But at the height of morning trading in Europe, #NZDUSD erased all gains following the publication of the RBNZ decision, pulling back to 0.6150. The sell-off so far looks like profit-taking after rallying 5.8% in a fortnight following a weak US CPI report.
On the higher timeframes, NZDUSD almost touched the upper boundary of the descending corridor, which the pair has mainly followed since March 2021. This year, the pair have spent a lot of time near the lower boundary, while reversals down from the upper boundary have been swift.
During the period of this channel, it took only 5-6 weeks to move from the upper boundary of the range to the lower boundary. If the pattern repeats for the sixth time, NZDUSD could reach the 0.5750 level in early January.
The alternative bullish scenario will become mainstream only if NZDUSD can stay within the short-term growth momentum and overcome the previous local top at 0.6400.
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On the higher timeframes, NZDUSD almost touched the upper boundary of the descending corridor, which the pair has mainly followed since March 2021. This year, the pair have spent a lot of time near the lower boundary, while reversals down from the upper boundary have been swift.
During the period of this channel, it took only 5-6 weeks to move from the upper boundary of the range to the lower boundary. If the pattern repeats for the sixth time, NZDUSD could reach the 0.5750 level in early January.
The alternative bullish scenario will become mainstream only if NZDUSD can stay within the short-term growth momentum and overcome the previous local top at 0.6400.
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#WaveAnalysis
#AUDJPY reversed from resistance level 98.40
Likely to fall to support level 96.00
AUDJPY currency pair recently reversed down from the long-term resistance level 98.40, which stopped the sharp weekly uptrend in the middle of 2022, as can be seen below.
The resistance level 98.40 was further strengthened by the upper weekly Bollinger Band.
Given the strength of the resistance level 98.40 and the overbought weekly Stochastic, AUDJPY currency pair can be expected to fall further to the next support level 96.00.
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#AUDJPY reversed from resistance level 98.40
Likely to fall to support level 96.00
AUDJPY currency pair recently reversed down from the long-term resistance level 98.40, which stopped the sharp weekly uptrend in the middle of 2022, as can be seen below.
The resistance level 98.40 was further strengthened by the upper weekly Bollinger Band.
Given the strength of the resistance level 98.40 and the overbought weekly Stochastic, AUDJPY currency pair can be expected to fall further to the next support level 96.00.
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#WaveAnalysis
#GBPCHF reversed from resistance level 1.1130
Likely to fall to support level 1.1050
GBPCHF currency pair recently reversed down from the pivotal resistance level 1.1130, which stopped the previous minor correction 2 at the start of this month, as can be seen below.
The resistance level 1.1130 was strengthened by the upper daily Bollinger Band and by the 50% Fibonacci correction of the previous downtrend from June.
Given the overbought daily Stochastic, strong downtrend and the widespread Swiss franc inflows, GBPCHF currency pair can be expected to fall further to the next support level 1.1050.
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#GBPCHF reversed from resistance level 1.1130
Likely to fall to support level 1.1050
GBPCHF currency pair recently reversed down from the pivotal resistance level 1.1130, which stopped the previous minor correction 2 at the start of this month, as can be seen below.
The resistance level 1.1130 was strengthened by the upper daily Bollinger Band and by the 50% Fibonacci correction of the previous downtrend from June.
Given the overbought daily Stochastic, strong downtrend and the widespread Swiss franc inflows, GBPCHF currency pair can be expected to fall further to the next support level 1.1050.
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The crypto market cap fell 0.5% in 24 hours to $1.42 trillion, showing another pullback as part of a broader uptrend that started in mid-October but has slowed in the last couple of weeks.
#Bitcoin underwent a sell-off on Wednesday afternoon from the upper end of an upward range above $38.4K. Countless times, the market has proven that it's not ready to accelerate, but it hasn't found any reason to go deep down either.
Only a failure below $36.7K will confirm that $38K is a solid horizontal resistance. Without this confirmation, the working scenario remains in the upward range.
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#Bitcoin underwent a sell-off on Wednesday afternoon from the upper end of an upward range above $38.4K. Countless times, the market has proven that it's not ready to accelerate, but it hasn't found any reason to go deep down either.
Only a failure below $36.7K will confirm that $38K is a solid horizontal resistance. Without this confirmation, the working scenario remains in the upward range.
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Disappointing growth adds to pressure on the yuan
There is a new batch of weak data from China, whose economy has so far failed to respond meaningfully to government stimulus.
Official PMI (Purchasing Managers’ Survey) estimates noted that the manufacturing sector remained in contraction mode in November, while growth in the services sector approached zero.
The manufacturing PMI fell from 49.5 to 49.4 instead of the expected rise to 49.8. The simultaneous decline in the orders component and purchase prices is alarming. Manufacturing employment is in contractionary territory (48.1 in November and 48.0 in October).
The services PMI fell from 50.6 to 50.2 instead of forecasts of a 50.9 rise, with export sales falling from 49.1 to 46.8 and weakness in employment (46.9 vs. 46.5 previously).
It is clear from such data that the economy’s vivid upturn has not yet occurred. This is causing pressure on the markets where the need to build up support is being discussed.
There is a new batch of weak data from China, whose economy has so far failed to respond meaningfully to government stimulus.
Official PMI (Purchasing Managers’ Survey) estimates noted that the manufacturing sector remained in contraction mode in November, while growth in the services sector approached zero.
The manufacturing PMI fell from 49.5 to 49.4 instead of the expected rise to 49.8. The simultaneous decline in the orders component and purchase prices is alarming. Manufacturing employment is in contractionary territory (48.1 in November and 48.0 in October).
The services PMI fell from 50.6 to 50.2 instead of forecasts of a 50.9 rise, with export sales falling from 49.1 to 46.8 and weakness in employment (46.9 vs. 46.5 previously).
It is clear from such data that the economy’s vivid upturn has not yet occurred. This is causing pressure on the markets where the need to build up support is being discussed.
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Meanwhile, the #USDCNH pair has been moving around 7.1450 for more than a week.
Technically, the yuan has found support on the decline towards the 200-day moving average and accumulated oversold on the RSI on the daily timeframes.
This is roughly the same area where the yuan was completing its corrective recovery in July. Therefore, it would not be surprising to see USDCNH rise in the coming days.
Fundamentally, selling the yuan against the dollar may also make sense due to the weakness in the economy. Managed RMB weakness may be in the Politburo’s interest as a measure to support exports.
In addition, China’s price growth rate is close to zero, so the authorities are not afraid of fuelling inflation through a weaker currency.
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Technically, the yuan has found support on the decline towards the 200-day moving average and accumulated oversold on the RSI on the daily timeframes.
This is roughly the same area where the yuan was completing its corrective recovery in July. Therefore, it would not be surprising to see USDCNH rise in the coming days.
Fundamentally, selling the yuan against the dollar may also make sense due to the weakness in the economy. Managed RMB weakness may be in the Politburo’s interest as a measure to support exports.
In addition, China’s price growth rate is close to zero, so the authorities are not afraid of fuelling inflation through a weaker currency.
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Economy may be the reason for ECB rate cuts
The euro was down 0.5%, close to 1.09, on Thursday on a continuing wave of weak data from Germany and the eurozone, reinforcing expectations of a policy reversal.
Wednesday saw weak inflation reports from Germany and Spain. On Thursday, equally weak French (-0.2% m/m and 3.4% y/y) and Italian (-0.4% m/m and 0.8% y/y) data added to the feeble inflation picture. For the entire eurozone, price growth slowed in November from 2.9% to 2.4% y/y, the lowest since July 2021. Core inflation is not falling as fast, dropping to 3.6% y/y.
This return to normal comes at a high price.
The euro was down 0.5%, close to 1.09, on Thursday on a continuing wave of weak data from Germany and the eurozone, reinforcing expectations of a policy reversal.
Wednesday saw weak inflation reports from Germany and Spain. On Thursday, equally weak French (-0.2% m/m and 3.4% y/y) and Italian (-0.4% m/m and 0.8% y/y) data added to the feeble inflation picture. For the entire eurozone, price growth slowed in November from 2.9% to 2.4% y/y, the lowest since July 2021. Core inflation is not falling as fast, dropping to 3.6% y/y.
This return to normal comes at a high price.
Europe is losing jobs, as seen in 10 months of non-stop jobless growth in Germany. The unemployment rate there rose to 5.9% in November, having bottomed out in February-May 2022 at 5%.
Fresh data also showed a 0.9% drop in personal spending for October - after zero change in September and a 0.6% decline.
Weakness in the labour market and consumer spending form the basis for a monetary policy reversal. Building on the weakness in demand, the ECB may move to cut rates before inflation steadily returns to target. By comparison, in the US, inflation is slowing, but the labour market continues to create jobs, requiring current rates to be maintained at the very least.
We would not be surprised if, in the coming weeks, debt market traders markedly lower their rate forecasts for next year, pushing the single currency down against its major peers.
Fresh data also showed a 0.9% drop in personal spending for October - after zero change in September and a 0.6% decline.
Weakness in the labour market and consumer spending form the basis for a monetary policy reversal. Building on the weakness in demand, the ECB may move to cut rates before inflation steadily returns to target. By comparison, in the US, inflation is slowing, but the labour market continues to create jobs, requiring current rates to be maintained at the very least.
We would not be surprised if, in the coming weeks, debt market traders markedly lower their rate forecasts for next year, pushing the single currency down against its major peers.
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The crypto market has added 1.5% over to the cap of $1.44 trillion, which has been acting as resistance for the last three weeks. The upward movement has intensified since the beginning of December.
#Bitcoin rose 9.4% to $37.7K in November, strengthening for the third consecutive month. In terms of seasonality, December is considered relatively neutral, adding half the time over the past 12 years. The average gain is 30.8%, while the average decline is 12.8%.
December started on the upside, returning BTCUSD to another test of highs near $38.4K. The price went up with the start of a new day and month before touching the lower boundary of the trading channel. Such dynamics look like an attempt to accelerate the growth trend.
#Ethereum is adding 3.8% over the day, having returned to test $2100 - a horizontal resistance which withstood the bulls' onslaught in November and was a turning point in April. A move above opens up a wide untraded range, giving ETH freedom of movement all the way to $3500.
#Bitcoin rose 9.4% to $37.7K in November, strengthening for the third consecutive month. In terms of seasonality, December is considered relatively neutral, adding half the time over the past 12 years. The average gain is 30.8%, while the average decline is 12.8%.
December started on the upside, returning BTCUSD to another test of highs near $38.4K. The price went up with the start of a new day and month before touching the lower boundary of the trading channel. Such dynamics look like an attempt to accelerate the growth trend.
#Ethereum is adding 3.8% over the day, having returned to test $2100 - a horizontal resistance which withstood the bulls' onslaught in November and was a turning point in April. A move above opens up a wide untraded range, giving ETH freedom of movement all the way to $3500.
The #DowJones has taken a high of 36,000, which is only 2.5% below its historical peak of January 2022. Above that round level, the index traded above it for a few days in November 2021 and briefly in December and January 2022.
This was a turning point three years ago and could now be again, and it's not about the magic of numbers at all but a lack of fuel for growth. The Dow Jones rally began on 30 October after closing below 32,400 the day before. The ensuing rally of more than 11.4% was almost without a pullback.
As a result, the Relative Strength Index reached 78.10 on the daily charts, going deep into overbought territory. The index has not climbed higher since the end of 2017. In that period, the RSI spent quite a long time in highly overbought territory, but the Dow Jones 30 growth rate was two to three times lower than the current one.
This was a turning point three years ago and could now be again, and it's not about the magic of numbers at all but a lack of fuel for growth. The Dow Jones rally began on 30 October after closing below 32,400 the day before. The ensuing rally of more than 11.4% was almost without a pullback.
As a result, the Relative Strength Index reached 78.10 on the daily charts, going deep into overbought territory. The index has not climbed higher since the end of 2017. In that period, the RSI spent quite a long time in highly overbought territory, but the Dow Jones 30 growth rate was two to three times lower than the current one.
There is another worry for the bulls - the performance of other equity indices. The #Nasdaq100 – the guiding star of investors in recent years – has stabilised in a narrow range since the beginning of last week. An attempt to develop growth on Wednesday was met with a sell-off, and Thursday also went to the bears' credit.
The #SP500 index, the leading market benchmark, stuck to the 4560 level. The bulls managed to close the gap from the beginning of August and seem to be exhausted. A side effect of this is the compression of volatility and the VIX index falling to multi-year lows, from which reversals have also often occurred.
The small-cap #Russell2000 index, the DJIA’s opposite, has been hitting horizontal resistance near 1810 for more than two weeks now, unable to get above its 200-day moving average despite a spectacular reversal in late October.
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The #SP500 index, the leading market benchmark, stuck to the 4560 level. The bulls managed to close the gap from the beginning of August and seem to be exhausted. A side effect of this is the compression of volatility and the VIX index falling to multi-year lows, from which reversals have also often occurred.
The small-cap #Russell2000 index, the DJIA’s opposite, has been hitting horizontal resistance near 1810 for more than two weeks now, unable to get above its 200-day moving average despite a spectacular reversal in late October.
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On Friday and Monday, we saw legendary moves in gold. On Friday evening, the price rose to $2075 on the background of risk appetite with reduced liquidity in the instrument. On Monday, the price of gold reached $2145, a new historical price maximum.
The nature of the movement on Friday and Monday morning suggests that we have seen the bears in gold wash out of the market. As liquidity returned, the price pulled back to $2060. This is still extreme territory, as the price only spent a few hours above.
Among the bullish technical signals, we note the Golden Cross formed when the 50-day moving average exceeded the 200-day moving average. In addition, the price is above this crossover, which also strengthens the bullish signal.
Still, joining the upward move in gold may be too dangerous right now. On the daily charts, the RSI is flirting with overbought territory, creating correction risks.
The nature of the movement on Friday and Monday morning suggests that we have seen the bears in gold wash out of the market. As liquidity returned, the price pulled back to $2060. This is still extreme territory, as the price only spent a few hours above.
Among the bullish technical signals, we note the Golden Cross formed when the 50-day moving average exceeded the 200-day moving average. In addition, the price is above this crossover, which also strengthens the bullish signal.
Still, joining the upward move in gold may be too dangerous right now. On the daily charts, the RSI is flirting with overbought territory, creating correction risks.
The upward movement generally fits into a Fibonacci pattern with an initial impulse from $1810 to $2007, followed by a correction to $1932. The realisation of this pattern suggests a 161.8% retracement of the initial rise to 2129. This is a fairly accurate execution of the pattern, given the low-liquidity trading hours and historical highs.
The next few days for gold are decisive for the subsequent trend. The ability to hold above $2050 will point to continued extreme bullish sentiment in the precious metals market.
The previous three times that gold made highs - in 2011 and three times in the last three years - it went into a sharp and deep correction that lasted for years in the first case and months in the aftermath of the pandemic.
The latter scenario looks more likely, given lower inflation fears and attractive yields in bonds, gold's main competitor.
The next few days for gold are decisive for the subsequent trend. The ability to hold above $2050 will point to continued extreme bullish sentiment in the precious metals market.
The previous three times that gold made highs - in 2011 and three times in the last three years - it went into a sharp and deep correction that lasted for years in the first case and months in the aftermath of the pandemic.
The latter scenario looks more likely, given lower inflation fears and attractive yields in bonds, gold's main competitor.
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#WaveAnalysis
#DowJones broke multi-month resistance level 35735.00
Likely to rise to resistance level 37000.00
Dow Jones index under the bullish pressure after the earlier breakout of the multi-month resistance level 35735.00, which stopped the previous impulse wave (A) at the end of July.
The breakout of the resistance level 35735.00 accelerated both of the active impulse waves 5 and (C).
Given the multi-month uptrend, Dow Jones index can be expected to rise further to the next resistance level 37000.00 (target price for the completion of the active waves 5 and (C)).
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#DowJones broke multi-month resistance level 35735.00
Likely to rise to resistance level 37000.00
Dow Jones index under the bullish pressure after the earlier breakout of the multi-month resistance level 35735.00, which stopped the previous impulse wave (A) at the end of July.
The breakout of the resistance level 35735.00 accelerated both of the active impulse waves 5 and (C).
Given the multi-month uptrend, Dow Jones index can be expected to rise further to the next resistance level 37000.00 (target price for the completion of the active waves 5 and (C)).
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#WaveAnalysis
#CHFJPY reversed from resistance level 170.30
Likely to fall to support level 167.40
CHFJPY currency pair recently reversed down from the key resistance level 170.30, which stopped the previous impulse wave (3) earlier this month.
The resistance level 170.30 was strengthened by the upper daily Bollinger Band.
Given the strength of the resistance level 170.30, bearish divergence on the daily Stochastic, CHFJPY currency pair can be expected to fall further to the next support level 167.40 (previous minor pivot support from the end of November)).
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#CHFJPY reversed from resistance level 170.30
Likely to fall to support level 167.40
CHFJPY currency pair recently reversed down from the key resistance level 170.30, which stopped the previous impulse wave (3) earlier this month.
The resistance level 170.30 was strengthened by the upper daily Bollinger Band.
Given the strength of the resistance level 170.30, bearish divergence on the daily Stochastic, CHFJPY currency pair can be expected to fall further to the next support level 167.40 (previous minor pivot support from the end of November)).
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Gold's historic highs and the surge in risk demand at the end of last week did not spare cryptocurrencies. Cryptos experienced impressive gains on Monday, but one cannot leave aside the weekend bull run as well. The #crypto market capitalisation reached 1.55 trillion, adding 10.5% in seven days.
#Bitcoin proved that the smooth uptrend since late October was just a long consolidation before a new upward spurt. Bitcoin has added over 11.5% since Friday, surpassing $42K at one point on Monday. While Bitcoin is overbought on daily timeframes, this is not necessarily a reason for a correction. In this mode, the first cryptocurrency can move for many more days, drawing more and more layers of investors into FOMO. Technically, up to $46K is thin-air territory for Bitcoin, and price swings between $40K and $46K can be pretty wild.
#Bitcoin proved that the smooth uptrend since late October was just a long consolidation before a new upward spurt. Bitcoin has added over 11.5% since Friday, surpassing $42K at one point on Monday. While Bitcoin is overbought on daily timeframes, this is not necessarily a reason for a correction. In this mode, the first cryptocurrency can move for many more days, drawing more and more layers of investors into FOMO. Technically, up to $46K is thin-air territory for Bitcoin, and price swings between $40K and $46K can be pretty wild.
Swiss inflation falls to 1.4%, will it affect the SNB?
Swiss inflation is falling below expectations, and this may be a reason for the SNB to change its rhetoric next week. Consumer prices fell 0.2% in November, slowing the annual pace from 1.7% to 1.4%, while no changes were expected.
This is a two-year low and down under the historical 101-year average (1.75%), although above the 0.6% average since 2000 when the SNB moved to inflation targeting.
The strong franc is one of the reasons why inflation is falling faster than in the US and the eurozone.
Swiss inflation is falling below expectations, and this may be a reason for the SNB to change its rhetoric next week. Consumer prices fell 0.2% in November, slowing the annual pace from 1.7% to 1.4%, while no changes were expected.
This is a two-year low and down under the historical 101-year average (1.75%), although above the 0.6% average since 2000 when the SNB moved to inflation targeting.
The strong franc is one of the reasons why inflation is falling faster than in the US and the eurozone.
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