USD soft amid Omicron haven unwind, rising JOLTS data
• Early BioNTech, Pfizer data suggests boosters may protect against Omicron infection
• U.S. job openings jump to 11 million; fewer workers voluntarily quitting
• US Oct JOLTS Job Openings, 11.033 mln, 10.369 mln f’cast, 10.438 mln prev, 10.602 mln r’vsd
• US 3 Dec, w/e MBA Mortgage Applications, 2.0%, -7.2% prev; Mortgage Mkt Idx, 616.4, 604.2 prev
• Biden says he made clear there would be economic consequences like none before if Putin invades Ukraine, says he is confident Putin got the message
• Russia’s Putin says his talks with U.S.’ Biden were open, constructive
• Senate panel likely to hold hearings for Fed’s Powell, Brainard next month
• Bank of Canada keeps interest rates unchanged, warns of Omicron uncertainty
• CA 8 Dec BoC Rate Decision, 0.25%, 0.25% f’cast, 0.25% prev
• ECB’s Schnabel says adjusting sequence of policy instruments not appropriate
• Digital euro, Swiss franc trials were successful, central banks say
• Brexit: UK’s Johnson says on protocol: We do not remove the possibility of Article 16
• Johnson imposes COVID-19 ‘Plan B’ in England to contain Omicron
• Johnson: Will reintroduce guidance to work from home, extend face mask requirement to most public venues from Friday
• Johnson: Will give businesses a week’s notice on NHS COVID pass requirements, will make the pass mandatory for venues and places with large crowds
Looking Ahead – Economic Data (GMT)
• 8 Dec 21:45 NZ Q3 Manufacturing Sales, -0.1% prev
• 8 Dec 23:50 JP 4 Dec, w/e Foreign Bond Investment (JPY), -1,343.2 bln prev; Foreign Stock Invest, 105.7 bln prev
• 8 Dec 23:50 JP 4 Dec, w/e Foreign Invest JP Stock (JPY), -309.6 bln prev; Foreign Invest JP Bonds, -451.3 bln prev
• 8 Dec 23:50 JP Nov M2 Money Supply (JPY), 1,172,084,100 mln prev; Broad Money, 2,006.0 trln prev
• 9 Dec 01:30 CN Nov PPI YY, 12.4% f’cast, 13.5% prev
• 9 Dec 01:30 CN Nov CPI YY, 2.5% f’cast, 1.5% prev; MM, 0.3% f’cast, 0.7% prev
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Looking Ahead – Events, Other Releases (GMT)
• 08:00 Riksbank executive board meeting in Stockholm
• 10:00 Irish Central Bank deputy governor Sharon Donnery speaks on Future of Europe Housing Conference in Dublin
Macro Themes In Play
• The dollar fell on Wednesday, reversing recent Omicron-related haven buying as markets remained enthralled by preliminary reports indicating the severity of the new variant may be less than prior iterations and Pfizer comments that a three-shot course could provide protection.
• The dollar index was down 0.42% at 95.875, deriving no support from JOLTS data showing the labor market was tighter than expected in October.
• U.S. job openings surged in October while hiring decreased, adding to evidence of a worsening worker shortage that could hamper employment growth and the overall economy.
• Market trends have also become muddled by the approach of two high-profile risk events — Friday’s U.S. inflation report and next week’s Fed meeting — along with the thin liquidity that usually accompanies the year-end period.
• The U.S. yield curve bucked its recent flattening trend, steepening after JOLTS data and the BoC’s rate hold and less-hawkish-than-expected guidance.
• EUR/USD rose 0.67% to 1.1344 aided by broad long USD haven unwinds and EUR/GBP cross buying in anticipation of the tougher COVID-19 restrictions British Prime Minister Boris Johnson imposed in England on Wednesday — ordering people to work from home, wear masks in public places and use vaccine passes in a bid to slow the spread of the Omicron coronavirus variant.
• UK-euro zone rate differentials are narrowing as the restrictions add to near-term uncertainty about UK rate hikes and push expectations out the curve.
• USD/JPY rallied to 113.96 in early NorAm on Omicron haven unwinds, matching Nov. 29 highs, but dollar bulls were unable to sustain gains.
• A broad wave of dollar selling pushed USD/JPY lower to 113.69 in late-U.S. trade, though diverging U.S.-Japan rate differentials should keep it bid in the near-term.
• GBP/USD put in a new 2021 low at 1.3162, reacting to UK lockdown talk and a further reduction of odds on a BoE rate hike. Diverging U.S.-UK rates kept the pound on the backfoot versus the dollar, while converging UK-euro zone rate differentials lifted the EUR by 0.76% versus the pound.
• AUD/USD moved was trading at 0.7177, up 0.82% in late-U.S. dealings. China’s RRR cut, diminished Omicron angst and the RBA’s upbeat economic outlook helped boost Aussie above its 10-DMA at 0.7092, putting the 30-DMA at 0.7274 in sharper focus.
• USD/CAD whipsawed after the BoC held rates steady, rising from its post-meeting flash low at 1.2607 to session highs by 1.2667 before reversing to stand 0.02% higher at 1.2645. While no rate change had been expected, some traders had positioned for a more aggressive tack on early rate hikes.
Commentary and Analysis
EUR/USD-Shorts squeezed as US rate gains erode
• EUR/USD falls to 1.1267 on EBS in early NY trading but dip gets bought
• Safe-havens US$ & yen get sold, EUR/JPY hits 129.11 on EBS before dipping
• US$ sinks vs EM ccys, USD/CNH fall extends towards 6.3300
• JOLTS data helps soften US interest rates
• US$ slide intensifies, EUR/USD hits 1.1350 on EBS, very little pull back
• Rising RSIs, 10 & 21-DMA breaks, monthly long leg doji a bull signals
USD/JPY- Omicron haven unwind gives way to USD selling after JOLTS rise
• USD/JPY matches Nov 29 high 113.96 in early NorAm, dips to 113.63 into close
• Pair stalls ahead of 21-DMA by 113.98; 114.03, 50% Fib of 115.53-112.54
• USD lower after JOLTS rise; BoC holds rate, outlook steady
• USD rises vs yen as diminished Omicron angst spotlights rates
• Yen haven flows replaced by broad USD selling ahead of Fed meeting Dec 15
• Reduced Omicron angst weighs on dollar as haven USD buyers unwind USD longs
• US rates rising 150bps vs steady yen rates over next 2-yrs should lift USD
Sterling’s lockdown-related slide stalls ahead of 200-WMA by 1.3152
• GBP/USD ending NorAm -0.04% at 1.3237, Wednesday’s range 1.3260-1.3162
• Pair reversed early Omicron-lockdown-related slide to new 2021 low 1.3162
• BoE rate hike odds fall further amid growing econ uncertainty
• GBP hits new 2021 low as UK lockdown talk adds to rates weight
• Below 200WMA supt at 1.3134, the lwr 30-d Bolli, 1.3135 Dec 11 2020 wkly low
• Res at 1.3281’s 10-DMA; bulls gain momentum abv 1.3338, 50% of 1.3514-1.3162
• EUR/GBP +0.71% to 0.8570, Wed range 0.8585-15; converging EZ-UK rates lift EUR
AUD/USD-Rates, commodities, yuan gives longs the advantage
• After early strength US rates soften & weigh down US$
• Equities stay buoyant, copper & iron-ore rally
• Safe-havens yen & US$ sold for riskier assets, AUD/JPY nears 81.75
• EM ccys gain vs US$, yuan strength persists, USD/CNH sinks toward 6.3300
• AUD/USD steadily climb in NY, breaks 0.7170/75 resistance, nears 0.7185
• Techs are bullish; RSIs rising, 10-DMA supports, monthly bull hammer forms
Dollar extends rise vs yen as diminished Omicron angst spotlights rates
USD/JPY rose 0.28% to 113.85 through early NorAm as safe-haven support for the yen waned along with Omicron anxiety following very preliminary reports that the variant is less severe than prior COVID iterations and the Pfizer vaccines are successful in combating the new strain. Markets have refocused on the relative rate regimes in determining FX prices, marked by expectations that the BoJ will not tighten anytime soon and anticipation of the Fed announcing accelerated asset-purchase reduction on Dec. 15, potentially leading to earlier U.S. rate hikes than previously projected. Since recovering from Omicron-induced lows struck last week by 112.50, USD/JPY ran into resistance on Wednesday ahead of the Nov. 29 high at 113.96, with further resistance at 114.03, the 50% Fib of the November-December range of 115.53-112.54. A rise above 114.03 would shift momentum back to dollar bulls for a further test of recent highs by 115.49 as markets anticipate Fed rate hikes in 2022. Eurodollar futures are pricing in 150bp of hikes between December 2021 and December 2023, while Japanese rates are expected to remain steady over the same period. Chart: https://tmsnrt.rs/3duwG0L
Big AUD/USD move higher possible if key nearby resistance breaks
AUD/USD hit a 5-session high Wednesday and could be on track for bigger gains if it breaks through key chart resistance up ahead. The pair’s current rally is being driven by upbeat risk sentiment as well as RBA comments suggesting the recovery remains on track, waning concerns for the Omicron variant in combination with yuan strength and the PBOC’s RRR cut. Position covering from AUD/USD shorts after the break of the psychological 0.7000 level failed to sustain downward momentum also lends support. Key resistance in the 0.7170/75 zone is now threatened. The September monthly low along with Nov. 30 and Dec. 1 daily highs sit in that zone. A break of that impediment is likely to trigger further short covering and target 0.7290/0.7310 resistance and 55-DMA. Technicals highlight the upside risks. Daily RSI is rising and monthly RSI diverged on the new low which was set Dec. 3. Support from the 10-DMA and the monthly long-legged doji candle reinforce the bullish technical signals. AUD/USD’s rally faces risk from the November U.S. CPI report due Friday. Monthly CPI is estimated to moderate but yearly is expected to rise from October’s result. Should both periods show moderation in price rises AUD/USD is likely to rally above 0.7170/75 as U.S. rates and U.S. dollar could weaken as the Fed may take a less hawkish stance. Chart: https://tmsnrt.rs/33cQG6j
Chart of the Day (GBP/USD)
GBP/USD is preparing to end the year with a whimper, slipping to a new 2021 low at 1.3162 on Wednesday, with potential COVID-related restrictions providing the latest setback for sterling, which remains undermined by doubts over UK rate hikes since the BoE unexpectedly held steady on Nov. 4. Further divergence in U.S.-UK rate expectations after Dec. 15-16 Fed and BoE policy meetings would push GBP/USD lower toward early October 2020 lows by 1.28. Media reports of an imminent lockdown to arrest the spread of the Omicron variant kept market speculation of a rate hike at the Dec. 16 MPC meeting grinding lower, weighing on GBP/USD. Traders should now be eying support the 200-week moving average at 1.3152 and the lower 30-day Bolli by 1.3132. Diminishing rate-hike expectations have reversed sterling’s fortunes after its upbeat start to 2021 on waning Brexit tensions and the successful UK COVID vaccine rollout. Since the Nov. BoE meeting, the pound has been weak even against low-for-longer currencies such as the JPY and EUR. Sterling is now down 2.46% versus the yen and 0.45% versus the EUR over the past six months. The euro and yen have fallen more than 7% versus the dollar over the same period. Chart: https://tmsnrt.rs/3y7PtZl
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