- It could have been worse, but the major indices close lower on the day
- Canada cuts its forecast for 2021/22 deficit citing stronger economic performance
- Iran foreign minister highlights progress in nuclear talks
- WTI crude oil futures settle at $70.73
- White House says 'not quite there' with Manchin on Build Back Better
- South Africa test positivity rises to 31%
- Major European indices close mostly lower. Spain's Ibex is the exception
- Dollar bid as the London fixing approaches
- European energy prices are back at insane levels
- Hard omicron data from South Africa leaves room for worry
- US November PPI +9.6% vs +9.2% y/y expected
- The EUR is the strongest and the JPY is the weakest as NA traders enter for the day
The US PPI data was expected to be high but not this high.
Producer price came in at 9.6% versus 9.2% year on year high. That was a record and on back of the CPI which rose to a near 4 decade high, suggests the pipeline of inflation will be around for a while.
The data comes ahead of the FOMC decision tomorrow which is largely expected to lead to a doubling of the taper to $30B per month (buying is currently at $105B so in 3+ months the taper can be complete and the debt market will stand on it's own two feet - assuming all goes well)).
The Fed will also release their expectation for growth, inflation and employment and the "dot plot" of rate expectations. At the September meeting the Fed was expecting 0 to 1 tightening in 2022. That plot will be ratcheted up to up to 2-3 (if they are consistent with the market)..
As a result, it is not surprising that there was anxiety in some of the markets today.
In the forex, the GBP was the strongest of the major currencies. The CAD was the weakest. The USD moved higher through the day as there was some dollar buying ahead of the FOMC decision. However, the pairs have been doing a lot of up and down trading of late. The dollar only fell GBP today (modestly). The biggest gain was versus the CAD as the loonie was pressured by lower oil prices as well.
Some technicals to eye into the new trading day:
- EURUSD: The EURUSD it is closing near it's low for the day at 1.1255. That took the price below a swing area between 1.12595 and 1.12658. That takes price below a floor that next targets the lower extremes of going back to November 30 at 1.1233 and December 7 at 1.12266. If the sellers can stay below the old floor those be targets on the downside in the new trading day. Move back above and be disappointed on the break.
- GBPUSD: The GBPUSD tried for the third day to extend above the 200 hour moving average after stay below that moving average going back to November 22. That moving average comes in at 1.32386 and the break above failed. The price is down testing the 100 hour moving average at 1.3222 at the close. A move below that moving average line with more momentum would have traders targeting the lows from earlier today at 1.31894 and lows from last week down to 1.31588. Move back above the 200 hour moving average and traders will start to wonder if the fourth time is the charm.
- USDJPY: Another quiet day for the USDJPY. The pair bottomed for the second day in a row against its 200 hour moving average (green line) currently at 113.458, and extended above its 100 hour moving average at 113.561. What it could not do is get above the recent swing highs from December 7, December 9, and December 10 between 113.77 and 113.806. Getting above that area would have traders targeting the 114.00 level which is home to the 50% midpoint of the move down from the November 24 high (at 114.019) and swing highs from November 29 and December 8 at 113.954. Break back below the 100 and 200 hour moving averages, and it could be fast break the other way (i.e. to the downside).
- USDCHF: The USDCHF moved sharply lower in the European session and in the process moved below the 100 day moving average at 0.9201. In the late New York session the price rebounded back above that moving average level and also extended above the converged 100 and 200 hour moving averages at 0.92245. The price is currently trading at 0.9240. In the new trading day stay above the moving averages will be the barometer for the bulls and bears. Staying above is more positive/bullish. Move below and it's more bearish.
IN other markets as the US ay comes to an end:
- Spot gold is down $50.21 or -0.85% at $1770.45
- Spot silver is down $0.39 a -1.75% at $21.91
- WTI crude oil futures after the close are trading at $70.26. The settlement price came in at $70.73
- Bitcoin is trading at $48,331.83
