Yen Weakness Still the Main Theme as US Stocks Might Extend Record Run

Market overviews

Overall outlook in the markets are unchanged, with US futures pointing to slightly higher open. DOW and S&P 500 could continue their record runs. Selloff in Yen remains the main theme while Sterling is strong together with Aussie and Kiwi. Euro and Dollar are both soft and bounded in range against each other.

Technically, a range breakout in EUR/USD is long overdue. But we’d probably wait till 2022 to happen. It’s rather hard to predict which side the breakout would be. Pure on EUR/USD’s technically, the down trend from 1.2348 should continue. This is in line with the outlook in EUR/GBP, EUR/CHF and even EUR/AUD. We’ll see.

In Europe, at the time of writing, FTSE is up 0.05%. DAX is up 0.21%. CAC is up 0.29%. Germany 10-year yield is down -0.0188 at -0.202. Earlier in Asia, Nikkei dropped -0.40%. Hong Kong HSI rose 0.11%. China Shanghai SSE rose 0.62%. Singapore Strait Times dropped -0.36%. Japan 10-year JGB yield rose 0.012 to 0.072.

Happy new year our readers. We’ll be back on Jan 4.

US initial jobless claims dropped to 198k, lowest since 1969

US initial jobless claims dropped -8k to 198k in the week ending December 25, better than expectation of 205k. Four-week moving average of initial claims dropped -7k to 199k, lowest since October 25, 1969.

Continuing claims dropped -140k to 1716k in the week ending December 18, lowest since March 7, 2020. Four-week moving average of continuing claims dropped -60k to 1850k, lowest since March 14, 2020.

Swiss KOF dropped to 107 in Dec, economy to develop positively at 2022 start

Swiss KOF Economic Barometer dropped slightly from 107.5 to 107.0 in December. “The barometer remains above its long-​term average,” KOF said. “The Swiss economy should thus continue to develop positively at the beginning of 2022, if the economic activity is not impaired by the renewed spread of the virus.”

“This month, the barometer is mostly influenced by indicators covering private consumption, which are slightly negative. Another slight negative contribution is sent by bundles of indicators from the finance and insurance sector. In contrast, indicators for foreign demand are contributing positively.”

ECB Knot and Visco doubt if inflation falls below 2% after 2022

ECB Governing Council member Klaas Knot said he had a “different view” to ECB’s projection that inflation will fall back to 1.8% after 2022. He said, “I think the chance we remain stuck above 2% is just as big. Not far above 2%, but still.”

Separately, another governing council member Ignazio Visco said, “(Inflation) forecasts below 2% in 2023-24 are of course subject to both downside and upside risks.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3431; (P) 1.3465; (R1) 1.3521; More…

Intraday bias in GBP/USD remains on the upside for the moment. Current development suggests that corrective fall from 1.4248 has completed with three waves down to 1.3158, after hitting 1.3164 medium term fibonacci level. Further rise should be seen to 1.3570 support turned resistance. Sustained break there will further affirm this bullish case and target 1.3833 resistance next. On the downside, break of 1.3375 minor support will turn intraday bias neutral first.

In the bigger picture, focus remains on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, after rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493. However, strong rebound from current level will revive argue that up trend from 1.1409 is still in progress, and probably ready to resume.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
08:00 CHF KOF Economic Barometer Dec 107 106.4 108.5 107.5
13:30 USD Initial Jobless Claims (Dec 24) 198K 205K 205K 206K
14:45 USD Chicago PMI Dec 61.5 61.8
15:30 USD Natural Gas Storage -128B -55B