Another inflation release below expectations – another rally
US consumer prices added 0.1% for November, significantly weaker than the expected 0.3%. The annual price growth rate slowed to 7.1% YoY against expectations of 7.3%, 7.7% a month earlier and two percentage points below the June peak.
An important factor was the release of a lower-than-expected Core-CPI, which decreased to 6.0% YoY. This strongly indicates that the fall in commodity prices is also spreading rapidly across the basket.
For market players, such data reinforces expectations that inflation has proved more responsive to rate hikes and less sticky than warned at the Fed and feared by markets in previous months. The weak inflation strengthens hopes that Powell's tone tomorrow will be more amicable than in the last few months.
In terms of interest rates, this means that after three 75-point hikes, the main scenario is another 50-point increase, followed by two 25-point hikes.
US consumer prices added 0.1% for November, significantly weaker than the expected 0.3%. The annual price growth rate slowed to 7.1% YoY against expectations of 7.3%, 7.7% a month earlier and two percentage points below the June peak.
An important factor was the release of a lower-than-expected Core-CPI, which decreased to 6.0% YoY. This strongly indicates that the fall in commodity prices is also spreading rapidly across the basket.
For market players, such data reinforces expectations that inflation has proved more responsive to rate hikes and less sticky than warned at the Fed and feared by markets in previous months. The weak inflation strengthens hopes that Powell's tone tomorrow will be more amicable than in the last few months.
In terms of interest rates, this means that after three 75-point hikes, the main scenario is another 50-point increase, followed by two 25-point hikes.
If the inflation rate continues to react "favourably" to high-interest rates, the central bank's QE policy could already end at the end of 2023.
However, such expectations are very fragile constructions. Producer prices rise did not slow in November, adding 0.3% m/m for the 3rd month in a row. The annual growth rate is falling due to a high base effect but not due to a fall in prices. At the same time, the labour market remains "tight", suggesting further pressure on prices due to wages.
Thus, it may be too premature to celebrate victory over inflation and bet on an end to policy tightening by the Fed or other central banks.
However, such expectations are very fragile constructions. Producer prices rise did not slow in November, adding 0.3% m/m for the 3rd month in a row. The annual growth rate is falling due to a high base effect but not due to a fall in prices. At the same time, the labour market remains "tight", suggesting further pressure on prices due to wages.
Thus, it may be too premature to celebrate victory over inflation and bet on an end to policy tightening by the Fed or other central banks.
👍1
#WaveAnalysis
#CADJPY reversed from round support level 100.00
• Likely to rise to resistance level 101.60
CADJPY recently reversed up once again from the round support level 100.00, intersecting with the 50% Fibonacci correction of the upward impulse from February.
The upward reversal from the support level 100.00 started the active short-term ABC correction 4.
CADJPY can be expected to rise further toward the next resistance level 101.60 (former strong support from June, August and November).
📣Trade responsibly with fxpro.com
#CADJPY reversed from round support level 100.00
• Likely to rise to resistance level 101.60
CADJPY recently reversed up once again from the round support level 100.00, intersecting with the 50% Fibonacci correction of the upward impulse from February.
The upward reversal from the support level 100.00 started the active short-term ABC correction 4.
CADJPY can be expected to rise further toward the next resistance level 101.60 (former strong support from June, August and November).
📣Trade responsibly with fxpro.com
👍2
#WaveAnalysis
#Amazon reversed from support level 87.70
• Likely to rise to resistance level 95.00
Amazon earlier reversed up from the pivotal support level 87.70 (which has been reversing the price from the start of November), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 87.70 stopped the earlier short-term impulse wave 3, which belongs to wave (C) from August.
Amazon can be expected to rise further toward the next resistance level 95.00 (which stopped wave (ii) at the end of November).
📣Trade responsibly with fxpro.com
#Amazon reversed from support level 87.70
• Likely to rise to resistance level 95.00
Amazon earlier reversed up from the pivotal support level 87.70 (which has been reversing the price from the start of November), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 87.70 stopped the earlier short-term impulse wave 3, which belongs to wave (C) from August.
Amazon can be expected to rise further toward the next resistance level 95.00 (which stopped wave (ii) at the end of November).
📣Trade responsibly with fxpro.com
❤1👍1
#Bitcoin was adding 5% intraday on Tuesday, at one point approaching 18K. The primary growth momentum co-occurred as the stock market after US inflation data boosted risk appetite.
The price increased a few hours before the release amid an active European session. Perhaps Bitcoin's buying was facilitated by problems with USDT withdrawals from Binance, which prompted the search for liquid alternatives to Stablecoin.
In addition, the first cryptocurrency is trading just 0.8% below yesterday's peak, against a 3% decline in the Nasdaq100, which returned to its pre-release starting point three hours later. The risk hangs over the markets that the Fed might indicate in the evening that it does not share investor optimism on inflation.
Short-term, positive development and consolidation above $18K promise to be a strong bullish signal, opening a quick path to $20.8K.
The price increased a few hours before the release amid an active European session. Perhaps Bitcoin's buying was facilitated by problems with USDT withdrawals from Binance, which prompted the search for liquid alternatives to Stablecoin.
In addition, the first cryptocurrency is trading just 0.8% below yesterday's peak, against a 3% decline in the Nasdaq100, which returned to its pre-release starting point three hours later. The risk hangs over the markets that the Fed might indicate in the evening that it does not share investor optimism on inflation.
Short-term, positive development and consolidation above $18K promise to be a strong bullish signal, opening a quick path to $20.8K.
👍1
UK CPI rose by 0.4% in November vs the expected 0.6%, slowing the YoY rate from 11.1% to 10.7%. Equally important, Core CPI slowed from 6.5% to 6.3%, while the previous two months' pace was expected to be maintained.
Faster-than-expected price deceleration has two sides. This news supports risk appetite as it will dampen expectations on how fast and high the Bank of England will raise rates.
The bad news is that the slowdown in the annual rate is due to a high base effect while prices continue to rise. A 0.4% increase in prices for the month brings the annual rate to 4.8%, which is also well above the central bank's target and will force it to hold the Key Rate above inflation. The 6.1% y/y wage increase rate also supports the stability of the inflation spiral, encouraging a pass-through of inflation to end-users.
A slowdown in core CPI could also be a sign of weak demand. The BoE may be forced to turn quickly to policy easing, risks making the GBP a victim of the FX like the JPY earlier this year.
Faster-than-expected price deceleration has two sides. This news supports risk appetite as it will dampen expectations on how fast and high the Bank of England will raise rates.
The bad news is that the slowdown in the annual rate is due to a high base effect while prices continue to rise. A 0.4% increase in prices for the month brings the annual rate to 4.8%, which is also well above the central bank's target and will force it to hold the Key Rate above inflation. The 6.1% y/y wage increase rate also supports the stability of the inflation spiral, encouraging a pass-through of inflation to end-users.
A slowdown in core CPI could also be a sign of weak demand. The BoE may be forced to turn quickly to policy easing, risks making the GBP a victim of the FX like the JPY earlier this year.
👍1
Be prepared for the Fed rate decision
The Fed rate decision will be announced on Wednesday, December 14th, at 19:00 GMT, followed by decisions from the SNB, Bank of England, and ECB.
Traders' attention will be drawn to both the current moves and hints of a slowdown in policy tightening.
All four Central Banks are expected to hike Key Rates by 50 percentage points. It is expected that the Fed will signal the end of the most extreme tightening period but that hikes will continue.
A shift in focus from inflation to the economy and jobs could increase pressure on central banks' currencies while supporting equities and commodities. A weakening dollar and a two-month rally may challenge markets if inflation remains a priority.
Keep in mind: The volatility in the markets in the run-up to these events and in the first hours after the official comments may increase significantly. Please make sure you have sufficient funds in your account to maintain open positions.
The Fed rate decision will be announced on Wednesday, December 14th, at 19:00 GMT, followed by decisions from the SNB, Bank of England, and ECB.
Traders' attention will be drawn to both the current moves and hints of a slowdown in policy tightening.
All four Central Banks are expected to hike Key Rates by 50 percentage points. It is expected that the Fed will signal the end of the most extreme tightening period but that hikes will continue.
A shift in focus from inflation to the economy and jobs could increase pressure on central banks' currencies while supporting equities and commodities. A weakening dollar and a two-month rally may challenge markets if inflation remains a priority.
Keep in mind: The volatility in the markets in the run-up to these events and in the first hours after the official comments may increase significantly. Please make sure you have sufficient funds in your account to maintain open positions.
👍1
S&P500 clings to bear trend until last
The Fed's key rate meeting promises to be the last significant scheduled event for financial markets. Decisions and comments today have every chance of being decisive for the stock market over the next few weeks. The currency market has already picked its trend earlier this month.
The Fed will almost certainly raise rates by 50 points, slowing down after four hikes of 75 points earlier this year. The Fed has long hinted at such a move and is unlikely to want to surprise markets today with unexpected moves, preferring the tactic of managing expectations.
A sharper-than-expected slowdown in inflation has affected rate expectations. The market is now pricing in just one or two more hikes of 25 points after today's move. And here, the Fed has a lot to manage. Previously, some Fed officials have persisted that rates could rise higher than the market is setting and (even more importantly) hold high for longer than expected.
The Fed's key rate meeting promises to be the last significant scheduled event for financial markets. Decisions and comments today have every chance of being decisive for the stock market over the next few weeks. The currency market has already picked its trend earlier this month.
The Fed will almost certainly raise rates by 50 points, slowing down after four hikes of 75 points earlier this year. The Fed has long hinted at such a move and is unlikely to want to surprise markets today with unexpected moves, preferring the tactic of managing expectations.
A sharper-than-expected slowdown in inflation has affected rate expectations. The market is now pricing in just one or two more hikes of 25 points after today's move. And here, the Fed has a lot to manage. Previously, some Fed officials have persisted that rates could rise higher than the market is setting and (even more importantly) hold high for longer than expected.
👍1
However, markets continue to argue with such predictions, reacting with notable purchases of risky assets on lower-than-expected inflation releases. Earlier today, another such report came out - on import prices. This index is losing for the fifth month, falling by 4.6%. The annual growth rate has fallen to 2.7%, the lowest since January 2021. This is a significant anti-inflationary factor considering the huge US foreign trade deficit. Added to this is the impressive pullback in commodity prices in recent months.
As a result, the Fed can afford to slow down policy tightening and soon take a pause drastically. If we are right, Powell will clear the way for such an opportunity.
As a result, the Fed can afford to slow down policy tightening and soon take a pause drastically. If we are right, Powell will clear the way for such an opportunity.
👍1
Meanwhile, the stock market is in no hurry to get ahead of the game. The S&P500's more than 3% surge after the CPI release was more than nullified in the following couple of hours. The index failed to close the day above the 200-day MA, clinging to the bearish trend with all its might.
A consolidation above 4050 for the S&P500 promises to be a meaningful bullish signal for the market, triggering a rally right up to Christmas or even the end of the year. An additional supporting sign could be a sharp rise above 4100, triggering a short squeeze.
At the same time, a sharp reversal downwards from those levels would be a very unpleasant surprise to the markets, capable of triggering a new wave of sell-offs comparable to the more than 15% declines that started in April and August. Recall that the Fed's actions were the fundamental reason for the reversal in both cases.
A consolidation above 4050 for the S&P500 promises to be a meaningful bullish signal for the market, triggering a rally right up to Christmas or even the end of the year. An additional supporting sign could be a sharp rise above 4100, triggering a short squeeze.
At the same time, a sharp reversal downwards from those levels would be a very unpleasant surprise to the markets, capable of triggering a new wave of sell-offs comparable to the more than 15% declines that started in April and August. Recall that the Fed's actions were the fundamental reason for the reversal in both cases.
👍1
#WaveAnalysis #DJI
Dow Jones reversed from support level 33500.00
• Likely to rise to resistance level 34660.
Dow Jones continues to rise inside the short-term impulse wave 3, which started earlier from the key support level 33500.00 (which has been reversing the price from the start of November), standing near the lower daily Bollinger Band and the 50% Fibonacci correction of the upward impulse from November.
The upward reversal from the support level 33500.00 created the daily Bullish Engulfing reversal candlesticks pattern – forming the 5th consecutive candle near this support level.
Dow Jones can be expected to rise further toward the next resistance level 34660.00 (which stopped the previous short-term impulse wave 1).
📣Trade responsibly with fxpro.com
Dow Jones reversed from support level 33500.00
• Likely to rise to resistance level 34660.
Dow Jones continues to rise inside the short-term impulse wave 3, which started earlier from the key support level 33500.00 (which has been reversing the price from the start of November), standing near the lower daily Bollinger Band and the 50% Fibonacci correction of the upward impulse from November.
The upward reversal from the support level 33500.00 created the daily Bullish Engulfing reversal candlesticks pattern – forming the 5th consecutive candle near this support level.
Dow Jones can be expected to rise further toward the next resistance level 34660.00 (which stopped the previous short-term impulse wave 1).
📣Trade responsibly with fxpro.com
👍2👏1
#WaveAnalysis
#NZDJPY reversed from resistance level 87.73
• Likely to fall to support level 86.00
NZDJPY recently reversed down from the major resistance level 87.73 (which stopped the previous sharp uptrend in September), intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 87.73 stopped the earlier short-term impulse waves (iii) and 3, which belong to the higher order impulse wave (C) from May.
Given the bearish NZD sentiment seen today, NZDJPY can be expected to fall further toward the next support level 86.00.
📣Trade responsibly with fxpro.com
#NZDJPY reversed from resistance level 87.73
• Likely to fall to support level 86.00
NZDJPY recently reversed down from the major resistance level 87.73 (which stopped the previous sharp uptrend in September), intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 87.73 stopped the earlier short-term impulse waves (iii) and 3, which belong to the higher order impulse wave (C) from May.
Given the bearish NZD sentiment seen today, NZDJPY can be expected to fall further toward the next support level 86.00.
📣Trade responsibly with fxpro.com
#Bitcoin updated five-week highs above $18,300 on Wednesday but then fell along with stock indices amid the Fed's intention to raise rates higher and hold them longer than markets had hoped.
The market reaction to the Fed brought the price back to levels before the lift-off but has yet to trigger a sustained decline. Bitcoin failed to close the day above its 50-day moving average but continues to hover around that curve. A consolidation above this line could spur additional demand.
The cryptocurrency Fear and Greed Index was up 1 point to 31 by Thursday and continues to be in a state of "fear". Despite dropping 1.4% overnight, the crypto market's total capitalisation at 860bn has been near the upper end of its trading range for more than a month.
📣Trade responsibly with fxpro.com
The market reaction to the Fed brought the price back to levels before the lift-off but has yet to trigger a sustained decline. Bitcoin failed to close the day above its 50-day moving average but continues to hover around that curve. A consolidation above this line could spur additional demand.
The cryptocurrency Fear and Greed Index was up 1 point to 31 by Thursday and continues to be in a state of "fear". Despite dropping 1.4% overnight, the crypto market's total capitalisation at 860bn has been near the upper end of its trading range for more than a month.
📣Trade responsibly with fxpro.com
🥰1
Swiss National Bank raises rate slower than others
The SNB raised its rate by 50 points to 1.0% after two hikes of 50 and 75 points at the previous two meetings. In an accompanying commentary, the NBS said it was countering rising inflationary pressures.
In the commentary, the central bank says that "further rate hikes are not ruled out". This is a milder formulation than other G10 central banks without Japan. However, the exact phrase was in the two previous decision comments, so we cannot speak of a softening tone in this case.
At the recent and previous meetings, the step-up was the same as for our colleagues from the Fed and the ECB: now by 0.5 percentage points, in September by 0.75. However, remember that SNB meetings are twice as rare, so Swiss policy tightening is less drastic. For the year Swiss central bank raised the rate by 175 points against 250 points for the ECB (including the expected +50 today), 340 (also including the forthcoming decision) for the Bank of England and 425 for the Fed.
The SNB raised its rate by 50 points to 1.0% after two hikes of 50 and 75 points at the previous two meetings. In an accompanying commentary, the NBS said it was countering rising inflationary pressures.
In the commentary, the central bank says that "further rate hikes are not ruled out". This is a milder formulation than other G10 central banks without Japan. However, the exact phrase was in the two previous decision comments, so we cannot speak of a softening tone in this case.
At the recent and previous meetings, the step-up was the same as for our colleagues from the Fed and the ECB: now by 0.5 percentage points, in September by 0.75. However, remember that SNB meetings are twice as rare, so Swiss policy tightening is less drastic. For the year Swiss central bank raised the rate by 175 points against 250 points for the ECB (including the expected +50 today), 340 (also including the forthcoming decision) for the Bank of England and 425 for the Fed.
👏1
On the other hand, inflation is not as acute here, having retreated from a peak of 3.5% y/y to 3.0% in the last three months. The producer and import price index retreated to 3.8% y/y in November from 6.9% in June.
Historically, Switzerland has comparatively lower inflation which is the reason for the lower key rate. Therefore, the current slower pace of monetary policy tightening is not likely to fundamentally undermine the Swiss franc. By playing up the divergence in the speed of rate hikes, the USDCHF could develop a rebound without encountering significant resistance to 0.9400, which looks like a very modest pullback after a more than 9% decline since November 3.
Historically, Switzerland has comparatively lower inflation which is the reason for the lower key rate. Therefore, the current slower pace of monetary policy tightening is not likely to fundamentally undermine the Swiss franc. By playing up the divergence in the speed of rate hikes, the USDCHF could develop a rebound without encountering significant resistance to 0.9400, which looks like a very modest pullback after a more than 9% decline since November 3.
The ECB raised key rates by 50 points, bringing the key rate to 2.5% - the highest in 14 years, but promising not to stop there. In addition to the rate decision, the ECB will start selling assets off the balance sheet from March 2023, starting at 15bn per month, promising to revise the parameters regularly.
The commentary on the decision states upside risks for inflation and downside risks for the economy, expecting the economy to grow by 3.1% this year and 0.8% next year. This is noticeably better than the Fed's forecasts which expect GDP growth of 0.5% each in 2022 and 2023. A sharp cooling of GDP growth has not stopped the Fed and is unlikely to stop the ECB.
The US business cycle is often 2-3 quarters ahead of the European one, which is why the Fed was the first to rush with rates. But now the ECB is starting to sound more hawkish than the Fed. During the press conference, Lagarde predicted more 50-point rate hikes, while the Fed is expected to raise rates by +25 percentage points next.
The commentary on the decision states upside risks for inflation and downside risks for the economy, expecting the economy to grow by 3.1% this year and 0.8% next year. This is noticeably better than the Fed's forecasts which expect GDP growth of 0.5% each in 2022 and 2023. A sharp cooling of GDP growth has not stopped the Fed and is unlikely to stop the ECB.
The US business cycle is often 2-3 quarters ahead of the European one, which is why the Fed was the first to rush with rates. But now the ECB is starting to sound more hawkish than the Fed. During the press conference, Lagarde predicted more 50-point rate hikes, while the Fed is expected to raise rates by +25 percentage points next.
EURUSD is adding on major news for the third day in a row, strengthening by 1% after the US inflation release, regaining initial losses and rewriting semi-annual highs after the Fed, and strengthening by almost 0.5% after the ECB rate decision.
The EURUSD has been trading steadily above its 200-day average since the beginning of December, signalling a break in the downtrend. The pair has also crossed above the 61.8% mark of the declining amplitude from May 2021 to September 2022, and now it looks like it is about to start a long rally rather than a correction. The results of the most recent Fed and ECB meetings this year have underpinned this trend reversal by showing that the ECB is now catching up to the Fed. However, there is an essential technical test ahead at 1.0750-1.0800, where the 2020 lows are concentrated, a significant April-June consolidation area and local fatigue from an already past rally will accumulate.
The EURUSD has been trading steadily above its 200-day average since the beginning of December, signalling a break in the downtrend. The pair has also crossed above the 61.8% mark of the declining amplitude from May 2021 to September 2022, and now it looks like it is about to start a long rally rather than a correction. The results of the most recent Fed and ECB meetings this year have underpinned this trend reversal by showing that the ECB is now catching up to the Fed. However, there is an essential technical test ahead at 1.0750-1.0800, where the 2020 lows are concentrated, a significant April-June consolidation area and local fatigue from an already past rally will accumulate.
🔥1
#WaveAnalysis
#CHFJPY rising inside short-term impulse wave 3,
• Likely to rise to resistance level 149.0
CHFJPY continues to rise inside the short-term impulse wave 3, which previously broke the
resistance level 147.00 standing near the resistance trendline of the daily down channel from September.
The breakout of the resistance level 147.00 continues the clear multi-month uptrend inside which the pair has been moving from the start of this year.
📣Trade responsibly with fxpro.com
#CHFJPY rising inside short-term impulse wave 3,
• Likely to rise to resistance level 149.0
CHFJPY continues to rise inside the short-term impulse wave 3, which previously broke the
resistance level 147.00 standing near the resistance trendline of the daily down channel from September.
The breakout of the resistance level 147.00 continues the clear multi-month uptrend inside which the pair has been moving from the start of this year.
📣Trade responsibly with fxpro.com
#WaveAnalysis
#Gold formed daily Evening Star
• Likely to fall to support level 1750.00
Gold earlier reversed down strongly from the pivotal resistance level 1805.00 (which has been reversing the price from the middle of May).
The downward reversal from the resistance level 1805.00 created the daily candlesticks reversal pattern Evening Star.
Gold can be expected to fall further toward the next support level 1750.00 (forecast price for the completion of the active wave (ii)).
📣Trade responsibly with fxpro.com
#Gold formed daily Evening Star
• Likely to fall to support level 1750.00
Gold earlier reversed down strongly from the pivotal resistance level 1805.00 (which has been reversing the price from the middle of May).
The downward reversal from the resistance level 1805.00 created the daily candlesticks reversal pattern Evening Star.
Gold can be expected to fall further toward the next support level 1750.00 (forecast price for the completion of the active wave (ii)).
📣Trade responsibly with fxpro.com
👍3
#WaveAnalysis
• IBM reversed from major long-term resistance level
• Likely to fall to support level 143.00
IBM under the bearish pressure after the price reversed down from the major long-term resistance level 152.50 (which has been reversing the price from the end of 2018) coinciding with the upper weekly Bollinger Band.
The downward reversal from the resistance level 152.50 stopped the previous weekly upward impulse wave C.
📣Trade responsibly with fxpro.com
• IBM reversed from major long-term resistance level
• Likely to fall to support level 143.00
IBM under the bearish pressure after the price reversed down from the major long-term resistance level 152.50 (which has been reversing the price from the end of 2018) coinciding with the upper weekly Bollinger Band.
The downward reversal from the resistance level 152.50 stopped the previous weekly upward impulse wave C.
📣Trade responsibly with fxpro.com
👍1
#Bitcoin fell on Thursday by the most in 3.5 weeks amid a sharp decline in stock indices and a stronger US dollar. BTC rolled back to $17.4K, losing 1.3% overnight. Ethereum, which trades at $1270, shows the same decline amplitude.
Total crypto market capitalisation is down 0.7% to $852bn. The pressure on cryptocurrencies came from the stock market, so assets with more institutions are faring worse than others.
From a tech analysis perspective, Bitcoin has failed to latch on to levels above the 50-day moving average, causing it to now face speculative pressure. However, this kind of pressure usually lasts for a day or two unless backed by external reasons.
On the higher - weekly – timeframe, one can see the development of the current downward phase since the end of May. The RSI would form a bullish divergence, as new price lows correspond to higher levels in the index. This could signal exhaustion for the sellers or consolidation before the next leg down.
Total crypto market capitalisation is down 0.7% to $852bn. The pressure on cryptocurrencies came from the stock market, so assets with more institutions are faring worse than others.
From a tech analysis perspective, Bitcoin has failed to latch on to levels above the 50-day moving average, causing it to now face speculative pressure. However, this kind of pressure usually lasts for a day or two unless backed by external reasons.
On the higher - weekly – timeframe, one can see the development of the current downward phase since the end of May. The RSI would form a bullish divergence, as new price lows correspond to higher levels in the index. This could signal exhaustion for the sellers or consolidation before the next leg down.