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Daily Pivots: (S1) 0.9287; (P) 0.9311; (R1) 0.9355; More....

USD/CHF's rise from 0.9084 resumes by breaking 0.9328. Intraday bias is back on the upside for 0.9367 resistance. Break there will resume whole choppy rise form 0.8925 to 0.9471 key resistance. On the downside, break of 0.9248 support is needed to indicate near term topping. Otherwise, further rally will remain in favor in case of retreat.

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.

Daily Pivots: (S1) 114.22; (P) 114.59; (R1) 115.24; More...

USD/JPY's break of 114.96 resistance confirms resumption of whole up trend from 102.58. Intraday bias is back on the upside. Current rise should target 100% projection of 102.58 to 111.65 from 109.11 at 118.18 next. On the downside, break of 113.57 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, corrective decline from 118.65 (2016 high) should have completed at 101.18 already. Rise from the 102.58 is seen as the third leg of the up trend from 101.18. Next target is 118.65 high. This will now be the preferred case as long as 111.65 resistance turned support holds, even in case of deep pull back.

Dollar surged overnight after Fed Chair Jerome Powell was nominated for a second term by US President Joe Biden. The greenback stays firm in Asian session and is ready to extend its near term rally. On the other hand, New Zealand Dollar is trading notably lower, as traders are probably pricing out the chance of an aggressive 50bps RBNZ hike later in the week. Yen is also soft, following rebound in global benchmark treasury yields.

Technically, EUR/USD is starting to trade comfortably below 1.13 handle, but there is no clear downside acceleration yet. But the greenback does progress with upside breakout in USD/JPY. Gold's sharp decline also affirms the underlying momentum of Dollar. A focus for the week is whether Gold's selloff is enough to push it through 1800 handle, for at least a test on 1757.84 support.

In Asia, at the time of writing, Hong Kong HSI is down -1.08%. China Shanghai SSE is up 0.38%. Singapore Strait Times is down -0.12%. Japan is on holiday. Overnight, DOW rose 0.05%. S&P 500 dropped -0.32% after hitting new record at 4743. NASDAQ also dropped -1.26% after hitting new record at 16212. 10-year yield rose 0.089 to 1.625.

New Zealand retail sales dropped -8.1% qoq in Q3, 12 of 15 industries down

New Zealand retail sales dropped -8.1% qoq in Q3, better than expectation of -10.2% qoq. Ex-auto sales dropped -6.7% qoq, also better than expectation of -7.6% qoq.

Twelve of the 15 industries had lower sales volumes. By industry, the largest movements were: Food and beverage services – down -19%; Motor vehicle and parts retailing – down -12%; Department stores – down -24%; Hardware, building, and garden supplies – -down 15%.

The Auckland region dominated the national fall with a record decrease of -15% (1.5 billion), compared with the 6.2% ($618 million) rise in the June 2021 quarter.

NZD/USD accelerating down to 0.6858 support first

Selling in New Zealand Dollar is taking off today as traders could be starting to price out an aggressive 50bps hike by RBNZ later in the week. NZD/USD's decline from 0.7217 is re-accelerating as seen in 4 hour MACD. And it's on track to take on 0.6858 support.

Overall, the corrective pattern from 0.6804 should have completed with three waves up to 0.7217, after rejection by medium term falling channel. The development suggests that whole pattern from 0.7463 is still in progress. Break of 0.6858 will affirm this bearish case. Deeper decline should be seen through 0.6804 to 38.2% retracement of 0.5467 to 0.7463 at 0.6731 next. This will remain the favored case as long as 0.7051 resistance holds.

Some previews on RBNZ:

• RBNZ To Lift Policy Rate Again after Strong Inflation
• RBNZ Preview: Rate Rise Unlikely To Boost The Bird – NZDUSD
• RBNZ Meeting: Single or Double Rate Hike?

Australia PMI composite rose to 55, business confidence improved

Australia PMI Manufacturing rose from 58.2 to 58.5 in November. PMI Services rose from 51.8 to 55.0. PMI Composite rose from 52.1 to 55.0. All three indexes hit 5-month highs.

Jingyi Pan, Economics Associate Director at IHS Markit, said: "Supply chain issues featured strongly in the Australian PMI survey as delivery times lengthened, widespread shortages were reported and price increases continued to be seen. While some of these can be attributed to the presence of pent-up demand that was reported, it will be worth watching if the constraints clear over time.

"Overall business confidence improved in the latest survey and this was a very positive sign. Private sector firms were also more willing to expand their workforce capacity, though instances of labour shortages had continued to surface."

Looking ahead

PMIs from Eurozone, UK and US are the main focuses of the day.

USD/JPY Daily Outlook

Daily Pivots: (S1) 114.22; (P) 114.59; (R1) 115.24; More...

USD/JPY's break of 114.96 resistance confirms resumption of whole up trend from 102.58. Intraday bias is back on the upside. Current rise should target 100% projection of 102.58 to 111.65 from 109.11 at 118.18 next. On the downside, break of 113.57 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, corrective decline from 118.65 (2016 high) should have completed at 101.18 already. Rise from the 102.58 is seen as the third leg of the up trend from 101.18. Next target is 118.65 high. This will now be the preferred case as long as 111.65 resistance turned support holds, even in case of deep pull back.

Economic Indicators Update

Selling in New Zealand Dollar is taking off today as traders could be starting to price out an aggressive 50bps hike by RBNZ later in the week. NZD/USD's decline from 0.7217 is re-accelerating as seen in 4 hour MACD. And it's on track to take on 0.6858 support.

Overall, the corrective pattern from 0.6804 should have completed with three waves up to 0.7217, after rejection by medium term falling channel. The development suggests that whole pattern from 0.7463 is still in progress. Break of 0.6858 will affirm this bearish case. Deeper decline should be seen through 0.6804 to 38.2% retracement of 0.5467 to 0.7463 at 0.6731 next. This will remain the favored case as long as 0.7051 resistance holds.

Some previews on RBNZ:

• RBNZ To Lift Policy Rate Again after Strong Inflation
• RBNZ Preview: Rate Rise Unlikely To Boost The Bird – NZDUSD
• RBNZ Meeting: Single or Double Rate Hike?

Australia PMI Manufacturing rose from 58.2 to 58.5 in November. PMI Services rose from 51.8 to 55.0. PMI Composite rose from 52.1 to 55.0. All three indexes hit 5-month highs.

Jingyi Pan, Economics Associate Director at IHS Markit, said: "Supply chain issues featured strongly in the Australian PMI survey as delivery times lengthened, widespread shortages were reported and price increases continued to be seen. While some of these can be attributed to the presence of pent-up demand that was reported, it will be worth watching if the constraints clear over time.

"Overall business confidence improved in the latest survey and this was a very positive sign. Private sector firms were also more willing to expand their workforce capacity, though instances of labour shortages had continued to surface."

Full release here.

New Zealand retail sales dropped -8.1% qoq in Q3, better than expectation of -10.2% qoq. Ex-auto sales dropped -6.7% qoq, also better than expectation of -7.6% qoq.

Twelve of the 15 industries had lower sales volumes. By industry, the largest movements were: Food and beverage services – down -19%; Motor vehicle and parts retailing – down -12%; Department stores – down -24%; Hardware, building, and garden supplies – -down 15%.

The Auckland region dominated the national fall with a record decrease of -15% (1.5 billion), compared with the 6.2% ($618 million) rise in the June 2021 quarter.

Full release here.

Or is there too much momentum?

It’s been a wild ride for gold this past few weeks and the latest moves highlight just how much uncertainty there is in the markets right now.

The yellow metal saw incredible support earlier this month as inflation indicators flashed and central banks pushed back against accelerating their policy response.

The transitory claim was starting to fall on deaf ears and that worked out well for gold, a traditional inflation hedge. Low real yields continued to be supportive for gold prices as long as policymakers remained dovish and the data remained good but not great.

With the data improving, gold started to run out of steam and the retail sales data showed the consumer is thriving. Brainard missing out on being the next Chair today appears to have been the straw that broke the camels back and the dollar soared, dragging gold lower.

So what next? As I’ve mentioned, these markets are a bit crazy at the moment and I’m not expecting that to change. But as far as the near-term is concerned, the key test for gold now is $1,800.

Aside from being the next big round number – which often has a psychological impact – it’s also the 61.8 retracement of the November lows to highs and falls around the 200/233-period SMA band on the 4-hour chart.

Needless to say, a break below here could be painful with $1,760 the big test below. A rotation higher could suggest there’s more to come for the gold rally. The challenge is momentum which hasn’t eased on approach to $1,800. Gold’s resolve may soon be tested.

Key Highlights

• EUR/USD extended decline below the 1.1350 support zone.
• A connecting bearish trend line is forming with resistance near 1.1320 on the 4-hours chart.
• GBP/USD is still struggling to clear the 1.3500 resistance zone.
• Gold price started a downside correction from the $1,875 resistance zone.

EUR/USD Technical Analysis

The Euro gained bearish momentum after it broke the 1.1500 support against the US Dollar. EUR/USD even traded below the 1.1400 support to enter a bearish zone.

Looking at the 4-hours chart, the pair even settled below the 1.1350 zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

The pair even traded below the 1.1320 support zone. A low is formed near 1.1249 and the pair is now consolidating losses.

On the upside, the pair is facing resistance near 1.1315. It is near the 50% Fib retracement level of the recent decline from the 1.1374 swing high to 1.1249 low. There is also a connecting bearish trend line forming with resistance near 1.1320 on the same chart.

A clear break above the 1.1315 and 1.1320 resistance levels could open the doors for more gains. The next key resistance could be 1.1400.

On the downside, an initial support is near the 1.1250 level. A downside break below 1.1250 may perhaps open the doors for a move towards 1.1220. The next major support sits at 1.1200, below which the pair could dive to 1.1150.

Looking at GBP/USD, the pair is facing hurdle near the 1.3500 zone. Besides, gold price started a downside correction below the $1,850 level.

Economic Releases

• US Existing Home Sales for Oct 2021 (MoM) - Forecast +1%, versus +7% previous.

STOCKS

Slight recovery seen in most equities but the important near term supports to need to hold strong in order to send the index up again. Dow and Dax have supports at 35500 and 16100 respectively which need to hold for the index to start moving up again. Nikkei needs to sustain above 29750 while Shanghai needs to trade above 3550. Nifty and Sensex too may respect near term supports at 17200 and 58000 and bounce back soon.

Dow (35619.25, +17.27, +0.049%) has risen slightly today. The view remains bearish to test support near 35500.

DAX (16115.69, -44.28, -0.27%) has come down slightly today. Support can be seen at 16100 which can hold for now and produce a bounce towards 16400 before we see a dip again.

Nikkei (29774.11, +28.24, +0.095%) has broken above the interim resistance at 29750. The index now has room to rise up towards 30000/31000 in the near term.

Shanghai (3592.98, +10.9, +0.30%) has risen today and is heading towards 3600 as mentioned earlier. A strong and sustained break above 3600 is needed to test 3700. Else, we can see a corrective fall from 3600 back towards 3500.

Nifty (17416.55, -348.25, -1.96%) went down sharply to test 17280 before rising again to close at 17416.55 yesterday. The 17200 level is a strong support which can hold and produce a bounce. Failure to hold above 17200 can take the index towards 17000.

Sensex (58465.89, -1170.12, -1.96%) fell to test the support at 58000 before bouncing back from there. While above 58000 the view remains bullish to see a rise towards 59000-60000 soon.

COMMODITIES

Precious metals have fallen sharply and look bearish on Dollar strength. Gold can test 1800-1780/60 in the near term while Silver can fall to 24. Copper has risen a bit and needs to break above 4.45 to move higher. Crude prices are stable and has scope to fall towards important supports near 76/75 (Brent) and 73-70 (WTI). Immediate view is bearish for both crude prices and precious metals.

Brent (79.46) has scope to fall towards 76-75 while below 80/79. WTI (76.34) on the other hand has scope to fall towards 73-70 on a break below 75. Immediate view is bearish.

Gold (1810.20) has fallen back sharply as Dollar Index has moved up and continues to look strong. While the US Dollar trades strong, Gold can fall in the near to medium term towards 1780/60 again on a break below 1800. View has turned bearish for the near term. Watch support near 1800-1780.

Silver (24.31) too is coming off as resistance near 25.50 is holding well. A fall to 24 cannot be negated in the very near term. Any break below 24 can trigger a further fall towards 23-22. Watch price action near 24.

Copper (4.4140) has risen well but needs to break above resistance near 4.45 to turn further bullish. A sideways trade within 4.45-4.25 for some sessions looks possible before breaking on either side.

FOREX

Dollar Index trades higher and targets 97.50-98 while above 96.50, taking up Dollar Yen along towards 116+ and dragging down Euro towards 1.12-1.10. Aussie and Pound continue to trade lower and is bearish for the medium term. EURJPY has bounced well from support at 128 and needs to sustain to move higher. Surprisingly, USDCNY and USDINR are broadly ranged and may continue so for some more sessions. USDCNY can trade within 6.39-6.37 while USDINR can trade within 74.50/60-74.20/00 in the near term.

Dollar Index (96.54) has risen to break above immediate resistance at 96.50. A sustained trade above 96.50 would open up chances of a rise to 97.50-98 which is the next crucial resistance zone and likely to produce a rejection back towards 96-94 in the longer run. For now, view remains bullish while above 96.50.

Euro (1.1236) has fallen relentlessly. Euro could be vulnerable for a fall to 1.10 if there is no bounce in the near term from 1.12. Confirmation of further bearishness would come in on a break below 1.12 as Dollar Index is headed towards 98. Overall bearishness in Euro is likely to continue.

EURJPY (129.25) has bounced well from support at 128 and can move up towards 130 initially. Thereafter we need to see if it manages to break above 130 or falls off from there.

Aussie (0.7223) continues to trade lower after breaking below support at 0.7250. While Aussie trades below 0.7250. it has scope to fall towards 0.72-0.7170 in the next few sessions. View is bearish just now.

Pound (1.3394) continues to fall and could test 1.3350-1.330 in the near term. Immediate view is bearish.

Dollar-Yen (115.06) has seen a good rally from the 113.50 Support over the last three days. If the current rise past 115.00 sustains, the pair can target 116+ soon. With the US Dollar looking strong the pair may get upward momentum in the coming sessions.

USDCNY (6.3853) is trading within a very narrow range. A sideways range of 6.39-6.37 looks likely to hold just now.

USDINR (74.40) rose to test 74.50 yesterday. We would keep a close watch at resistance near 74.50/60 which may hold and produce a fall back towards 74.25-74.00 in the coming sessions. Immediate upside could be capped at 74.50/60.

INTEREST RATES

The US Treasury yields have risen sharply contrary to our expectation to see a fall at the far-end. Jerome Powell getting the nod for a second term has triggered the rise in the yields. There is room for further rise and a close watch is needed to see if the yields are breaking above their key resistances or not. The German yields have seen some recovery bounce. But it is likely to be short-lived and the yields are likely to fall-back again to keep the broader bearish view intact. The 5Yr and 10Yr GoI have risen back yesterday and can move up to test the upper end of their respective range in the near-term.

The US 2Yr (0.63%), 5Yr (1.32%), 10Yr (1.62%) and the 30Yr (1.96%) have risen sharply across tenors contrary to our expectation to see a fall at the far-end. The 10Yr is back above 1.6% and can now retest the 1.65%-1.67% region. It will have to be seen if it reverses lower again from there or extends the upside to 1.7%-1.75%. The 30Yr on the other hand can test 2% and can extend the upside to 2.1% if it breaks above 2%.

The German 2Yr (-0.76%), 5Yr (-0.61%), 10Yr (-0.31%) and 30Yr (0.02%) yields have recovered across tenors after having fallen sharply towards the end of last week. However, we expect the bounce-back to be short-lived. Our bearish view remains intact to see a fall to -0.45% and -0.5% on the 10Yr and -0.1% and -0.2% on the 30Yr in the coming weeks.

The Indian 10Yr GoI (6.3513%) has risen back again. But the resistance at 6.38% can continue to cap the upside and drag the yield down to 6.3% in the near-term. 6.3%-6.38% could be the narrow range of trade within the broad 6.3%-6.45% range. We retain our bearish view of seeing a downside break below 6.3% and a fall to 6.2% eventually over the medium-term.

The 5Yr GoI (5.6882%) has risen back after testing 5.66%. This keeps the 5.66%-5.75%/5.78 range intact. As mentioned yesterday, a test of 5.7%-5.73% looks likely now. From a bigger picture we expect the 5Yr GoI to break this range below 5.66% and fall to 5.63%-5.62%.

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