean Crick said: "Domestic demand drove the fall, with prolonged lockdowns across NSW, Victoria and the ACT resulting in a substantial decline in household spending.

"The fall in domestic demand was only partly offset by growth in net trade and public sector expenditure. GDP in the September quarter 2021 was 0.2 per cent below the December quarter 2019 pre-pandemic level."

Australia AiG manufacturing rose to 54.8, grew more decisively

Australia AiG Performance of Manufacturing Index rose 4.4 pts to 54.8 in November. Looking at some details, production rose 4.7 to 52.5. Employment rose 2.0 to 50.0. New orders rose 1.0 to 59.3. Supplier deliveries rose 12.2 to 53.4. Input prices dropped -3.5 to 78.3. Selling prices rose 4.2 to 68.1. Average wages dropped -1.3 to 62.4.

Ai Group Chief Executive Innes Willox said: "The Australian manufacturing industry grew more decisively in November after a few flat months during which the south-east corner of the country was held back by the delta outbreaks and associated activity restrictions and while the states and territories tightened barriers to the movement of people."

China Caixin PMI manufacturing dropped to 49.9, recovery not solid

China Caixin PMI Manufacturing dropped from 50.6 to 49.9 in November, below expectation of 50.5. Caixin added that output rose for the first time in four months as power supply issues unwound. But total new orders fell slightly. Inflationary pressures eased markedly.

Wang Zhe, Senior Economist at Caixin Insight Group said: "To sum up, the manufacturing sector remained stable overall in November. Increased downward pressure and easing inflationary pressure were prominent features of the economic situation.... After the shortage of power was alleviated, the supply side began to recover. But due to weak demand, the supply recovery was limited, and the foundation of the recovery was not solid."

Japan PMI manufacturing finalized at 54.5 in Nov

Japan PMI Manufacturing was finalized at 54.5 in November, up from October's 53.2. That's the best reading since January 2018, and the 10th consecutive month of overall growth. Markit noted that output and new orders rose at faster rates. There was sharp rise in cost burdens amid sustained supply chain disruption. Businesses reported strong optimism regarding future output.

Also released, capital spending rose 1.2% in Q3 versus expectation of 2.7%.

Looking ahead

Swiss CPI and SVME PMI will be released in European session. Germany will release retail sales. Eurozone and UK will release PMI manufacturing.

Later in the day, Canada will release building permits and PMI manufacturing. US will release ISM manufacturing and construction spending. Fed will also publish Beige Book economic report.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7071; (P) 0.7121; (R1) 0.7179; More...

AUD/USD's break of 0.7158 minor resistance argues that a short term bottom might be formed at 0.7061, on bullish convergence condition in 4 hour MACD. Intraday bias is back on the upside for stronger rebound, possibly towards 55 day EMA (now at 0.7318). In case of another fall, we'd look for support from 0.6991/7051 key support zone to bring rebound. But 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.

Economic Indicators Update

Key Highlights

• Gold price is consolidating above the $1,775 support zone.
• A major bearish trend line is forming with resistance near $1,825 on the 4-hours chart.
• EUR/USD gained pace for a move above the 1.1320 resistance.
• The US ISM Manufacturing Index could rise from 60.8 to 61.0 in Nov 2021.

Gold Price Technical Analysis

This past week, gold saw a bearish reaction from the $1,880 zone against the US Dollar. The price traded below the $1,840 support level to move into a bearish zone.

The 4-hours chart of XAU/USD indicates that the price even traded below the $1,820 support level. There was a close below the $1,800 level, the 200 simple moving average (green, 4-hours), and the 100 simple moving average (red, 4-hours).

A low was formed near $1,777 and is currently consolidating. An immediate resistance is near the $1,810 level.

The next major resistance is near the $1,825 level and the 100 SMA. There is also a major bearish trend line forming with resistance near $1,825 on the same chart. The trend line is also close to the 50% Fib retracement level of the downward move from the $1,877 swing high to $1,777 low.

A clear break above $1,825 could send the price toward the $1,850 resistance zone in the near term. The next key resistance is near the $1,880 level.

On the downside, the price might remain supported near $1,780. The main support is near $1,760, below which there is a risk of a break below $1,750.

Looking at EUR/USD, the pair started a steady recovery wave above the 1.1320 level. Besides, GBP/USD could also recover if it settles above 1.3400.

Economic Releases to Watch Today

• Germany's Manufacturing PMI for Nov 2021 - Forecast 57.6, versus 57.6 previous.
• Euro Zone Manufacturing PMI for Nov 2021 – Forecast 58.6, versus 58.6 previous.
• UK Manufacturing PMI for Nov 2021 – Forecast 58.2, versus 58.2 previous.
• US Manufacturing PMI for Nov 2021 – Forecast 59.1, versus 59.1 previous.
• US ISM Manufacturing Index for Nov 2021 – Forecast 61.0, versus 60.8 previous.

STOCKS

Equities need to hold above immediate supports to bounce back. After the Dow fell sharply yesterday on Fed chair Powell’s statement, there could be chances of a fall to 34000 if it does not recover and bounce back immediately tonight. Dax needs to hold above 15000-15250 to rise again in the near term. Nikkei and Shanghai need to hold above 28500 and 3550 to turn bullish for the near term. Nifty trades within 16800-17400 and we need to see if it breaks below 16800 or attempts to rise higher. Sensex has scope to test 56500-56000 before bouncing from there.

Dow (34483.72, -652.22, -1.86%) fell sharply after Powell statement that inflation is high and QE should be wound up fast. Near term Support at 34500 is broken. If the Dow does not bounce back to levels above 34500 immediately, the next level to watch would be 34000 (40-45% chances). Watch where the market closes today.

DAX (15280.86, +23.82, +0.16%) has fallen sharply and may test the support at 15100/15000. A strong and sustained rise above 15250 is needed for the view to bullish towards 15500.

Nikkei (28498.91, +214.99, +0.76%) has risen slightly today after falling down sharply yesterday. A strong break above 28500 is needed to take the index towards 29000-29500 initially.

Shanghai (3568.72, +6.03, +0.17%) went up to test 3572 but came down from there. The view is bullish to see a test of 3600 in the coming sessions. A strong break above 3600 is needed to take the index towards 3700 else a fall back to 3550/3500 is possible.

Nifty (17053.95, +27.50, +0.16%) came down sharply after testing the high of 17324.65. The view is bearish below 17400. Sharp fall in Dow yesterday can have a negative impact on the Indian market today. The range of 16800-17400 is holding well. We need to see if Nifty nreaks below 16800 today.

Sensex (57260.58, +153.43, +0.27%) also fell sharply and has closed just above 57000. Further fall towards 56500/56000 is possible before we see a corrective upmove.

COMMODITIES

Crude prices fell sharply overnight and needs to now hold above respective supports to turn bullish else the current fall could extend downside. Brent needs to hold above 7 to head towards 75-80 else a fall to 65 is on the cards. Similarly, WTI needs to hold above 68/69 else can fall further towards 64/63. Gold is holding above immediate support at 1770 and could be ranged within 1770-1820 for now. Silver is ranged within 24-22. A break on either side will determine the next course of direction in the medium term. Copper is bullish while above 4.25 towards 4.50.

Brent (70.74) Brent fell to 69.345 before rising slightly from there. It needs to hold above 70 and rise above 75 to be bullish again towards 80. While below 75/70, an eventual fall below 65 is on the cards. Price action near crucial support at 70 needs a close watch.

WTI (67.56) has also fallen sharply due to the new covid variant scare and the volatility seen in the FX markets. WTI needs to rise above 68/69 to be bullish towards 75 else a fall to 64/63 can be on the cards.

Gold (1780.30) fell sharply to test support at 1770 yesterday but has started rising up again. Gold can continue to consolidate between 1770-1810/1820 before we see a break on either side.

Silver (22.86) has been falling since past few days. While below 23 the view is bearish to see a test of 22 on the downside. While above 22, an eventual rise back towards 24/24.50 is possible in the medium term.

Copper (4.3190) trades above support at 4.25 and while that holds, there is scope for a rise to 4.45/50 soon. View is bullish above 4.25.

FOREX

Huge volatility in the currency markets after the FED chair Powell’s statement. Dollar Index fell to 95.517 before bouncing back from there keeping the near term range of 95.50-97 intact for now. Euro tested 1.1283 before rising from there, but watch support near 1.1170/50 which needs to hold to keep Euro higher over the coming sessions. On the upside watch possible cap near 1.1350. EURJPY needs to sustain above 128 to rise towards 129-130 or higher. Continuous attempts to break below 128 can eventually give way to the downside. Aussie is bullish while above 0.71 and Pound is bullish while above 1.33-1.3250/67. Any break below the mentioned levels will force to look for a further fall in the near to medium term. USDCNY continues to fall sharply despite which the Dollar Rupee trades higher. As the NDF quotes 74.98, we may expect a gap own opening today but have to keep a close watch to see if it attempts to rise above 75-75.16 again. The higher than expected India GDP release could also favor Rupee today.

Dollar Index (96.02) fell to 95.517, the lower end of the mentioned 95.50-97 region, before bouncing back from there. A sustained trade above 96 can see a test of 96.50-97 again in the medium term. A break below 95.50 would be needed to indicate bearishness towards 95-94 in the longer run.

Euro (1.13) fell sharply to 1.1283 after FED chairman Jerome Powell stated possible downside risks to employment and economic activity and increase in uncertainty for inflation due to the emergence if the Omicron variant. But thereafter Euro has now risen back to 1.1321. Immediate support is seen near 1.1170/50 while immediate upside could be capped at 1.1350. Watch price action within this range before a break on either side is seen.

EURJPY (128.45) tested 127.48 and 127.64 over the last couple of sessions but has bounced well from there. Any more attempts to fall below 128 can trigger bearishness towards 127-126 on the downside. The cross pair needs to sustain above 128 in order to rise sharply towards 129-130 or higher in the medium term.

Aussie (0.7148) fell sharply below 0.71 to test 0.7062 before bouncing back again to current levels. Sustained trade above 0.71 can lead to a rise to 0.72. Immediate range of 0.72-0.71 may hold for now.

Pound (1.3303) too fell sharply to 1.3194 but bounced back well. Any break below 1.33-1.3267/50, if seen again can take the Pound lower and signal fresh bearishness. Overall view is likely to see a bullish reversal from immediate support near 1.33-1.3267/50.

Dollar-Yen (113.42) fell to 112.53 but has recovered a bit today. Overall sideways range of 114-113 looks possible with a possible fall to 112/111 in the medium term. View is sideways to bearish while below 114. A break above 114 is needed to bring back higher levels of 115-115.50 into focus.

USDCNY (6.3624) continues to fall sharply and could be headed towards 6.36/35 in the near to medium term. View is bearish while below 6.38.

{USDINR (75.1650) quotes 74.98 on the NDF and may open with a gap down boosted by Euro strength above 1.13 and on Yuan strength seen over the last couple of sessions. But we would keep a close watch to see if the pair rises back to attempt 75.20/50 on the upside or fall back while 75.20 holds as a decent resistance for now. Also note that the India GDP release yesterday showed a 8.4% growth for quarter ended Sep'21, higher than the 7.9% and 8.1% projections made by the monetary policy committee of Reserve Bank of India and a Bloomberg forecast of economists. This could be in favor of Rupee today.

INTEREST RATES

The US Treasury yields have bounced-back from their day’s low yesterday. The US Federal Reserve Chairman Jerome Powell indicated that the central bank would discuss on increasing the pace of stimulus taper in its meeting this month. Broadly, the yields at the far-end are just above their key range supports which can hold and keep the broad sideways range intact. The German yields have come down further and are keeping our bearish view intact. There is room for further fall. The 10Yr and 5Yr GoI have supports near current levels which can hold and produce a bounce within the expected narrow range in the near-term.

The US 2Yr (0.59%), 5Yr (1.19%), 10Yr (1.49%) and the 30Yr (1.83%) have risen back well from their lows. 1.4%-1.35% on the 10Yr and 1.8%-1.75% on the 30Yr will be the crucial support zones to watch. We expect these supports to hold and keep the broader 1.35%-1.75% (10Yr) and 1.75%-2.1%/2.2% (30Yr) range intact. A break below the above-mentioned supports will be bearish for the yields.

The German 2Yr (-0.76%) and 5Yr (-0.63%) yields remain stable while the 10Yr (-0.35%) and 30Yr (-0.07%) have declined further in line with our expectation. The 10Yr can fall to -0.45% / -0.5% and the 30Yr can test -0.1% / -0.2% on the downside in the coming days and keep the broader bearish view intact.

The Indian 10Yr (6.3263%) and the 5Yr (5.6463%) have closed on a mixed note yesterday. Supports are at 6.3% (10Yr) and 5.62% (5Yr). While the support holds, the 10Yr can bounce-back to 6.35%-6.38% and keep the 6.3%-6.38% range intact. The 5Yr on the other hand can rise back to 5.7% and remain in the range of 5.62%-5.7% for some time.

US stocks dropped sharply overnight following surprisingly hawkish comments from Fed Chair Jerome Powell. In short, he said that "the threat of persistently higher inflation has grown". More importantly, Fed is "going to have a conversation at our next meeting about accelerating the taper and ending our asset purchases a few months early".

More on Fed: Hawkish Powell Expects Fed to End QE Tapering a Few Months Earlier than Previously Anticipated

S&P 500 dropped -1.90% to close at 4567.0 and it's now pressing 55 day EMA (now at 4564.0). Sustained break there will align the outlook with DOW, and indicates that 4743.83 is a medium term top.

In this case, SPX could have already started a correction to whole up trend from 3233.94. Deeper decline could then be seen back to 38.2% retracement of 3233.94 to 4743.83 at 4167.05. For now, risk will stay on the downside as long as 4743.83 resistance holds, in case of recovery.

Or is the downtrend continuing?

EURUSD is already running into resistance, so quickly after rebounding off the lows around 1.12 late last week.

The euro started to make its comeback in recent days after coming under a lot of pressure this month but already it’s seeing resistance around 1.14, the first major test to the upside.

This coincides with the most recent area of resistance, as well as the 38.2% retracement of the late October highs to November lows and the bottom of the descending channel it broke below.

Having rebounded so aggressively, it would be natural to think that’s bearish. After such a large decline, such a shallow correction would be very negative if it breaks new lows.

But with price recovering well after the rebound off 1.14, perhaps a larger correction is on the cards. The key level remains 1.14 to the upside, with 1.15 above here then be massive.

There is some notable resistance before, like 1.1440 – 50 fib – but 1.15 is key. This coincides with the 61.8 fib, 200/233-period SMA on the 4-hour chart and maybe the top of the channel. A move above here would be very bullish over the medium term.

China Caixin PMI Manufacturing dropped from 50.6 to 49.9 in November, below expectation of 50.5. Caixin added that output rose for the first time in four months as power supply issues unwound. But total new orders fell slightly. Inflationary pressures eased markedly.

Wang Zhe, Senior Economist at Caixin Insight Group said: "To sum up, the manufacturing sector remained stable overall in November. Increased downward pressure and easing inflationary pressure were prominent features of the economic situation.... After the shortage of power was alleviated, the supply side began to recover. But due to weak demand, the supply recovery was limited, and the foundation of the recovery was not solid."

Full release here.

Japan PMI Manufacturing was finalized at 54.5 in November, up from October's 53.2. That's the best reading since January 2018, and the 10th consecutive month of overall growth. Markit noted that output and new orders rose at faster rates. There was sharp rise in cost burdens amid sustained supply chain disruption. Businesses reported strong optimism regarding future output.

Usamah Bhatti, Economist at IHS Markit, said: "Anecdotal evidence indicated supply chain disruption continued to hinder activity within the sector. Firms recorded a sustained and marked deterioration in lead times in November. Moreover, material shortages and logistical disruptions contributed to a rapid rise in average cost burdens, as input prices rose at the fastest pace since August 2008.

"Beyond the immediate future, Japanese manufacturers remained confident that output would rise over the coming 12 months. Firms were hopeful that an end to the COVID-19 pandemic would accelerate the launch and mass production of new products, amid a broad-based boost to demand in both domestic and international markets. This is in line with the IHS Markit forecast of a 5.3% rise in industrial production in 2022."

Full release here.