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Daily Pivots: (S1) 127.64; (P) 128.50; (R1) 129.19; More....

EUR/JPY's fall continues today and intraday bias remains on the downside. Corrective pattern from 134.11 should target 126.58 medium term fibonacci level next. On the upside, however, break of 129.97 resistance will indicate short term bottoming, and turn bias back to the upside for rebound back towards 133.44 high.

In the bigger picture, as long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of medium term bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

Daily Pivots: (S1) 0.8437; (P) 0.8466; (R1) 0.8520; More...

Further rise is mildly in favor in EUR/GBP. Sustained break of 55 day EMA (now at 0.8486) will target 0.8593 structural resistance. On the downside, though, break of 0.8434 minor support will turn bias back to the downside for retesting 0.8379 low.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8593 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8593 will now be an early sign of medium term bottoming. However, sustained break of 0.8276 will be a sign of long term bearish reversal.

Daily Pivots: (S1) 1.5681; (P) 1.5799; (R1) 1.6020; More...

Further rise is mildly in favor in EUR/AUD as long as 1.5743 support holds. Fall from 1.6434 might have completed at 1.5354 already. Rebound from there would target 161.8% projection of 1.5354 to 1.5743 from 1.5446 at 1.6075 next. On the downside, 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.

Daily Pivots: (S1) 1.0430; (P) 1.0461; (R1) 1.0494; More....

Intraday bias in EUR/CHF remains on the downside for the moment. Current down trend should target 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.

Daily Pivots: (S1) 1.1243; (P) 1.1286; (R1) 1.1366; More...

Intraday bias in EUR/USD remains neutral for consolidation above 1.1185 temporary low. Further decline is still in favor as long as 1.1373 resistance holds. Break of 1.1185 will target 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.

EUR/USD

Current level - 1.1280

The currency pair entered a corrective phase after it had previously reached a local bottom at 1.1185. At the time of writing the analysis, the EUR/USD is confirming the breach of the resistance level of 1.1287 which, if successful, would deepen the correction and pave the way towards 1.1365. Alternatively, if the breach of 1.1287 is not confirmed, the correction would be completed and the downtrend would be restored, with its first target being 1.1230. This week, investors will focus on the CPI data for the euro area (Tuesday; 10:00 GMT) and the U.S. non-farm payrolls (Friday; 13:30 GMT).

USD/JPY

Current level - 113.62

The corrective phase was limited above 113.00 and, following that, the currency pair regained some of its losses and headed towards a test of the resistance level of 113.75. In case the pair manages to breach 113.75, it would enter the range in which the Ninja was trading a few days ago (between 113.75 and 114.89) and would probably consolidate within this zone. In the negative direction, the first support is found at 112.75.

GBP/USD

Current level - 1.3332

The decline of the Cable was limited above the support level of 1.3300 and, at the time of writing, the currency pair is consolidating around the 1.3350 zone. In case a downtrend correction develops, it is expected to be limited below 1.3500. The negative sentiment is still intact and it is quite possible to witness another test of the support level of 1.3300. This week, increased activity can be expected around the release of the manufacturing PMI for the U.K. (Wednesday; 09:30 GMT) and the services PMI data for the U.K. (Friday; 09:30 GMT).

Daily Pivots: (S1) 1.3286; (P) 1.3326; (R1) 1.3375; More...

Intraday bias in GBP/USD remains neutral for consolidation above 1.3277 temporary low. Upside of recovery should be limited below 1.3512 resistance to bring another fall. Break of 1.3277 will resume the decline from 1.4248 to 1.3164 fibonacci level next. Nevertheless, break of 1.3512 will indicate short term bottoming and bring stronger rebound.

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) 0.9187; (P) 0.9274; (R1) 0.9329; More....

Intraday bias in USD/CHF remains on the downside as fall from 0.9372 will target 0.9084 support first. 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. For now, risk will stay mildly on the downside as long as 0.9372 resistance holds, in case of recovery.

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.

Markets

The new Covid-variant which caused havoc across markets last Friday has been labelled “Omicron”. The WHO declared it a “variant of concern”. The jury is still out whether Omicron causes severe or mild illness symptoms. Answering that question will be crucial in assessing the new Covid-variant’s shelf date as a market theme. In the very short term, we’d prefer to err on the side of caution as several governments reacted very promptly in introducing travel restrictions to slow the virus from spreading. Friday’s market moves were impressive. Investors decided to take some chips off the table as uncertainty over the new Covid-variant was very high ahead of the weekend. Better to be safe than sorry. European stock markets lost 4%-5% with main US indices ending 2.5% lower. Heavy risk aversion generated a bid for core bonds. US yields declined by 13.6 bps (30-yr) to 18.3 bps (5-yr) in a move where the belly of the curve outperformed the wings. The US 10-yr yield’s test of the October high at 1.7% abruptly ended, but the medium term technical picture isn’t altered yet. The German yield curve showed more of a bull flattening trend with yields shedding 2.2 bps (2-yr) to 8.6 bps (10-yr). The German 10-yr yield’s attempt to retake lost support at -0.19% ended in a similar sudden way. It is currently back to testing key support at -0.35% (November low & 62% retracement on August-October move higher). 10-yr yield spreads vs Germany widened marginally with Greece (+4 bps) underperforming. The ECB’s ostrich politics on inflation for once helped the euro. In the heavy risk-off market setting, EUR/USD rebounded from the low 1.12 area to close near 1.1330. Relative yield dynamics and EUR’s absolute JPY characteristics help explain the single currency’s unusual outperformance during risk aversion. Only JPY and CHF were in an even better position. USD/JPY dropped two big figures from the low 115 to the low 113, coming off the best levels since 2017. EUR/JPY set a new YTD low below 128 with EUR/CHF at a multi-year low sub 1.0450. EUR/GBP followed EUR/USD’s bounce higher to close just below 0.85.

Most of Friday’s moves are for a small part reversed this morning as doom scenarios about Omicron’s transmissibility and symptoms are for now downplayed. Uncertainty around Omicron suggest cautiousness to immediately bet on a fresh turnaround. It will be today’s main talking point, dwarfing eco releases (EC confidence data, German CPI) and speeches by ECB/Fed governors. We wonder whether that will remain the case as this week’s back-loaded agenda looks very appealing with US ISM’s, ADP employment and payrolls all scheduled for release between Wednesday and Friday. European investors will be interested in tomorrow’s CPI print.

News headlines

The World Health Organization is stepping up efforts to understand the development of the new Omicron corona-variant. According to a statement on Sunday, WHO indicated that there is no information yet that the symptoms of the new variant are different from other variants. According to the WHO it is not clear the new Omicron coronavirus variant is more transmissible compared to other variants or if it causes more severe disease. WHO is working with technical partners to understand the potential impact of this variant on our existing countermeasures, including vaccines. During the weekend, governments from multiple countries already banned travelers from southern African countries. Israel even already banned the entry of all foreign travelers. Japan will take a similar measure.

OPEC+ has delayed two technical meetings as it wants more time to assess the impact of the new Omicron coronavirus variant on the balance between demand and supply on the oil market. In its process of winding down last year’s production cuts, OPEC+ over the previous months added 400 000 barrels per day. However, the cartel recently already indicated that the US and other countries releasing strategic reserves could lead to oversupply early next year. According to sources OPEC+ is inclined to slow of even halt the pace of reducing output cuts. A decision in expected on Thursday. Brent oil tumbled from $81/b to $72/b on Friday and tries a modest rebound this morning ($75 p/b).

Daily Pivots: (S1) 112.48; (P) 113.92; (R1) 114.79; More...

Intraday bias in USD/JPY remains on the downside for 112.71 support. Sustained break there 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. For now, risk will stay on the downside as long as 115.51 resistance holds, in case of recovery.

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.