Daily Market Outlook, December 6, 2022

Robust US Econ Data Supports US Yields & The Dollar, Weighing On Risk Sentiment...

  • Overnight Asian equity markets were subdued, as Wall Street saw further weakness driven by a rebound in US bond yields which provided support for the Dollar, the reversal in risk sentiment was driven by another set of strong economic data out of the US, this led markets to reprice hopes for the Fed to reduce the overall terminal rate for rate increases, dashing hopes for an early end to the rate cycle, with many investors now betting on another hawkish outcome form next week's FOMC meeting. The Reserve Bank of Australia raised rates overnight by another 25bps, as expected, in its subsequent statement, the central bank reiterated that inflation remains too high but that medium-term expectations remain well anchored.

  • For the day ahead, the data calendar is pretty sparse, focus in the UK will be on construction PMI data, which will give an update on the very interest rate-sensitive sector, ahead of next week's Bank of England meeting, the October construction PMI saw it biggest rise in five months, with commercial building lead the way, this was offset by a distinctly weak reading for housing activity, which saw its fourth month of decline, market watchers expect the November data to show another overall increase, however, the issue is likely to be that growth expectations overall will be somewhat more sanguine, suggesting the current uptick in overall activity will likely fizzle out.

  • In the US markets await trade balance data later today, October international trade data suggests another meaningful rise in the overall trade deficit is likely, as US imports continue to rise rapidly, while exports continue to stagnate, this suggests a further decline in competitiveness as the strong greenback weighs on demand for US exports, underpinned by slower global growth environment, leaving exporters handicapped. Markets-wise, investors will be watching for any follow-through in the reversal in risk sentiment, especially a continuation of firmer US yields which will likely weigh on equity markets, the benchmark SP500 is testing some key support in the 3970/80 area a continued absence of buyers here could put hopes for a Santa Claus rally in further jeopardy!

Overnight Headlines

  • China Reports Fewer Covid Cases As Blanket Testing Rules Eased

  • Australia Raises Key Rate, Reiterates Further Tightening To Come

  • Australia Records First Current Account Deficit In Three Years

  • Japan Oct Real Wages Post Biggest Fall In 7 Years With Hot Inflation

  • Japan’s Households Spend More Despite Falling Real Wages

  • BoJ Gov Kuroda Rules Out Rate Hike Until Wages Rise More

  • Fitch: World Growth Forecasts Cut Again As Inflation Fight Intensifies

  • ECB’s Lane Confident Inflation Near Peak As More Hikes To Come

  • UK’s Soaring Inflation Rate Erodes Jump In Shop Sales, BRC Says

  • Dollar Holds Firm On Hawkish Fed Bets, Aussie Tad Higher After RBA

  • China’s Local Credit Market Weakens Further On Fund Outflows

  • Oil Snaps Two-Day Drop With China Demand And Russia Cap In Focus

  • US, EU Mull Climate-Based Tariffs Aimed At China Steel, Aluminium

  • Asia-Pacific Markets Mixed; Beijing Eases Some Covid Measures

  • Porsche Will Join Germany's Blue-Chip Index - Deutsche Boerse

  • PepsiCo To Lay Off Hundreds Of Workers In Headquarters Roles

  • Chevron Set To Take Control Of Venezuela Oil Facility This Week

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 3990

Technicals

  • Primary support is 3990

  • Primary upside objective is 4120

  • Next pattern confirmation, acceptance above 4050

  • Failure below 3975 opens a test of 3930

  • 20 Day VWAP bullish, 5 Day VWAP bearish

EURUSD Bias: Bullish Above Bearish below 1.0450

Technicals

  • Primary support is 1.0450

  • Primary upside objective is 1.0620

  • Next pattern confirmation, acceptance above 1.0550

  • Failure below 1.04 opens a test of 1.0350

  • 20 Day VWAP bullish, 5 Day VWAP bullish

  • Today’s New York Cut Option Expiries: 1.0325 (214M), 1.0410-15 (252M)

  • 1.0425-35 (876M), 1.0550 (787M), 1.0575 (240M)

GBPUSD Bias: Bullish Above Bearish below 1.21

Technicals

  • Primary support is 1.21

  • Primary upside objective 1.24

  • Next pattern confirmation, acceptance above 1.2250

  • Failure below 1.20 opens a test of 1.1930

  • 20 Day VWAP bullish, 5 Day VWAP bullish

  • Today’s New York Cut Option Expiries: EUR/GBP: 0.8550 (450M)

USDJPY Bias: Bullish above Bearish Below 136

Technicals

  • Primary resistance is 137.50

  • Primary downside objective is 132

  • Next pattern confirmation, acceptance below 133.50

  • Acceptance above 138 opens a test of 139.30

  • 20 Day VWAP bearish, 5 Day VWAP bullish

Today's New York Cut Option Expiries: 139.50 (370M), 140.00 (1.71BLN)

AUDUSD Bias: Bullish Above Bearish below .6640

Technicals

  • Primary support is .6640

  • Primary upside objective is .6900

  • Next pattern confirmation, acceptance above .6800

  • Failure below .6600 opens a test of .6550

  • 20 Day VWAP bullish, 5 Day VWAP bearish

  • Today’s New York Cut Option Expiries: 0.6700 (410M), 0.6750 (292M), 0.6800 (593M) 0.6820 (327M).

  • NZD/USD: 0.6370 (527M)

  • USD/CAD: 1.3615-25 (1.04BLN), 1.3660 (310M)

BTCUSD Bias: Intraday Bullish Above Bearish below 16500

Technicals

  • Intraday 16500 is primary support

  • Primary upside objective is 18000

  • Next pattern confirmation, acceptance below 17200

  • Failure 16400 opens a test of 16000

  • 20 Day VWAP bearish, 5 Day VWAP bullish