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In an interview with the Financial Times (FT), Cleveland Fed President Loretta Mester made some hawkish comments on speeding up taper and likely rates

In an interview with the Financial Times (FT), Cleveland Fed President Loretta Mester delivers hawkish comments on likely rates next year while cautioning about the risks from the Omicron covid variant.

Key quotes

Omicron threatens to stoke US inflation.

Variant could exacerbate supply chain crunch and worker shortages.

The fear of the virus is still one of the factors holding people back from re-entering the labor force.

Have to entertain the risk that those persistently high numbers of inflation could become more embedded.

The economy is better at dealing with these variants.

The demand side effects have been lessened, but we’ve seen these supply-side effects, which are related to the virus.

Would support at least one rate increase next year, and that two might be “appropriate”.

Market reaction

These above comments had little to no impact on the US dollar, as it trades flat at 96.16 against its major rivals, at the time of writing. Markets await the US NFP for a fresh trading direction.

USD/INR stays indecisive around 75.00, even as weekly moves contrast the one-month rebound during early Friday. The Indian rupee (INR) is up for snapp
  • USD/INR bounces off intraday low inside a bullish chart pattern.
  • Fortnight-old support line, 200-HMA joins firmer RSI to keep buyers hopeful.
  • Multiple hurdles around 75.20 act as a tough nut to crack for bulls.

USD/INR stays indecisive around 75.00, even as weekly moves contrast the one-month rebound during early Friday. The Indian rupee (INR) is up for snapping three-day advances but a bullish pennant on the hourly play favor buyers on a key day.

That said, a firmer RSI line and the quote’s successful trading beyond a two-week-old support line and 200-HMA offer extra support to the pair bulls.

Though, sustained trading beyond the 75.00 immediate hurdle will need validation from the multiple tops marked since October 20 near 75.19-20. Following that, the USD/INR rally towards the yearly top of 75.65 can’t be ruled out.

On the contrary, a downside break of the stated pennant’s support line, around 74.90, will drag the quote towards the stated short-term support line near 74.83 and then to the 200-HMA level of 74.78.

It should be noted, however, that the bearish impulse past 74.78 will aim for a 61.8% Fibonacci retracement level of November 18-30, near 74.45.

To sum up, USD/INR bulls are bracing for another battle with the 75.20 resistance.

USD/INR: Hourly chart

Trend: Further upside expected

 

Singapore Retail Sales (YoY) climbed from previous 6.6% to 7.5% in October
Singapore Retail Sales (MoM) fell from previous 6% to 0.7% in October
EUR/USD grinds lower around 1.1300, indecisive ahead of Friday?s European session. The major currency pair struggles for clear direction after two con
  • EUR/USD pauses two-day downtrend, remains sidelined on the key day.
  • US Treasury yields remain pressured as markets brace for faster Fed tapering, extended PEPP at ECB.
  • Virus woes escalate but with hopes of a cure, China, Russia portray geopolitical fears.
  • ECB’s Lagarde, Eurozone Retail Sales and US ISM Services PMI are important too.

EUR/USD grinds lower around 1.1300, indecisive ahead of Friday’s European session. The major currency pair struggles for clear direction after two consecutive days of a downside as traders await important catalysts scheduled for the day amid mixed macros and indecision over the major central bank’s next moves.

Among the positives are hopes that the coronavirus variant from South Africa, dubbed as Omicron, will soon have its cure from the UK. On the same line were talks of the covid strain’s less lethal symptoms than initially feared. Furthermore, the US policymakers finally avoided the government shutdown, at least till February, while adding bars for the market’s preference for the US dollar.

Alternatively, hawkish Fedspeak, led by including Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin, fuelled US Treasury yields the previous day. Also helping the bond sellers were softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November.

It’s worth noting that the Eurozone Unemployment Rate eased in November and favored the European Central Bank (ECB) hawks. However, the regional central bank signaled less hawkish performance during December’s meeting, per the latest updates from Reuters.

Additionally, the European Union (EU) and the US criticism of China’s moves in the South China Strait and Taiwanafter Thursday’s talks in Washington join Beijing’s calls for the US to cut the tariffs on their goods to weigh on the market sentiment.

Amid these plays, the US 10-year Treasury yields fade bounce off 10-week low, marked the previous day, but the S&P 500 Futures also print 0.12% intraday downside by the press time. Furthermore, the US Dollar Index (DXY) rises 0.05%, up for the third consecutive day around 96.17 at the latest.

Moving on, ECB’s President Christine Lagarde and Eurozone Retail Sales for November may entertain EUR/USD traders but major attention will be given to the US jobs report and ISM Services PMI for the last month.

Technical analysis

EUR/USD dropped for the last two days following its failures to cross the 100-SMA, around 1.1320 at the latest. Also favoring the sellers is the MACD line that flashed bear cross.

However, a clear downside break of the one-week-long ascending support line, around 1.1255 at the latest, becomes necessary for the pair sellers to aim for the yearly low of 1.1186. Following that, 61.8% Fibonacci Expansion (FE) of November 09-30 moves, near 1.1120, will gain the market’s attention.

 

Gold (XAU/USD) portrays a corrective pullback from a monthly low, bouncing off key supports to print a $1,773 level during early Friday. The yellow me
  • Gold bounces off four-month-old support line, key Fibonacci retracement level.
  • Yields reverse corrective pullback from 10-week low, stock futures dwinde on mixed concerns.
  • Omicron tightens the grip but UK braces for a cure, US policymakers avoid government shutdown.
  • Gold Price Forecast: Pressure persists November low at risk of giving up

Gold (XAU/USD) portrays a corrective pullback from a monthly low, bouncing off key supports to print a $1,773 level during early Friday. The yellow metal’s recent gains could be linked to the market's cautious sentiment ahead of the all-important US Nonfarm Payrolls (NFP) release and softer yields.

That said, the US 10-year Treasury yields fade bounce off 10-week low, marked the previous day, but the S&P 500 Futures also print 0.16% intraday downside by the press time. The reason could be linked to the market’s indecision amid contrasting headlines and a lack of conviction over the key central bank’s future moves, not to forger headlines concerning Omicron, China and the US.

After days of haggling, the US policymakers finally avoided the government shutdown, at least till February. Though fears of the faster Fed tapering keep bond bears hopeful. Among the key promoters of faster rolling back of easy money, also conveying reflation fears, were Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin.

Elsewhere, cases of the South African coronavirus variant, dubbed as Omicron, rise in the US and China, as well as the UK. However, Britain approves medical treatment that’s likely a cure for the worries COVID-19 strain.

On a different page, the European Union (EU) and the US criticized China after Thursday’s talks in Washington while Beijing calls for the US to cut the tariffs on their goods. Further, Beijing-based IT firm Didi is up for leaving the US stock exchange and joining Hong Kong’s Hang Seng.

It’s worth noting that even if the global policymakers do signal to dial back the easy money policies, backed by the inflation fears, a fresh covid wave challenges the further monetary policy tightening. This in turn helps the investors to jump back towards the traditional safe-havens like US government bonds and gold.

Though, today’s US employment data and PMI numbers will be important for near-term direction as the Fed policymakers slip into the no-talk periods from this Saturday.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

Technical analysis

Having been defeated by a wall of resistance around $1,792, comprising 50, 100 and 200-DMA, gold bounces off an ascending support line from August around $1,762, not to forget staying above 61.8% Fibonacci retracement (Fibo.) of March-June upside.

Although softer yields and recovery from short-term key supports favor bulls to aim for another battle with the DMA convergence near $1,792, bearish MACD signals and an absence of oversold RSI keep the commodity sellers hopeful.

That said, fresh selling awaits a clear downside break of the stated 61.8% Fibo. level of $1,768, which in turn will direct gold towards an ascending support line from August around $1,762.

However, a nine-month-old horizontal area surrounding $1,750-47, will be a tough nut to crack for the gold sellers afterward.

Meanwhile, gold buyers have a tough task on hand of crossing the $1,792 SMA convergence if they aim for re-entry.

Following that, the $1,800 threshold and October’s peak near $1,813 will be on their radars before confronting another important resistance level close to $1,834 that includes highs marked during July and September.

Overall, gold sellers have an upper hand, at least technically, than their bull friends. Though, US jobs report becomes crucial to watch.

Gold: Daily chart

Trend: Further weakness expected

 

Asian equities stay mostly firmer amid softer US Treasury yields and hopes of finding a cure to the South African strain of the coronavirus, dubbed as
  • Asian shares grind higher as softer yields jostle with Omicron headlines.
  • South African covid variant tightens grips in China, US but UK hints at a solution.
  • China’s Didi prepares for US delisting, Hong Kong joining, US Senate avoids government shutdown.
  • Japan shows readiness for more stimulus, Australian data came in mixed.

Asian equities stay mostly firmer amid softer US Treasury yields and hopes of finding a cure to the South African strain of the coronavirus, dubbed as Omicron. However, chatters surrounding China and worsening COVID-19 conditions in the developed countries join the pre-Fed caution to challenges optimists.

Amid these plays, MSCI’s index of Asia-Pacific shares outside Japan drops 0.63% whereas Japan’s Nikkei 225 rises 0.40% on firmer Jibun Bank Services PMI for November and Tokyo’s statement to not hesitate from suing more fiscal measures if needed.

On the other hand, the European Union (EU) and the US criticized China after Thursday’s talks in Washington while Beijing calls for the US to cut the tariffs on their goods. Elsewhere, Omicron cases rise in the US and China while Beijing-based IT firm Didi is up for leaving the US stock exchange and joining Hong Kong’s Hang Seng. Against this backdrop, Shares in Hong Kong dropped a bit but those from China remain mildly bid at the last.

Markets in Australia and New Zealand joined those from China but not Indonesia amid virus woes. It should be noted that South Korea’s KOSPI and India’s BSE Sensex print mild gains at the latest.

On a broader front, the US 10-year Treasury yields fade bounce off 10-week low, marked the previous day, but the S&P 500 Futures also print 0.16% intraday downside by the press time.

That said, Fed policymakers, including Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin, were the most hawkish and fuelled US Treasury yields the previous day. Also helping the bond sellers were softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November.

Moving on, the US Nonfarm Payrolls (NFP) and ISM Services PMI for November will be crucial for the near-term market direction.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

AUD/USD is consolidating at yearly lows near 0.7070, heavily weighed down by the prevailing risk-on market profile. The market sentiment soured in Asi
  • AUD/USD drops in tandem with S&P 500 futures, as risk sentiment sours.
  • Omicron covid woes escalate, China’s Caixin Services PMI disappoint.
  • Focus shifts to US NFP, as the aussie shrugs off early RBA rate hike calls.

AUD/USD is consolidating at yearly lows near 0.7070, heavily weighed down by the prevailing risk-on market profile.

The market sentiment soured in Asia this Friday after investors reacted negatively to the news of the new Omicron covid variant spreading in the US, with new cases reported in Hawaii, New York and Los Angeles. Reflecting risk-off mood, the S&P 500 futures drop 0.20% so far.

Further, renewed US-China tussle, as Didi Global Inc. prepares delisting from the US bourses, added to the damp mood while exacerbating the pain in the higher-yielding aussie.

The aussie bears also cheered the drop in the Chinese Caixin Services PMI, with the index arriving at 52.1 in November vs. 53.8 previous.

Collaborating with the downside in the spot, the US-Sino trade woes are back in play, especially after China’s ambassador to the US called for the abolition of tariffs on Chinese goods.

Attention now turns towards the US Nonfarm Payrolls release, which could further strengthen the Fed’s hawkish view. Meanwhile, the aussie appears to ignore the earlier calls for an RBA rate hike, as investors remain unnerved.

AUD/USD: Technical levels

“The 4-hour chart also hints at further declines, as the pair remained below bearish moving averages, while technical indicators hold within negative levels with uneven strength. Support levels: 0.7060 0.7015 0.6970. Resistance levels: 0.7140 0.7175 0.7210,” FXStreet’s Chief Analyst Valeria Bednarik notes.

AUD/USD: Additional levels to consider

 

USD/CHF justifies Thursday?s bearish Doji while printing a 0.08% intraday loss around 0.9200 heading into Friday?s European session. Even so, the 200-
  • USD/CHF stays mildly offered following the previous day’s bearish candlestick formation.
  • 200-DMA challenges the sellers, key Fibonacci retracement levels add to the upside filters.
  • Firmer Momentum line sustained trading beyond the key SMA, trend line favor buyers.

USD/CHF justifies Thursday’s bearish Doji while printing a 0.08% intraday loss around 0.9200 heading into Friday’s European session. Even so, the 200-DMA challenges the Swiss currency (CHF) pair sellers.

In addition to the stated key moving average near 0.9180, 50% and 61.8% Fibonacci retracement levels of August-November upside, respectively around 0.9197 and 0.9155, also challenge the sellers.

It’s worth noting that the firmer Momentum line and a four-month-old ascending trend line, near 0.9115, keeps USD/CHF bulls hopeful.

Meanwhile, an upside break of the 38.2% Fibonacci retracement level of 0.9240 will reject the bearish candlestick performance. However, USD/CHF buyers may wait for a clear run-up past 0.9250, comprising early November lows, to retake controls.

Overall, USD/CHF remains sidelined with eyes on the US Nonfarm Payrolls (NFP).

USD/CHF: Daily chart

Trend: Further weakness expected

 

In the face of the new Omicron covid variant and Fed Chair Jerome Powell?s hawkish view, the US dollar is poised for new upside risks in the coming we

In the face of the new Omicron covid variant and Fed Chair Jerome Powell’s hawkish view, the US dollar is poised for new upside risks in the coming weeks.

Key quotes

"Recent developments have introduced new upside risks to our broad Dollar forecasts.”

“First, following public comments from Fed officials, our economists now expect the FOMC to accelerate the pace of QE tapering and to wrap up the process in mid-March. They also now anticipate three 25bp rate hikes next year instead of two (in June, September, and December, vs July and November previously), and a two-per-year pace thereafter.”

“Second, the new covid variant already roiling South Africa may introduce new downside risks to global growth, and therefore upside risks to the safe haven Dollar.”

“We have not revised our broad USD forecast today but will be considering an upgrade over the coming week."  

Japan government vows to deploy necessary fiscal spending without hesitation in response to the crisis, Reuters reports, citing the government's draft

Japan's government vows to deploy necessary fiscal spending without hesitation in response to the crisis, Reuters reports, citing the government's draft guidelines for the fiscal 2022 budget.

Key takeaways

“Japan must restore economy first and then tackle fiscal reform.”

“Japan must prioritize efforts to shore up the economy over fixing its tattered public finances.”

“The guidelines dropped a reference to the need for "reviewing spending without sanctuary", which had been inserted in recent years as a pledge to stick to fiscal discipline.”

USD/JPY reaction

USD/JPY is treading water around 113.00, on a cautious footing amid falling yields and risk-off trading ahead of the key US NFP release.

Reuters is reporting that the US Senate has voted to approve the bill to avert a government shutdown over the weekend. The US government funding bill

Reuters is reporting that the US Senate has voted to approve the bill to avert a government shutdown over the weekend.

The US government funding bill was passed in the Senate by 68-29 votes.

Early Asia, the funding bill was passed in the House of Representatives, which will keep the government afloat until February 18. The bill will now be sent to US President Biden for signing. 

Market reaction

The US dollar index remains unfazed by the above comments, currently trading flat at 96.20. Traders await the US NFP for fresh impetus.

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a six-day downtr

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a six-day downtrend by the end of Thursday’s North American session, per the data source Reuters.

In doing so, the inflation gauge bounced off the 10-week low flashed the previous day to print 2.47% at the latest.

The uptick in the US inflation expectations could be linked to the hawkish Fedspeak and optimism over the US policymakers’ ability to avoid a government shutdown, which has a deadline of Saturday.

Adding strength to the momentum were firmer US job-related data and recent optimism over Omicron treatment after the UK approves clinical trials for the drug that is a likely solution.

However, spreading cases of the South African covid variant in the US and cautious mood ahead of the US Nonfarm Payrolls (NFP), as well as US ISM Services PMI, challenges the market optimism.

Read: Yields retreat, S&P 500 Futures consolidate gains with eyes on US NFP

Market players stay divided during early Friday as the Fed hawks confront reflation and geopolitical concerns. Adding to the filters is the cautious m
  • US 10-year Treasury yields fade bounce off 10-week low.
  • S&P 500 Futures pare the week’s heaviest daily gains, Asia-Pacific stocks trade mixed.
  • Hawkish Fedspeak weigh on sentiment but hopes over Omicron treatment, US bill to avoid shutdown probe bond bears.
  • China-linked headlines add to the negative catalysts but nothing more important than the US NFP.

Market players stay divided during early Friday as the Fed hawks confront reflation and geopolitical concerns. Adding to the filters is the cautious mood ahead of the US Nonfarm Payrolls (NFP).

To portray the sentiment, the US 10-year Treasury yields drop 2.3 basis points (bps) to 1.426% whereas the S&P 500 Futures drop 0.50% at the latest. That said, the US bond yields recovered from the latest October levels the previous day while the Wall Street benchmarks posted the biggest daily jump in the current week.

Fed policymakers, including Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin, were the most hawkish and fuelled US Treasury yields the previous day. Also helping the bond sellers were softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November.

The recent optimism over finding the cure of the South African variant of the coronavirus, dubbed as Omicron, seemed to have underpinned the US stocks on Thursday.

Recently, the EU-US dislike for China and comments by Beijing’s Ambassador to the US, over phase one deal and tariffs, seem to challenge the risk appetite. Furthermore, the US policymakers’ struggle to avoid a government shutdown on Saturday probes the optimists of late. Additionally, the five Omicron cases in the US and spreading virus woes in the rest of the world also weigh on the risk appetite.

Talking about data, China’s Caixin Services PMI for November came in below 53.8 figures to 52.1 while the Composite PMI also dropped from 51.5 to 51.2 during the stated month. Before that, Australia’s PMIs were mixed for November while Japan’s Jibun Bank Manufacturing PMI came in better than previous for the stated month.

Looking forward, markets expect 550K of NFP print and an easy 4.5% Unemployment Rate, an absence of which can extend the latest weakness of the US Treasury yields and favor equities amid hopes of further easing.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

Asia witnesses a turnaround in the market sentiment, as risk trades take a hit from the growing spread of the highly contagious Omicron covid variant

Asia witnesses a turnaround in the market sentiment, as risk trades take a hit from the growing spread of the highly contagious Omicron covid variant in the US.

After a case of the new strain detected in California a day ago, Los Angeles reported its first case in the last hour.

Earlier on, Hawaii confirmed a single Omicron covid strain case while New York State registered five cases. Although all fives cases reported are said to be mild.

In light of escalating concerns over the new variant, the US has announced a mandatory COVID-19 test a day prior to departure for travelers inbound to the country from December 6.

To soothe these discouraging headlines, investors remain hopeful that vaccines will remain effective or can be adjusted.

According to Bloomberg, “A UK study testing seven different COVID-19 vaccines as booster doses found most of them increased antibodies, with shots from Moderna Inc. and the Pfizer Inc.-BioNTech SE partnership performing best.”

Meanwhile, GlaxoSmithKline said Its COVID-19 antibody drug, Sotrovimab, is likely effective against the Omicron variant.

Market reaction

As of writing, the Asian stocks are trading mixed, weighed by the negative momentum in the Japanese and Australian indices.

Meanwhile, the S&P 500 futures are down 0.40% on the day. The high beta AUD/USD is losing 0.30% on the day to trade near yearly lows sub-0.7100.

The price of gold has been on the backfoot while the greenback consolidates and risk appetite improves. The US stock market has surged back to life wi
  • Gold is on the offer below critical daily support structures.
  • Bears are looking for a break into the $1,750s for the rest of the week. 

Update: The gold price has remained firm despite the bearish bias from a technical perspective, as illustrated below where the $1,750s were marked out as a target for the closing sessions of the week. However, the price is currently trading at $1,770 and up on the day by 0.1% so far. The drift higher is slow and could be subject to a sell-off if the bulls don't commit with bigger size and demand in the coming hours. The main event will be the US Nonfarm Payrolls, so there could be some cause to move to the sidelines.

Analysts are expecting a positive outcome which would be expected to fuel the US dollar and weigh on the gold price. ''US November non-farm payrolls are expected to reflect the robust momentum in the economy (Westpac f/c (and market median): 550k) which should also see the Unemployment rate edged lower (market f/c: 4.5%),'' analysts at Westpac explained. ''Average hourly earnings growth is expected to remain strong given the limitations on labour supply (market f/c: 0.4%).''

End of update

The price of gold has been on the backfoot while the greenback consolidates and risk appetite improves. The US stock market has surged back to life with the S&P 500 running up over 1.6% on the day so far.

Gold, on the other hand, has fallen around 1% and is printing a fresh low at the time of writing at $1,763.51. The price has fallen from $1,783.45 on the day. Investors continue to acknowledge the hawkish tilt at the Federal Reserve which makes this week's Nonfarm Payrolls a key event ahead of the December Fed meeting.

The idea that the Fed is closer to a rate hike is dampening the demand for the non-yielding inflation hedge that is the yellow metal. Strong jobs on Friday could be the nail in the coffin for gold and support the greenback higher in anticipation of a faster rate of tapering from the Fed. 

''Payrolls probably surged again,'' analysts at TD Securities explained. ''A strong trend continues to be signalled by surveys and claims, but our forecast also reflects the latest Homebase data—with a decline in the Homebase series more than accounted for by seasonality. Along with our +650k forecast for payrolls, we forecast a 0.2pt decline in the unemployment rate and a 0.4%MoM (5.0% YoY) rise in hourly earnings.''

Meanwhile, the United States recorded its first case of the Omicron variant on Wednesday, weighing on market sentiment. The person was fully vaccinated and is experiencing "mild symptoms, which are improving at this point," Fauci said. Dr. Grant Colfax, San Francisco's director of public health, said the person had not had a booster shot. Meanwhile, the United States and Germany also added to the nations around the globe planning stricter COVID-19 restrictions on Thursday. 

Gold technical analysis

''The yellow metal has struggled to shore up enough support to catalyze a buying program amid Chair Powell's more hawkish communications,'' analysts at TD Securities argued.

''However, while the hawkish announcement has thus far kept gold prices from breaking north of a key threshold for CTA short covering, it ultimately does not represent a significant shift relative to market pricing. In turn, CTA trend followers may still have a surprise in store for the hawks should prices break north of $1790/oz.''

Following a restest of the counter trendline, the price is deteriorating below daily support that would now be expected to act as resistance. The focus is on the $1,750s for the remainder of the week.

NZD/USD remains depressed around the intraday low of 0.6786 following the release of China?s Caixin PMI data during early Friday. In doing so, the kiw
  • NZD/USD braces for the biggest daily loss of the week, stays pressured around the yearly low.
  • China Caixin Services PMI, Composite PMI ease in November.
  • Risk appetite sours as US-China tussles regain market attention, Fedspeak favors faster tapering.
  • US jobs report will be the key ahead of the Fed blackout period.

NZD/USD remains depressed around the intraday low of 0.6786 following the release of China’s Caixin PMI data during early Friday. In doing so, the kiwi pair portrays the market’s sour sentiment, as well as reacts to the softer data, ahead of the key US Nonfarm Payrolls (NFP).

China’s Caixin Services PMI for November came in below 53.8 figures to 52.1 while the Composite PMI also dropped from 51.5 to 51.2 during the stated month. In doing so, the private activity gauges differ from the official readings published earlier in the week.

Read: Chinese Caixin Services PMIs expand at a slower pace

Mostly adding to the bearish bias is the broad US dollar strength amid hopes of faster Federal Reserve (Fed) tapering after the policymakers sound hawkish in their latest appearances, before the silent period starts from this Saturday. Among the key promoters of faster rolling back of easy money, also conveying reflation fears, were Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin.

Not only the hawkish Fedspeak but the softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November, also underpinned the hopes of faster Fed tapering and favored the yields and USD.

It should be observed that the Wall Street benchmarks also consolidated weekly losses the previous day but the S&P 500 Futures and Asia-Pacific stocks dwindle during early Friday.

The reason could be linked to the hopes of the US policymakers to avoid a government shutdown, which is looming for Saturday. Also positive for the kiwi prices could be the recent optimism over finding the cure of the South African variant of the coronavirus, dubbed as Omicron.

Alternatively, the recent EU-US dislike for China and comments by Beijing’s Ambassador to the US, over phase one deal and tariffs, seem to challenge the risk appetite. On the same line were cautious sentiment ahead of the US jobs report.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

Technical analysis

In addition to a clear downside break of a 14-month-old rising support line around 0.6900, as sustained trading below 61.8% Fibonacci retracement (Fibo.) level of August 2020 to February 2021 upside, near 0.6860, also keeps NZD/USD bears hopeful. That said, the yearly low of around 0.6770 may act as immediate support to watch during the quote’s weakness. However, major attention will be given to a convergence of the descending support line from late August and 78.6% Fibo. level near 0.6710.

 

Chinese ambassador to the US Qin Gang urges America for early abolition of additional tariffs on the country?s goods. Additional comments China is red

Chinese ambassador to the US Qin Gang urges America for early abolition of additional tariffs on the country’s goods.

Additional comments

China is reducing the time needed for approval of travel by US business executives to no more than 10 days

China to make COVID-19 testing more convenient, will allow work during quarantine. 

Market reaction

AUD/USD fails to take advantage of these comments, as it sheds 0.30% on the day amid risk aversion. The spot is trading close to yearly lows of 0.7063.

China Caixin Services PMI dipped from previous 53.8to 52.1 in November
Activity in China's services sector expanded at a slower pace in November amid rising inflationary pressures and continuing small-scale COVID-19 outbr

Activity in China's services sector expanded at a slower pace in November amid rising inflationary pressures and continuing small-scale COVID-19 outbreaks, a private survey showed on Friday as reported by Reuters.

''The Caixin/Markit services Purchasing Managers' Index (PMI) fell to 52.1 in November from 53.8 in October, but remained above the 50-point mark that separates growth from contraction on a monthly basis.''

''Caixin's November composite PMI, which includes both manufacturing and services activity, fell to 51.2 from 51.5 the previous month.''

Reuters reported that ''analysts say the services sector, which has been slower to recover from the pandemic than manufacturing, is more vulnerable to sporadic COVID-19 outbreaks and anti-virus measures, clouding the outlook for a much anticipated rebound in consumption in the months to come.''

"Policymakers should still focus on supporting small and midsize enterprises. They should also pay attention to problems including deteriorating job prospects, limited household income growth and weak consumer purchasing power," said Wang Zhe, senior economist at Caixin Insight Group.

"Enterprises are still facing high cost pressures. Policymakers should take inflation seriously."

AUD/USD remains steady regardless

AUD/USD has been on the move to the downside in Asia, reestablishing the move that was interrupted by a bullish start on Wall Street on Thursday. 

It had broken the hourly support ahead of the data as illustrated above. However, the data has failed to move the needle so far despite expanding at a slower clip in services. 

About the China Caixin Services PMI

A monthly questionnaire issued to purchasing executives in over 400 private service sector organizations yielded responses that formed the basis of the Caixin China General Services PMI (Purchasing Managers' Index). Sales, employment, inventories, and pricing are some of the variables tracked by the index.

A rating of greater than 50 suggests that the services sector is generally increasing, while a reading of less than 50 indicates that it is generally contracting.

A higher than expected figure should be seen as positive (bullish) for the CNY while a lower than expected figure should be seen as negative (bearish) for the CNY.

US Dollar Index (DXY) holds onto the three-day recovery moves, up 0.06% around 96.18 during early Friday. In doing so, the greenback gauge stays above
  • DXY prints three-day uptrend towards 10-DMA immediate resistance.
  • Weekly falling trend line, 2021 peak also probes buyers before 61.8% FE level.
  • 20-DMA, five-week-old support line adds to the downside filters.
  • Sustained trading above key supports, firmer RSI favor buyers.

US Dollar Index (DXY) holds onto the three-day recovery moves, up 0.06% around 96.18 during early Friday.

In doing so, the greenback gauge stays above the 20-DMA and an ascending support line from October 29 amid a firmer RSI line, not overbought, which in turn suggests the quote’s further advances.

However, the 10-DMA level of 96.30 precedes a weekly resistance line near $96.45, to restrict the immediate upside of the DXY.

Should the quote manage to cross the 96.45 hurdle on a daily closing basis, the latest run-up can challenge the yearly peak of 96.94 with eyes on the 61.8% Fibonacci Expansion (FE) of November’s moves, around 97.55.

Meanwhile, pullback moves remain less worrisome until staying beyond 20-DMA and the aforementioned support line, respectively around 95.75 and 95.30.

It’s worth noting that the US Dollar Index becomes vulnerable to visit 94.60 level, surrounding early November’s top, on the break of 95.30 support line.

Read: Nonfarm Payrolls Preview: Jobs’ headline could be a make it or break it in tapering’s decision

DXY: Daily chart

Trend: Further upside expected

 

In recent trade today, the People?s Bank of China (PBOC) set the yuan (CNY) at 6.3738 vs the estimate of 6.3739 and the previous 6.3719. About the fix

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3738 vs the estimate of 6.3739 and the previous 6.3719.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

As per the prior analysis, AUD/USD Price Analysis: High forex vol points to continuation to weekly support, the price remains on a bearish trajectory
  • AUD/USD bears seeking a downside extension with critical data coming up. 
  • Chinese data and the US Nonfarm Payrolls will be key events for the pair on Friday. 

As per the prior analysis, AUD/USD Price Analysis: High forex vol points to continuation to weekly support, the price remains on a bearish trajectory as follows:

In the daily chart above, the weekly lows are illustrated with 0.6990 eyed as a potential target on a break of 0.7030. For the day ahead, the bears need to break the hourly support as follows:

AUD/USD H1 chart

The bears are taking control below the 0.7120 key level with the price staying below the 21-EMA:

Bears will want to see a break of the 0.7080 support before fully engaging, but the Chinese data could be the catalyst. With that being said, there are prospects of a trapped market into the NFP data today if the price fails to break lower on disappointing Chinese data. 

USD/JPY reverses the day-start losses to regain 113.15, following the first positive day in three, during the early hours of Tokyo open on Friday. The
  • USD/JPY picks up bids after snapping two-day downtrend.
  • Market sentiment dwindles amid Fed rate hike bets, Omicron concerns and US funding bill news.
  • Hawkish Fedspeak couldn’t stop Wall Street from positing gains but Asia-Pacific equities trade mixed of late.
  • Japan Jibun Bank Services PMI improved in November, US jobs report in focus.

USD/JPY reverses the day-start losses to regain 113.15, following the first positive day in three, during the early hours of Tokyo open on Friday.

The risk barometer pair tracked from the firmer US Treasury yields the previous day to recover while hopes of finding a solution to the South African covid variant, as well as avoiding the US government shutdown seem to recently favor the buyers. However, cautious sentiment ahead of the US Nonfarm Payrolls (NFP) data for November, expected 550K, tests the USD/JPY upside.

US 10-year Treasury Treasury yields bounced off a 10-week low to regain 1.45% level the previous day, down two basis points (bps) to retest the 1.43% mark at the latest.

Fedspeak pushed for a sooner tapering in the last-ditched efforts before the silent period starting from this Saturday, which in turn propelled the bond yields and the US Dollar Index (DXY). Among the key promoters of faster rolling back of easy money, also conveying reflation fears, were Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin.

Also adding to the DXY strength could be softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November. That said, the final reading of Japan’s Jibun Bank Services PMI for November rose past 50.7 prior to 53.00.

Furthermore, optimism concerning Omicron’s cure, spread by the UK, joins the recovery in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, to favor the USD/JPY prices.

On the contrary, fears of a negative surprise from the US jobs report and virus woes join geopolitical tension surrounding Russia, Iran and China to test the market sentiment and the USD/JPY prices.

Amid these plays, the US 10-year Treasury yields struggle to extend the previous day’s rebound while the Asia-Pacific equities and the S&P 500 Futures trade mixed by the press time.

Moving on, the virus updates and the geopolitical chatters could offer intermediate direction to the USD/JPY traders ahead of the US NFP.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

Technical analysis

USD/JPY holds onto the previous resistance line from March, around 112.75 by the press time. However, the 50-DMA level of 113.40 restricts immediate upside.

 

Ireland Purchasing Manager Index Services dipped from previous 63.4to 59.3 in November
Hong Kong SAR Nikkei Manufacturing PMI above forecasts (51.3) in November: Actual (52.6)
WTI crude oil prices struggle to keep the previous day's recovery moves from late August around $67.00 during Friday?s Asian session. The black gold?s
  • WTI fades bounce off 15-week low, grinds higher during the second positive day in four.
  • Oversold RSI conditions favor rebound, 61.8% Fibonacci retracement guards immediate upside.
  • Bears await a clear break of ascending support line from March.

WTI crude oil prices struggle to keep the previous day's recovery moves from late August around $67.00 during Friday’s Asian session.

The black gold’s stated rebound portrays the importance of an upward sloping trend line from March 23 with the oversold RSI conditions suggesting further recovery.

However, 61.8% Fibonacci retracement level of March-October upside, around $68.00, probes the oil buyers before directing them to the key 200-DMA hurdle of $69.85.

Also acting as an upside filter is the $70.00 threshold and 50% Fibo. near $71.20.

Alternatively, a daily closing below the multiday-old support line near $64.75 will redirect the WTI bears to attack August month’s low of $61.73.

Following that, the $60.00 round figure may probe the commodity sellers before directing them to March’s low of $57.27.

WTI: Daily chart

Trend: Further recovery expected

 

USD/CAD is on the move and the bulls are in control from a longer-term perspective. The following illustrates the prospects of a run all the way into
  • USD/CAD is making tracks to the upside with the 1.30s are in sight. 
  • The month and weekly targets are clear and Fridays Nonfarm payrolls could be the deciding factor. 

USD/CAD is on the move and the bulls are in control from a longer-term perspective. The following illustrates the prospects of a run all the way into test the 1,30's in the coming days. However, US Nonfarm Payrolls will be critical in this regard. 

The greenback earlier gained after US data showing initial claims for state unemployment benefits rose 28,000 to a seasonally adjusted 222,000 for the week ended Nov. 27, lower than the forecast of 240,000. Today, Payrolls probably surged again, according to analysts at TD Securities.  

''A strong trend continues to be signaled by surveys and claims, but our forecast also reflects the latest Homebase data—with a decline in the Homebase series more than accounted for by seasonality. Along with our +650k forecast for payrolls, we forecast a 0.2pt decline in the unemployment rate and a 0.4%m/m (5.0% y/y) rise in hourly earnings.''

USD/CAD monthly chart

The bulls are in charge and there is overhead resistance that could be tested in the coming days near 1.2995. 

USD/CAD weekly chart

The weekly outlook has the price on the verge of making a W-formation. There needs to be some more upside, however. The bulls can target the key monthly resistance at 1.3050 once 1.30 is cleared. On the flip side, the W-formation would be expected to attract bears in to test the neck line near 1.2770. 

Japan Jibun Bank Services PMI up to 53 in November from previous 50.7
Reuters came out with its optimistic survey results for the market expectations of the Reserve Bank of Australia?s (RBA) next move. ?Against a backdro

Reuters came out with its optimistic survey results for the market expectations of the Reserve Bank of Australia’s (RBA) next move.

“Against a backdrop of rising inflation in Australia and around the world, the RBA is now predicted to lift its cash rate from a record low 0.10% in the first quarter of 2023,” per November 29-December 2 poll of 35 respondents were published during Friday’s Asian session.

“That's sooner than the second quarter of 2023 forecast in a poll taken almost a month ago, while in a survey taken only two months ago there was no consensus for any rate rise in 2023,” adds Reuters.

Key quotes

A small majority, 16 of 25 economists, expected at least one rate hike by the end of the first quarter of 2023, compared with 11 of 25 economists in the previous poll.

Economists in the Nov. 29-Dec. 2 poll expect a second rate hike in the second quarter of 2023 of 25 basis points to 0.50%. The cash rate is then projected to rise to 0.75% in the final quarter of 2023.

All 34 economists expected the cash rate to stay at 0.10% at the Dec. 7 meeting.

Market reaction

Despite the upbeat Reuters poll on RBA rate hike calls, the AUD/USD refreshes intraday low to 0.7085 as markets brace for the Fed rate hike and awaits Friday’s US jobs report.

Read: AUD/USD bears look to 0.7000 on firmer yields ahead of US NFP

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