Daily Market Outlook, December 14, 2022

Daily Market Outlook, December 14, 2022 Stocks Reverse CPI SurgeWall Street surged higher on softer-than-expected CPI as investor risk sentiment seemed fuelled by the prospect of peak inflation being in the rear view mirror, however, as markets digested the data sentiment shifted significantly from the prospect of peak inflation to growth concerns, the intraday reversal was also deemed to be driven by profit-taking ahead of today's FOMC meeting and tomorrow's BoE & ECB meeting the final meaningful macro events of 2022. Asian equity markets have held onto small gains overnight as investors wait for Fed Chair Powell's press conference this evening.The remaining central bank meetings this week are all likely to raise rates, however, markets are positioned for a reduction in the increment of rate rises, with markets currently pricing a 50bps move by the FOMC this evening. The focus for investors is going to be firmly centred on the Fed Chair Jay Powell's press conference, his comments will be parsed for any signs of a dovish tilt to his messaging, specifically his views on the Fed funds terminal rate, markets appear to be aligning around a 2023 terminal rate between 5.25% and 4.50%, markets will likely cheer any lean towards the lower end of the spectrum, however, markets are currently pricing a 4.82% terminal rate down from 4.98% ahead of the CPI release, if Powell pushes back against this reduction in expectations, expect further selling in equities as investors will likely seek solace in the safety of government debt over riskier assets. Markets-wise, huge options expiration in US markets on Friday are likely to contain any major moves on Wall Street, with $3.9 trillion of options expiring on Friday, the options market is priced for a 4000-4100 range on the benchmark SP500, ahead of the options expiration the action is likely to remain broadly within this range, post-expiration offers the potential for a range expansion, with investors still pinning their hopes on a Santa rally into year-end!Overnight HeadlinesChina’s Economy Likely Worsened Before Abrupt Covid Policy ShiftChina Gives Up Counting All Covid Cases After Ending Mass TestsChina’s Zero-Covid Retreat Sparks Wealth Mgmt Product Sell-OffMorgan Stanley Lifts China GDP Forecast On Reopening, EasingJapan’s Tankan Highlights Manufacturing, Service Firms’ DivideNew Zealand Forecasts 2023 Recession As Rates RiseCongressional Negotiators Reach Framework For Deal On Funding GovFed Seen Slowing Rate Hikes, Likely Ending Them Below 5%Dollar Weak After Soft US Inflation Data, Focus Switches To FedCrypto’s Binance Seeks to Reassure Over Reserves, Says Debt FreeOil Slips As US Crude Stock Build Stirs Doubts On DemandEU Pushes Gas Cap Decision To Next Week As Haggling ContinuesEU Agrees To Tap Carbon Market For €20 Billion In Energy PivotAsia Stocks, US Futures Edge Higher Before FedBipartisan Senate Bill Would Bar Huawei From US Finance SystemPfizer Awarded $1.96B Contract From US Gov For Paxlovid FX Options Expiring 10am New York CutEUR/USD: 1.0375-80 (1.74BLN), 1.0450 (564M), 1.0500 (526M)1.0545-55 (505M), 1.0650 (444M), 1.0700 (929M), 1.0800 (406M)USD/JPY: 136.00 (355M). USD/CHF: 0.9415 (210M)GBP/USD: 1.2120 (210M). EUR/GBP: 0.8700 (239M)AUD/USD: 0.6450 (960M), 0.6675 (216M), 0.6750 (327M)NZD/USD: 0.6400 (1.02BLN), 0.6425 (1.15BLN)USD/CAD: 1.3560 (1.1BLN)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 39004120 Target Achieved, New Pattern EmergingPrimary support is 3980Primary upside objective is 4150Failure at 3950 opens a test of 390020 Day VWAP bullish, 5 Day VWAP bullishEURUSD Bias: Bullish Above Bearish below 1.051.0620 Target Achieved, New Pattern EmergingPrimary support is 1.0590Primary upside objective is 1.07Failure at 1.05 opens a test of 1.0420 Day VWAP bullish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish below 1.22Primary support is 1.22Primary upside objective 1.24Failure at 1.2080 opens a test of 1.203020 Day VWAP bullish, 5 Day VWAP bullishUSDJPY Bias: Bullish above Bearish Below 137.70Primary resistance is 137.70Primary downside objective is 132Acceptance above 138 opens a test of 139.3020 Day VWAP bearish, 5 Day VWAP bullishAUDUSD Bias: Bullish Above Bearish below .6790Primary support is .6790Primary upside objective is .6900Failure at .6700 opens a test of .660020 Day VWAP bullish, 5 Day VWAP bearishBTCUSD Bias: Intraday Bullish Above Bearish below 1750018000 Target Achieved, New Pattern EmergingIntraday 17500 is primary supportPrimary upside objective is 18200Failure at 17400 opens a test of 1720020 Day VWAP bearish, 5 Day VWAP bullish

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US & UK Inflation Falls - GBPUSD Traders Await the Fed

US Inflation Cools FurtherThe peak inflation narrative has been given a further boost this week with the latest US and UK inflation data showing a cooling of consumer prices in both economies. In the US, annualised inflation was seen falling back to 7.1% last month, marking its lowest level since December 2021. This marks a further decline from the prior month’s 7.7% reading and was also below the 7.3% reading the market was looking for. Looking at the monthly breakdown, headline prices rose just 0.1%, down from the prior month’s 0.4% and below the 0.3% rise expected. Core prices, meanwhile, rose 0.2%, again, lower than both the prior and expected 0.3%.Attention Turns to FedWith US inflation now down a full 2% from the peak in the summer, the market turns its attention to the Fed later today. The reversal of initial gains in equities indices reflects a reluctance to show too much exuberance ahead of the main event later. While the downturn in inflation is clearly encouraging, the Fed still has a way to go and will want to avoid the market taking too dovish a view on next year, particularly with inflation still more than 3x above target.UK Inflation Falls in NovemberIn the UK, consumers were greeted by slightly better news today also. November CPI was seen falling back to 10.7% last month, down from the prior month’s 41-year highs at 11.1%. This was also below the 10.9% reading the market was looking for and saw core CPI falling to 6.3% from 6.5%. Hawkish risks ahead of the BOE tomorrow have likely now been diluted with the smaller .5% hike the most likely option. However, the BOE is widely expected to retain a hawkish outlook on rates as well as a gloomy view on the economy, particularly on the back of further weak GDP data earlier this week and news of an uptick in unemployment.Technical ViewsGBPUSDThe rally in GBPUSD this week has seen the market breaking out above the 1.2195 level, with the bull channel developing further. While price holds above this support level and with the retail market still heavily short, the focus is on a further push higher with 1.2659 the next key level to watch. To the downside, any drop back below the level will turn focus to the bull channel lows and the 1.1474 level beneath it.

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A recession is coming, here is how to prepare your finances

The Bank of England has warned we’re probably already in a recession, and it’s due to be one of the longest in recent memory. Here’s what to expect, and how to prepare your finances.

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Technical Trade Levels Ahead of CPI & FOMC Releases

Technical Trade Levels Ahead of CPI & FOMC Releases

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Unemployment rises as over 50s head back to work

The latest figures from the Office for National Statistics showed a 0.1% increase in unemployment, but a decreased rate of inactivity.

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Market Spotlight: DXY & US CPI Today

US CPI In FocusThe headline market event today is the US CPI release for November. The data will be the final key input ahead of the December FOMC tomorrow and on the back of the fall in October inflation, the data today will likely be pivotal for the early 2023 US rates outlook.Market Impact - Bearish USDThe market is looking for monthly CPI to rise 0.3% on the headline figure and core while annual inflation is set to fall to 7.3% from 7.7% prior. While a .5% hike is all but certain this time around, If data is confirmed that consensus levels or below, the market will likely move in favour of expecting a less hawkish outlook from the Fed, paving the way for a slower pace of tightening over Q1 2023.  In this scenario, risk assets should be well supported with stocks and commodities set to gain quickly, as well as high-beta FX, as USD and bond yields come off.Bullish USD  However, should data come in above forecasts, this will keep more uncertainty in the outlook, likely causing the Fed to stick to a more hawkish outlook for early 2023. In this scenario, USD is likely to be well bid fuelling a sharp move lower in risk assets along with an uptick in bond yields.Technical ViewsDXYThe reversal from 114.58 highs has seen the Dollar Index has seen the market breaking down below the 109.18 level support and below the bear channel lows. Price is now sitting on support at the 104.95 level. Momentum studies have flattened for now, suggesting room for a move higher while support holds. However, below here, focus shifts to 101.22 next.

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Market Spotlight: UK Wages & Unemployment Rise Ahead of BOE

Further Poor UK DataOn the back of yesterday UK GDP print which showed that economic activity contracted 0.3% in the three months through October, UK traders suffered yet further dad news today. UK wages were seen rising 6.1% over the same period, up from 6% prior while unemployment rate increased to 3.7% from 3.6% prior. With prices rising and the workforce weakening, the near-term economic outlook for the UK has shifted lower again. Focus now turns to the BOE meeting on Thursday.Recession Risks & BOE The BOE outlined UK recession risks last time around, warning that the UK was likely at the start of a 2-year recession. This week’s data looks to have confirmed this view and traders are now expecting the BOE to double down on the gloomy warnings offered last time around. Given the recession risks facing the UK the market is looking for a further .5% hike. However, on the back of the recent record inflation print and with wages seen rising again upside risks are visible into the meeting.Technical Views6B (GBP Futures)Looking at the market, the breakout above the bearish trend line has seen price trading up to test the summer highs around 1.2270. Price is currently stalled here. However, with momentum studies firmly bullish, focus is n a continued push higher and a test of the 1.2683 level next. Should we reverse from here however, 1.1730 is the next support to note.

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The IndeX Files 13-12-2022

All Eyes on US CPI Ahead of Tomorrow's FOMCGlobal equities benchmarks have seen relatively muted action so far this week as traders await today’s headline US CPI event ahead of the November FOMC tomorrow. October’s CPI reading was a major market event fuelling a wave of USD sales which helped underpin equities sentiment and lift asset prices across the board. Equities bulls will therefore be hoping for a similar reaction today.Looking at consensus forecast, the market is looking for headline annual CPI at 7.3%, down from October’s 7.7%. This reading or lower should see stocks supported into tomorrow’s FOMC event with the Fed likely afforded more room to signal a slower pace of tightening with a view towards pausing rate hike if inflation continues to calm. However, on the back of the upside surprise we saw in US labour data, there are still risks of an upside surprise today. If seen, stronger US inflation will bolster the likelihood of the Fed retaining a more hawkish outlook tomorrow, dragging stocks lower near-term.Looking beyond Wednesday, UK and European traders will then be turning to the ECB and BOE meetings on Thursday. Both central banks are expected to hike further by at least .5% with hawkish risks for both. As such, European and UK indices hold plenty of bilateral risk into these events. On the back of yesterday’s weak UK GDP reading, today’s data saw wages and unemployment both ticking higher into October, compounding recessionary fears in the UK ahead of the meeting.Technical ViewsDAXThe index continues to hold in the recent range set between 14703.98 and 14170.79 following the upside break seen in early November. Momentum studies have softened here, highlighting risks of a downside break. However, focus remains on further upside while the range support holds.S&P 500Following the rejection at the latest test of the bear channel top, price has subsequently found support into a test of the 3910 level, turning price higher again. Momentum studies are turning higher here keeping the focus on further upside and a test of the 4153.50 level while 3910 holds.FTSEThe market continues to correct lower from the 7575.8 level which marks the peak of the latest FTSE rally for now. Price is trading back towards the 7362.6 level, in line with falling momentum studies. Bulls will need to see this level hold to retain upside focus near-term.NIKKEIThe rejection at the 28356.6 level saw the market correcting as low as a test of the 27422.9 level, which has since held as support. Momentum studies are turning higher and while this level holds, the focus is on an eventual break of 28356.6 and a continuation higher.

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UK house prices see their biggest December drop in four years

According to Rightmove’s house price index average asking prices dipped 2.1% in December.

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Market Spotlight: EURJPY ECB Set Up

EURJPY Pattern PlayEURJPY price action is looking very interesting here ahead of the ECB meeting this week. The pair has been trading higher this year, underpinned by the rising trend line from the March lows. Similarly to what we saw over June – September, price has recently been correcting lower within a bear channel. Given the broader uptrend, the current move can be viewed as a bull flag, highlighting risks of an eventual break higher as we saw from the last formation.Two-Way Risk into ECBGiven the event risk on deck with the ECB this week, the pattern looks even more interesting. The ECB is tipped to hike rates by a further .5%. However, on the back of recent eurozone data and hawkish commentary from several ECB members, there are clear hawkish risks going into the meeting. Should the ECB press ahead with a larger hike or signal more aggressive action to come, EUR looks likely to make fresh gains against JPY given the BOJ’s continued commitment to maintaining an easing presence in the market. However, should there be any dovish surprise at the meeting, EURJPY runs the risk of breaking below the rising trend line and correcting deeper still.Technical ViewsEURJPYFollowing the bounce off the rising trend line and the 140.82 level, price is now testing the 144 level and corrective bear channel top. If we see a break higher here focus will turn back to the 147.75 level next and a potential break to new highs. To the downside, any move below the 140.82 level will open the way for a test of the 137.74 level next.

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Market Spotlight: UK GDP Underscores Recession Risks Ahead of BOE

GDP Rises on Month, Dips on QuarterThe latest UK GDP data this morning paints a bleak picture ahead of the BOE meeting on Thursday. At first glance, the 0.5% rise in October looks promising, marking an uptick from the prior month’s -0.6% reading and a beat on the 0.3% the market was looking for. However, the 3 months output reading, from August through October, was seen contracting 0.3%, suggesting the UK is still heading into recession.UK Recession RisksThe BOE governor himself warned last time around that the UK is likely at the start of a two-year recession. This week, traders are wary of hawkish risks for the BOE given that inflation remained at four decade highs last month and is showing little sign of cooling. Additionally, while a hike of between .5% and .75% is expected, the BOE is also expected to double down on the gloomy warnings issued last time around meaning that Thursday will likely be particularly volatile for GBP and UK assets.BOE Division GrowingHowever, given the particular severity of the risks facing the UK economy, which many cite as the worst since the 1970s, risks of greater division among BOE members is rising. Indeed, with many concerned about stagflation in the UK, a potential four-way split (first time ever) is one outcome being touted ahead of the meeting. The split would essentially consist of votes in favour of a hike, a larger hike, a smaller hike and no change. Such an outcome would no doubt fuel an uptick in investor uncertainty, hitting UK asset prices. For now, GBP continues to rally ahead of the event with investors seemingly more focused on upside risks to rates.Technical ViewsGBPUSDThe pair continues to grind higher here within the bullish channel which has framed the recovery off the lows. Price is currently testing the 1.2195 level resistance. If price can hold above here, focus will turn to a test of the 1.2695 level next. Starting to see some bearish divergence creeping in, highlighting reversal risks. Any sudden drop below 1.2195 will turn focus to a test of the channel lows and the 1.1474 level next.

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Daily Market Outlook, December 12, 2022

Daily Market Outlook, December 12, 2022 Investors Pare Risk Ahead of This Week's Inflation Data & Central Bank DecisionsAsian equity markets have started the week on the back foot, as investors pare risk positions ahead of tomorrow's US headline inflation data coupled with major central bank announcements due Wednesday and Thursday. Friday's firmer PPI data underpinned US Yields with the 10yr trading back above the 3.50% level, the move in US Yields also helped support the greenback, however, foreign exchange markets are predominantly range-bound ahead of the headline event risk this week. This morning's UK GDP data showed some signs of improvement, the economy rebounded by 0.5% in October, pipping market expectations of 0.4% for the month, the increase represents an uptick on September's 0.6% decline, driven by the additional bank holiday following the Queen's funeral. The improvement in UK GDP comes ahead of tomorrow's employment report, followed by domestic CPI data Wednesday, then Thursday sees the final Bank of England meeting for the year, market watchers anticipate another modest increase in headline inflation to print 10.9%, this should see the BoE raise rates again on Thursday by another 50bps to 3.5%. Looking to tomorrow, US inflation data will be scrutinised as to the effectiveness of the Fed's most aggressive hiking cycle since the 1980's, this data comes a day ahead of Wednesday's FOMC meeting. In the Eurozone, the ECB will also update its policy on Thursday, with markets poised for the European central bank to slow the pace of rate hikes from 75bps to 50bps raise this week.Markets-wise, expect somewhat of a holding pattern to develop today as investors await the deluge of inflation and central bank data before repositioning into year-end, with many investors hoping that once this week's data is digested, the eagerly anticipated year-end rally in equity markets may have a chance to get underway.Overnight HeadlinesCongress Faces Deadline For Keeping Government FundedBoE Divisions on Rates Set To Deepen With UK Stagflation OutlookUK Power Surges To Record As Sub-Zero Chill Sends Demand SurgingUK Home Asking Prices Are Falling At Sharpest Pace In Four YearsUK Lenders See 23% Slide In Mortgages For Home-Buyers In 2023China’s Top Medical Adviser Says Omicron’s Risks Same As FluChina's Healthcare System Put To The Test As Covid Curbs FadeJapan PPI Inflation Sticks To Near 41-Year High In NovemberBoJ’s Takata Says Not Time To End Yield Curve ControlKishida Aide Says Amamiya, Nakaso Among Candidates For BoJ ChiefInvestors Withdraw Record Levels Of Coins From Crypto ExchangesUneasy Traders Ramp Up Bets On Europe Bond SelloffOil Rebounds As Key Pipeline Remains Shut And China Eases CurbsTurkey’s Oil Tanker Backlog Is Starting To ClearAsian Shares Fall, Dollar Firms Ahead Of Central Bank Rate HikesWorld’s Top Money Managers See Global Stocks Recovering In 2023FX Options Expiring 10am New York CutEUR/USD: 1.0380-90 (1.06BLN), 1.0420-25 (637M)1.0500-10 (1.6BLN), 1.0550 (381M), 1.0565 (270M)1.0600-10 (598M)USD/JPY: 135.00 (610M), 136.00-05 (730M), 138.00 (911M)USD/CHF: 0.9500 (208M)GBP/USD: 1.2070 (298M), 1.2150 (446M). EUR/GBP: 0.8750 (405M)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 3900Primary support is 3900Primary upside objective is 4120Failure at 3880 opens a test of 385020 Day VWAP bearish, 5 Day VWAP bearishEURUSD Bias: Bullish Above Bearish below 1.05Primary support is 1.05Primary upside objective is 1.0620Failure at 1.0440 opens a test of 1.035020 Day VWAP bullish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish below 1.22Primary support is 1.22Primary upside objective 1.24Failure at 1.2080 opens a test of 1.203020 Day VWAP bullish, 5 Day VWAP bullishUSDJPY Bias: Bullish above Bearish Below 137.70Primary resistance is 137.70Primary downside objective is 132Acceptance above 138 opens a test of 139.3020 Day VWAP bearish, 5 Day VWAP bullishAUDUSD Bias: Bullish Above Bearish below .6640Primary support is .6640Primary upside objective is .6900Failure at .6600 opens a test of .655020 Day VWAP bullish, 5 Day VWAP bearishBTCUSD Bias: Intraday Bullish Above Bearish below 16500Intraday 16500 is primary supportPrimary upside objective is 18000Failure at 16400 opens a test of 1600020 Day VWAP bearish, 5 Day VWAP bullish

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Precious Metals Monday 12-12-2022

Metals Markets Await US CPI & FedFollowing the rallies we’ve seen over the last month or so, both gold and metal look hungry to break out here. Both metals have seen choppier action in recent weeks though have still been grinding higher amidst a broadly lower US Dollar.The key decider this week will of course be the FOMC on Wednesday. Just ahead of that event, however, we have the latest US CPI which is highly likely to decide which way the Fed’s goes. The market is currently looking for a further decline on headline CPI to 7.3% from 7.7%, which would be good news for metals if seen.However, on the back of Friday’s stronger-than-forecast US PPI reading, markets look primed for the Fed to deliver a hawkish outlook, citing the need to keep going with rates hikes while upside inflation risks remain. This is likely to weigh on metals, particularly if accompanied by hawkish action from the ECB and BOE on Thursday.However, if the Fed is seen to be less concerned about upside inflation risks now, perhaps instead focusing on the fact that trajectory is now lower and things are headed the right way, this might reassure markets somewhat allowing metals to take off as USD unwinds.Technical ViewsGoldPrice action in gold is looking very interesting here. The rally off the lows has been framed by a rising wedge pattern, typically a bullish reversal formation, suggesting risks of a downside break. This is further endorsed by the bearish divergence we’re seeing in momentum studies. Price is currently struggling at the 1791.63 support and if we pierce below the structure here, 1722.37 will be the next support to note. To the topside, any break higher will turn focus to the 1871.04 level next.SilverThe move higher in silver is a little more advanced than the upside we’ve seen in gold with the market recently breaking above the 22.3205 level and holding a retest of the level from above. While this level holds, the focus remains on further upside. Worth noting we are seeing some bearish divergence creeping in on momentum studies, suggesting bearish reversal risks. With this in mind, prudent to monitor price action as the market tests the 24.0073 level. Any move below 22.3205 will turn focus to support at the 20.6398 level next.

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American Index S&P500: Potential Drop Ahead!

American stock index S&P500 broke the uptrend and got back to it. Currently, the asset is trying to pull from the broken trendline. However, the index will have to break the level of 3930 first. After that, it might potentially hit the level of 3600. So, let’s wait and see what is going to happen next.Bitcoin keeps moving along the level of 17000. It is likely to target the level of 18500 next. The upcoming flag formation on the chart might help Bitcoin head up.The currency pair EUR/USD keeps testing the weekly downtrend. Hence, the asset might target the supporting level of 1.0350 next to the broken uptrend, and jump.

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