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NZDUSD broke below August 20, 2021 low (0.6805) and now shows a 5 swing sequence from February 25, 2021 high favoring more downside. A 5 swing sequence is an incomplete sequence and needs another leg lower to end 7 swing. Short term, cycle from October 21, 2021 high is in progress as a 5 waves impulse Elliott Wave structure. Down from October 21 peak, wave 1 ended at 0.6976 and rally in wave 2 ended at 0.70527. Pair then resumes lower in wave 3 towards 0.68 and bounce in wave 4 ended at 0.6839.

Near term, as far as pivot at 0.7055 high stays intact, pair could see further downside to end wave 5. Alternatively, pair may have already ended wave 5 and consequently cycle from October 21 peak may have ended. Either way, we expect a larger degree 3 waves rally should happen soon to correct the cycle from October 21 high. Afterwards, due to the 5 swing sequence from February 25, 2021 high, this rally should likely fail in 3, 7, or 11 swing for more downside. A 7 swing structure from February 25 has potential 100% – 161.8% Fibonacci extension target towards 0.615 – 0.655.

NZD/USD 60 minutes Elliott Wave chart

Daily Pivots: (S1) 1.1263; (P) 1.1289; (R1) 1.1320; More...

Intraday bias in EUR/USD remains neutral as consolidation from 1.1185 is extending. With 1.1373 resistance intact, further decline is still in favor. On the downside, break of 1.1185 will resume the larger down trend to 161.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1068 next. However, firm break of 1.1373 will indicate short term bottoming and turn bias back to the upside for stronger rebound.

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.

Overall market sentiment is stable, with major Asian indexes mixed, following the recovery in US stocks overnight. Yen and Dollar soften slightly after turning into consolidations, but Swiss Franc is still strong. Commodity currencies are mixed with no follow through buying with the current rebound attempt. In other markets, Gold is struggling in tight range below 1800 handle. WTI crude oil is flip-flopping around 70 handle, with no momentum for a sustainable rebound.

Technically, we'll be looking at the development in both EUR/USD and USD/JPY closely. As for EUR/USD, recovery from 1.1185 remains capped below 1.1373 minor resistance, and thus keeps near term outlook bearish. However, break of 1.1373 could solidify upside momentum in Euro in crosses, in particular in EUR/GBP, EUR/CAD and EUR/AUD. Meanwhile, USD/JPY is still holding above 112.71 support. But a firm break there could prompt deeper selling in other Yen crosses.

In Asia, at the time of writing, Nikkei is up 0.43%. Hong Kong HSI is down -1.09%. China Shanghai SSE is up 0.23%. Singapore Strait Times is down -0.56%. Japan 10-year JGB yield is down -0.0026 at 0.072. Overnight, DOW rose 0.68%. S&P 500 rose 1.32%. NASDAQ rose 1.88%. 10-year yield rose 0.048 to 1.530.

Fed Powell: Emergence of Omicron poses downside risks to economy

In the prepared remarks for a Senate Committee hearing, Fed Chair Jerome Powell said , "the recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation."

"Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions," he added.

Powell also reiterated, inflation is expected to "move down significantly over the next year as supply and demand imbalances abate." However, "it now appears that factors pushing inflation upward will linger well into next year." Also, "with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace."

Japan industrial production rose 1.1% mom in Oct, more growth expected in Nov and Dec

Japan industrial production rose 1.1% mom in October, below expectation of 1.8% mom. That's nonetheless the first rise in four months.

The seasonally adjusted index of production at factories and mines stood at 90.5 against the 2015 base of 100. The index of industrial shipments increased 2.0% to 88.3 while that of inventories was up 0.8% at 98.9.

The Ministry of Economy, Trade and Industry expects industrial production to grow 9.0% mom in November and then 2.1% mom in December.

Unemployment rate dropped from 2.8% to 2.7% in October, better than expectation of 2.8%.

China PMI manufacturing rose to 50.1, non-manufacturing dropped to 52.3

China official PMI Manufacturing rose from 49.2 to 50.1 in November, above expectation of 49.6. PMI Non-Manufacturing dropped from 52.4 to 52.3, below expectation of 53.0. PMI Composite rose from 50.8 to 52.2.

"A series of policy measures to ensure energy supply and stabilize market prices have borne some fruits. The tight supply of electricity eased while prices of some raw materials dropped significantly in November," said Zhao Qinghe, a senior NBS statistician.

New Zealand ANZ business confidence finalized at -16.4 in Nov

New Zealand ANZ business confidence was finalized at -16.4 in November, down from October's -13.4. Own activity outlook dropped from 21.7 to 15.0. Looking at some more details, export intentions rose from 8.6 to 9.5. Investment intentions rose from1 3.8 to 16.3. Employment intentions rose from 10.9 to 15.8. Cost expectations rose from 87.2 to 88.7. Pricing intentions rose from 65.5 to 66.5. Inflation expectations rose from 3.45% to 4.24%.

From Australia, private sector credit rose 0.5% mom in October, versus expectation of 0.6% mom. Building permits dropped -12.9% mom, versus expectation of -2.0% mom. Current account surplus rose to AUD 23.9B in Q3, below expectation of AUD 27.8B.

Looking ahead

France GDP, Germany unemployment, Eurozone CPI flash and Swiss KOF will be released in European session. Later in the day, Canada will also released GDP. US will release house price index, Chicago PMI and consumer confidence.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1263; (P) 1.1289; (R1) 1.1320; More...

Intraday bias in EUR/USD remains neutral as consolidation from 1.1185 is extending. With 1.1373 resistance intact, further decline is still in favor. On the downside, break of 1.1185 will resume the larger down trend to 161.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1068 next. However, firm break of 1.1373 will indicate short term bottoming and turn bias back to the upside for stronger rebound.

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

China official PMI Manufacturing rose from 49.2 to 50.1 in November, above expectation of 49.6. PMI Non-Manufacturing dropped from 52.4 to 52.3, below expectation of 53.0. PMI Composite rose from 50.8 to 52.2.

"A series of policy measures to ensure energy supply and stabilize market prices have borne some fruits. The tight supply of electricity eased while prices of some raw materials dropped significantly in November," said Zhao Qinghe, a senior NBS statistician.

Key Highlights

• GBP/USD is struggling to clear the 1.3350 and 1.3380 resistance levels.
• A key bearish trend line is forming with resistance near 1.3355 on the 4-hours chart.
• EUR/USD failed to recover further above the 1.1320 resistance.
• Crude oil price found support and recovered above $70.00.

GBP/USD Technical Analysis

The British Pound started a major decline below 1.3500 against the US Dollar. GBP/USD moved further into a bearish zone below 1.3350.

Looking at the 4-hours chart, the pair even extended decline below 1.3300. However, it was stable above 1.3250. There was a close below the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

On the upside, the pair is facing hurdles near 1.3350. There is also a key bearish trend line forming with resistance near 1.3355 on the same chart.

The next major resistance is near 1.3420 and the 100 simple moving average (red, 4-hours), above which the pair could accelerate higher in the coming sessions.

If not, there could be more losses below the 1.3270 and 1.3250 support levels. In the stated case, the pair may possibly decline towards the 1.3150 level.

Looking at EUR/USD, the pair tried to clear the 1.1320 resistance but failed. Besides, gold price is showing a few bearish signs below the $1,800 level.

Economic Releases

• Euro Zone CPI for Nov 2021 (YoY, Preliminary) - Forecast +3.7%, versus +4.1% previous.
• Euro Zone Core CPI for Nov 2021 (YoY, Preliminary) - Forecast +1.9%, versus +2.0% previous.
• US S&P/Case-Shiller Home Price Indices for Sep 2021 (YoY) - Forecast +20%, versus +19.7% previous.

Japan industrial production rose 1.1% mom in October, below expectation of 1.8% mom. That's nonetheless the first rise in four months.

The seasonally adjusted index of production at factories and mines stood at 90.5 against the 2015 base of 100. The index of industrial shipments increased 2.0% to 88.3 while that of inventories was up 0.8% at 98.9.

The Ministry of Economy, Trade and Industry expects industrial production to grow 9.0% mom in November and then 2.1% mom in December.

Unemployment rate dropped from 2.8% to 2.7% in October, better than expectation of 2.8%.

STOCKS

The equity indices have bounced a bit from sharp declines seen over the last couple of sessions. We need to see if the recovery is short lived and if more decline is left to be seen in the near term. Watch supports near 34750-34500 on Dow, near 15000 on Dax and near 28000 on Nikkei. On shanghai there is support near 3475/3500 while Nifty and Sensex needs to trade above supports at 16780 and 57000 to move up in the coming sessions.

Dow (35135.94, +236.60, +0.68%) has support between 34750-34500 on the Daily Candles which can hold in the near-term, keeping the Dow ranged between 34500-35750 for most of Dec’21.

DAX (15280.86, +23.82, +0.16%) has risen slightly but is overall bearish towards a 15000 on a break below 15250. We may expect a bounce from 15000 in the medium term. Till then view remains bearish. Any rise above 15550 can take the index towards 15750 before a decline is again seen from there.

Nikkei (28498.91, +214.99, +0.76%) has risen today. Nikkei needs to break above 28750 to rise towards resistance at 29000-29500. While below 29500/28750, the view of a fall towards 28000 or lower cannot be negated.

Shanghai (3568.72, +6.03, +0.17%) has come up and heading towards 3575/3600. A strong break above 3600 can take the index towards 3625/50. Else a fall back to 3550/3500 or even 3475 is possible.

Nifty (17053.95, +27.50, +0.16%) made a low at 16782.40 before coming up to close above 17000. Nifty has to sustain above 17000 to be bullish towards 17200/400. Else a break below 17000 would mean a fall towards 16000/15980 in the coming sessions.

Sensex (57260.58, +153.43, +0.27%) tested 56482.93 before coming up to close above 57000. A further fall towards 56000/55000 is possible in the near term while below 58000. Only a sustained break above 59000, if seen can again make the index bullish for the medium term. Till then sideways to bearish movement could be expected.

COMMODITIES

Stability is seen in most commodity prices. Crude prices have dipped a bit but we need to see if respective supports of 70 and 67/68 hold on Brent and WTI to produce a short bounce in the near term. Failure to hold above the mentioned supports may give way for a fall. Gold may trade within 1780-1820 while Silver can break below 23 to test 22 before bouncing back from there. Copper can test supports near 4.25-4.00 before bouncing higher.

Brent (74.10) and WTI (70.89) have dipped a bit from levels seen yesterday. Brent tested 73.89 and WTI tested 70.03 before bouncing back from there. As mentioned yesterday, Brent needs to hold above 70 to bounce back towards 75/82 on the upside again. While below 75, the price may slowly give way to an eventual fall towards 65 in the medium term. Watch price action near 70/75. On WTI, we need to see if it sustains trade above 67/68.

Gold (1791) tested 1784.30 before rising from there. We continue to expect trade within 1780-1810/20 to continue for the near term unless a break on either side of the range is seen.

Silver (22.99) is breaking below 23 and if the fall sustains, we can expect a decline towards 22 which is an important support.

Copper (4.3455) trades slightly lower. It has important support at 4.25 and can bounce back if the support holds. In case the price breaks below 4.25 (less likely), it can fall to 4.00 before reversing from there.

FOREX

Currencies look more or less range for now. Dollar Index may remain within 95.75-96.50/97 which can keep Euro above 1.12 and below 1.1450/1.14 for the next couple of weeks. EURJPY has risen back above 128 and can continue to rise within the 128-130 range. Any break below 128 can open up chances of a fall to 125. Aussie and Pound look ranged too for now. USDCNY has fallen sharply within 6.37-6.40 and needs to bounce from 6.37 else a fall to 6.36/35 would come into the picture. USDINR can test 75.25/50 for now. A maximum rise to 75.75 is possible before falling off from there.

Dollar Index (96.13) trades lower but has to break below 95.75 to turn further bearish. Till then we may expect trade within 95.75-96.50/97 to continue.

Euro (1.13) tested 1.1331 before coming off from there. Immediate resistance is seen near 1.1360-1.14 which can be tested soon before a slight dip is seen. In the next 2-weeks, we may expect a rise to 1.14-1.1450 before again declining from there.

EURJPY (128.50) fell to test 127.48 before bouncing back again to 128+ levels. While above 127.48-128, view is bullish towards 129-129.60 before another decline is seen.

Aussie (0.7151) is holding above 0.71 and while that holds, a rise to 0.72 can be possible.

Pound (1.3325) is trading above immediate support near 1.328/326 and while that holds, the Pound could be found in a sideways range within 1.325-1.34. Thereafter, we would wait to see which way the price moves for further direction cues.

Dollar-Yen (113.65) has bounced from 113 and attempting to move up over the past 2-sessions. If it holds above 113, a rise back to 115-115.50 is possible. Else a fall back towards 112 can come into the picture. Watch ranged movement within 113-115 for now.

USDCNY (6.3732) has fallen sharply to test the lower end of the 6.40-6.37 range. If the pair does not immediate bounce back, it can fall towards 6.36/35 eventually.

{USDINR(75.1025) rose sharply to close above 75 yesterday. This was contrary to our initial expectation of a fall from 74.80 and brings forth the less likely alternative view of a rise towards 75.25/50 on the upside before declining from there. A maximum upside of 75.75 (only on a break above 75.50) is possible within the current upmove, to be followed by a sharp fall back towards 74.80/60.

INTEREST RATES

The US Treasury yields have come down further in line with our expectation. Supports are coming up near current levels and it needs to be seen if the yields can bounce-back from there or not. The German yields are likely to fall from current levels and keep the broader downtrend intact. The 10Yr and 5Yr GoI have inched up slightly yesterday. They can rise further within their overall broad range if they manage to sustain the uptick seen yesterday.

The US 2Yr (0.50%), 5Yr (1.17%), 10Yr (1.51%) and the 30Yr (1.86%) continue to move down in line with our expectation. The 10Yr has come closer to the 1.5%-1.45% region and the 30Yr is just above 1.85%. Need to see if they can bounce-back from there or not. We reiterate that we can see a broad 1.45%-1.65% (narrow) / 1.35%-1.75% (broad) on the 10Yr and 1.75%-2.1%/2.2% on the 30Yr.

The German 2Yr (-0.77%), 5Yr (-0.63%), 10Yr (-0.32%) and 30Yr (0.01%) yields remain lower and stable. Our view of seeing a fresh fall to -0.45% / -0.5% (10Yr) and -0.1% / -0.2% (30Yr) remains intact. The yields will have to break above -0.2% (10Yr) and 0.10% (30Yr) to negate this bearish view and rise to -0.1% (10Yr) and 0.2% (30Yr).

The Indian 10Yr (6.3351%) and the 5Yr (5.6614%) have inched up slightly. While above 6.32%, the 10Yr can move back up to 6.36%-6.38% again. The narrow 6.3%-6.38% range remains intact for now. The 5Yr can rise to 5.7% if it manages to sustain above 5.66%. Else a dip to 5.62%-5.61% is possible.

New Zealand ANZ business confidence was finalized at -16.4 in November, down from October's -13.4. Own activity outlook dropped from 21.7 to 15.0. Looking at some more details, export intentions rose from 8.6 to 9.5. Investment intentions rose from1 3.8 to 16.3. Employment intentions rose from 10.9 to 15.8. Cost expectations rose from 87.2 to 88.7. Pricing intentions rose from 65.5 to 66.5. Inflation expectations rose from 3.45% to 4.24%.

ANZ said. "It's an uncertain time for the New Zealand economy.... the global COVID situation has taken a turn as well with the uncertain implications of the new Omicron variant. Costs are rising and firms aren't confident they'll be able to maintain their profit margins. But in the bigger picture, demand is solid with jobs plentiful, Auckland is nearly out of lockdown, and there's a plan to reopen the border, as long as the new variant doesn't turn out to be a game changer.... it's a mixed bag, yes, but overall things are still ticking along pretty well. Here's hoping COVID doesn't throw a curve ball."

Full release here.

In the prepared remarks for a Senate Committee hearing, Fed Chair Jerome Powell said , "the recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation."

"Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions," he added.

Powell also reiterated, inflation is expected to "move down significantly over the next year as supply and demand imbalances abate." However, "it now appears that factors pushing inflation upward will linger well into next year." Also, "with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace."

Full remarks here.

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