• Michael Moran, Senior Market Strategist & Trading Mentor at ACY Securities


• 16.12.2021 01:00 pm
#stocks

Summary: The US Federal Reserve announced plans to double its monthly taper from USD 15 to USD 30 billion beginning in January 2022. The Fed also left interest rates on hold. Following the meeting, more policymakers (12 out of 18) saw three rate hikes next year. Fed Chair Jerome Powell sought to soothe markets, telling reporters that the US central bank would not hike rates before ending up tapering. Lower than forecast US November Retail Sales slowed the Greenback’s rally. After initially soaring to a 3-week high at 96.91, the Dollar Index, which measures the value of the Greenback against a basket of 6 major currencies slid back to close unchanged at 96.57. The Australian Dollar (AUD/USD) jumped 0.56% on a typical short squeeze, finishing at 0.7140 from 0.7105 yesterday. Against the Japanese Yen, the Greenback edged higher to 114.07 from 113.72 on improved risk sentiment and the hawkish Fed outcome.  The Euro (EUR/USD) steadied to finish near its overnight highs at 1.1270 (1.1258 yesterday). Sterling finished little changed at 1.3235 (1.3225) ahead of today’s Bank of England interest rate policy meeting. UK CPI, released yesterday, rose above 5%, higher than economist’s expectations at 4.8%. The US Dollar finished mixed against the Asian and Emerging Market currencies. USD/SGD (Dollar-Singapore Dollar) dipped to 1.3670 (1.3700) while USD/THB (Dollar-Thai Baht) was last at 33.50 from 33.40 yesterday. The Greenback finished little changed against the Chinese Offshore Yuan (USD/CNH) at 6.3723 (6.3735). China’s trifecta of economic data (Retail Sales, Industrial Production and Fixed Asset Investment) saw mixed results.
Wall Street stocks rose with global equities on a relief rally. The DOW ended 0.5% higher to 35,725 (35,587) and was still rallying in post New York as this is being written. The S&P 500 currently trades around 4,711 from yesterday’s 4,640. Treasury prices fell, pushing up bond yields. The benchmark US 10-year rate settled at 1.47% (1.44% yesterday). Germany’s 10-year Bund yield was flat at -0.37%. Australia’s 10-year Treasury bond yield climbed to 1.55% from 1.53% yesterday.
Data released yesterday saw China’s November Retail Sales dip to 3.9% from 4.9%, lower than estimates at 4.9%. Chinese November Industrial Production (y/y rose to 3.8% from 3.5%, matching median estimates). China’s Fixed Asset Investment for November dipped to 5.2% against expectations of 5.3%, and a previous 6.1%. UK November CPI (y/y rose to 5.1% from a previous 4.2%, and higher than forecasts of 4.8%. UK November Core CPI (y/y rose to 4.0% from a previous 3.4%, and higher than estimates at 3.8%. Canada’s November Housing Starts climbed to 301,000 from October’s 236,600. Canadian Manufacturing Sales matched forecasts at 0.2%. US November Retail Sales (m/m) fell 0.3%, lower than estimates at 0.8%. The US Empire State Manufacturing Index for December rose to 31.9 from a previous 30.9, beating forecasts at 27.3.

• AUD/USD – The Aussie Battler hopped back to life, reversing its drop to finish 0.56% higher at 0.7140 from 0.7105 yesterday. Risk appetite increased, lifting equities post the FOMC meeting and announcement. AUD/USD hit an overnight high at 0.7151 on a typical short squeeze. In early Asia, the AUD/USD pair trades at 0.7167.
• EUR/USD – The shared currency rallied to finish at 1.1270 after trading to an overnight high at 1.1277. Yesterday the Euro opened at 1.1258. Overnight low traded for the EUR/USD pair was at 1.1222. The ECB has its interest rate policy meeting later today.
• GBP/USD – Sterling finished with modest gains versus the US Dollar at 1.3235 from 1.3225 yesterday. A rise in the UK November Headline and Core CPI ahead of today’s Bank of England rates policy meeting saw speculators trim the short Sterling bets.
• USD/JPY – a rise in the US 10-year bond yield and mostly risk-on market stance saw the Greenback edged higher versus the Japanese Yen. USD/JPY finished at 114.07 from 113.72 yesterday. It was the first time since November 27 that the USD/JPY pair finished above 114.

On the Lookout: Today’s economic data calendar picks up with the release of global Markit Manufacturing and Services PMIs. New Zealand kicked off today’s reports with its Q3 GDP, which was down to -3.7%, but better than expectations at -4.1%. In early Asian trade, the Kiwi (NZD/USD) jumped to 0.6780 from its New York close of 0.6755. The Dollar has edged lower against its rivals in early Asian trade. Australia also released its December Markit Manufacturing PMI, matching estimates at 57.1 but lower than a previous 59.2. Australia’s Flash December Services PMI fell to 55.1, from 55.7, and lower than estimates at 57.4. Japan follows next with its November Trade Balance (f/c -JPY 675 billion from -JPY 67.4 billion – ACY Finlogix), Japan’s Jibun Bank December Manufacturing PMI (f/c 55 from 54.4), Japanese Jibun Bank Services PMI (no f/c, previous was 53). Australia follows with its November Employment Change (f/c +200,000 from previous -46,300 – ACY Finlogix), Australian November Unemployment Rate (f/c 5% from 5.2% - ACY), and Australian Participation Rate for November (f/c 65.5% from 64.7% - ACY Finlogix). France starts off European data with its December Flash Manufacturing PMI (f/c 55.3 from 55.9), French Services PMI (f/c 55.6 from 57.4), German Flash December Manufacturing PMI (f/c 57 from 57.4), Germany Services PMI (f/c 51 from 52.7), Eurozone December Manufacturing PMI (f/c 57.7 from 58.4), Eurozone Services PMI (f/c 54.2 from 55.9), UK Flash December Manufacturing PMI (f/c 57.6 from 58.1), UK Services PMI (f/c 57.5 from 58.5), Canadian November Employment Change (no f/c, previous was 65,800), Canadian October Wholesale Sales (f/c 1.4% from 1.0%) – All ACY Finlogix estimates. Finally, the US releases its Weekly Unemployment Claims (f/c 195,000 from 185,000), Philadelphia Fed Manufacturing Index (f/c 29.6 from 39.0), US November Housing Starts (f/c 1.57 million from previous 1.52 million), US November Building Permits (f/c 1.66 million from 1.653 million), US Markit Flash December Manufacturing PMI (f/c 58.5 from 58.3) and finally US Markit December Flash Services PMI (f/c 58.7 from 58). Whew!

Trading Perspective: The DXY closed flat at 96.55 after trading to an overnight and 3-week and post-Fed high at 96.91. Which confirms suggestions that speculators have been carrying long US Dollar bets for some time now. Overnight, the ranges of almost all the currency pairs widened in choppy trading conditions. Expect this to continue next week, which is the last full trading week ahead of the Christmas break. The large bank trading rooms will see a reduction in dealing staff and spreads will widen. Whatever one’s view is, the best strategy is to be nimble and flexible. This is not the time to have strong opinions. Dust those tin helmets put them on and get ready to rumble.

• AUD/USD – It’s been just over an hour since I started writing this commentary and FX has been on the move already in early Asia. The AUD/USD pair has hopped anew to its current 0.7173 level from this morning’s open at 0.7140 (0.7105 yesterday). Recorded high this morning is at 0.7177. Immediate resistance lies at 0.7180 followed by 0.7210 and 0.7240. Immediate support is found at 0.7100, 0.7070 and 0.7040. Going to get choppy today, likely range 0.7110-0.7210. Just trade the range shag on this puppy today.

(Source: Finlogix.com)

• EUR/USD – The Euro has managed to find some life in it, rallying against the Greenback to 1.1297 from this morning’s 1.1270. This morning’s high traded was at 1.1301 so far. Immediate resistance lies at 1.1310 followed by 1.1340 and 1.1370. On the downside, immediate support can be found at 1.1240, and 1.1220 (overnight low 1.1222). The next support level lies at 1.1180. Expect a volatile session on the Euro today, pre-ECB meeting likely range will be 1.1220-1.1320.
• GBP/USD – Ahead of the Bank of England’s policy meeting today, expect a choppy session on the British Pound. Sterling closed in New York at 1.3235. In early Asian trade, GBP/USD has rallied to 1.3267 with the Asian high so far at 1.3275. For today, immediate resistance lies at 1.3275 followed by 1.3305 and 1.3335. Immediate support can be found at 1.3230, 1.3200 and 1.3170. Likely trading range today, 1.3210-1.3310.
• USD/JPY – Against the Japanese Yen, the US Dollar finished at 114.07 (113.72 yesterday). This morning, the USD/JPY pair has edged higher to 114.14. Despite the rally in the other currencies against the Greenback, the USD/JPY pair has been steady. The market’s risk-on stance has supported this currency pair. On the day, immediate resistance lies at 114.30 (overnight high 114.27). The next resistance level is found at 114.60. On the base, immediate support can be found at 113.90, 113.60 (overnight low 113.63) and 113.30. Look for a choppy trading range today in the USD/JPY between 113.80-114.40.

Have a top Thursday ahead all, happy trading.

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