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GBP/CHF rebounds, eyes 1.115 resistance

    By
    ActionForex.com
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    GBP/CHF stands as one of the focuses this week, particularly in light of the upcoming monetary policy decisions by both BoE and SNB. Market consensus widely anticipates that both central banks will maintain their current interest rates.

    GBP/CHF’s rebound from 1.0978 extends higher today. The development suggests that fall from 1.1153 has completed at 1.0978 already. More importantly, corrective pattern from 1.1150 might has completed with three waves down to 1.0978 too.

    Further rise is now in favor as long as 1.1022 minor support hold. Decisive break of 1.1153 resistance will confirm resumption of whole rise from 1.0779. GBP/CHF should then target 61.8% projection of 1.0779 to 1.1150 from 1.0978 at 1.1199, or even further to 100% projection at 1.1341.

    Q3 Next Year Marked for SNB’s First Rate Cut, Economists Predict

      By
      ActionForex.com
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      SNB is widely anticipated to maintain its key policy rate at 1.75%. However, the focus of market analysts and economists has shifted to speculating the timing of potential policy loosening. Recent polls conducted by Reuters and Bloomberg revealed a consensus among economists that SNB would only start cutting interest rates in Q3 next year.

      The Reuters poll, conducted between December 5-11, gathered responses from 31 economists, all of whom unanimously agreed that SNB would hold the rate at 1.75% in the upcoming meeting. A substantial majority, approximately 70% (or 21 out of 31), predicted that SNB would maintain this rate until at least the third quarter of next year. Furthermore, a notable minority of 45% (or 13 out of 29) economists foresee the first rate cut by being pushed back to December 2024 or even later.

      In comparison, a separate Reuters poll last week focusing on ECB revealed that around 57% of economists expect the ECB to implement at least one rate cut by the end of June. This comparison highlights expectations that SNB could starting cutting rates after ECB.

      Additionally, a Bloomberg poll conducted from December 1-7 forecasts SNB initiate an interest rate cut in September next year. This would be followed by two more reductions of 25 bps each, anticipated in December 2024 and March 2025.

      USD/CHN sets sight on 7.2 as rebound from fibonacci support extends

        By
        ActionForex.com
        -

        Chinese Yuan weakens notably in Asian session today, setting its sights on crossing the 7.2 mark against Dollar. This movement is largely attributed to deepening deflation in consumer and factory prices in China, exerting downward pressure on the Yuan. Concurrently, Dollar is still riding the tailwind generated by last week’s robust job data.

        A key question for Yuan is whether its extended decline, which began in January this year, concluded in September. And, if Yuan is now in a medium-term up trend that’s set to extend through 2024.

        Some economists remain cautious about the currency’s prospects, pointing to the prolonged downturn in China’s housing market and consumer spending as significant drags on its value. Further impacting Yuan is the ongoing “de-risking” efforts by multinational corporations. These firms are increasingly adopting a “China+” strategy, diversifying their operations by adding plants and facilities in other countries, thereby diverting investments away from China. Moreover, these companies are likely to continue repatriating earnings, driven by China’s relatively low interest rates, which could further depress Yuan.

        From a technical perspective, it remains to be confirm is USD/CNH’s fall from 7.3679 is a correction to the up trend from 6.6971, or reversing it.

        The notable rebound from 7.1154 cluster support (38.2% retracement of 6.6971 to 7.3679 at 7.1117) is favoring the former case. Even so, sustained break of 55 D EMA (now at 7.2311) is needed to confirm completion of the pull back, and bring retest of 7.3679/3745 resistance zone.

        On the other hand, sustained break of 7.1117/54 will favor the latter case of bearish trend reversal, and target 61.8% retracement at 6.9533 and below.

        USD/CNH’s trajectory is not only crucial in understanding the Yuan’s movements but also serves as a valuable guide for USD/JPY. Additionally, it acts as a secondary indicator for the strength or weakness of AUD/USD.

        Bitcoin and Ether undergo sudden pullback as consolidation phase commences

          By
          ActionForex.com
          -

          The cryptocurrency markets saw a sharp downturn in today’s Asian session. The decline doesn’t seem to be triggered by any specific event and might be amplified by the typically low liquidity on Mondays in the Asian markets. Another contributing factor could be profit-taking by traders following a recent strong bull run, especially with the impending FOMC rate decision looming on Wednesday.

          Technically speaking a short term top should be in place at 44727 in Bitcoin. Consolidations should follow in the near term, and deeper pull back cannot be ruled out. But downside should be contained by 36710 cluster support (38.2% retracement of 24896 to 44727 at 37151) to bring rebound. Larger uptrend from 15452 is expected to resume at a later stage.

          As for Ethereum, a short term top is in place at 2402, and more consolidative trading would be seen in the near term. There is risk of deeper pull back from outlook will stay cautiously bullish as long as 1984.4 support holds, which is close to 55 D EMA (now at 2017).

          However, the larger outlook of Ethereum is less bullish, as it’s just capped by 38.2% retracement of 4863.7 to 878.5 at 2400. Break of above mentioned 1984.4 support will indicate rejection by 2400 fibonacci level, and keeps medium term outlook neutral at best.

          China’s CPI fell to -0.5% yoy in Nov, deepening deflation

            By
            ActionForex.com
            -

            Released over the weekend, China’s economic data revealed a concerning trend as CPI plunged further into negative territory in November, marking the country’s deepest deflationary period in three years. CPI fell to -0.5% yoy, a notable decline from -0.2% yoy in the previous month and falling short of the expected -0.2% yoy. This deflationary reading is the most significant since November 2020, indicating mounting economic pressures. Core CPI, which excludes volatile items such as food and fuel, remained stable at 0.6% yoy, mirroring October’s figures.

            National Bureau of Statistics chief statistician, Dong Lijuan, highlighted that the overall decline was driven primarily by decrease in energy and food prices. In particular, food prices dropped by -4.2% yoy, significantly impacted by a sharp -31.8% yoy decrease in pork prices. Meanwhile, non-food prices saw a modest increase of 0.4% yoy, with services prices climbing by 1.0% yoy.

            On a month-on-month basis, CPI also experienced a downturn, falling by -0.5% mom in November from the previous month. This decline was characterized by a -0.9% drop in food prices and a -0.4% decrease in non-food prices.

            From January to November, the average CPI increase was a mere 0.3% yoy, starkly undershooting China’s set annual inflation target of around 3%.

            Furthermore, PPI also recorded a downturn, declining by -3.0% yoy, which is worse than the prior month’s -2.6% yoy and below the anticipated -2.8% yoy. This marks the 14th consecutive month of negative PPI readings, the worst since August.

             

            US NFP grows 199k, unemployment rate down to 3.7%

              By
              ActionForex.com
              -

              US Non-Farm Payroll employment grew 199k in November, slightly above expectation of 190k. That was below the average monthly gain of 240k over the prior 12 months.

              Unemployment rate fell from 3.9% to 3.7%, below expectation of 3.9%. Participation rate rose 0.1% to 62.8%.

              Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings rose 4.0% yoy. Average workweek for all employments edged up by 0.1 hour to 34.4 hours.

              Full US non-farm payroll release here.

              BoE survey reveals lower public inflation expectation

                By
                ActionForex.com
                -

                The latest Bank of England/Ipsos quarterly Inflation Attitudes Survey show inflation expectations decreased in the near term. There’s also a shift in public sentiment towards a more balanced view of the economic situation in the UK, with decreasing number of people expecting further interest rate hikes and an increasing number advocating for stability or reduction in rates.

                Median expectation for inflation over the coming year has decreased to 3.3%, down from 3.6% in August 2023. This decline suggests a growing optimism among respondents about the easing of inflationary pressures in the near term. However, when considering the twelve months following that period, expectations remain unchanged at 2.8%, indicating that respondents anticipate a stabilization of inflation rates in the longer term.

                Regarding the future path of interest rates, there has been a notable shift in public opinion. Only 44% of respondents now expect rates to rise over the next 12 months, a significant decrease from the 63% who held this view in August. Conversely, 29% expect rates to stay about the same, up from 19%.

                When asked about what would be “best for the economy”, only 11% of respondents suggested that rates should “go up”, down from 13%. Meanwhile, the proportion of respondents who believe that interest rates should “go down” remains steady at 40%, and those who think rates should “stay where they are” have increased to 29% from 26%.

                Full BoE survey results here.

                US NFP in spotlight: A crucial test for soft-landing hypothesis

                  By
                  ActionForex.com
                  -

                  Today’s primary focus in the financial markets is US Non-Farm Payrolls report, which is keenly anticipated by investors assessing the “soft landing” scenario in the economy. The soft landing hypothesis implies that labor market is cooling sufficiently to reduce inflation and pave the way for Fed to start lowering interest rates next year, without posing a significant threat to the overall economy.

                  Non-Farm Payrolls report is expected to indicate that job growth reaccelerated to 190k in November, up from October’s 150k. Unemployment rate is projected to remain steady at 3.9%, and average hourly earnings are anticipated to show 0.3% mom increase.

                  Recent labor market data has shown signs of cooling. ISM Manufacturing Employment index dropped from 46.8 to 45.8, while ISM Services Employment index saw a slight improvement from 50.2 to 50.7. ADP Employment growth recorded 103k, nearly unchanged from the previous month’s 106k. The four-week moving average of initial jobless claims rose from 213k to 221k. Additionally, the latest JOLTs reported a drop in the ratio of job openings to number of unemployed workers to 1.34, the lowest since August 2021.

                  A “goldilocks” Non-Farm Payrolls report, signifying a balanced labor market condition, could reignite bull runs in the stock markets and subsequently exert renewed selling pressure on the Dollar. However, market reactions to deviations from this ideal scenario are difficult to predict.

                  Regarding the Dollar index, recovery from 102.46 was interrupted after reaching 104.23, largely due to the steep selloff in USD/JPY. For now, further rise is mildly in favor as long as 103.06 minor support holds, towards 55 D EMA (now at 103.54).

                  But the index could start to struggle above there, unless EUR/USD could extended its near term decline through 55 D EMA decisively, while USD/JPY could stabilize at 142.45 fibonacci support.

                  Japan’s nominal pay rises 1.5% yoy, but fail to keep pace with inflation, consumer spending drops

                    By
                    ActionForex.com
                    -

                    Japan’s nominal pay growth rose by 1.5% yoy, surpassing the expected 1.0% yoy increase. This marked the fastest rate of increase since June. Regular or base salaries contributed to this increase with a 1.4% yoy rise. However, overtime pay slightly decreased by -0.1% yoy. Special payments, a variable component of wages, saw a significant jump of 7.5% yoy.

                    However, the positive trend in nominal pay was offset by the continued decline in inflation-adjusted real wages, which fell for the 19th consecutive month, dropping by -2.3% yoy. A labor ministry official commented, “Price increases have outpaced wage growth.” This situation is exacerbated by the consumer inflation rate, which includes fresh food prices but excludes owner’s equivalent rent, re-accelerating to 3.9% after a brief two-month slowdown.

                    Alongside wage trends, household spending in Japan also experienced a downturn, decreasing by -2.5% yoy in October. This decline, while still significant, was less severe than the anticipated 3.0% yoy drop. The continued decrease in household spending, which has now extended to eight consecutive months, reflects ongoing challenges in the domestic consumption sector.

                    BoC’s Gravelle elaborates on holding interest rates steady amid balanced economy

                      By
                      ActionForex.com
                      -

                      In a speech overnight, BoC Deputy Governor Toni Gravelle said the decision to maintain policy interest rate at 5% this week was an effort to “balance the risks of over- and under-tightening.” BoC aims to avoid excessively slowing down the economy, while also alleviating the burden of high inflation on Canadians.

                      Gravelle observed that the Canadian economy “no longer looks to be in excess demand”, a shift that has contributed to reducing price pressures across a wide array of goods and services. He added said, “The economy is now roughly in balance.

                      He also emphasized that BoC is closely monitoring several key economic indicators, such as inflation expectations, wage growth, and corporate pricing behavior. These factors are crucial in determining whether inflation is on a consistent path towards the 2% target.

                      Despite the current state of balance in the economy, Gravelle stated, “Given the risks to the inflation outlook, we remain prepared to increase the policy rate further if needed.”

                      Full speech of BoC’s Gravelle here.

                      US initial jobless claims rose to 220k, vs exp 226k

                        By
                        ActionForex.com
                        -

                        US initial jobless claims rose 1k to 220k in the week ending December 2, below expectation of 226k. Four-week moving average of initial claims rose 500 to 220.75k.

                        Continuing claims fell -64k to 1861k in the week ending November 25. Four-week moving average of continuing claims rose 7kk to 1872k, highest since December 11 2021.

                        Full US jobless claims release here.

                        Eurozone GDP growth finalized at 0.1% qoq in Q3

                          By
                          ActionForex.com
                          -

                          Eurozone GDP growth in Q3 was finalized at 0.1% qoq. Household final consumption expenditure increased by 0.3%. Government final consumption expenditure increased by 0.3% Gross fixed capital formation remained stable. Exports decreased by -1.1%. Imports decreased by -1.2%.

                          EU GDP was flat qoq. Malta (+2.4%) recorded the highest increase of GDP compared to the previous quarter, followed by Poland (+1.5%) and Cyprus (+1.1%). The highest decreases were observed in Ireland (-1.9%), Estonia (-1.3%) and Finland (-0.9%).

                          Full Eurozone and EU GDP release here.

                          China’s exports return to growth in Nov, but imports slump

                            By
                            ActionForex.com
                            -

                            China’s export figures for November 2023 showed an unexpected rise, growing by 0.5% yoy to USD 291.9B, surpassing the anticipated -0.8% yoy decline. This increase marks the first growth in exports China has seen in seven months.

                            Notably, exports to US rose by 7% yoy. However, exports to EU and ASEAN experienced declines, falling by -14.5% yoy and -7.0% yoy, respectively.

                            Conversely, imports decreased by -0.6% yoy to USD 223.5B, significantly underperforming against the expected rise of 3.0% yoy. This decline in imports contributed to widening of trade surplus, which expanded from USD 56.5B to USD 68.4B, exceeding the forecasted USD 58.1B surplus.

                            Looking at the broader January to November period, China’s exports contracted by -5.2% yoy, while imports declined by -6.0% yoy. The cumulative trade balance for this period stood at a surplus of USD 748.13B.

                            WTI oil breaks 70, focus shits to 63/67 support zone

                              By
                              ActionForex.com
                              -

                              WTI crude oil fell sharply overnight, breaking 70 psychological level for the first time since June. Further decline is expected in the short-term from technical perspective. But 63/67 support zone is expected to provide a floor to contain this downtrend.

                              This selloff is driven by several key factors. The primary concern is demand destruction in the fuel market, underscored by EIA reporting a larger-than-expected increase in US gasoline inventories. Additionally, persistent worries about China’s economic health are adding to the bearish sentiment in the oil market. This concern is exacerbated by Moody’s downgrade of China’s A1 rating outlook from stable to negative. Market skepticism regarding the effectiveness of OPEC+’s production cuts also plays a role.

                              Technically, WTI’s strong break of 72.65 support confirms resumption of the fall from 95.50. Further decline is expected as long as 74.23 resistance holds. Break of 61.8% projection of 91.07 to 72.65 from 79.77 at 68.38 is envisaged.

                              Strong support is expected from 63.67/66.94 zone to contain downside to complete the five wave sequence from 95.50, and bring sustainable rebound. Even if 63.67 is breached, 100% projection at 61.35 should provide the floor, preventing further substantial drops in oil price.

                              BoJ’s Ueda sees multiple options for target interest rates post-negative rate era

                                By
                                ActionForex.com
                                -

                                BoJ Governor Kazuo Ueda noted there are various options for its interest rate targets once it transitions away from negative short-term borrowing costs. However, he emphasized that no decision has been made yet regarding this shift. Ueda reiterated BoJ’s commitment to continuing its monetary easing under Yield Curve Control to support economic activity and foster a cycle of wage growth.

                                Speaking to the parliament, Governor Ueda noted the economy is to continue recovering moderately. But there is “extremely high” uncertainty surrounding the outlook. He emphasized, “We have not yet reached a situation in which we can achieve [our] price target sustainably and stably and with sufficient certainty.”

                                Regarding shifts in BoJ’s monetary policy, Ueda outlined that once the central bank moves away from its negative interest rate policy, it could consider various options for its interest rate targets. These include continuing to target the interest rate applied to reserves that financial institutions hold with the central bank or reverting to a policy that focuses on the overnight call rate. He clarified, “We have not made a decision yet on which interest rate to target once we end our negative interest rate policy.”

                                 

                                ECB’s Villeroy foresees 2024 rate cut possibility, dismisses immediate action

                                  By
                                  ActionForex.com
                                  -

                                  ECB Governing Council member Francois Villeroy de Galhau indicated that the central bank will not pursue further interest rate hikes. In an interview with the French newspaper La Depeche du Midi, Villeroy stated, “Our decisions to increase interest rates are fully playing their role as a remedy against the disease that is inflation.”

                                  He added, “This is why, barring any shock, there will be no further increase in our rates — the question of a reduction may arise in 2024, but not now.”

                                  Villeroy expressed confidence in the progress made in the fight against inflation, noting that “we are well on our way… even if we are not yet finished.” He urged patience with the duration of these measures, reiterating the ECB’s commitment to bringing inflation back toward 2% by 2025 at the latest.

                                  Furthermore, he pointed out that disinflation is occurring faster than anticipated due to two main factors: slowdown in energy prices, unaffected by conflicts in the Middle East, and deceleration of other prices, including services and manufactured products, as a result of ECB’s monetary policy.

                                  BoC stands pat as economic slowdown eases inflationary pressures

                                    By
                                    ActionForex.com
                                    -

                                    BoC keeps overnight rate target unchanged at 5.00%, aligning with market expectations. In its policy statement, the central bank emphasized its ongoing concern about inflationary risks, stating it “remains prepared to raise the policy rate further if needed.”

                                    Nevertheless, BoC also noted recent data suggesting that the Canadian economy is “no longer in excess demand”. This shift is seen as contributing to a reduction in inflationary pressures across a broad range of goods and services prices. This observation suggests a subtle yet significant change in the economic environment, potentially signaling a pivot in the central bank’s future policy decisions.

                                    Full BoC statement here.

                                    USD/CAD is steady after the policy announcement. The focus for the rest of the week will be on whether rebound from 1.3479 could extend through 1.3625 resistance decisively to confirm that whole correction from 1.3897 has completed.

                                    US ADP jobs grows 103k, pay rise slows further

                                      By
                                      ActionForex.com
                                      -

                                      US ADP private sector employment grew 103k in November, below expectation of 120k. By sector, goods-producing jobs fell -14k while service-providing jobs rose 117k. By establishment size, small companies added 6k jobs, medium companies added 68k, large companies added 33k.

                                      Job-stays saw a 5.6% yoy pay increase, down from 5.7% yoy, and the slowest since September 2021. Job-changes saw a 8.3% yoy pay rise, down from 8.4% yoy, slowest since June 2021.

                                      “Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said Nela Richardson, chief economist, ADP. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”

                                      Full US ADP release here.

                                      BoE’s Bailey: Rates to stay high for an extended period

                                        By
                                        ActionForex.com
                                        -

                                        BoE Governor Andrew Bailey, in a press conference today, stated that “rates are likely to need to remain at these levels for an extended period to bring inflation back to target on a sustained basis,” referring to the current bank rate at 5.25%.

                                        He also noted that the full impact of the higher interest rates is yet to be fully realized, and highlighted the central bank’s vigilance towards potential financial stability risks that might emerge as a result.

                                        Separately, BoE’s half-yearly Financial Stability Report noted, “The overall risk environment remains challenging, reflecting subdued economic activity, further risks to the outlook for global growth and inflation, and increased geopolitical tensions.”

                                        The report also drew attention to the strains on household finances due to rising living costs and higher interest rates. It pointed out that some effects of these higher rates, particularly in terms of mortgage repayments, have yet to fully manifest.

                                         

                                        Eurozone retail sales rises 0.1% mom in Oct, EU up 0.3% mom

                                          By
                                          ActionForex.com
                                          -

                                          Eurozone retail sales volume rose 0.1% mom in October, below expectation of 0.2% mom. Volume of retail trade increased by 0.8% mom for non-food products, while it decreased by -0.8% mom for automotive fuels and by -1.1% mom for food, drinks and tobacco.

                                          EU retail sales rose 0.3% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Croatia (+3.1%), the Netherlands (+2.4%) and Slovakia (+1.9%). The largest decreases were observed in France (-1.0%), Belgium and Austria (both -0.8%), Spain and Portugal (both -0.4%).

                                          Full Eurozone retail sales release here.

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