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Daily Pivots: (S1) 1.3485; (P) 1.3532; (R1) 1.3615; More...

Intraday bias in GBP/USD stays neutral for the moment. On the downside, firm break of 1.3410 low will confirm resumption of larger decline from 1.4248 and target 1.3164 fibonacci level next. However, on the upside, above 1.3604 minor resistance will turn bias back to the upside of 1.3833 resistance. Decisive break there will be a sign of near term bullish reversal.

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, firm break of 1.4376 key resistance (2018 high) will add to the case of long term bullish reversal. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.

Daily Pivots: (S1) 1.1561; (P) 1.1578; (R1) 1.1605; More...

EUR/USD is still staying in range of 1.1512/1615 and intraday bias remains neutral. Further decline is in favor as long as 1.1615 minor resistance holds. Break of 1.1512 will extend the pattern from 1.2348 to 61.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1453. Break will pave the way to 100% projection at 1.1306. On the upside, though, above 1.1615 minor resistance will dampen the bearish case and turn bias back to the upside for 1.1691 resistance.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Yen stays general firm after earlier rally today, and Dollar is following. Euro shrugs off better than expected German economic sentiment data. Sterling and Swiss Franc are mixed. Australian and New Zealand Dollar are currently the weakest. Gold is firm but there is no follow through buying through 1833.79 key resistance. WTI oil treads water at around 82 handle. A focus is whether benchmark yields in US and Europe would extend recent decline.

Technically, EUR/CHF would be a pair to watch today as it's struggling to extend rebound from 1.0532. Yet, break of 1.0602 resistance will indicate short term bottoming, and should bring stronger rise back to 1.0678 support turned resistance. If happens, that might help lift EUR/USD through 1.1615 minor resistance to 1.1691 near term resistance level.

In Europe, at the time of writing, FTSE is down -0.06%. DAX is up 0.19%. CAC is up 0.23%. Germany 10-year yield is down -0.039 at -0.282. Earlier in Asia, Nikkei dropped -0.75%. Hong Kong HSI rose 0.20%. China Shanghai SSE rose 0.24%. Singapore Strait Times dropped -0.63%. Japan 10-year JGB yield rose 0.0048 to 0.066.

US PPI up 0.6% mom, 8.6% yoy in Oct

US PPI for final demand rose 0.6% mom in October, above expectation of 0.5% yoy. For the 12 months period, PPI was unchanged at 8.6% yoy, slightly below expectation of 8.7% yoy.

PPI core came in at 0.4% mom, 6.8% yoy, versus expectation of 0.5% mom, 6.8% yoy.

ECB Klass: Transitory pressures are not necessarily short-lived

ECB Governing Council member Klaas Knot reiterated that inflation remains "largely transitory" but "upside risks to this baseline dominate". Though "we need to prepare for upside scenarios as well," he added.

"These transitory pressures are not necessarily short-lived," Knot said. "In fact, we have come to realize that the inflationary pressures from these sources last longer than initially thought."

He also said that ECB shouldn't tie itself up, as "we cannot make long-lasting unconditional commitments that might end up being incompatible with how the inflation outlook develops". But still, conditions for a rate hike are "very unlikely" to be met next year.

German ZEW economic sentiment rose to 31.7, but current situation dropped to 12.5

Germany ZEW Economic Sentiment rose to 31.7 in November, up from 22.3, well above expectation of 20.3. That's also the first rise since May. Current Situation, however, worsened again and dropped sharply from 21.6 to 12.5, well below expectation of 19.4.

Eurozone ZEW Economic Sentiment rose from 21.0 to 25.9, above expectation of 20.6. Current situation dropped -4.3 pts to 11.6. Inflation expectations for Eurozone dropped very sharply by -31.4 pts to -14.3. This shows that the experts expect the inflation rate in the eurozone to decline over the next six months.

"Financial market experts are more optimistic about the coming six months. However, the renewed decline in the assessment of the economic situation shows that the experts assume that the supply bottlenecks for raw materials and intermediate products as well as the high inflation rate will have a negative impact on the economic development in the current quarter. For the first quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the eurozone," comments ZEW President Professor Achim Wambach on current expectations.

Also released, Germany trade surplus narrowed to EUR 13.2B in September, versus expectation of EUR 14.2B. France trade deficit widened slightly to EUR -6.8B, versus expectation of EUR -7.0B.

Australia NAB business confidence rose to 21 in Oct, conditions rose to 11

Australia NAB business confidence rose sharply from 10 to 21 in October. Business conditions rose from 5 to 11, back above long-run average. Trading conditions rose from 10 to 17. Profitability conditions rose from 2 to 8. Employment conditions rose from 1 to 6.

"The large improvement in forward orders provides further evidence of the strong rebound in economic activity that is underway," said NAB Chief Economist Alan Oster. "Businesses can see that conditions are improving and that momentum should continue over coming months."

"We are starting to see some price pressures, but these remain largely in the form of pressure on input costs," said Oster. "These pressures should pull back as global supply chain disruptions ease and labour markets normalise, although this process may take some time yet."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1561; (P) 1.1578; (R1) 1.1605; More...

EUR/USD is still staying in range of 1.1512/1615 and intraday bias remains neutral. Further decline is in favor as long as 1.1615 minor resistance holds. Break of 1.1512 will extend the pattern from 1.2348 to 61.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1453. Break will pave the way to 100% projection at 1.1306. On the upside, though, above 1.1615 minor resistance will dampen the bearish case and turn bias back to the upside for 1.1691 resistance.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Economic Indicators Update

US PPI for final demand rose 0.6% mom in October, above expectation of 0.5% yoy. For the 12 months period, PPI was unchanged at 8.6% yoy, slightly below expectation of 8.7% yoy.

PPI core came in at 0.4% mom, 6.8% yoy, versus expectation of 0.5% mom, 6.8% yoy.

Full release here.

ECB Governing Council member Klaas Knot reiterated that inflation remains "largely transitory" but "upside risks to this baseline dominate". Though "we need to prepare for upside scenarios as well," he added.

"These transitory pressures are not necessarily short-lived," Knot said. "In fact, we have come to realize that the inflationary pressures from these sources last longer than initially thought."

He also said that ECB shouldn't tie itself up, as "we cannot make long-lasting unconditional commitments that might end up being incompatible with how the inflation outlook develops". But still, conditions for a rate hike are "very unlikely" to be met next year.

The euro is drifting in the Tuesday session. Currently, EUR/USD is trading at 1.1590, up 0.03%.

German Economic Sentiment rebounds

German ZEW Economic Sentiment impressed in November, accelerating from 22.3 to 31.7. The index had been on a long slide since May, when it stood at a lofty 84.4 points, so the first rise in six months is significant. Financial market experts are optimistic about economic conditions in the next six months and expect growth to expand, but also expect high inflation levels to ease. The eurozone release was similar to what we saw in Germany, climbing from 21.0 to 25.9, also its first rise since May. The euro didn’t gain any ground despite the strong ZEW Economic Sentiment reports. This could be a reflection of growing concern over surging Covid cases across Europe and the potential return of health restrictions.

Investors will be listening carefully as ECB President Christine Lagarde speaks at an ECB forum. The ECB remains in dovish mode and Lagarde reiterated last week that the ECB had no plans to raise rates prior to 2023. The November ZEW Economic Sentiment releases, which project that inflation will ease, is in sync with the ECB’s position that high inflation is temporary and will cool off.

The dovish stance of the ECB is weighing on the euro, as are tensions over Brexit. Specifically, the UK wants to reopen the Northern Ireland Protocol and change the trade rules affecting the movement of goods between Northern Ireland and the rest of the UK. Prime Minister Johnson has threatened to suspend the Protocol if no agreement is reached with the Europeans. Such a move would certainly trigger retaliation from the EU and could shake up the euro and the pound.

EUR/USD Technical

• There are resistance lines at 1.1618 and 1.1669
• 1.1515 is the next support level. Below, we find support at 1.1463

EURCHF is struggling to gain optimism as its 50-day simple moving average (SMA) has crossed below the 200-day SMA completing a ‘death cross’, increasing fears of a sustained bearish outlook. Moreover, the pair is currently trading well below its early March descending trendline, indicating that a short-term convergence towards that point should not be ruled out.

The bearish outlook and the recent price depreciation are also supported by the short-term momentum indicators, as the RSI is currently below its 50 neutral mark, while the MACD is found below zero but above its red signal line, which indicate that the negative momentum might be fading.

Should the price drop below its 1.0531 support, the selling pressure could intensify, sending the price to test the 1.0503 barrier. A further descending movement from this point could promote further selling activity, paving the way towards the April 2015 low of 1.0404. Breaking below this crucial support could strengthen the pair’s negative momentum.

On the flip side, if the price breaks above the 1.0603 level, the bulls may then target the 1.0655 barrier. Surpassing that level could pave the way towards a region which encapsulates the 50-day SMA currently found at 1.0742, and the 1.0765 resistance. Advancing higher from that region, the bulls might target the 1.0864 resistance and the 200-day SMA currently found at 1.0881. Surpassing the latter could turn the cards around for the pair, changing its outlook to positive.

In brief, the overall outlook of the EURCHF is negative. However, this might change if the price breaks above the 200-day SMA, while breaking below the April 2015 low could strengthen the pair’s negative momentum.

USDZAR has been giving up ground in the last week after its recent rally ceased at the 8-month high of 15.4850. Although the pair has surrendered around half of its latest gains and has crossed below its 50- and 200-period simple moving averages (SMAs), the negative bias seems to be weakening.
In the immediate term, the momentum indicators suggest that the selling pressure is waning. The RSI is pointing upwards in the negative region, while the stochastic oscillator has posted a bullish cross in the oversold area.

Should the bearish bias continue to fade and the price ascents, the pair would find immediate resistance at the 15.0830 level. If the upwards movement persists, the next hurdle would be the 15.1900 region that provided both resistance and support for the pair in October. Failing to find resistance in the aforementioned level, the bulls could then target the 15.3000 mark. Higher up, the pair would test its eight-month high of 15.4850.

On the flipside, if sellers manage to retake control, then the next challenge might be 14.8070. Overcoming this level, the bears are likely to meet support at the 14.6640. Should the pair manage to successfully surpass this barrier, the 14.5500 mark that provided support twice in October might be in focus.

Overall, USDZAR remains in a downtrend in the short term despite the bulls recently gaining some strength. Only, a break above the 15.3000 zone could accelerate the positive momentum.

EUR/USD technical analysis

• Downtrend trend line.
• The retracement is at 50.0 Fib.
• M H3 camarilla pivot point.
• Bears should keep the price below 1.1620.

1. The swing high.
2. Swing High.
3. Strong bearish marubozu candle.
4. 50.0 Fib retracement.
5. Target.

The price is still bearish. Bears need to keep the price below 1.1620 as the trend is still bearish and there is room till the next support level. If the markets reject from the 50.0 fib, it will be seen on the daily TF as a rejection candle with no big wick to the upside. Daily TF will give us the next direction but the market is still undecided. After the NFP Monday, we can still see that markets are making a pullback but the general idea for the EUR/USD is bearish. The 1.1595 zone is important for bears and the targets are 1.1510 followed by 1.1463.

Notes/Observations

• German Nov ZEW Survey mixed. Pointed that domestic recovery losing momentum as the year end approached but optimism persisted.
• German Sept Trade data showing that export sector still sputtering.
• Awaiting US inflation data and speeches from various central-bankers; dealers note that data could fuel speculation that the Fed was moving closer to raising interest rates.

Asia

• Japan Current Account Balance: ¥1.03T v ¥1.06Te.
• China Economic Daily stated that China would not follow the US Fed on tightening monetary policy.

Europe

• UK Oct BRC Sales Like-For-Like Y/Y: -0.2% v -0.4% prior.
• German Council of Economic Advisers cut 2021 GDP growth forecast from 3.1% to 2.7% citing supply shortages while raising the 2022 GDP growth from 4.1% to 4.6%.
• ECB chief Lagarde reiterated confidence that current high inflation was transitory.
• BOE Gov Bailey: Much of rise in inflation has to do with reopening after lockdowns.
• France Fin Min Le Maire proposed an automatic energy price stabilization system to protect consumers.

Americas

• President Biden said to decide on Fed Chair appointment by Thanksgiving. Fed’s Brainard (Dove) was interviewed by President Biden and said to be a contender to become Fed Chair.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.14% at 484.26, FTSE +0.12% at 7,309.23, DAX +0.24% at 16,084.40, CAC-40 +0.15% at 7,057.99, IBEX-35 +0.39% at 9,106.50, FTSE MIB -0.10% at 27,682.00, SMI +0.22% at 12,381.10, S&P 500 Futures +0.01%].
• Market Focal Points/Key Themes: European indices open modestly lower across the board but later reversed to trade marginally higher; better performing sectors include health care and industrials; sectors among those leading to the downside are consumer discretionary and utilities; focus on upcoming central banks conference; earnings expected during the upcoming US session include Clear Channel, EchoStar, DR Horton and Cardinal Health.

Equities

• Consumer discretionary: Associated British Foods [ABF.UK] +7% (earnings), Carrefour [CA.FR] +1% (strategy update), Basic-Fit [BFIT.NL] -4% (stake sale).
• Financials: Munich Re [MUV2.DE] -3% (earnings).
• Industrials: Renault [RNO.FR] +5% (Nissan results), Bayer [BAYN.DE] +2% (earnings), Rolls-Royce Holdings [RR.UK] +4% (reactors funding secured), Continental [CON.DE] +4% (large order for displays).

Speakers

• ECB's Panetti (Italy) stated that the Digital Euro would likely to get legal tender status.
• ECB's Enria (SSM chief) stated that European banking sector was taking action on costs. Was seeing froth in some market segments.
• France Fin Min Le Maire stated that still needed budgetary support in some sectors.
• Norway Central Bank (Norges) Financial Stability Report: Domestic financial system had weathered the pandemic well. Largest Norwegian banks could weather a sharp downturn without having to tighten lending substantially. High household debt was seen as the main weakness in the system.
• Russia Central Bank (CBR) Gov Nabiullina stated that the digital Ruble to have legal tender status and would seek to replace Crypto, not banks. She noted that Cryptocurrencies, stablecoins posed risks to financial stability.
• Poland Central Bank official Sura stated that might need to raise the Base Rate above 1.50% to tame inflation.
• Poland Central Bank's Hardt stated that would likely to raise rates in Dec.
• Japan PM Kishida stated that looked to achieve growth and improve public finances in the medium term.
• Japan Econ Min Yamagiwa stated that PM had ordered to include public-set wage increase in the incoming economic stimulus package.
• China PBoC Gov Yi Gang stated that would test the eCNY's impact on monetary policy and financial market. He added the E-CNY should be market-oriented.

Currencies/Fixed Income

• USD was initially softer as the session began on reports that Fed’s Brainard was interviewed by President Biden last week and said to be a contender to become Fed Chair. Such a move would suggest a more dovish Fed.
• EUR/USD at 1.1585 by mid-session after testing 1.1606 in Asia. German Nov ZEW Survey pointed domestic recovery losing momentum as the year end approached. Dealers awaiting US inflation data over the coming days which could fuel speculation that the Fed was moving closer to raising interest rates. Last week saw various central banks push back against rising rate hike expectations from markets participants.
• GBP/USD was trying to regain a foothold above the 1.36 area while USD/JPY slumped to test 112.72 during Asia.

Economic data

• (FR) Bank of France Oct Industrial (Business) Sentiment: 102 v 100e.
• (DE) Germany Sept Current Account Balance: €19.6B v €17.0Be; Trade Balance: €16.2B v €16.0Be; Exports M/M: -0.7% v 0.0%e; Imports M/M: 0.1% v 0.5%e.
• (DK) Denmark Sept Current Account Balance (DKK): 16.1B v 15.1B prior; Trade Balance: 12.8B v 1.1B prior.
• (NO) Norway Q3 Average Monthly Earnings Y/Y: 3.2% v 2.1% prior.
• (FR) France Sept Trade Balance: -€6.8B v -€7.1Be; Current Account Balance: -€2.7B v -€1.4B prior.
• (HU) Hungary Oct CPI M/M: 1.1% v 0.8%e; Y/Y: 6.5% v 6.2%e (7th month above target range and highest in almost a decade).
• (SE) Sweden Sept Private Sector Production M/M: +1.9% v -3.9% prior; Y/Y: 6.0% v 4.1% prior.
• (SE) Sweden Sept Industrial Orders M/M: -2.0% v -2.9% prior; Y/Y: 0.9% v 2.2% prior.
• (SE) Sweden Sept Industry Production Value Y/Y: 3.9% v 1.2% prior; Service Production Value Y/Y: 7.0% v 5.9% prior.
• (SE) Sweden Sept Household Consumption M/M: +0.1% v -0.4% prior; Y/Y: 4.4% v 4.8% prior.
• (CZ) Czech Oct International Reserves: $171.6B v $169.2B prior.
• (DE) Germany Nov ZEW Current Situation Survey: 12.5 v 20.0e; Expectations Survey: 31.7 v 18.0e.
• (EU) Euro Zone Nov ZEW Expectations Survey: 25.9 v 21.0 prior.
• (HU) Hungary Oct YTD Budget Balance (HUF): -2.922T v -2.292T prior.

Fixed income Issuance

• (PE) Peru to sell EUR-denominated 15-year social bond via syndicate.
• (NL) Netherlands Debt Agency (DSTA) sold €1.835B vs. €1.5-2.5B in 0% Jan 2038 DSL Bonds; Avg Yield: 0.118% v 0.188% prior (syndicated on Apr 13th 2021).
• (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2035, 2040 and 2048 bonds.

Looking Ahead

• (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rate by 50bps to 2.00%.
• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05;30 (DE) Germany to sell €6.0B in0% Sept 2023 Schatz.
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 06:00 (US) Oct NFIB Small Business Optimism Index: 99.5e v 99.1 prior.
• 06:00 (FI) Finland to sell combined €1.0B in 6-month and 9-month Bills.
• 06:30 (EU) ESM to sell €1.1B in 12-month Bills.
• 06:55 (US) Daily Libor Fixing.
• 07:00 (MX) Mexico Oct CPI M/M: 0.8%e v 0.6% prior; Y/Y: 6.2%e v 6.0% prior; CPI Core M/M: 0.5%e v 0.5% prior.
• 07:00 (TR) Turkey to sell bonds.
• 08:00 (RU) Russia Oct Official Reserve Assets: $623.0Be v $614.1B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (EU) ECB chief Lagarde.
• 08:30 (US) Oct PPI Final Demand M/M: 0.6%e v 0.5% prior; Y/Y: 8.6%e v 8.6% prior.
• 08:30 (US) Oct PPI (ex-food/energy) M/M: 0.5%e v 0.2% prior; Y/Y: 6.8%e v 6.8% prior.
• 08:30 (US) Oct PPI (ex-food/energy/trade) M/M: 0.2%e v 0.1% prior; Y/Y: No est v 5.9% prior.
• 08:30 (UR) Ukraine Oct CPI M/M: 0.9%e v 1.2% prior; Y/Y: 11.08%e v 11.0% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (US) Fed Chief Powell.
• 10:00 (MX) Mexico Weekly International Reserve data.
• 13:00 (US) Treasury to sell U.S. To Sell 10-Year Notes.
• 14:00 (AR) Argentina Sept Industrial Production Y/Y: No est v 13.8% prior; Construction Activity Y/Y: No est v 22.7% prior.
• 16:30 (US) Weekly API Oil Inventories.
• 18:00 (KR) South Korea Oct Unemployment Rate: 3.1%e v 3.0% prior.
• 18:30 (AU) Australia Nov Consumer Confidence Index: No est v 104.6 prior.
• 18:50 (JP) Japan Oct M2 Money Supply Y/Y: 4.0%e v 4.2% prior; M3 Money Supply Y/Y: 3.7%e v 3.8% prior.
• 20:30 (CN) China Oct CPI Y/Y: 1.4%e v 1.2% prior; PPI Y/Y: 12.3%e v 10.7% prior.
• 22:00 (KR) South Korea Oct Total Bank Lending To Household (KRW): No est v 1,053T prior- 22:00 (CN) China to sell 2-year Upsize and 5-year Bonds.