Investment Bank Outlook 30-11-2021

CIBCKey Headlines In a joint congressional hearing with Yellen, Fed Powell will say that the rising Covid-19 cases and omicron variant threaten to imperil the economic recovery and exacerbate inflation pressures. China’s official PMIs unexpectedly rebounded to expansion in November, ending a two-month contraction. But sub-indexes measuring domestic and external demand remained in contractionary territory this month. It is month-end and rebalancing of portfolios tops agenda. Hearsay shift out of equities into bonds.FX Flows There wasn’t much of Tokyo fixing activity, speculators bought €Yen ahead of open but ran into difficulty near 128.50. Apparently, EUR$ offers were iceberg around 1.1300. $Yen got up to 113.90 and then reversed back. Slightly firmer UST yields should tempt buyers on dips. There is one decent option strike maturing today New York cut, at 113.80 we have $1.6bn, others are way off the radar. With €Yen buying earlier, EUR$ rose to 1.13005, offers were hidden or iceberg. With talk of month-end rebalancing, think we might just squeeze through. First level of resistance is 1.1330, then 1.1370. Downside support at 1.1260, there is a €1.03bn 1.1255 strike due today. I suspect that market positioning is well balanced, leveraged accounts are small short while IMM are long, they have reduced over the past weeks but still substantial. Late morning squeeze soaked up offers and rose to 1.1305.Credit AgricoleUSDJPY & OmicronThe emergence of the omicron coronavirus variant led to a clearing out of long USD/JPY positions. According to our FAST FX model, USD/JPY has become undervalued relative to its short-term fundamentals. n Omicron has so far shown to cause minor symptoms. While there was a rapid spread of the variant throughout South Africa, less than a quarter of the country’s population is fully vaccinated. Pharmaceutical companies have the ability to refit their vaccines and provide new vaccines to counter the omicron variant, if needed, by the New Year. n We continue to expect 2022 to represent the return to something more ‘normal’ in the global economy as more countries adopt living with Covid strategies.This environment would be negative for the JPY, especially as Japan stands to gain the least out of the G10 economies given that its services sector makes up the smallest part of its economy relative to its manufacturing sector. n USD/JPY represents a good hedge against inflation being more than transitory in 2022 given its positive correlation with oil prices, and we believe the Fed will be one of the first major central banks to respond if inflation pressures turn out to be less transitory than expected.

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Dollar Weakens; Yen, Swiss Franc Favored as Omicron Fears Rise

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Daily Market Outlook, November 30, 2021

Daily Market Outlook, November 30, 2021 Overnight Headlines Moderna Chief Predicts Existing Vaccines Will Struggle With Omicron Variant US President Biden Warns Against Omicron Panic, Pledges No New Lockdowns US Congress Aims For Quick Passage Of Bill Averting Government Shutdown Senator Manchin Holds Off On Committing To Moving Biden Agenda This Year Fed Chair Powell To Tell Senate Omicron Poses Downside Risk To Economy Yellen Warns Failure To Deal With Debt Limit Would 'Eviscerate' US Recovery French PM To Offer Boris Johnson EU Migration Deal After Channel Deaths Half Of UK Companies Plan To Raise Prices To Offset Higher Wages: LLoyds EU, Russia And Iran Upbeat As Nuclear Talks Resume Amid Scepticism Chinese Manufacturing Rebounds In November With Signs Inflation Easing Japanese Output Rises For First Time In 4 Months As Supply Constraints EaseThe Day Ahead Asian equity markets are down this morning as investors remain uncertain about the risks posed by the Omicron variant. In England, the government has announced an acceleration of its booster vaccine programme. Meanwhile in the US, President Biden said that no new restrictions were necessary at present. The November Lloyds Business Barometer, which was released overnight, edged lower for the second month in a row. However, the decline was a modest 3 points, leaving the headline reading still well above levels earlier this year and its long-run average. The survey showed that hiring intentions remained strong although they have eased a touch since the end of the furlough scheme. Meanwhile, wage pressures continued to build and the percentage of firms expecting to raise prices rose to a record high. BoE policymaker Mann is set to speak this afternoon. She voted with the majority to leave interest rates unchanged in November but also for an early end to the QE programme. Mann has indicated that she favours a modest rise in interest rates in the coming months, but it was unclear even before the recent news on the virus whether she would support a December hike. Markets will focus on any comments on the potential impact of the new variant on the outlook for monetary policy. US Federal Reserve Chair Powell will testify to Congress alongside Treasury Secretary Yellen later today. Powell is bound to be quizzed about the sharp rise in US inflation. Of most interest will be whether he offers any signals about the future policy response. Prior to last week’s news, markets were increasingly speculating that the Fed would accelerate the tapering of its asset purchase programme at its December meeting to open up an earlier than expected hike in interest rates. However, Powell’s pre-released opening comments yesterday pointed to the downside risks to economic growth and employment, which suggests that any further action may now be delayed. In the Eurozone, November CPI inflation is forecast to have risen further above the ECB’s target and to a record high. Yesterday’s rise in German inflation points to a risk that the rise may be larger than expected. However, it will have little impact on interest rate expectations as ECB policymakers continue to signal that they see the increase as temporary and that monetary policy will not be tightened in response.CFTC DataFor the first week in seven, investors added to the aggregate USD long position with a large USD3.8bn increase over the Nov 17-23 week. The total bullish position on the greenback now sits at USD22.3bn, less than 5% off its early-October high of USD23.2bn. Over the week, the USD gained ground against all major currencies, with the MXN seeing the steepest decline at 2.2% while the JPY, CHF, and GBP outperformed with more modest losses of 0.3/4%.Negative EUR sentiment worsened significantly this week as accounts added USD1.8bn to the shared currency’s short of now USD2.3bn. The EUR looked on track to test the 1.12 level in the days following the data cutoff (it has since traded briefly under the mark) amid ultra-dovish policy settings at the ECB and the risk of lockdowns in the currency zone due to surging contagions. The current EUR short is, however, still about USD1bn smaller than in early-October and interest in shorting the EUR may now be limited after already seeing a 10c drop since May.Speculative adjustments in the high-beta/commodity currencies (CAD, MXN, AUD, NZD) accounted for a net USD1.1bn combined bet in favour of the dollar. The shift in CAD sentiment accounted for the bulk of this move, however, as positioning deteriorated from net long to net short at USD247mn on a USD941mn move against it over the period with USDCAD testing 1.27. The MXN short rose only slightly by USD17mn to USD1.2bn.The sizeable AUD short rose for the first time since early-October ahead of its decline under 0.72 last week. Investors placed a net USD107mn wager against the Aussie last week, taking the overall AUD short to USD4.6bn about USD2bn short of its peak last month. As for the NZD long, bullish optimism is showing limited signs of waning despite the kiwi dropping under the 0.70 level in mid-month and today trading at a new low since last November. The NZD long position (still the largest in this report) was left practically unchanged close to USD1bn in data to Tuesday afternoon, i.e. just before the RBNZ’s cautious hike that evening.The haven/yield-sensitive currencies, the JPY and CHF, saw an increase in their respective aggregate shorts after two consecutive weeks of reductions; market turmoil in recent days has possibly resulted in adjustments in their favour, however. Bearish positioning in the JPY rose to USD10.6bn on the back of a USD420mn negative bet after the previous week’s USD1.5bn bullish adjustment. As for the CHF, speculators increased their negative bets by USD330mn to USD1.5bn.Finally, the GBP’s short rose for a fourth consecutive week, by USD239mn to USD2.9bn its highest level since summer 2020, as investors continue to adjust to BoE hike uncertainty that has taken the pound to its weakest level for the year in recent trading.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )EUR/USD: 1.1250-55 (1.3BLN), 1.1300 (553M), 1.1350 (549M)1.1445-50 (1.5BLN). GBP/USD: 1.3485-1.3500 (427M)AUD/USD: 0.7075 (230M), 0.7150 (249M)AUD/NZD: 1.0470 (1BLN). NB: 1.2BLN will expire at 1.05 on WednesdayUSD/JPY: 113.80 (1.6BLN), 114.00 (615M), 114.50 (718M), 114.75 (471M)115.00 (2.8BLN)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above Edges higher in quiet Asia as asset markets remain steady EUR/USD opened 0.22% lower at 1.2290 after recovering from 1.1258 It moved up to 1.1305 early Asia on EUR/JPY demand at Tokyo fix Heading into the afternoon it is settling around 1.1300 Support at 10-day MA at 1.1279 and another close above would suggest bottom forming 5-day MA pointing up and about to cross 10-day MA also suggesting bottoming Resistance is at the 38.2 of 1.1692/1.1186 at 1.1379 & 21-day MA at 1.1397GBPUSD Bias: Bearish below 1.36 Bullish above. GBP steady – buoyant in Asia, awaiting fresh catalysts GBP steady to buoyant in Asia, awaiting fresh catalysts Cable 1.3310-29, holding above 1.3288 low yesterday, 1.3278 low Friday Holding for now in area of 1.3319-52 hourly Ichi cloud, 1.3322 55-HMA Seen heavy above 1.3331 descending 100-HMA, recent moves above rejected GBP/JPY 151.07-62, above 150.65-67 double bottom yesterday, Friday Also mostly below 151.51 descending 55-HMA, 151.55 hourly Ichi cloud base BoE key going forward, seen more hawkish but weak economy may weighUSDJPY Bias: Bullish above 112.50 Bearish below USD/JPY swoons with US yields, Nikkei on Moderna news News Moderna vaccine not as effective against Omicron Risk suddenly off in late Tokyo trading, USD/JPY, Nikkei, US yields off Nikkei currently -0.9% @28,033, yield on US Treasury 10s @1.466% USD/JPY as low as 113.03 before bouncing a bit, high earlier 113.90 Looks like Omicron news to continue to impact thin month-end marketsAUDUSD Bias: Bearish below 0.75 Bullish above AUD/USD dives as Moderna sounds pessimistic on Omicron AUD/USD takes a dive, reversing modest gains, last 0.7112 Close to breaking Aug base 0.7107; would be lowest in a year Ceiling of Bollinger downtrend channel moves lower to 0.7182 Moderna chief predicts Omicron resistant to vaccines Sparks risk-off reaction in some FX, S&P futures -0.6% Uncertainty around new variant still causing volatility

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Aussie and kiwi slide, yen up on Moderna CEO's Omicron warning

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Speculators' net long U.S. dollar bets hit highest since mid-October - CFTC, Reuters data

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Market Update – November 30– Stocks up down up

Omicron remains in focus and warnings that it will leave current vaccines far less effective and that it will take time to modify and produce new ones has seen markets adjusting growth forecasts and central bank projections.

• USD (USDIndex 96.00 up from 95.92 low),  fresh wave of risk aversion Treasuries sold off, but cautiously with only a modest back up in yields, &  Stocks bounced significantly with the USA100 jumping over 2% intraday with IT a big winner. It closed with a 1.88% gain, with the USA500 1.3% firmer, and the USA30 up 0.68%.
• Wall Street stocks closed higher as investors were hopeful that the Omicron coronavirus variant would not lead to lockdowns after reassurance from US President Joe Biden.
• Moderna’s CEO told the FT that existing vaccines will be less effective and that it may take months before modified vaccines are available at scale. #Moderna +12.73% yesterday.
• US Yields 10- and 30-year rates were up just over 3 bps to 1.51% and 1.859%, respectively, with the 2-yar 1bps higher at 0.508%. 10-year currently corrected -3.9 bp to 1.46% , but it is still in negative territory, at -1.05% on Tuesday, keeping gold’s opportunity cost low.
• Equities – Topix and Nikkei are down -1.0% and -1.6% respectively,  Hang Seng lost -2.3%, the CSI 300 -0.6%, while the ASX outperformed with a modest gain of 0.2%.
• USOil – down by 2%, drifted to $66.73 – after FT cast doubt on the efficacy of COVID-19 vaccines against the Omicron – expectations are growing that OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) of supply in January.
• Gold spiked to $1795 –  World Health Organization said on Monday carried a very high risk of infection surges.
• #TWTR was UP 12% pre-market on news Dorsey was leaving as CEO – it closed DOWN 2.74%. The USA100 rose+1.88%.
• FX markets – Yen rallied (a new flight to safety),Aussie and kiwi slide. USDJPY at 112.94, EURUSD now 1.1326 & Cable steadied to 1.3300-1.3330. 

European Open – The December 10-year Bund future is up 46 ticks, Treasury futures are outperforming and in cash markets the US 10-year rate has corrected -3.9 bp to 1.46% amid a fresh wave of risk aversion.  DAX and FTSE 100 futures are down -1.5% and -1.1% respectively, while a -1.1% drop in the Dow Jones is leading U.S. futures lower. In FX markets both EUR and GBP gained against the dollar. EGB yields had moved higher against the background of improving risk appetite and a jump in German inflation yesterday, but while Eurozone HICP today is likely to exceed forecasts, central bankers have already been out in force to play down the importance of the number for the central bank outlook and rate expectations. Virus developments will also help to take the sting out of the number.

Today – German labour market data, EU Inflation, Canadian GDP and US Consumer confidence are due today. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen are due to testify before the US Senate Banking Committee at 15:00 GMT.

Biggest FX Mover @ (07:30 GMT) AUDJPY (-0.68%) Risk-sensitive currencies slid and safe havens gained. AUDJPY dropped to 80 lows (S2). Currently MAs point rightwards,  MACD signal line & histogram below 0, RSI rising above 30 but Stochastic OS. Hence mix picture intraday.

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Andria Pichidi 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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USDJPY – struggling to correct after a heavy fall on Friday

USDJPY, H1

Panic from the emergence of the Omicron variant resulted in the safe haven currency pair falling sharply on Friday from a high above 115.50 to a low of 113.00 and it is now trading back to this key 113.00 level after panic eased but uncertainty remains. The Omicron variant may not be as dangerous as initially thought, however, it is very early in its development. As a result, US stock markets recovered, with the S&P 500 +1.32%, Nasdaq +1.88% and Dow +0.68%, as well as the Nikkei 225 up +0.76% this morning at 28,498 points.

In terms of economic data, Japan’s October jobless rate fell to its lowest point since March of this year at 2.7%, lower than the 2.8% forecast, while October industrial production rose for the first time in four months at 1.1%, benefiting from the reopening of factories reducing supply constraints. However, this increase is still below market expectations of 1.8%.

While it is unclear how virulent the Omicron variant is, yesterday the Japanese government announced another lockdown after having just announced the opening of the country earlier this month, as opposed to the US where President Biden has announced that there are currently no plans to implement lockdown, meaning there will be no new restrictions on travel to and from the US.

US data to keep an eye on today is the Chicago PMI Index, Consumer Confidence Index, Fed Chairman Powell’s Testimony and Treasury Secretary Yellen’s Speech before the Senate Banking Committee on the CARES Act, as well as speeches by FOMC Williams and Clarida.

From a technical point of view, the USDJPY is currently undergoing a correction during the downtrend. The price has been rallying in a narrower frame with a rising wedge pattern trend, meaning the pair is likely to go further down if it breaks the lower band and target the downtrend at the original low of 113.00. Conversely, if the US data is good, the pair could move up to test the week high of 114.00.

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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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USDJPY, H4 | Potential for Pullback

Type: Bullish BreakoutKey Levels:Resistance: 114.196Pivot: 113.673Support: 113.02Preferred Case:Prices are on bearish momentum. We see potential for a dip from our Pivot at 113.673 in line with 23.6% Fibonacci retracement towards our 1st support at 113.02 which is a graphical swing low and close to our area of Fibonacci confluences.Alternative Scenario:Alternatively, prices may climb towards our 1st resistance at 114.196 in line with 61.8% Fibonacci extension.

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Dollar Down, Near One Week Low, as Omicron Fears Ease

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BTCUSD, H4 | Bearish Continuation

Type: Bearish ReversalKey Levels:Resistance: 59494.65Pivot: :57669.37Support: 53630.53Preferred Case:Price is reacting in between the descending channel, signifying overall bearish momentum. We can expect price to drop from pivot level in line with 78.6% Fibonacci retracement and 127.2% Fibonacci projection towards 1st Support in line with 78.6% Fibonacci projection and overall graphical support.Alternative Scenario:Alternatively, price could push upwards to the 1st Resistance in line with 161.8% Fibonacci projection.

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AUDNZD, H4 | Bearish Continuation

Type: Bearish ReversalKey Levels:Resistance: 1.05014Pivot: 1.04836Support: 1.04309Preferred Case:Price is abiding to the descending trendline resistance, signifying bearish momentum. We can expect price to drop from pivot level in line with 78.6% Fibonacci projection and 61.8% Fibonacci retracement towards 1st Support in line with 38.2% Fibonacci retracement and 78.6% Fibonacci projection.Alternative Scenario:Alternatively, price might push up to 1st Resistance in line with 100% Fibonacci projection.

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XAUUSD, H4 | Bullish momentum!

Type: Bullish BounceKey Levels:Resistance: 1811.937Pivot: 1782.659Support: 1771.62Preferred Case:Prices is on bullish momentum and abiding to our ascending trendline. We see potential for a bounce from our Pivot at 1782.659 which is an area of Fibonacci confluences towards our 1st resistance at 1811.937 in line with 38.2% Fibonacci retracement.Alternative Scenario:Alternatively, prices may dip towards our 1st support at 1771.62 in line with 100% and 127.2% Fibonacci extension.

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Oil markets recover but volatility is never far away

USOil, H1

Oil prices have backed up from Friday’s lows and the front end WTI future saw a high of $72.16 per barrel this morning, as markets mull OPEC action. Russia’s Deputy Prime Minister Novak said a meeting of the OPEC+ joint ministerial monitoring committee “was postponed to get more information about the current events, including the new virus strain”. After speculation of a reaction to the release of strategic oil reserves, the comments added to talk that OPEC+ may postpone the planned increase in output as Novak confirmed that the alliance will discuss “the need for measures.

OPEC’s Joint Technical Committee and the Joint Ministerial Monitoring Committee (JTC and JMMC respectively) will now meet on Wednesday and Thursday (1 and 2 December).  The two committees responsibilities cover different but related areas of the market and need to be completed. The JTC’s role is to make an assessment of energy markets, the supply and demand balance, for OPEC ministers to consider when making cartel policy, whereas the JMMC tracks the compliance of OPEC+ members with their production quotas.

The USOil spot price is currently trading back at $72.24 per barrel and the Futures price at $72.40. Technically, the sell-off from Friday has now recouped the 21-hour moving average $71.50 and is testing the 50.0 Fibonacci level of the daily move at $72.20. Next resistance sits at the 61.8 Fibonacci level at $73.50, which also coincides with the 38.2 Fibonacci level of the larger decline from October highs. Above here sits the key psychological $75.00 level. Immediate support today sits at $71.00, $70.00 and then $69.45, with the Friday level of $67.00 to be watched if the OPEC meetings diverge from expectations later in the week and if more negative Omicron variant news emerges.

Also lifting Oil prices today is a JP Morgan note entitled “OPEC+ ‘Show me the Barrels’ touting possible $150/barrel price spikes by 2023, due to under investment during the last 18 months. More details can be found here:

https://www.forexlive.com/technical-analysis/!/oil-retraces-50-of-the-omicron-rout-20211129

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Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Weekly Market Outlook 29-11-21

In this Weekly Market Outlook 29-11-21, our analyst looks into the trading week ahead, possible market moving data releases across the globe and the technical analysis to accompany it!

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