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Tomorrow has the all-important release of US labor market numbers. But the Fed's Powell kind of already robbed the thunder from the release during his speech at the Brookings Institute yesterday. He basically implied that the Fed would start slowing down its tightening at the next meeting. Naturally the market jumped and the dollar weakened in response. Now the question is whether there will be follow-through on the optimism with the jobs numbers. November's NFP is expected to come in lighter compared to the prior month, but it should be noted that the data has been markedly outperforming expectations lately. Taken in context of the latest BLS report showing that the labor market remained tight, the consensus for what to expect out of NFP has drifted up, slightly. A week ago, analysts were forecasting 200K jobs added, but that has now moved up to 210K jobs, compared to 261K in October. The trends remain favorable Prior to covid, a 210K jobs report would be considered relatively good. But referring back to the BLS report that came out yesterday, there are some worrying signs. As mentioned, in October there were 261K jobs created, but 353K jobs went off the market. Meaning… Read More »US NFP and how the market could react

The US core Consumption Expenditures Price Index will likely signal easing pressures. The US ISM Manufacturing PMI is foreseen to fall into contraction territory. EUR/USD could revisit the 1.0500 price zone after the dust settles. December will kick start with a high note in the United States, as the country publishes the Personal Consumption Expenditures (PCE) Price Index data, the US Federal Reserve’s preferred inflation gauge, while the Institute of Supply Management (ISM) will unveil the November Manufacturing PMI. Updates on inflation and business growth will be critical ahead of the last US Fed decision of the year, scheduled for December 14. Core PCE inflation, which excludes volatile food and energy prices, is expected to have risen by 0.3% MoM, while the annual reading is foreseen at 5%, easing from 5.1% in October.  On the other hand, the ISM Manufacturing PMI is expected to have fallen into contraction territory, from 50.2 in October to 49.8. Signs of easing inflation will be encouraging but not a surprise. Neither will confirmation the economy has contracted. Still, a Manufacturing PMI below 50 would undoubtedly hit the US Dollar, while a better-than-anticipated figure could boost the battered American currency. US Federal Reserve’s upcoming decision… Read More »US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes

Outlook: Today the important data is the JOLTS report, the ADP forecast of the private sector component of payrolls, and Fed chief Powell’s speech. We also get the Beige Book (for the December 14-15 FOMC), another revision to Q3 GDP, Oct trade balance for goods, and pending home sales. Going into a day of data overload, remember that last week the Atlanta Fed had Q4 GDP at 4.3% and holiday retail sales are excellent.   The Jolts report is expected to how ongoing divergence between jobs offered and the workers available to fill them. The space is so wide that even if offerings contract by 450,000 as forecast, the labor shortage will still be obvious and equally obvious, the expectation of rising wages to pull labor in. The continuation of job growth will be tested with payrolls on Friday, but there is little doubt the Fed will not be getting the conventional response to rate hikes. Chart from the WSJ. As noted before, companies may be exaggerating their offering requirements but at the same time, unemployed may have given up because they don’t qualify due to illiteracy, innumeracy and drug addiction.   Jolts may prepare us for payrolls on Friday,… Read More »FX market expects Powell to repeat that it’s time to dial back the aggressiveness

EUR/USD ends the day in the red for the third straight day on Tuesday amid modest USD strength. Softer German consumer inflation figures undermine the Euro and contribute to the downtick. Bets for smaller Fed rate hikes cap the USD and help the pair to regain traction on Wednesday. Traders look to flash Eurozone CPI and Fed Chair Powell’s speech for some meaningful impetus. The EUR/USD pair continued with its struggle to find acceptance above a technically significant 200-day SMA and finally settled in the red for the third straight day on Tuesday. The US Dollar attracted some dip-buying and climbed to a multi-day high, which, in turn, was seen as a key factor that acted as a headwind for the major. The US Treasury bond yields gained some positive traction in the wake of the overnight hawkish remarks by Federal Reserve policymakers. Apart from this, worries about the worsening COVID-19 situation in China drove some haven flows towards the greenback. The shared currency was further undermined by softer German consumer inflation figures, showing that price pressures eased a bit in Europe’s largest economy during November. This, however, did little to cool expectations for a series of interest rate hikes… Read More »EUR/USD Analysis: Bulls remain hesitant near 200-DMA, Eurozone CPI/Powell’s speech in focus

S&P 500 recovered from China uncertainty, keeping right below 4,000 until Williams and Bullard reiterated sticky inflation and high rates views. Reiterated – not brought fresh and unexpected information. Still, stocks and much of the rest declined sharply, and even the 3,960s support was tested. It held, and overnight crawl higher began. VIX is slowly picking up, market breadth deteriorated, but Russell 2000 isn‘t in capitulation mode. Neither are my favorite Friday mentioned sectors. While I‘m not a raging short-term bull, I acknowledge the very solid medium-term prospects for the stock market rally to continue, especially over the final 2-3 weeks of the year. Markets are welcoming the decelerating inflation, and willing to bet against the hawkish Fed rhetoric in the short-term. Running on borrowed time, but running still. Note crude oil and precious metals with copper – turning up on yet another China easing rumor. Should it turn out true, it would be powerful, but for now let‘s count with muted, positive effect on the ebbing and flowing real assets. More up than down as the sensitivity to tight Fed rhetoric and moves decreases. Keep enjoying the lively Twitter feed serving you all already in, which comes on top… Read More »Powell ahead

EUR/USD remains on the defensive for the second straight day amid a modest USD strength. China’s COVID-19 woes weigh on investors’ sentiment and benefit the safe-haven greenback. Bets for less aggressive Fed rate hikes could cap the buck and limit the downside for the pair. The EUR/USD pair edges lower during the Asian session on Monday and moves away from its highest level since August 12 touched last week. The cautious market mood – amid worries about the worsening COVID-19 situation in China – offers some support to the safe-haven US Dollar and drags the major lower for the second straight day. China recorded a record-high number of daily infections on Saturday, forcing the government to impose strict anti-COVID measures in several cities. Furthermore, public discontent over the zero-COVID policy flared protests across China and raised concerns about a further slowdown in economic activity. This, in turn, keeps investors on edge, evident from a generally weaker tone around the equity markets and driving haven flows towards the greenback. The flight to safety and growing acceptance of a less aggressive policy tightening by the Fed continue to exert downward pressure on the US Treasury bond yields. It is worth recalling that the… Read More »EUR/USD Analysis: Bulls turn cautious near 200-DMA amid China’s COVID-19 jitters

A flash estimate of Eurozone inflation for November will be released next week (November 30). In October, inflation rose further to 10.6% y/y, from 9.9% y/y previously. The main driver was food prices, which increased to 13.1% y/y. In contrast, energy price pressures remained stable at a high level and core inflation also recorded only a slight increase to 5.0% y/y. Although energy price pressures stabilized, an analysis of the data shows that, on one hand, price dynamics for fuels (petrol and diesel) are falling rapidly. On the other hand, the dynamics for electricity and gas continue to increase. This reflects the rapid increase in electricity and gas prices this summer. Although the situation on the wholesale markets has already eased considerably, we expect inflation levels for electricity and gas to remain high in the coming months, due to the delayed pass-through of prices to households. In contrast, the price dynamics for petrol and diesel will probably continue to decline. As a result, energy price inflation should remain stable in November, according to our assessment. For the further development of food inflation, the UN's index for global food prices should provide some guidance. This has been showing a strong downward… Read More »EZ – Inflation should peak soon

XAU/USD Gold price edges lower in European trading on Friday, after the action repeatedly failed at 10DMA ($1756), with daily techs remaining bullishly aligned after a pullback from Nov 15 peak ($1786) found firm ground just above pivotal Fibo support (38.2% of $1616/$1786), reinforced by rising 20DMA. The metal is on track for a marginal weekly gains that would partially offset negative signal from previous week’s bearish candle with long upper shadow, with more positive signals from monthly performance, as the yellow metal advanced strongly in December and on track for the first bullish monthly close after seven straight months in red ( November’s rally marks so far the biggest rally since May 2021). Initial support at $1746 (cracked Fibo 23.6%/5DMA) should ideally hold, however, deeper dips should not exceed key supports at $1721, to keep near-term bulls in play. Res: 1762; 1771; 1786; 1800. Sup: 1746; 1732; 1721; 1712. Interested in XAU/USD technicals? Check out the key levels

EUR/USD may move back to parity EUR/USD managed to move rise by almost 1,000 pips after it has been falling for more than a year. In fact, this pullback was needed as the currency pair dropped by more than 20% in just twelve months. The eurodollar moved from $0.9534 to $1.047 in two months in the midst of a US dollar retreat. Related article: Stock indices may crash again soon Now the currency pair stopped at a trend line and resistance. It could be heading back to parity if it fails to break the trend line. Several failed divergences also point to a possible overheated upward move, drawing EUR/USD back down.  EUR/USD is forming a double top pattern, while bouncing from a 200-day moving average (EMA200). The eurodollar might be moving back to parity until the end of 2022, but traders need to stay cautious as there still wasn’t a full bounce from the trend line. The technical analysis suggests EUR/USD will go down temporarily, but traders need to wait for a confirmation signal. It will probably form in the next few days after the weekend. However, if the currency pair manages to get above the trend line, uptrend is… Read More »Forex analysis on EUR/USD, GBP/JPY and CAD/CHF

S&P 500 closed on a fine note, and keeps nibbing at 4,040 – the great resistance that will ultimately fall (likely early next week). Running the stops before that, but key sectoral performance indicates that it would be only weak hand that would be shaken out. If the sellers had any chance to push through, it was this week – and the final opportunity to do so this year, is to evaporate once the second week of Dec gets out of the way. The outside markets aren‘t hinting at much success for the bears – bonds remain risk-on, USD not throwing a spanner in the works… 10y over 2y yield relenting together with 3m yield going down, that would be most constructive for the bulls – still absent for now, and that‘s why this Q4 rally will fail in Q1 2023. Opening today‘s article for everyone after Thanksgiving – thank you all for the honor of serving you! Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over… Read More »Winning the day