Australia

Overview: With the FOMC's decision several hours away, the dollar is trading lower against nearly all the major currencies.  The Antipodeans and Norwegian krone are leading.  The euro, yen, and sterling are posting minor gains (less than 0.1%).  Most of the freely liquid and accessible emerging market currencies are also firmer.  The Turkish lira is a notable exception.  The decline in the core inflation and a smaller than expected rise in the headline pace embolden officials for another rate cut when the central bank meets on November 18.  The JP Morgan Emerging Market Currency Index is rising for the second consecutive session after falling in the previous four sessions.  Equities are lower.  The MSCI Asia Pacific Index fell for the fifth session in the past six.  Among the large markets, Taiwan and Australia bucked the trend.  The four-day advance of the Stoxx 600 in Europe is at risk, and US futures are weaker.   Benchmark 10 year yields are mostly two-four basis points lower across most high-income countries today.  That puts the US 10-year Treasury yield near 1.52%.  Australia's two-year yield fell almost 10 bp to 0.55%.  It had peaked above 0.71% last week.   The three-year yield is off nearly 30 bp in recent days.  Gold continues to chop within the range set last Friday (~$1772-$1801).  Ahead of the OPEC+ meeting tomorrow amid talk that the US may seek to coordinate sales for a coalition of strategic reserves and a build of US inventories reported by API weigh on oil prices.  December WTI has approached the 20-day moving average (~$82), which has not closed below since late August. Base metals are higher as iron ore snapped a five-day slide during which it lost over 20%.  Copper is also recovering after forging a base in the $432-$433 area.  It is up around 1.5% today.  If sustained, it would be the largest gain in three weeks.   Asia Pacific China's Caixin services unexpectedly rose to 53.8 from 53.4 in September.  Recall that the manufacturing reading had improved to 50.6 from 50.0.  The net effect was that the composite edged up to 51.5 from 51.4.  The composite has converged with the "official" PMI, which stands at 50.8.  Separately, note that China is experiencing a broad spread of the virus into a dozen provinces, and the number of new cases is the highest in a couple of months. Inter-provincial travel has been restricted, and new social protocols are being introduced.  According to reports, the government advised households to stock up in necessities and ensure adequate food supplies for local authorities.  Australia's service and composite PMI shows the recovery was not quite as strong as the preliminary data suggested.  The service PMI rose to 51.8, not 52.0  from 45.5.  The composite stands at 52.1 rather than 52.2.  It was at 46 in September.   Tomorrow Australia reports Q3 real retail sales, but it will still be picking up the weakness of the lockdown.  September trade figures will also be reported.  Weaker exports and stronger imports are expected to have narrowed the trade surplus by almost 20% to A$12.4 bln. Ahead of the weekend, the central bank will make its Monetary Policy Statement.  The swaps market is pricing in 70 bp, down from 80 bp, of tightening over the next 12 months.  The dollar has been confined to a narrow quarter yen range through the Asian session and most of the European morning.  Softer yields and equities would be expected to give the yen a bit of support.  The 20-day moving average is near JPY113.65, and the greenback has not closed below it since the September FOMC meeting.  In the bigger picture, we have suggested the dollar-yen rally from mid-September through mid-October puts the dollar in a new range.  We suspected JPY114.50-JPY115.00 marks the upper end and JPY113.00 may be the lower end.  The Australian dollar fell almost 1.4% yesterday, its largest decline since May.  It reached $0.7420 yesterday, just above the $0.7410 (38.2% retracement objective of last month's rally).  It has stabilized today and has (so far) been capped near $0.7450.  Resistance is seen in the $0.7460-$0.7470 area.   For two weeks, the Chinese yuan has been alternating between advances and declines, and net-net little changed over the period.  Yesterday, the yuan slipped (0.04%), and today it is firmer (0.06%).  The PBOC has consistently set the dollar's reference rate above model projections, and today's fix was at CNY6.4079 compared with median expectations (Bloomberg) for CNY6.4068.  The PBOC was unexpectedly generous in its open market operations, injecting CNY50 bln. As a result, the overnight repo rate fell 12 bp to 1.99%.   Europe Norway's central bank meets tomorrow.  It was the first of the high-income countries to raise rates this year, so far, followed only by New Zealand.  We overstated the case for Norway to hike rates at the meeting, but don't be mistaken. The case for a rate hike exists, but the pattern is not to move at these "off-meetings" (without updated formal policy path guidance).  Instead, officials will likely confirm their intentions to raise rates in December. The swaps market is pricing in almost three hikes next year.   The dollar trended lower against the Nokkie since August 20. The downward momentum stalled in late October.  Yesterday it rose above NOK8.50 for the first time since mid-October.  The momentum indicators have turned up.  The 200-day moving average is slightly below NOK8.55 and near NOK8.60 is the (38.2%) retracement of the down move.  The UK is emerging from the economic soft patch in the June-August period.  The final service and composite PMI report today showed stronger activity than the preliminary estimates.  The service PMI rose to 59.1 from 55.4 in September.  The flash estimate had put it at 58.0.  The composite stands at 57.8, up from the preliminary projection of 56.8 and September 54.9.    The Bank of England meets tomorrow.  There does not seem to be much conviction, and the market appears divided. In the Bloomberg survey, 22 out of 45 economists expect a hike that seems to have been largely discounted by the markets (15 bp).  Three of the largest UK banks do not expect a hike.  Some observers argue that what is the point of stopping now when it would end next month. We often think the signaling channel of QE is under-appreciated.  Stopping the bond-buying now adds to the seriousness of the moment if it does not lift rates. Sterling has retreated by 2.3 cents since last week's high to approach $1.36 yesterday in the US. The euro reached its lowest level against sterling since March 2020 in late October near GBP0.8400, and yesterday rose to above GBP0.8500 for the first time since October 12.   Poland's central bank is expected to hike the base rate 25 bp today to 0.75%.  Recall that it hiked 40 bp last month to begin the cycle.  It started later than Czech and Hungary.  Preliminary October CPI rose 1% on the month, accelerating the year-over-year pace to 6.8% (from 5.9% in September.  It was at 5% as recently as July.  The Czech central bank meets Friday and is expected to hike the repo rate 75 bp to 2.25%.  After two quarter-point hikes (June and August), it hiked by 75 bp in September. Inflation (CPI) rose to 4.9% in September from 4.1% in August.  It is the highest since 2008.  Turkey's CPI rose by 2.39% last month to bring the year-over-year rate to 19.89% (19.58% in September), slightly lower than expected.  The core rate slipped slightly to 16.82% from 16.98%.   The euro has been confined to about a quarter of a cent range above $1.1575 so far.  It stalled yesterday near $1.1615, the (50%) retracement of the pre-weekend slide from almost $1.1700 to $1.1535.  It is making session highs in the European morning, but we look for a less friendly North American session.  There are options for about 530 mln euros at $1.16 that expire today.  A hawkish Fed (see below) could bring option expirations tomorrow at $1.1525 (~825 mln euros ) and $1.1550 (~900 mln euros) into play.  Sterling tested $1.36 yesterday, the lowest level since October 13.  It has hardly managed to distance itself from the lows.  It found new offers near $1.3635.   There is a GBP675 mln option expiring today at $1.3650.  A larger one (~GBP820) is at $1.3615 also expires but has liked been neutralized.   America It seems well appreciated that the Federal Reserve will announce it will begin slowing the bond purchases. Most expect a reduction of $10 bln of Treasuries and $5 bln of Agency MBS.  Investors appear to be anticipating the monthly reduction of these amounts through June 2022.  Even with yesterday's upticks, the June Fed funds futures contract continues to discount a rate hike then.  If the effective Fed funds rate is steady in the first half of June at eight basis points and then rises to 33 bp for the second half of the month (25 bp rate hike on June 15), the average effective rate is about 20.5 bp.  The contract settled at an implied rate of 20 bp yesterday.   Since this is already in the market, the tapering announcement itself may not be hawkish.  There are two steps the Fed could take if it wanted to drive home the point.  First, the FOMC statement has been referring to inflation as largely "transitory."  It could simply drop this qualifier or modify it.  The Chair has already acknowledged that it will likely persist longer than initially anticipated.  Indeed, next week's CPI report is expected (Bloomberg survey median) is expected to have risen by 0.5%, which, given the 0.1% increase in October 2020, means the 12-month rate will accelerate to around 5.8%.   Second, after the last press conference, Powell was asked about needing to reduce monetary stimulus while the Fed was still engaged in QE.  The Bank of England said it would hike if necessary while it was still buying bonds.  Powell said in that situation, the Fed would not send contradictory signals but accelerate the tapering process.  Quicker tapering would be a hawkish signal, and reaction by the market would likely bring forward the first hike.   The Democratic Party lost the Virginia gubernatorial context.  Biden had carried the state by 10 percentage points last year, and the preliminary results suggest a loss of suburban voters, a key part of the new Democratic coalition.  New Jersey's governor contest is very close, and the Democratic incumbent is trailing. The results play on ideas that the Democrats are likely to lose both houses of Congress in next year's mid-term election, in which it is common for the party in the White House to lose seats.  Some in the press have been critical that Xi and Putin are not attending COP-26, but their leadership was always in doubt.  The election results may undermine US leadership because Biden's commitments may not get legislative support, and executive decisions could be reversed in 2024.   Today could be the first day since October 13 that the US dollar does not trade below CAD1.2400.  Still, note that the greenback remains in the CAD1.2300-CAD1.2435 range set last Wednesday when the Bank of Canada turned more hawkish.  Yesterday, the US dollar closed above its 20-day moving average for the first time since late September.  We suspect corrective forces could lift the exchange rate toward CAD1.2475, where the (38.2%) retracement of last month's decline is found, and the 200-day moving average (~CAD1.2485).  However, in its way stands the $920 mln option at CAD1.2450 that expires today.  The greenback reached almost MXN20.92120 yesterday, a new eight-month high. Sellers emerged, and the dollar closed lower to snap a five-day advance.  It is softer today but holding above yesterday's low (~MXN20.71).  Ahead of the FOMC outcome, the market may be cautious about taking the dollar below the MXN20.66-MXN20.70 area.   Disclaimer

Three main forces are shaping the business and investment climate:  Surging energy prices, a dramatic backing up of short-term interest rates in Anglo-American countries, and the persistence of supply chain disruptions.  The US and Europe have likely passed peak growth.  Fiscal policy will be less accommodative, and financial conditions have tightened. Japan appears to be getting a handle on Covid and after a slow start.  Its vaccination rate has surpassed the US.  The lifting of the formal state of emergency and a hefty dose of fiscal stimulus is expected to be delivered in the coming months. Many developing economies have already lifted rates, some like Brazil and Russia, aggressively so.  They will likely finish earlier too.      US light sweet crude oil rose nearly 12% last month, even though US inventories rose last month for the first time since April.   The price of WTI rose almost 10% in September.  Statistically, the rise in oil prices is strongly correlated with the increase in inflation expectations.  OPEC+ will boost supplies by another 400k barrels a day at the start of November and is committed to the same monthly increase well into 2022.   At the same time, new Covid infections in several Asia-Pacific countries, including China, Singapore, and Australia, warn of the risk of continued supply-chain disruptions.  In Europe, Germany and the UK recently reported the most cases since the spring. Belgium is tightening curbs.  Bulgaria is seeing a rise in infections, and Romania was at full capacity in its intensive care facilities.  The fact that Latvia lags the EU in vaccination at about 50% leaves it vulnerable.  The US may be lagging behind Europe, and the next four-six weeks will be critical.  Roughly 40% of Americans are not fully vaccinated.   The rise in price pressures and the gradual acknowledgment by many central bankers that inflation may be more persistent have helped spur a significant backing up of short-term rates in the Anglo-American economies. The ultimately deflationary implications of the surge in energy prices through demand destruction and the implications for less monetary and fiscal support still seem under-appreciated. Yet, the market has priced in aggressive tightening of monetary policy over the next 12 months.   The focus of the foreign exchange market seems squarely on monetary policy.  From a high level, the central banks perceived to be ahead in the monetary cycle have seen stronger currencies. The likely laggards, like the Bank of Japan, the Swiss National Bank, and the ECB, have currencies that underperformed.  Norway and New Zealand have already raised rates and are expected to do so again in November.    Of course, as you drill down, discrepancies appear.  In October, the Australian dollar was the top performer among the major currencies with a 4% gain.  It edged out the New Zealand dollar and the Norwegian krone, whose central banks are ahead of the Reserve Bank of Australia.  The RBA has pushed against market speculation that has 90 bp of tightening priced into 12-month swaps.  The Australian dollar outperformed sterling by about 2.5% in October even though the Bank of England has been so hawkish with its comments that the market had little choice but to price in a high probability of a hike as early as the November meeting.  In fact, the market has the UK's base rate above 50 bp by the end of Q1 22.  This is important because in its forward guidance that BOE has identified that as the threshold for it to begin unwinding QE by stopping reinvesting maturing issues.  Interestingly enough, when the BOE meets on March 17 next year, it will have a sizeable GBP28 bln maturity in its portfolio.   In an unusual quirk of the calendar, the Federal Reserve meets before the release of the October jobs report.  All indications point to the start of the tapering process.  It is currently buying $120 bln a month of Treasuries ($80 bln) and Agency Mortgage-Backed Securities.  The pace of the reduction of purchases is a function of the duration, and the Fed has clearly indicated the tapering will be complete around mid-year. That suggests reducing the purchases by about $15 bln a month.  Chair Powell indicated that unlike the Bank of England, the Fed will stop its bond purchases before raising rates. A faster pace of tapering would be a hawkish signal as it would allow for an earlier rate hike.  The gap between when the tapering ends and the first rate hike does not appear predetermined. Powell has talked about the economic prerequisites, which emphasize a full and inclusive labor market in the current context. The Fed funds futures entirely discount a 25 hike in July, with the risk of a move in June.  Comments by several officials hint that the Fed may drop its characterization of inflation as transitory, which would also be understood as a hawkish development.   Partly owing to the extended emergency in Japan, it is marching to the beat of a different drummer than the other high-income countries. Inflation is not a problem.  In September, the headline rate rose to 0.2% year-over-year, the highest since August 2020.  However, this is a function of fresh food and energy prices, without which the consumer inflation stuck below zero (-0.5%).  In December 2019, it stood at 0.9%.  In addition, while fiscal policy will be less accommodative in Europe and the US, a sizeable supplemental budget (~JPY30 trillion) is expected to be unveiled later this year.   After expanding by 1.3% quarter-over-quarter in Q2, the Chinese economy slowed to a crawl of 0.2% in Q3, which was half the pace expected by economists. Some of the decline in economic activity resulted from the virus and natural disasters (floods). Still, some of it stemmed from an effort to cut emissions in steel and other sectors.  The problems in China's property development space, accounting for a large part of its high-yield bond market,  unsettled global markets briefly.  Talk of a Lehman-like event seems a gross exaggeration. Still, given the sector's importance to China's economy (30% broadly measured) and the use of real estate as an investment vehicle, it may precipitate a structural shift in the economy.   The Communist Party and the state are reasserting control over the economy's private sector and the internet and social network.  It has also weighed in on family decisions, like the number of children one has, how long a minor should play video games, the length of men's hair, what kind of attributes entertainers should have, and appropriate songs to be played with karaoke.   It seems to be reminiscent of part of the Cultural Revolution and a broader economic reform agenda like Deng Xiaoping did in the late 1970s and Zhu Rongji in the 1990s.  At the same time, Beijing is wrestling with reducing emissions and soaring energy prices, which also dampen growth. Even though consumer inflation is not a problem in China (0.7% year-over-year in September), Chinese officials still seem reluctant to launch new stimulative fiscal or monetary initiatives. Moreover, new outbreaks of the virus could exacerbate the supply chain disruptions and delays fuel inflation in many countries.  The aggressiveness in which investors are pricing G10 tightening weighed on emerging market currencies in October.  The JP Morgan Emerging Market Currency Index fell by almost 0.8% last month after falling 2.9% in September, the largest decline since March 2020.  The continued politicization of Turkey's monetary policy and the aggressive easing saw the lira tumble nearly 7.5% last month, which brings the year-to-date depreciation to 22.5%.   On the other hand, Brazil's central bank has aggressively hiked rates, and the 150 bp increase in late October brought this year's tightening to 575 bp and lifting the Selic to 7.75%.  Yet, it is still below the inflation rate (10.34% October), and the government has lost the confidence of domestic and international business.  The Brazilian real fell nearly 3.5% last month to bring the year-to-date loss to almost 7.8%.   Our GDP-weighted currency basket, the Bannockburn World Currency Index, snapped a two-month decline and rose by 0.35%.  The rise in the index reflects the outperformance of the currencies against the dollar.  The currencies from the G10 countries, including the dollar, account for about two-thirds of the index, and emerging markets, including China, the other third.  The yen was the weakest of the majors, falling 2.3%.  It has a weighting of 7.5% in the BWCI.   Among the emerging market currencies in our GDP-weighted currency index, the Brazilian real's 3.4% decline was the largest, but its 2.1% weighting minimizes the drag.  It was nearly offset by the Russian rouble's 2.5% advance.  It has a 2.2% weighting in our basket.  The Chinese yuan, which has a 21.8% share, rose by 0.6%.      Dollar:   The market is pricing in very aggressive tightening by the Federal Reserve.  As recently as late September, only half of the Fed officials anticipated a hike in 2022.  The December 2022 Fed funds futures are pricing in a little more than two hikes next year. More than that, the market is discounting the first hike in June next year, implying a transition from completing the bond-buying to raising rates with no time gap.  The disappointing 2% Q3 GDP exaggerated the slowing of the world's largest economy.  We note that the supply-side challenges in vehicle production halved the growth rate.  Growth is likely to re-accelerate in Q4, but we continue to believe that the peak has passed.  While inflation is elevated, the pace of increase slowed in Q3.  Consider that the PCE deflator that the Fed targets rose at an annualized rate of 4.0% in Q3 after a 5.6% pace in Q2.  The core rate slowed to an annualized pace of 3.3% last quarter, half of the speed in the previous three months.  The infrastructure spending plans have been reduced, and some of the proposed tax hikes, including on corporations, appear to be dropped as part of the compromise among the Democratic Party.   Euro:  For most of Q3, the euro has been in a $1.17-$1.19 trading range.  It broke down in late September, and was unable to recapture it in October.  Instead, it recorded a new low for the year near $1.1525.  A convincing break of the $1.1500 area could signal a move toward $1.1300. The single currency drew little support because growth differentials swung in its favor in Q3:  the Eurozone expanded by 2.2% quarter-over-quarter while the US grew 2% at an annualized pace.  The ECB is sticking to its analysis that the rise in inflation is due to transitory factors while recognizing that energy prices may prove more sticky.  That said, news that Gazprom may boost gas sales to Europe after it finishes replenishing Russian inventories after the first week in November, natural gas prices fall at the end of October.  After the Pandemic Emergency Purchase Program ends next March, decisions about the asset purchases next year will be announced at the December ECB meeting along with updated forecasts.   (October indicative closing prices, previous in parentheses)   Spot: $1.1560 ($1.1580) Median Bloomberg One-month Forecast $1.1579 ($1.1660)  One-month forward  $1.1568 ($1.1585)    One-month implied vol  5.1%  (5.1%)         Japanese Yen:  The dollar rose 2.3% against the yen in October to bring the year-to-date gain to nearly 9.5%.  The Bank of Japan will lag behind most high-income countries in the tightening cycle, and the higher US yields are a crucial driver of the greenback's gains against the yen.  Japan's headline inflation and core measure, which only excludes fresh food, may be rising, but they are barely above zero and, in any event, are due to the surge in energy prices. In response to the weakening yen, Japanese investors appear to have boosted their investment in foreign bonds, while foreign investors increased their holdings of Japanese stocks.  The LDP and Komeito maintained a majority in the lower chamber of the Diet. A sizeable stimulus supplemental budget is expected to help strengthen the economic recovery now that the formal emergencies have been lifted.  In Q3, the dollar traded mainly between JPY109 and JPY111.  It traded higher in the second half of September rising to nearly JPY112.00.  The dollar-yen exchange rate often seems to be rangebound, and when it looks like it is trending, it is frequently moving to a new range.  We have suggested the upper end of the new range may initially be the JPY114.50-JPY115.00.  The four-year high set last month was about JPY114.70.  A move above JPY115.60 could target the JPY118.50 area.     Spot: JPY113.95 (JPY111.30)       Median Bloomberg One-month Forecast JPY112.98 (JPY111.00)      One-month forward JPY113.90 (JPY111.25)    One-month implied vol  6.4% (5.6%)   British Pound:  Sterling rallied around 4 1/3 cents from the late September low near $1.34.  The momentum stalled in front of the 200-day moving average (~$1.3850).  After several attempts, the market appeared to give up.  We anticipate a move into the $1.3575-$1.3625 initially, and possibly a return toward the September low. The implied yield of the December 2021 short-sterling interest rate futures rose from 22 bp at the end of September to 47 bp at the end of October as the market.  It was encouraged by Bank of England officials to prepare for a hike at the meeting on November 4, ostensibly while it is still providing support via Gilt purchases.  If there is a surprise here, it could be that, given the unexpected softening of September CPI and the fifth consecutive monthly decline in retail sales, rising Covid cases, that the BOE chooses to take the more orthodox route.  This would entail ending its bond purchases, as two MPC members argued (dissented) at the previous meeting and holding off lifting rates a little longer.        Spot: $1.3682 ($1.3475)    Median Bloomberg One-month Forecast $1.3691 ($1.3630)  One-month forward $1.3680 ($1.3480)   One-month implied vol 6.8% (7.1%)      Canadian Dollar:  The three drivers for the exchange rate moved in the Canadian dollar's favor in October and helped it snap a four-month slide against the US dollar.  First, the general appetite for risk was strong, as illustrated by the strength of global stocks and the record highs in the US.  Second, the premium Canada pays on two-year money more than doubled last month to almost 60 bp from 25 bp at the end of September.  Third, commodity prices in general and oil, in particular, extended their recent gains.  The CRB Index rose 3.8% last month, the 11th monthly increase in the past 12, to reach seven-year highs.  The Bank of Canada unexpectedly stopped its new bond purchases and appeared to signal it would likely raise rates earlier than it had previously indicated.  The swaps market is pricing 125 bp of rate hikes over the next 12 months, with the first move next March or April.  Still, the US dollar's downside momentum stalled near CAD1.2300.  There is scope for a corrective phase that could carry the greenback into the CAD1.2475-CAD1.2500 area.     Spot: CAD1.2388 (CAD 1.2680)  Median Bloomberg One-month Forecast CAD1.2395 (CAD1.2580) One-month forward CAD1.2389 (CAD1.2685)    One-month implied vol 6.2% (6.9%)      Australian Dollar:  The Aussie's 4% gain last month snapped a four-month, roughly 6.5% downdraft.  Despite RBA Governor Lowe's guidance that the central bank does not anticipate that the condition to hike rates will exist before 2024 is being challenged by the market.  Underlying inflation rose above 2% in Q3. The central bank's failure to continue defending the 10 bp target of the April 2024 bond spurred speculation that it would be formally abandoned at the November 2 policy meeting.  The RBA's inaction unsettled the debt market.  The two-year yield soared almost 70 bp last month, and the 10-year yield rose nearly 60 bp.  Although the RBA could have handled the situation better, New Zealand rates jumped even more.  Its two-year yield jumped 80 bp while the 10-year yield surged by 58 bp.  Last month, the Australian dollar's rally took it from around $0.7200 to slightly more than $0.7550, where it seemed to stall, just in front of the 200-day moving average.  We suspect the October rally has run its course and see the Aussie vulnerable to a corrective phase that could push it back toward $0.7370-$0.7400.  The New Zealand dollar has also stalled ($0.7220), and we see potential toward $0.7050.       Spot:  $0.7518 ($0.7230)        Median Bloomberg One-Month Forecast $0.7409 ($0.7290)      One-month forward  $0.7525 ($0.7235)     One-month implied vol 9.1  (9.0%)        Mexican Peso:  The peso eked out a minor gain against the dollar last month.  However, the nearly 0.4% gain understated the swings in the exchange rate last month.  The dollar's recovery seen in the second half of September from almost MXN19.85 to nearly MXN20.40 at the end of the month was extended to a seven-month high around MXN20.90 on October 12.  It then proceeded to fall to almost MXN20.12 before the greenback was bought again.  A move above the MXN20.60 area now would likely signal a test on last month's high and possibly higher. Recall that the dollar peaked this year's peak set in March was near MXN21.6350. The economy unexpectedly contracted in Q3  by 0.2% (quarter-over-quarter).  Nevertheless, with the year-over-year CPI at 6% in September, Banxico will see little choice but to hike rates at the November 11 meeting. The market expects a 25 bp increase.  A 50 bp hike is more likely than standing pat.       Spot: MXN20.56 (MXN20.64)   Median Bloomberg One-Month Forecast  MXN20.42 (MXN20.41)   One-month forward  MXN20.65 (MXN20.74)     One-month implied vol 9.6% (11.0%)      Chinese Yuan: Our starting point is the yuan's exchange rate is closely managed.  The fact that the yuan rose to four-month highs against the dollar and a five-year high against the currency basket (CFETS) that the PBOC tracks imply a tacit acceptance.  While it is tempting for observers to link the appreciation to securing an advantage as it secures energy supplies and other commodities, we note that the yuan's gains are too small (0.6% last month and less than 2% year-to-date) to be impactful.  We suspect that the dollar's recent weakness against the yuan will be unwound shortly.  The US government continues to press its concerns about the risk for investors in Chinese companies listed in the US and American companies operating in China. At the same time, the FTSE Russell flagship benchmark began including mainland bonds for the first time.  China's 10-year government bond is the only one among the large bond markets where the yield has declined so far this year (~16 bp).  On the other hand, Chinese stocks have underperformed.  That said, some investors see this underperformance as a new buying opportunity.  The NASDAQ Golden Dragon Index that tracks Chinese companies listed in the US fell by 30% in Q3 and gained 5% in October, its best month since February.  Lastly, the Central Committee of the Chinese Communist Party meets November 8-11 this year, a prelude to the important National Party Congress in 2022 that is expected to formally signal the third term for President Xi.     Spot: CNY6.4055 (CNY6.4450) Median Bloomberg One-month Forecast  CNY6.4430 (CNY6.4470)  One-month forward CNY6.4230 (CNY6.4725)    One-month implied vol  3.5% (3.4%)    Disclaimer

Overview:  The Federal Reserve announced tapering and, like the Reserve Bank of Australia earlier in the week, did not validate expectations for an aggressive rate hike.  Now the focus is on the Bank of England, where several officials seemed to goad the market into lifting short-term rates. The S&P 500 and NASDAQ rallied to new record highs yesterday and helped raise global shares today.  Among the large markets in the Asia Pacific region, only Taiwan and India did not participate in today's dance.  In Europe, the Stoxx 600 is extending its advance for the sixth consecutive session and nine of the past ten.  US futures are trading firmer.  The market is trimming yesterday's 5.5 bp rise in the US 10-year yield. It is about 3 bp lower near 1.57%.  European yields are 1-3 bp lower. The dollar, which slipped lower after the FOMC meeting, is back with a vengeance today.  It is gaining against all the majors, with the euro bearing the brunt, off about 0.5% to return toward the week's lows below $1.1550.  The yen is the most resilient and is flattish.  Emerging market currencies are also mostly lower.  The Chinese yuan is the strongest emerging market currencies today with about a 0.15% gain, recouping its losses of the past two sessions.  The Polish zloty is the weakest, off 0.6%, despite the larger than expected 75 bp hike yesterday.  Gold was tarnished by 1% yesterday, its biggest loss since mid-October, but is steadied today, up around 0.4% near $1777.  December WTI extended its pullback from $85 seen at the start of the week to dip briefly below $80.  It has firmed back above $81 in the European morning ahead of the OPEC+ meeting outcome.  Cooper prices have stabilized after tumbling 1% yesterday.   Asia Pacific  The final reading of Japan's service and composite PMI was unchanged from the preliminary estimate, with both at 50.7. The services component was the first above the 50 boom/bust level since January 2020.  The composite is at the highest since April.  The virus and formal emergency hobbled the economy, but the economy is on the mend, though out of sync with the other major economies.  Japan intends to use fiscal policy in a pro-cyclical fashion.  Prime Minister Kishida is preparing a large stimulus budget, and it is expected to be unveiled around the middle of the month.  Australia is also emerging from a soft economic period.  Real retail sales fell 4.4% in Q3, faring a little better than economists expected.  Separately, it reported its September trade surplus in line with expectations of about A$12.2 bln.  However, how it got, there was a bit different than anticipated.  First, the August trade surplus was shaved to A$14.7 bln from A$15.1 bln as imports were revised to show a 2% gain instead of a 1% loss. Second, exports fell 6% in September, twice the decline expected, but this was offset by a 2% decline in imports, rather than a 1% gain.  First thing tomorrow, the central bank issues its monetary policy statement, which is hoped to shed more light on the RBA's intent.  The US dollar is straddling the JPY114.00 area.  It reached a three-day high slightly below JPY114.30 and has held above JPY113.90.  Two large options expire today, but they have likely been neutralized.  The first is for nearly $2 bln at JPY114.00, and the other is for $1.8 bln at JPY114.30.  The Australian dollar extended yesterday's recovery to reach $0.7470 before meeting a wall of sellers, which drove it back to almost $0.7425.  Yesterday's low was set near $0.7410.  A break of $0.7400 could signal a test on the $0.7365 area.  The greenback finished yesterday at its best level against the Chinese yuan in almost three weeks, but it continues to be sold on moves above CNY6.40.  Today's yuan gain has nearly recouped the past two session's decline.  Meanwhile, the PBOC continues to set the dollar's reference rate slightly above where bank models project.  Today's fix was at CNY6.3943, while the median (Bloomberg) had it at CNY6.3926.  The PBOC has been relatively generous with its money market provisions.  New fiscal spending this month and next is expected to provide more liquidity.   Europe Before the Bank of England's last meeting (September 23), the December short-sterling interest rate futures implied a yield of 13 bp.  It is now yielding 46 bp.  The market appears to have a 15 bp hike discounted, but economists are split.  A hawkish hold could be delivered if the BOE signaled its intention to raise rates shortly while ending its bond-buying operations early.  With weak retail sales (down five months in a row through September), softer than expected September CPI, and no employment data since the furlough program, is the urgency exaggerated?   The eurozone flash services PMI was shaved lower to 54.6 from 54.7, and this led to the paring of the composite reading to 54.2 from 54.3.  It was the third consecutive decline in the composite PMI.  German and French preliminary estimates were confirmed.  Spain surprised on the upside with a service reading of 56.6.  Economists had expected a 55.8 report after 56.9 in September.  The smaller than expected decline saw a 56.2 composite, down from 57.0, but not as soft as expected.  Italy disappointed.  The services PMI fell to 52.4 from 55.5.  The median forecast was 54.5.  The composite stands at 54.2, down from 56.8.   Germany's September factory orders showed a muted response after August's revised 8.8% drop (initially reported as a 7.7% decline).  The 1.3% gain was less than expected and solely a function of foreign orders (6.3%).  Moreover, the foreign orders were from outside the euro area.  They rose by 14.9%, offsetting August's 14.7% fall.  Domestic orders fell by 5.9%.  It is the third consecutive month domestic orders declined.   The euro has been pushed below $1.1550, where a 1.1 bln euro option expires today.  It initially tried extending yesterday's post-Fed gains but stalled a little above $1.1615.  That area now looks like formidable resistance.  Support is seen in the $1.1525-$1.535 area, but note that the $1.1490 level corresponds to the (50%) retracement objective of the euro's rally from March 2020 lows.  A break of that targets the $1.13 area.  Similarly, sterling's advance yesterday was marginally extended but stopped in front of $1.3700, which is also below the 20-day moving average.  It has been sold in the European morning ahead of the BOE outcome. It has found support in front of $1.3600. Below there, the $1.3575 area marks the (61.8%) retracement target of the rally from the late September low near $1.3410.  Sterling's retreat has left the intraday momentum indicators stretched, warning of the risk of a bounce after the BOE.   America By announcing it would reduce its bond-buying starting this month by $15 bln (a month), the Federal Reserve delivered as expected. The Fed's statement was modified slightly, saying that the elevated prices are "expected" to be transitory.  There was no hawkish surprise, and Chair Powell's tried to thread the proverbial needle by acknowledging that price pressures are likely to continue well into next year.  Treasury Secretary Yellen suggested a similar scenario recently.  The dollar softened, and stocks rallied on the news.   Separately, we note that recently President Biden said he would soon make an announcement about the Fed Chair, whose term expires next February.  Yellen has defended Powell on two issues--financial market regulation and the officials trading/investing--suggests that if Biden does not re-nominate Powell, he would likely have to overrule his Treasury Secretary.   Powell cited the dramatic rise in the Employment Cost Index at yesterday's press conference.  Today, the US reports a more holistic measure of labor costs:  unit labor costs, which incorporates productivity.  The fact of the matter is that unit labor costs fell in H1. However, they are volatile quarter-to-quarter, and unit labor costs likely rise sharply in Q3.  It appears that many employers thought to get by over the summer, waiting for the end of the extra federal unemployment compensation and the re-opening of schools to free up labor without having to pay up for it.  Indeed, Q3 non-farm payroll growth averaged 488k a month, the lowest three-month average since February. This is because the employers preferred to have the existing workers do more overtime than hire.  However, the end of the benefits and re-opening of schools so far proved insufficient.  Another factor that Powell could have cited was the loss of immigrant workers. Pre-pandemic immigrants accounted for one-in-five manufacturing workers and closer to one-in-four in some industries like semiconductors, medical equipment, and food processing.  This squeeze end around November 8 as the border will be re-opened with work visas.  The US has lobbied OPEC+ to boost output faster.  Part of the problem is that some OPEC+ members, like Nigeria and Angola, have been unable to increase production, leaving OPEC+ short of the 400k barrels a day they were going to add last month.  Separately, the US reportedly will join new talks with Iran later this month.  The prospect of Iranian oil also weighed on prices.  In addition, some of the large shale producers have indicated plans to boost output. The US also reports the September trade balance.  A record shortfall is expected of a little more than $80 bln.  Weekly jobless claims pale in comparison to tomorrow's national employment report.  Canada reports September's merchandise trade balance.  Through August, Canada has reported an average monthly surplus of $700 mln.  In the first eight months of 2020, the average deficit was a little more than C$3 bln and in the same period, in 2019 recorded an average deficit of C$1.5 bln. The US dollar spiked to almost CAD1.2460 yesterday but reversed lower and settled on its lows near CAD1.2390.  It is consolidating and straddling CAD1.2400 today.  There is an option for nearly $800 at CAD1.2420 that expires today and one for $515 mln at CAD1.2375 that expires tomorrow.  The intraday momentum indicator suggests limited upside in early North America.  The greenback posted a potential key reversal against the Mexican peso yesterday by first making a new high for the move (~MXN20.98) and then selling off to close below the previous session's low.  Yesterday's low (~MXN20.5150) has held so far today as the dollar consolidates mostly below MXN20.60.  An option for $430 mln at MXN20.55 expires today.  A break of MXN20.50 sees nearby support around MXN20.47 (the 20-day moving average ) and MXN20.44 (the 6.18% retracement objective of the dollar's rally from late last month).  Disclaimer

S&P 500 paused to a degree, but bonds didn‘t – we‘re far from a peak. That though doesn‘t mean a brief correction (having a proper look at the chart, sideways consolidation not reaching more than a precious couple of percentage points down) won‘t arrive still this month. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher still, but this is the time for value and smallcaps. And when the dollar starts rolling over to the downside (I‘m looking at the early Dec debt ceiling drama to trigger it off), emerging markets would love that. And commodities with precious metals too, of course – sensing the upcoming greenback weakness has been part and parcel of the gold and silver resilience of late. Precious metals are only getting started, but the greatest fireworks would come early spring 2022 when the Fed‘s failure to act on inflation becomes broadly acknowledged. For now, they‘re still getting away with the transitory talking points, and chalking it down to supply chain issues. As if these could solve the balance sheet expansion or fresh (most probably again short-dated) Treasuries issuance (come Dec) – the Fed is also way behind other central banks in raising rates. Canada, Mexico and many others have already moved while UK and Australia are signalling readiness – the U.S. central bank is joined by ECB in hesitating. Don‘t look for the oil breather to last too long – black gold is well bid above $78, and hasn‘t made its peak in 2021, let alone 2022. As I wrote on Friday, its downswing that works to increase disposable income (serving as a shadow Fed funds rate in the zero rates environment), would prove short-lived. The real economy would have to come to terms with stubbornly high oil prices – and it will manage. The yield curve is starting to steepen modestly again, and fresh spending initiatives would breathe some life into the stalling GDP growth. Next year though, don‘t be surprised by a particularly weak (even negative) quarterly reading, but we aren‘t there by a long shot, I‘m telling you. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 looks getting ripe for taking a pause – the rising volume isn‘t able to push it much higher intraday. Credit Markets HYG strength indeed continues, and it‘s a good sign that quality debt instruments are joining – the reprieve won‘t last long though (think a few brief weeks before rates start rising again). Gold, Silver and Miners Gold and silver continue reversing the pre-taper weakness, and miners are indeed joining in. I‘m looking for more gains with every dip being bought. Crude Oil Crude oil hasn‘t peaked, and looks getting ready to consolidate with a bullish bias again. $85 hasn‘t been the top, and the energy sector remains primed to do well. Copper Copper is deceptively weak, and actually internally strong when other base metals are examined. As more money flows into commodities, look for the red metal to start doing better – commodities haven‘t topped yet. Bitcoin and Ethereum Bitcoin and Ethereum consolidation has come to an end, and the pre-positioned bulls have a reason to celebrate as my prior scenario– stabilization followed by slow grind higher is what‘s most likely next – came to fruition. Summary S&P 500 breather is a question of time, but shouldn‘t reach far on the downside – the credit markets don‘t support it. Commodities are catching up in the (dovish as assessed by the markets too) taper aftermath, and precious metals are sniffing the dollar‘s weakness a few short weeks ahead. With fresh money not needed to repair commercial banks‘ balance sheets, it flows into the financial markets, and the taper effects would be negated by the repo operations – yes, I‘m not looking for a liquidity crunch. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

S&P 500 pause goes on, and bonds support more of it to come. Tech keeps thus far the high ground gained, but value is showing signs of very short-term weakness – and yields haven‘t retreated yesterday really. The correct view of the stock market action is one of microrotations unfolding in a weakening environment – one increasingly fraught with downside risks. To be clear, I‘m not looking for a sizable correction, but a very modest one both in time and price. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher over time still, but this is the time for value and smallcaps in the medium term.The dollar though isn‘t putting much pressure on stock, commodity or precious metals prices at the moment – such were my yesterday‘s words:(…) when the dollar starts rolling over to the downside (I‘m looking at the early Dec debt ceiling drama to trigger it off), emerging markets would love that. And commodities with precious metals too, of course – sensing the upcoming greenback weakness has been part and parcel of the gold and silver resilience of late. Precious metals are only getting started, but the greatest fireworks would come early spring 2022 when the Fed‘s failure to act on inflation becomes broadly acknowledged.For now, they‘re still getting away with the transitory talking points, and chalking it down to supply chain issues. As if these could solve the balance sheet expansion or fresh (most probably again short-dated) Treasuries issuance (come Dec) – the Fed is also way behind other central banks in raising rates. Canada, Mexico and many others have already moved while UK and Australia are signalling readiness – the U.S. central bank is joined by ECB in hesitating.And that‘s what precious metals would be increasingly sniffing out. Commodities are joining in the post-taper celebrations, and my prior Tuesday‘s market assessments are coming to fruition one by one. Oil is swinging higher and hasn‘t topped, copper is coming back to life, and cryptos aren‘t in a waiting mood either.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 pause is here, and all that‘s missing, is emboldened bears. They may or may not arrive given that VIX keeps looking lazy these days – either way, the risks to the downside are persisting for a couple of days at least still.Credit MarketsHYG strength evaporated, but it‘s on a short-term basis only. The broader credit market weakness would get reversed, but it‘s my view that quality debt instruments would be lagging.Gold, Silver and MinersGold and silver continue reversing the pre-taper weakness – the upswing goes on, but is likely to temporarily pause as the miners‘ daily weakness foretells. Still, I‘m looking for more gains with every dip being bought.Crude OilCrude oil bulls continue having the upper hand, no matter the relative momentary stumble in maintaining gains – the energy sector hasn‘t peaked by a long shot.CopperCopper is participating in the commodities upswing – not too hot, not too cold. Just right, and it‘s a question of time when the red metal would start visibly outperforming the CRB Index again.Bitcoin and EthereumBitcoin and Ethereum consolidation has indeed come to an end, and both leading (by volume traded) cryptos are primed for further gains. SummaryS&P 500 breather remains a question of time, but shouldn‘t reach far on the downside – the bears are having an opportunity to strike as credit markets have weakened, and there isn‘t enough short-term will in tech to go higher still. The very short-term picture in stocks is mixed, but downside risks are growing. The dollar is already weakening, much to the liking of commodities and precious metals – there is still enough liquidity in the markets as any taper can be easily offset by withdrawing repo money sitting on the Fed‘s balance sheet.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

GBPUSD buried in bearish territory The pound continues to retreat after Britain’s growth fell short of expectations in Q3. A break below September’s low at 1.3420 has invalidated the latest rebound, putting buyers on the defensive once again. The RSI’s double bottom in the oversold area may ease the bearish push momentarily. A bounce could be an opportunity to sell into strength. 1.3500 is the immediate resistance. On the downside, renewed momentum would drive price action towards last December’s lows around 1.3200. AUDUSD struggles for support The Australian dollar came under pressure after the unemployment rate returned above 5% last month. The sell-off continued after a brief pause over the 30-day moving average near 0.7390, turning the latter into a fresh resistance. The lack of support suggests increasingly downbeat sentiment. The base of October’s bullish breakout at 0.7240 is the next support. The RSI’s oversold situation may cause a limited rebound from the round number at 0.7300, though it is likely to turn out to be a dead cat bounce. US100 tests demand zone The Nasdaq 100 suffers losses as high inflation dents risk appetite. An RSI divergence showed a deceleration in the uptrend, a sign that the rally has overheated. Subsequently, a drop below 16200 has prompted leveraged buyers to exit for fear of a correction. As the RSI inched into the oversold territory, the index saw bids near the breakout zone (15900) from earlier this month. The support-turned-resistance at 16200 is the first hurdle. Then the bulls will need to clear 16400 before the rally can resume.

1.  The market is still digesting the implications of Wednesday's CPI shock. The dollar has strengthened, yields have risen, the stock market wobbled after a long advancing streak, and in any event, stabilized in light trading during the US and Canadian holidays. However, given the low year-ago reading, there is a significant risk that inflation (including the core rate) will accelerate over the next few months. As a result, the Federal Reserve needs greater flexibility to raise rates sooner than it has envisioned.   The main restraint now is the pace of tapering.  The FOMC committed to reducing its bond-buying by $15 bln in November and December.  Its statement indicated that it anticipated maintaining the rate afterward, but the FOMC also reserved the right to adjust the pace if necessary. Thus, accelerating the tapering is the most likely course of action.  Bullard had suggested completing the tapering by the end of Q1.  If this is to become the majority view, there may be some effort to prepare the market.   Recently a rally in US bonds was attributed to talk that Governor Brainard could replace Powell as Fed chair.  The argument was that Brainard was more dovish.  Is this really relevant now?  Does it count as a strike against her?  With Yellen's apparent support, Powell is most likely to get re-appointed, and given that CPI is at 30-year highs, conventional thinking favors maintaining a stable hand at the helm. 2.    The dollar's gains accelerated since the higher than expected CPI report.  The euro was in a $1.15-$1.17 range last month and broke out on Wednesday.  Follow-through selling Thursday brought to about $1.1445.  We have suggested the next target is a little below $1.1300.   The jump in yields helped lift the greenback from below JPY112.80 above JPY114.00.  The five-year high set on October 20 was around JPY114.70, while we project the upper end of the likely range closer to JPY115.00. 3.  Disappointing economic data contributed to the losses of sterling and the Australian dollar.   Economists (Bloomberg survey) expected Australia to have created 50k jobs in October, but, instead, it lost 46.3k jobs for the third consecutive monthly decline.  The bulk of the loss (40.4k) were full-time positions, which reversed the 26.7k increase reported in September.  The unemployment rate jumped to 5.2% from 4.6%, the highest since April.  The Australian dollar peaked near $0.7550 in late October and fell below $0.7300 on Thursday, for the first time in a month.  The next target is around $0.7240-$0.7260.   The UK reported a significant slow down in Q3 GDP to 1.3% from 5.5% in Q2. Expectations for a 1.5% quarter-over-quarter expansion  (Bloomberg survey) seemed on the high side.  However, the September monthly GDP rose 0.6%, and the better than expected rise was offset but a reduction in the August GDP to 0.2% from 0.4%. The industrial output contracted in September. The trade deficit deteriorated after a dramatic revision in the August balance (to -GBP1.880 bln from -GBP3.716 bln, while services accelerated (0.7% from a revised 0.1% gain that had initially reported at 0.3%).  Sterling, which had been pushing near $1.36 before the Bank of England's meeting and slipped to a marginal new low for the year on Wednesday but still held above $1.34 (barely).  It fell to $1.3360 on Thursday. The next chart support area is seen around $1.3165-$1.3185. 4.  The joint US-China statement at COP-26 is promising.  It was the key to the Paris Agreement in 2015.  There was a commitment to boost efforts to cut emissions and illegal deforestation.  The gap between current policies and what is necessary was acknowledged, and there appeared to be an agreement in principle to reach an agreement on climate finances and rules for a carbon market.  The joint statement must have been in the works even as Biden criticized Xi for the lack of commitment for not attending COP-26.  There is still much speculation about a "virtual summit," which is supposed to signal something more than two phone calls the leaders have held this year.  The environment was also recognized where cooperation was possible.  Still, Beijing refused to join the US-EU commitment to cut methane admissions and opted for its own plan.   The geopolitical competition is unaffected by the joint statement. Meanwhile, the more pressing geopolitical threat is coming from the movement of Russian forces to the Ukraine border.  Reports suggest the US has briefed Europe on a possible Russian invasion of Ukraine.  Hostilities are said to have escalated recently.  Recall that Russia had amassed forces (~100k soldiers, tanks, and aircraft) in the Spring too.  It triggered a flurry of talks, and Moscow removed (redeployed) its forces.  Russia defended the troop movement within the country as an internal affair but has accused the US of provocation for sailing warships into the Black Sea, close to its territory last week.  Putin also reportedly was critical of Ukraine's alleged use of drones, which violated a previous agreement.  Meanwhile, tensions on the Polish-Belarus border remain tense.  Merkel sought Putin's help recently to defuse the situation, but he refused.   Belarus is thought to be instigating a migration crisis and has threatened to shut down a critical gas pipeline to the EU if Poland keeps its border closed.  These developments may have contributed to some pressure on the euro.   5.  The Mexican peso fell by around 0.5% after the central bank lifted the overnight rate to 5.00%. It is the third quarter-point move in the cycle that began in June.   The swaps market has nearly 90 bp of tightening discounted over the next three months and almost 220 bp in the next 12 months.  Banxico lifted its Q4 inflation forecast to 6.8% from 6.2%.  The one dissent (Esquivel, again) was to stand pat.  There was no vote for a 50 bp move, which contributed to the dovish read of the rate hike.  October CPI, reported earlier this week, is at 6.24% year-over-year,  6.   Friday's economic calendar is light.  Little new data from the large Asia Pacific and European countries.  The North American calendar is minimal.  The US JOLTS report on job openings and the University of Michigan's preliminary estimate of November sentiment and inflation expectations.   NY Fed's Williams is the lone speaker from the central bank and may not address monetary policy directly.  There are three sets of chunky options that expire tomorrow that may be relevant:  1.23 bln euros at $1.1460, $1.75 bln at JPY114.00, and GBP690 mln at $1.3320.   Disclaimer

The jump in US headline CPI above 6% crossed some Rubicon and injected dynamic into the process.  The dollar rallied, and new highs for the year were recorded against the euro and sterling.  The dovish tapering announcement by the Fed on November 3 was completely unwound as the December 2022 Fed funds futures returned to the high-yield mark of 66 bp ahead of the weekend.   The two-year yield rose from about 39 bp at the start of the last week to almost 55 bp.  The volatility of the bond market (the equivalent of the VIX for the S&P 500) surged back to the year's high (above 78%).   Ultimately, the idea that R-star, the real short-term interest rate when the US economy is at full capacity and inflation stable, has continued to trend lower will likely cap nominal rates.  Equities wobbled, and the S&P 500 snapped an eight-day advance, and the NASDAQ's 11-day rally stalled.  US equities stabilized and posted modest gains in the past two sessions.   The rise in price pressures requires the Federal Reserve to be more flexible to address a range of possible outcomes.  The pace of the tapering is the main constraint on policy.  The FOMC statement committed the Fed to reduce the bond-buying by $15 bln in November and December.  While it anticipated that the pace would continue, it reserved the right to adjust the rate.  This is likely to be the focus in the run-up to the mid-December meeting.  To finish QE in March, as St. Louis Fed's Bullard, a noted hawk, has argued, the Fed would need to double its pace of tapering to $30 bln a month starting in January.  What is at stake is when the Fed's rate hike cycle can begin, not the terminal rate, which is expected to be below 2%.   Dollar Index:  The CPI saw the Dollar Index surge to convincingly surpass the (38.2%) retracement target of the decline from the March 2020 high (~103) to the January 6 low (~89.20).  That retracement (~94.55) had been penetrated briefly before, but it did not stick.  This time, the Dollar Index rose to new highs for the year, slightly above 95.25.  The next retracement (50%) is found a little above 96.00, and the (61.8%) objective is almost 97.75.   The momentum indicators suggest a high is not yet in place, but the move since the mid-week CPI shocker, above the upper Bollinger Band (~95.00) warns against chasing it.  That said, initial support is likely in the 94.60-94.75 area.   Euro:  The euro was driven below $1.15 after the US CPI report and failed to resurface above this previous floor, which now acts as resistance.  A low near $1.1435 was recorded ahead of the weekend.  Neither the MACD nor Slow Stochastic is over-extended, but, as we saw with the Dollar Index, the exchange rate is outside the Bollinger Band (slightly below $1.1465) and settled below it for the third consecutive session ahead of the weekend. There is little chart support until the $1.1290-$1.1300 area is approached.  Moreover, if the euro has carved out some kind of topping pattern, the risk may extend toward $1.10.   Japanese Yen:  From around mid-September through mid-October, the dollar broke out of the old JPY109-JPY111 range to reach JPY114.70 on October 20.  It consolidated at lower levels and approached JPY112.70 on November 9.  The jump in the US CPI reported the following day lifted the greenback to JPY114.00, and it reached JPY114.30 before the weekend.  We often experience the dollar-yen exchange rate as a pair often rangebound.  We had anticipated a JPY113-JPY115 range and would allow about a half a yen range or so violation. The MACD has flatlined, while the Slow Stochastic has turned higher.  Although the fit is not perfect, we still look at US yields for directional cues.   British Pound:  Sterling had been turned lower on November 4 from $1.37 by the BOE, who caught the market leaning too far over its skis, arguably encouraged to do so by official rhetoric.  Its attempt to recover was stalled near $1.36, and the US inflation jump set it to new lows for the year.  The low ahead of the weekend was slightly below $1.3355.  The MACD is entering oversold territory, while the Slow Stochastic, which leveled off, seems to be slipping into over-extended territory as well.  After closing for two sessions below the lower Bollinger Band, it finished the week back above it (~$1.3355).  A close above $1.3400 would suggest a consolidative phase lies ahead.  Last December, sterling recorded lows $1.3135-$1.3185, and the risk is for this area to be tested.   Canadian Dollar:  Since the US CPI surprise, the Canadian dollar has been the weakest of the major currencies, falling around 0.75% against the greenback.  It was the third consecutive weekly decline for the Loonie, which was preceded by a five-week advance.  The US dollar posted an outside up day in the middle of last week on the back of the CPI news.  It rallied from slightly below CAD1.2390 to a little above CAD1.25.  On Thursday, when US and Canadian banks were closed for holidays, the dollar rose to almost CAD1.2600 and made a marginal new high ahead of the weekend.  This met the (50%) retracement of the US dollar's decline since the CAD1.29 level was approached a couple of days before the September 22 FOMC meeting.  The Slow Stochastic is over-extended, though the MACD has more scope to run.  Here too, the market moved quickly, and the greenback settled the past two sessions above the Bollinger Band (~CAD1.2555). The CAD1.2480 area may offer initial support.   Australian Dollar:  The Australian dollar recorded the low for the year on August 20, near $0.7100.  It recovered into early September (~$0.7480) before being turned back to $0.7170 by the end of the month. The Aussie launched another advance last month that carried to around $0.7555 and the 200-day moving average.  It has come under new pressure this month and fell to nearly $0.7275 ahead of the weekend, meeting the (61.8%) retracement target of the overall rally since August 20.  It closed on a firm note above $0.7300.  The Slow Stochastic is over-extended and could turn up next week.  The MACD is still pointing lower.  After settling out the Bollinger Band on Wednesday and Thursday, the Aussie moved back into it (~$0.7300) ahead of the weekend.  Initial resistance is seen in the $0.7335-$0.7355 band.   Mexican Peso:  The US CPI boosted the dollar by nearly 1.6% against the peso, the most in five months.  It was the only advance of the week, but it was sufficient for the greenback to close around 0.6% stronger.  The high for the week (~MXN20.7225) was recorded in the hours after the central bank delivered its fourth quarter-point rate hike.  Banxico showed no appetite to increase the pace, unlike other regional central banks, even though CPI is still accelerating.  Still, the greenback slightly exceeded the (61.8%) retracement target (~MXN20.70) of its decline from the November 3 high (~MXN20.98) to the November 9 low (~MXN20.2515) before retreating ahead of the weekend.  Support is seen around the 20-day moving average (~MXN20.42).  Among emerging market currencies, the Brazilian real (~2.3%) and the Chilean peso (1.6%) fared best.  The Hungarian forint (~-2.9%) and the Turkish lira (-2.75) saw the largest losses.  The JP Morgan Emerging Market Currency Index fell by about 0.40% last week, the eighth weekly decline in the past ten.   Chinese Yuan:  One would not know it by reading much of the free financial press, but the Chinese yuan is the strongest currency in the world this year.  Its 2.3% advance eclipses the Canadian dollar, the only major currency stronger against the US dollar on the year (~1.3%).  The tensions in Europe and the pullback in oil prices saw the Russian rouble tumble almost 2.3% last week.  It was knocked from its perch as the top performer, allowing the yuan to pull ahead.  The dollar settled last week, slightly under CNY6.38, its lowest close since May 31, when it recorded a three-year low (~CNY6.3570).  The trend line connecting the 2014 dollar-low and 2018 low is frayed in May and June but essentially held.  It is now being violated more convincingly.   Sentiment toward investment in China has become in fashion again.  The NASDAQ Golden Dragon Index that tracks Chinese companies that trade in the US rallied nearly 7% last week.  China's 10-year yield of 2.80% may not sound particularly exciting, but it is the only benchmark that has not sold off this year.  The yield has fallen 20 bp.    Disclaimer

Overview:  While the Belarus-Poland border remains an intense standoff, there have been a couple other diplomatic developments that may be exciting risk appetites today.  First, Biden and Xi will talk by phone later today.  Second, reports suggest the UK has toned down its rhetoric making progress on talks on the implementation of the Northern Ireland Protocol.  Equities in the Asia Pacific region were mostly firmer, with China a notable exception among the large markets, even though the October data was generally stronger than expected.  Europe's Stoxx 600, which has fallen only once this month, is edging higher to new records, while US futures are enjoying a firmer bias.  Benchmark 10-year yields are 1-2 bp lower, which puts the Treasury yield near 1.55%.  The European periphery is outperforming the core.  The dollar is soft.  The Scandis and Antipodeans lead the move, while the euro, yen, and British pound are little changed.  Emerging market currencies are also mostly stronger.  Here the Philippine peso is notable as it falls the most in seven weeks as corporates bought dollars.  After falling by 0.65% last week, the JP Morgan Emerging Market Currency Index is edging higher today.  Gold is snapping a seven-day rally, stalling near $1868.  Support is seen in the $1842-$1845 area.  January WTI  was sold again as it poked above $80.  It is pinned near last week's lows (~$78.65) as the US response is awaited.  European natural gas futures are firm as the capacity auction results are awaited, and Europe faces its first cold snap of the season.  Iron ore and copper prices are posting small losses.   Asia Pacific Japan's Q3 GDP disappointed, but it is old news and will likely spur Prime Minister Kishida to support a large supplemental budget, which could be unveiled by the end of the week.  Economic growth in the world's third-largest economy contracted for the fifth quarter in the past eight.  The 0.8% loss of output in Q3 was more than the 0.2% expected by the median forecast in Bloomberg's survey.  Consumption (-1.1%), business spending (-3.8%), and public investment (-1.5%) did the most damage.  The GDP deflator was unchanged from Q2 at -1.1%.  The Japanese economy is recovering here in Q4.  Talk of the size of the supplemental budget has increased to around JPY40 trillion (~$350 bln) from JPY30 trillion.  It is expected to include a cash payment for 18-year olds and younger, a tax break for companies that boost wages, a new subsidy for domestic travel, snd pay hikes for caregivers. China's October data was stronger than expected but does not shake off concern that the world's second-largest economy is struggling.  The year-over-year pace of retail sales rose for the second consecutive month in the face of expectations for a decline.  The 4.9% increase follows the 4.4% gain in September and 2.5% in August. In October 2020, it rose 4.3% year-over-year.  Industrial output rose 3.5% from a year ago. It was the first increase since March. Last October, it had increased by 6.9%. The surveyed joblessness was steady at 4.9%.  Fixed asset investment and property investment slowed.  Chinese officials have not addressed the economic slowdown with large-scale fiscal or monetary initiatives.   We have suggested that the dollar-yen exchange rate has entered a new range after trending higher from mid-September through mid-October.  That new range is likely JPY113-JPY115, and to find the floor, the dollar briefly traded below JPY112.80 last week. After spiking back to JPY114.00 on the US CPI surprise, the greenback continues to hover around there, the middle of the range.  Tomorrow's expiring options ($830 mln at JPY113.40 and $1.6 bln at JPY114.30) may mark the near-term range.  The Australian dollar is building on its pre-weekend recovery.  It saw a low slightly above $0.7275 on Friday and settled on its highs (a little above $0.7330).  It has risen to $0.7365, and the intraday momentum is getting stretched.  Look for resistance near $0.7375.  The greenback edged slightly lower against the Chinese yuan to record a new six-month low (~CNY6.3785) before recovering within a narrow range.  It is trading slightly above CNY6.3830 in late dealings. The PBOC set the dollar's reference rate at CNY6.3896, a little below the median forecast of CNY6.3896 (Bloomberg survey).  The PBOC rolled over in full the policy loans (CNY1 trillion) coming due this month, and the overnight repo rate fell by seven basis points to 1.78%, the lowest in three weeks.   Europe Tensions between the UK and EU appear to have taken a step away from the brink.  A deal on medicine supplies from other parts of Great Britain to Northern Ireland may have been the critical catalyst.  Reports suggest a de-escalation of UK rhetoric threatening to invoke Article 16, which allows for unilateral over-riding of the Northern Ireland Protocol under certain circumstances of serious economic, environmental, or societal risks.  Separately, two polls have begun showing Labour is edging ahead of the Tories. The Opinium poll (published in the Guardian) gave Labour a one percentage point lead, the first since January.  The Savanta Com Res poll (for the Daily Mail) put Labour ahead by six percentage points at 40%.  The main issue appears to be Prime Minister Johnson's handling of several ethics issues.  His personal support has also waned.    The US was warning at the end of last week that Russian may be preparing to invade Ukraine. Moscow seems to be acting out of fear, fear of the US and Europe creeping presence in Ukraine.  If Ukraine is going to remain independent, Russia insists it can only be a (weak) buffer state.  US rhetoric seemed aggressive in Moscow.  Last month US Defense Secretary Austin argued that no third country [i.e., Russia] has a veto over NATO membership decision[i.e., Ukraine].    Poland, Lithuania, and Latvia are considering formally requesting NATO consultations, while the EU is expected to announce new sanctions on Belarus later today.  Separately, we note reports that India has begun taking delivery of the S-400 air defense missile system from Russia (part of a $5.5 bln deal), which is the same that earned Turkey American sanctions.   The euro edged above the pre-weekend high, but the tone remains fragile, and for the third consecutive session has been unable to resurface above old support at $1.1500.  Since the US CPI report in the middle of last week, it has fallen, and the sideways movement could alleviate the overextended technical condition.  Sterling extended its pre-weekend recovery to reach $1.3440 before sellers reemerged to knock it to the session low of almost $1.3400.  We suspect it can move higher in North America today and target the $1.3480 area.   America The US seems more eager for the Biden-Xi call than Beijing  Expectations should be low, and with no actionable outcome likely (not even a statement), there appears to be little reason to spin it as a virtual summit. The top officials and the senior staff of the two largest economies should talk.  Previously, there were high-level meetings regularly.  Since their last call, a new US-UK-Australian alliance was announced that will result in Australia acquiring nuclear-powered submarines, and it was confirmed that the US has had military personnel in Taiwan since last November.  China continues with its intimidation campaign of repeatedly entering Taiwan's air-identification zone. China's assessment of the US is unlikely to have changed.  Beijing sees the same thing many others do.  Biden's approval rating has fallen to near 41%, and less than that has a favorable view of his handling of the economy.  At the end of last week, the Univerity of Michigan's consumer sentiment measure (preliminary November) fell to its lowest in a decade.  Surveys continue to point to the likelihood that the Democratic Party will lose both houses of Congress in next year's mid-term.  And to underscore the pressure on Biden, the US Court of Appeals (5th Circuit) sustained a block on OSHA's ordered vaccine mandate (or weekly test).  With the sixth plenum over,  Xi has, by all accounts, confirmed his ascendancy and domination of Chinese politics for years to come.   The week's economic calendar for the US begins off slowly.  The November Empire State manufacturing survey is on tap.  It has been in a sawtooth pattern, alternating between gains and losses for the past five months.  It fell sharply (19.8 from 34.3) in October and is expected to have turned up in November.  The US reports October retail sales and industrial production figures tomorrow. Fed officials begin taking to the public stage starting tomorrow.  Over the course of the week, around 11 officials are scheduled to speak.  In addition to US bills, the Treasury Dept sells 20-year bonds, whose auctions have been among the most challenging for coupons, and 10-year TIPS at the end of the week.   Canada reports September manufacturing and wholesale sales today, but the October existing home sales may be more important.  Tomorrow Canada reports housing starts, but the highlight of the week is Wednesday's October CPI.  Price pressures are accelerating in Canada, and the headline CPI is likely to move toward 5% (4.4% in September).  The swaps market is pricing in about 65 bp of tightening in six months.  This week, Mexico has a light economic diary after last week's higher than expected CPI (6.24%) and Banxcio's 25 bp rate hike (to 5%).  Brazil also has a light economic calendar this week.  Last week featured a further rise in (IPCA) CPI (10.67% vs. 10.25%) and weak September retail sales (-1.3% vs. -0.6% median forecast in Bloomberg's survey after a revised -4.3% fall in August). Last week's US CPI shocker saw the greenback jump from around CAD1.24 to slightly above CAD1.26, roughly the 50% retracement of the slump from CAD1.2900 on September 20.  It settled last week on a soft note, and some follow-through selling has seen the US dollar eased to about CAD1.2525.  A break here sees CAD1.2500 and then possibly CAD1.2470.  Since last September, the greenback has moved into a new and higher range against the Mexican peso.  It has not traded much below MN20.12.  Nor has it spent much time above MXN20.90.  It is in the pre-weekend range (~MXN20.45-MXN20.72).  Look for the consolidative day to continue through the local session.  The Brazil real was the strongest emerging market currency last week, rising almost 1.6% against the US dollar.  The US dollar found support around BRK5.40. Trendline support (from June, August, and September lows) and the 200-day moving average are near BRL5.36.   Disclaimer

XAUUSD tests trendlineGold continues on its way up as investors seek to hedge against inflationary pressures. The rally picked up steam after a break above the triple top at 1833. Price action is grinding up along a rising trendline.The bulls are pushing towards 1884, a major resistance where last June’s sell-off started. Strong selling pressure is possible in that supply zone as short-term buyers may take profit and reassess the directional bias.1855 on the trendline is the first support. A bearish breakout may trigger a correction to 1823.AUDUSD breaks above bearish channelThe Australian dollar softened after the RBA minutes reiterated that there will be no rate hike until 2024.The pair has found buying interest at the base of October’s bullish breakout (0.7280). A break above the falling channel indicates that sentiment could be turning around.0.7390 is a key resistance and its breach could prompt sellers to bail out. In turn, this would raise volatility in the process. Traders may then switch sides in anticipation of a reversal. An overbought RSI has so far limited the upside impetus.GER 40 rally gains tractionThe Dax 40 climbed after upbeat retail sales and industrial production in China lifted market sentiment.The index is seeking to consolidate its recent gains after it cleared the previous peak at 15990 which has now turned into support. Sentiment remains optimistic and 16300 would be the next step.An overbought RSI on the daily chart may temporarily put the brakes on the bullish fever. But a pullback may once again attract a ‘buying-the-dips’ crowd above 15990. A deeper correction may send the price towards 15770.

Overview: The much-heralded Biden-Xi meeting left little impression on the capital markets.  Equities in the region were mixed, and China's main markets fell, alongside Australia, South Korea, and India.  European equities continue their upward market, with the Stoxx 600 gaining for a fifth consecutive session. US futures are softer.  The bond market is quiet, with the US 10-year yield softer slightly below 1.60%.  European benchmark yields are 1-2 bp lower and the periphery is outperforming the core.  Encouraged by a strong employment report, sterling is the strongest of the majors, gaining about a third of one percent.  Most major currencies are trading with a heavier bias, and the euro is pinned near 19-month lows.  The dollar is gaining against most emerging market currencies.  The Turkish lira is off more than 1.5% as the market prices in a 100 bp cut on Thursday.   Hungary's disappointing Q3 GDP (0.7% vs. 1.0% forecasts) may limit the aggressiveness of the central bank today.  A 30 bp hike after two 15 bp moves was expected.  Gold is extending its rally and has taken out the downtrend drawn off the January and June highs (found ~$1872 today).  The next target is around $1900.  Oil is firm, and the January WTI contract is straddling the $80-level.  European natural gas is rising as new supplies are low, and there is a further delay in the certification process of the Nord Stream 2 pipeline.   Yesterday's 9% advance has been extended by another 8% today.  Iron ore has steadied, while copper is struggling after falling 1% yesterday.   Asia Pacific There is not much to say about the Xi-Biden "virtual summit."  The call reportedly lasted three hours.  The one concrete thing to emerge is that US business executives will have an easier/quicker time entering China.  Separately, Hong Kong's Chief Executive used her regular briefing to justify the decision to allow JP Morgan's CEO to skip the city's 21-day hotel quarantine because of the size of the bank's operations.  This speaks to the difference between the rule of law and the rule by law that some observers make.  Returning to regular meetings between the senior officials from both countries seems to be the logical way forward, but both sides appear to draw domestic benefits from demonizing the other.  In the US, the Biden administration uses the threat of China to justify building a 21st-century infrastructure. At the same time, Beijing plays the nationalistic chords to strengthen the loyalty to the Communist Party even as its delivery of improved living standards slows or stalls.   The minutes from the recent Reserve Bank of Australia meeting contained no surprises.  The exit from the yield curve control policy seems clumsy, but the RBA seems adamant that a rate hike next year is unwarranted.  The market remains convinced officials are wrong.  The swaps market has about 75 bp discounted over the next 12 months, with the hikes and risks increasing beginning in late H1 22. In a speech after the minutes were released, Governor Lowe referred to a hike in 2024 as "still plausible," but this seemed like a slight climb down from it being the "central case."  On the other hand, elevated price pressures and border controls have driven the unemployment rate to 3.4%, its lowest level since 2008, and lifted the participating rate to match record highs. The Reserve Bank of New Zealand will likely hike rates again next week.  The swaps market is pricing in nearly 50 bp of tightening by the RBNZ over the next three months and almost 140 bp in the following nine months.  It is difficult to see a more hawkish outlook.  The five basis point jump in the US 10-year yield helped lift the greenback to JPY114.30, matching its best level since November 1 (JPY114.45).  There is an option for $1.6 bln at JPY114.30 that expires today.   The four-year high was set on October 20 near JPY114.70.  The Japanese economy is recovering after a larger than expected contraction in Q3.  A large supplemental budget is expected as early as the end of the week but before month-end in any event.  As if confirming the lack of new insight from the RBA minutes, the Australian dollar is trading within yesterday's range (~$0.7320-$0.7370).  A break of the $0.7300 area would weaken the technical tone, while a move above $0.7380 signals a stronger recovery after finishing last month near $0.7550.  The Chinese yuan rose to new five-month highs today before pulling back.  The dollar fell to CNY6.3670 and rebounded to a new session high slightly above yesterday's high near CNY6.3850.  The PBOC set the dollar's reference rate at CNY6.3924, a little above the (Bloomberg survey) median projection of CNY6.3920. Ironically, the yuan's high was recorded as the Biden-Xi call got underway.  It trended lower through the rest of the session.   Separately, the PBOC boosted its liquidity injection via seven-day repos to CNY50 bln from CNY10 bln on Monday and rolled off its full medium-term lending yesterday, easing technical pressure in the money market.   Europe The UK's employment data is especially important in light of the BOE concerns about the labor market now that the furlough program has ended.  Around one million workers were on the program when it ended. The BOE surprised the market by not raising rates at the meeting earlier this month. Governor Bailey continues to blame the market for misconstruing his remarks and expressing his unease with the "inflation situation."  He said he wanted to see what happens now that the furlough program ended before hiking, but it is not clear that today's data is sufficient.  However, the preliminary indications suggest the UK labor market is normalizing quickly.  October payrolls rose by 160k. Jobless claims fell by nearly 15k after a revised decline of almost 86k in September (initially estimated at -51.1k).  In the three months through September, the UK employment rose by 247k, and the ILO measure of unemployment fell to 4.3% from 4.5%.  Of note, the next employment report will be issued two days before the next MPC meeting (December 16).     Governor Bailey acknowledged that his decision not to hike rates earlier this month was close.  The swaps market has a little more than a 55% chance of a hike in December and has it fully priced it in for the first meeting next year (February 3). The central bank's chief economist, Pill, said there was no evidence yet that higher inflation was seeping into general pay levels.  Starting salaries appear to be increasing, but it may not be lifting the pay for existing workers.  Separately, a technical glitch with an internet-based order system caused the BOE to postpone a bond purchases operation until Thursday.  The QE operations take place three times a week at a pace of slightly more than GBP3 bln a week, with an eye toward finishing them by year-end.   There is another twist to the saga of the controversial Nord Stream 2 pipeline.  Hopes that the completed pipeline could become operational soon were dealt a fresh blow by the German regulator, who suspended the certification process.  The technical issue was a change in the legal form of the operating company.  Nord Stream 2 AG established a subsidiary that would own and operator the German section of the pipeline.  There is some thought that after this delay, the corporate reorganization could expedite the eventual approval.   Coronavirus deaths spiked in Germany to the six-month highs, and the government is debating how to control the fourth pandemic wave. Ironically, Japan now has the highest inoculation rates among the G7. It reported the lowest number of new infections in 18 months. The euro was sold below $1.1400 yesterday and has been unable to resurface above there.  Since the $1.15 level broke, we have suggested the next target is near $1.1290-$1.1300. The ECB's dovish rhetoric contrasts with the prospect of a more hawkish posture by the Federal Reserve.   We continue to see an acceleration of the Fed's tapering as the most likely outcome of the December FOMC meeting, while next month's ECB meeting is more about extending the bond-buying after the Pandemic Emergency Purchases Program ends next March.  The prospects of a rate hike next month lifted sterling to four-day highs near $1.3475, but there does not look like there is the interest to test the $1.35 area, which holds a GBP407 mln option that expires today.  Initial support is now seen in the $1.3400-$1.3420 area. The euro is sliding for the third consecutive session against steering and looks poised to test the year's low near GBP0.8400 in the coming days. The UK reports October CPI figures tomorrow, and they are expected to have accelerated.    America The US economic growth is improving this quarter after the disappointing 2% annualized pace in Q3.  It will be reflected in the consumption and production data.  Today sees October retail sales, a little more than 40% of overall consumption, and industrial production, including factories and utilities, mining, and drilling.  Headline retail sales will likely be lifted by the first increase in auto sales in six months.  The core components, which exclude autos, gasoline, building materials, and food services, are forecast (Bloomberg, median) to rise a solid 0.9%.  It would be the third consecutive monthly gain, the first since Q3 20.  Consumer spending rose 2% at an annualized rate in Q3 and is expected to grow closer to 5% this year, having peaked in Q2 at 6.7%.  Industrial production fell in August and September but is expected to have snapped back in October as the recovery from Hurricane Ida took hold.  The median forecast (Bloomberg survey) is for a 0.8% gain.  The rig count rose by 23, matching the most since January.  According to the recent jobs report, manufacturing employment rose by 60k in October.  Few have noted it, but if confirmed, it would be the largest monthly increase since August 1998.  That said, the Markit manufacturing PMI and ISM manufacturing index fell.   The Biden administration's $1.75 trillion "Build Back Better" bill is in the balance.  Some argue that the surge in inflation has been spurred by the government's spending and transfer payments and are opposed to new large-scale spending.  However, the bill's defenders argue that it has been scaled back, and much of the expenditures will be covered by new revenue.  The non-partisan Congressional Budget Office, the arbiter of such scoring, will publish its full cost estimate on Friday.  Meanwhile, expectations that an announcement will be made shortly on the Fed's leadership were fanned by comments from the Senate Banking Chairman (Brown), who said he was told a decision was "imminent."  It was widely expected before the end of next week.  Reports suggest that Treasury Secretary Yellen has opined that Brainard would be a credible pick, but she is recommending Powell, emphasizing continuity and avoiding the politicization of the post.   Meanwhile, the Fed's Bullard, Barkin, and Daly speak today.  Note that Daly was interviewed for a Board of Governor slot but appears to have turned it down. Canada reports October housing starts today ahead of the October CPI figures tomorrow.  The headline rate is expected to approach 5% though the underlying measures are lower.  The market is positioned for a hike in the March-April period next year.  Recall that the jump in US CPI sent the greenback up from just below CAD1.2400 to slightly above CAD1.2600 at the end of last week.  It reversed lower before the weekend and slipped briefly below CAD1.2500 today, roughly the (50%) retracement of the CPI-inspired gains, before rebounding. Initial resistance is seen in the CAD1.2535-CAD1.2560 area.  Mexico's economic diary is light, and the movement of the peso may reflect broader forces.  For the past three sessions, the dollar has been consolidating in a broad range against the peso (~MXN20.45-MXN20.72). Within that range, initial support may be in the MXN20.55 area.   Disclaimer

Overview: The prospects that the 6.2% CPI will prompt the Fed to move quicker continue to underpin the dollar.  The euro fell to about $1.1265, its lowest level since last September, and the Japanese yen slumped to a fresh four-year low.  The JP Morgan Emerging Market Currency Index tumbled 1% yesterday, the largest decline since February.  A more stable tone is evident in Europe, as the euro has recovered above $1.13, and the JP Morgan Index is paring yesterday's losses.  The dollar is holding just below JPY115.00.  Asia Pacific equities did not fare well.  Only China and Taiwan markets, among the large regional markets, managed to rise.  Europe's Stoxx 600 is edging higher for the sixth consecutive session.  Recall it has fallen only once since October 27.  US futures are narrowly mixed. The bond market is quiet, with the US 10-year hovering around 1.62%.  European yields are a little softer.  Gold slid below $1850 yesterday but has snapped back today to test the $1860 area.  Crude oil is heavy, with the January WTI contract around $78.80, unable to resurface above $80 amid talk that the US and China may coordinate the release of strategic holdings.  Gas prices are up another 7% in Europe today after surging 16% yesterday and 9% on Monday. Due to "unplanned maintenance," a Belarus pipeline to Poland has been shut down, which may last three days.  Iron ore prices are giving back around half of yesterday's 1.2% gain, for the third loss in four sessions.  Copper is off for a third session, losing after dropping 2.2% in the past two sessions.   Asia Pacific Japan's October trade data disappointed.  Exports and imports were weaker than expected, and this resulted in a smaller deficit. Exports slowed to 9.4% year-over-year, down from 13% in September, defying expectations for a small double-digit increase.  Imports were up 26.7% from a year ago, off the heady 38.2% pace seen in September and below the 31.8% projected.  The resulting trade deficit of JPY67.4 bln was about a fifth of what economists anticipated (Bloomberg survey).  It is the third consecutive monthly deficit.  In the first seven months of the year, Japan recorded two deficits.  A year ago, Japan recorded a JPY840 bln surplus.   Reports suggesting that the possibility that the US and China coordinate the drawdown of strategic oil reserves are light on details, but the suggestion itself is enough to weigh on prices.  Still, the International Energy Agency yesterday echoed the broad assessment of America's EIA in anticipating that the tightness of the oil market could ease shortly.   Increased output in the US, Saudi Arabia, and Russia may account for half of the 1.5 mln barrel a day anticipated increase in supply. Nevertheless, the acting head of the EIA warned tapping the US Strategic Petroleum Reserve would have a short-term impact, for which other dynamics would quickly overshadow it.  Separately, note that the API estimated a slight build of 655k barrels in US stocks this past week, while gasoline inventories fell.   In other regional developments, Australia's wage price index rose a modest 0.6% in Q3 for a year-over-year pace of 2.2%.  This was in line with expectations.  It would seem to support the RBA's argument that it need not be in a hurry to raise rates.  The June 2022 T-bill yield settled last month at 69 bp and is now near 40 bp.  Separately, China appears to be allowing "high quality" property developments to return to the asset-backed securities market to raise capital after a three-month hiatus. Lastly, reports suggest Beijing is moving ahead with its import substitution plans to reduce dependency on foreign technology.    The dollar approached JPY115.00, where an option for almost $610 mln expires today.  The dollar has not traded above there since March 2017.  Since the dollar broke above JPY112.00, we have suggested that JPY114.50-JPY115.00 may mark the top of the new range.  While this has worked for the past month, the risk is on the upside.  A convincing break of around JPY115.50 would target the JPY118.00 area.  Initial support is now seen near JPY114.70.  Note that the upper Bollinger Band is slightly below JPY114.80.  The Australian dollar is trading near its lowest level since October 6, near $0.7265.  It is holding above a trendline connecting the August and September lows, which is found near $0.7250 today, but little stands in the way of a test on the $0.7200 in the coming days.  An option for a little more than A$800 mln at $0.7300 is set to expire today.  After posting a key upside reversal yesterday, the US dollar consolidated against the Chinese yuan today, and no follow-through buying materialized.  Instead, it seemed that the local market took advantage of the pop above CNY6.39 to sell the greenback, which is straddling CNY6.38 in late dealings.  The reference rate was set at CNY6.3935, just below the bank projections (CNY6.3936, according to the median in the Bloomberg survey).  We note that the yuan is also at its best level since 2015 against the trade-weighted CFETS basket the PBOC uses.   Europe On the heels of a strong employment report, the UK reported a larger than expected increase in the October CPI.  The preferred measure, which includes owner-equivalent housing costs, jumped to 3.8% from 2.9%.  The older measure rose to 4.2% from 3.1%.  On the month, consumer prices rose 1.1% rather than the 0.8% economists forecast (Bloomberg median). Flattered by increasing gas and electricity prices.  Core prices rose 3.4% year-over-year, accelerating from 2.9% in September and defying forecasts for a 3.1% pace.  Separately, producer prices, both input and output, also rose more than expected.  Lastly, UK house prices rose 11.8% year-over-year in September, up from a revised 10.2% in August.  The recent peak was 12.6% in June, which was the highest since 2004.    European gas prices are at one-month highs.  Belarus has stopped its pipeline to Poland, claiming unplanned maintenance issues, while the border tensions and earlier threats raise suspicions of a political move.  Separately, the German regulator suspended the certification process of the controversial Nord Stream 2 pipeline as corporate assets are rearranged.  Separately, a German court yesterday dismissed an environmental challenge to the pipeline.  Lastly, we note that the virus flare-up continues in Europe, and Germany and the Czech Republic reported a record number of cases. The euro surpassed our $1.1290 Fibonacci target and did not find bids until the $1.1265 area in Asian turnover.  The single currency has been in a tight range in Europe, holding above $1.1300.  Initial resistance is seen around $1.1330 now.  A move above yesterday's high, near $1.1385, is needed to lift the tone. We suspect the near big target is closer to $1.10.  Sterling slipped to a three-day low, slightly below $1.34, but shot up to the session high near $1.3375 on the inflation news. However, the momentum was not sustained, and sterling is little changed in late morning European turnover near $1.3430. The euro briefly traded below GBP0.8400 for the first time since March 2020 but snapped back.  An 840 mln euro option at GBP0.8445 expires today and another for about 620 mln euros at GBP0.8450 expires tomorrow.   America US retail sales surged last month, and the 1.7% rise was the best since March.  After slowing in Q3, consumption is off to a strong start in Q4.  Industrial production was also much stronger than expected, rising 1.6% compared with the 0.9% gain anticipated by economists (median, Bloomberg survey).  The US reports October housing starts today, and they are expected to have recovered from the 1.6% decline seen in September. Housing starts fell in Q3 but are seen rising in Q4, encouraged by an easing of some supply chain issues.   In fact, on several fronts, there are preliminary signs that the disruptions are dissipating.  Some reports suggest that the shortage of semiconductor chips may be passed, and US auto sales rose in October for the first time in six months.  Both the EIA and IEA have forecast a more balanced oil market, and some measures of shipping costs have moderated. The Los Angeles port has reportedly reduced the number of empty containers by around a quarter this month as six new sweeper ships have been brought into operation.  In addition, we note that the re-opening of US borders means immigrant workers may begin returning.  There is still much debate, of course, on the extent that the elevated price pressures are the result of supply chain disruptions.  A report by the Bank for International Settlements estimates that without the supply problems, US inflation would be closer to 2.5% and eurozone inflation near 1.5%. President Biden is expected to make his Fed announcements in the next few days, according to reports, but it could slip into early next week.  Powell is still the favorite, and he has Treasury Secretary Yellen's in support.  Yellen warns that action is needed soon on the debt ceiling.  Her efforts may be exhausted early next month.  Lastly, San Francisco Fed President Daly opined she was more bullish on the economy than a year ago.  This seems backward to us.  A year ago, the vaccine was announced, and fiscal stimulus was anticipated after the US election. Going forward, there will be less monetary and fiscal stimulus.  The pent-up demand ("excess savings") is projected to be exhausted by early next year, and, as we have noted, the doubling of the price of oil has preceded the last three recessions in the US. We suspect that there is sufficient stimulus and need to rebuild inventories to sustain reasonably strong growth for the next few quarters, but by the second half of next year, sub-3% growth will return as the norm.  Canada reports October CPI figures today.  The headline is likely to rise to 4.7% from 4.4% in September (Bloomberg median).  However, the base effect points to a further rise this month and December, when in 2020, the CPI rose 0.1% and fell 0.2%, respectively.   The underlying core rates are also increasing.  The Deputy Governor of the Bank of Canada cautioned about the high degree of uncertainty around potential structural shifts in the labor market that make it challenging to gauge full employment with any degree of confidence.  He pointed to economic areas that still show slack.  The market is expecting the first hike next March/April.  Note that tomorrow, the "Three Amigos" (Biden, Trudeau, and AMLO) meet in the US amid concern that the US "Build Back Better" has strong nationalistic elements, including for electric vehicles.     The US dollar posted an outside up day against the Canadian dollar yesterday, and follow-through buying has lifted it to around CAD1.2585.  At the end of last week, the high set was slightly above CAD1.2600, which close approximates the (50%) retracement of the greenback's decline since the September 20 high near CAD1.29.  The next retracement (61.8%) is found by CAD1.2665.  Still, we expect that a firm CPI report will lend the Loonie some support.  The session low, set in late Asia, near CAD1.2540, may be protected a CAD1.2545 option for $600 mln that expires today.  The greenback is consolidating against the Mexican peso today after rallying yesterday from about MXN20.56 to nearly MXN20.85.  The high from earlier this month was near MXN20.98.  It has not been above MXN21.00 since March.  Initial support is seen around MXN20.60.   Disclaimer

Summary:  The cost of your breakfast and food in general continues to rise, and following a few months of sideways trading, the Bloomberg Agriculture index, which tracks a basket of major food commodity futures, reached a fresh five-year high this week. Apart from troubled weather reducing available supply there are several other reasons playing a their part and in this update we take a look at some of those, including the reasons why coffee and wheat are two of the hottest food commodities this year. The cost of your breakfast and food in general continues to rise, and following a few months of sideways trading, the Bloomberg Agriculture index, which tracks a basket of major food commodity futures, reached a fresh five-year high this week. The table below shows the commodities with the biggest impact this year has been led by coffee, edible oils, wheat and sugar. There are individual reasons behind the strong gains, but what they all have in common has been a troubled weather year, a post pandemic jump in demand leading to widespread supply chains disruptions and more recently rising production costs via surging fertilizer prices and rising cost of fuels, such as diesel. The La Ninã weather pattern which can lead to floods, drought and cooler temperatures around the world returned to haunt producers this year, and recent forecasts say it will prevail through the coming northern hemisphere winter. In large swathes of South America and parts of North America a La Ninã is normally accompanied by drought, whereas in Australia and parts of Southeast Asia it is often resulting in heavy rainfall. Fertilizer prices have skyrocketed during the past few months as a result of soaring natural gas prices which have forced some European production plants to halt or reduce production. Fertilizer indices tracking prices in North America and Western Europe both trades more than 200% above their five-year averages. The surge has raised concerns farmers may reduce their usage of fertilizers or shift more acres into crops that require less nutrients. A drop in yields could drive prices even higher, thereby worsening already strong food inflation. Supply chain problems/disruptions: We are all familiar with stories about port congestion, lack of containers and surging prices on all the major routes around the world, especially from the production hub in Asia to major ports in Europe and the U.S. These problems began as a result of the pandemic which initially drove a major amount of order cancellations before the world a few months later went on a massive spending spree for consumer goods as the service sector grinded to a halt. These developments together with port disruptions due to continued Covid outbreaks helped trigger disruptions that to this day continue to cause problems for shippers of goods, including many of the food commodities that are transported in special containers. Arabica coffee trades at a nine-year high at $2.38 per pound with the supply outlook looking increasingly tight following an annus horribilis in Brazil where frost and drought dealt a blow to the 2021 crop. In addition to weather, the market also had to deal with lack of shipments and high container rates, surging fertilizer prices and roasters in Europe struggling to source supplies from alternative producers in Columbia and Vietnam. If that wasn’t enough, there is now also a growing risk of civil war in Ethiopia, the world’s third biggest grower of the Arabica bean. What may prove to be even worse over the coming months is that the flowering, or lack of, for the 2022 on-season crop is pointing to another low production year. The break above $2.25, the 2014 high may signal a market running towards $3, a record level that was last seen in 2011. Wheat: From a global food security perspective, the ongoing rally in global wheat prices is an even bigger concern. This week we have seen Chicago wheat futures climb to their highest level in nine years, while here in Europe, the benchmark Paris Milling Wheat contract trades just below €300 per tons, its highest price ever. Just like coffee, weather worries are the main driver, following a poor harvest in North America together with a year-on-year decline in exports from Russia, the world’s largest shipper. These developments have triggered increased demand for European sourced wheat, and with the prospect of another potentially challenging crop year in 2022 caused by weather and high fertilizer costs, some of the major importers have recently been stepping up their pace of purchase in order to cool local food prices, and to secure supplies ahead of winter. With buyers increasingly competing for supplies the market will look for some relief from the upcoming and promise-looking harvests in Argentina and Australia, taking place from now until January. One of the most actively traded ETF tracking the agriculture sector, the Invesco DB Agriculture Fund, broke higher last week to reach a four-year high. The index tracks the performance of 11 major futures markets spread across grains, softs and livestock. Source: Saxo Group

Overview:  The US dollar's sharp upside momentum stalled yesterday near JPY115 and after the euro met (and surpassed) a key retracement level slightly below $1.1300.  Led by the Antipodean currencies today, the greenback is mostly trading with a heavier bias.  Among the majors, helped by a steadying of US yields, the yen is soft.  In the emerging market space, the Turkish lira continues its headlong plunge while the yuan softened and the Mexican peso is off.  Hungary's central bank surprised with a 70 bp hike in the one-week deposit rate.  The JP Morgan Emerging Market Currency Index is posting a small gain through the European morning.  Disappointing tech results in China (Baidu and Bilibili) weighed on Chinese shares, but most markets in the region fell but Australia and Taiwan.  Europe's Stoxx 600 is struggling to extend the six-day advance.  US futures are also a little firmer.  After yesterday's four basis point pullback, the US 10-year yield is little changed near 1.58%.  European yields are 1-2 bp lower.  Gold remains within Tuesday's range (~$1850-$1877), but the moment seen earlier last week has faded, and the yellow metal is trading choppily in a consolidative phase.  The prospect of a coordinated sale of oil after China's announced it would tap its reserves for the second time saw the January WTI contract fall to $76.45, its lowest level since early October. Still, the price has stabilized in the European morning around $77 a barrel.  The benchmark European natural gas contract (Netherlands) has extended yesterday's pullback.  It settled a little below 75 euros last week, and after two days of declines, it is above 92 euros.  Iron ore is also falling for a second session and is now lower on the week.  Note that it settled October a little above $104 and is now around $86.40. Copper is lower for the fourth consecutive session.  It is trading around $424, off $20.5 this week.   Asia Pacific  Japan is expected to unveil the much-awaited supplemental budget tomorrow.  Prime Minister Kishida will get one bite of the proverbial apple, and he is expected to go big.  Talk of the size of the overall package has risen in recent days.  The Nikkei seemed to suggest a JPY79 trillion (~$690 bln) effort, while others report something on the magnitude of JPY56 trillion.  Still, it is recognized that part of the budget will include funds that were earmarked under previous budgets, which have not been spent.  The clear water is seen around JPY32 trillion.  Japan is one of the few countries that will provide new fiscal support.   New Zealand's central bank meets next week.  It is widely expected to hike rates for the second time in the cycle.   The swaps market has 200 bp of tightening priced in for the next 12 months.  The cash rate stands at 50 bp.  Earlier today, the central bank reported that the two-year inflation expectations (business survey)  rose to 2.96% in Q4 from 2.27% in Q3.  It is the highest in a decade.  The one-year expectation rose to 3.7% from 3.02%.  Still, with other countries slower to raise rates, a 50 bp move may not be necessary.  The Kiwi rose almost 4% last month and has given back nearly half so far in November.  Separately, the Philippines and Indonesia central banks met and left rates steady as expected.   The dollar posted a key reversal against the yen yesterday.  It made a new high for the move, a few pips below JPY115.00, and proceeded to sell-off and close (slightly) below Tuesday's low.  However, follow-through selling has been limited, and the greenback is trading firmly but may be absorbing sales related to the $1.34 bln in options in the JPY114.20-JPY114.25 area that expire today.  The Australian dollar initially extended its losses to almost $0.7250, where a A$575 mln option expires today. However, since early in the Asian session, it has posted corrective upticks and looks set to challenge yesterday's high and five-day moving average a little above $0.7300.   The Chinese yuan appears to have begun consolidating.  It remains in the range set on Tuesday that saw the dollar trade roughly between CNY6.3670 and CNY6.3965.  The small gain is the third this week.  The PBOC fix was at CNY6.3803, a bit firmer compared with expectations (CNY6.3786 in the Bloomberg survey) than seen recently.  Note that there is a $1 bln option at CNY6.3830 that expires today.   Europe The auto industry in Europe remained under pressure last month, though the US reported its first increase in sales in six months.  New car registration in Europe, including the UK, is a proxy for sales.  They tumbled by slightly more than 30% year-over-year in October.  This is considerably weaker than expected and is the poorest since May 2020.  The shortage of semiconductors is the likely culprit, and there are some signs of improvement.  The EC will propose modest tweaks in rules about how funds outside of its borders (UK) can be managed while avoiding more dramatic changes.   Draft proposals call for at least two full-time senior managers in the EU and for regulators to be notified when most of their assets are managed outside the EU.  These seem quite minor and unlikely to disrupt the UK fund business.  Earlier this month, the EU Commissioner for Financial Services indicated that temporary waivers would be granted to allow EU banks and money managers to clear trades in the UK. Meanwhile, the dispute over fishing appears to be worsening (Denmark complaining, not just France), and the UK continues to threaten to invoke Article 16.  Former Prime Minister Blair says he will propose a solution to the dispute over the Northern Ireland Protocol in the coming days.  Hungary delivered a 30 bp hike in the base rate earlier this week, which now stands at 2.10%.  It warned that it could make a separate decision on its one-week deposit rate.  It did so today, hiking it 70 bp to 2.50%.  It is a hawkish move that sent the forint higher.  Separately, as widely expected, the Central Bank of the Republic of Turkey cut the one-week repo rate 100 bps to 15%. As a result, the lira is weaker for the eighth consecutive session.  The lira's weakness not only fuels inflation but also will challenge companies and banks with foreign exchange exposure.  The dollar finished last month near TRY9.60 and after the rate hike, pushed above TRY10.97 before stabilizing.   The euro overshot the (61.8%) retracement target of the rally that took it from near $1.0640 in March 2020 to high on January 6, around $1.2350.  That retracement target was about $1.1290, and the euro fell to around $1.1265 yesterday. It recovered to new session highs early in North America yesterday (~$1.1330), leaving bullish hammer candlestick, and follow-through buying lifted it to $1.1345 today.  The combination of higher inflation and stronger retail sales this week have helped sterling to recover.  It had traded near $1.3350 at the end of last week and has barely traded below $1.34 this week.  Indeed, sterling is rising today for the fifth consecutive session, the longest advance in nearly seven months.  It poked above $1.35, where an option for about GBP345 mln will expire today.  A convincing move above $1.3515 could signal another cent advance.  The euro slipped to below GBP0.8385 today before recovering.  It is testing the GBP0.8400, which holds options for 1.1 bln euros that also expires today.   America Leave aside the gaffes by President Biden over Taiwan.  Bloomberg counts four such verbal blunders that have required official walk back or explanation or clarification.  Reports indicate that Biden probed Xi about oil sales.  China has intervened in the commodities (industrial metals) and crude oil market recently.  Today it indicated it will provide more oil from its strategic reserves.  The September is action 7.1 mln barrels, according to reports, and privately sold more.  It is unclear whether today's sales were planned or grew out of the "virtual summit."  Still, it puts the ball back into the US court.  If the US does not sell or lend oil from its strategic reserves, it will look bad after China's move.  On the other hand, its own agency (EIA) projects that it may not be needed as oil will be in oversupply shortly.  Moreover, the pain for consumers is coming from gasoline prices, not oil per se.  Drawing down strategic reserves may not help the gasoline market.  Apparently, Japan has been approached by the US about coordinating the release of oil, though Europe was not.  The US reports weekly initial jobless claims today.  They have fallen for six consecutive weeks, and at 267k, it is the lowest since the pandemic struck.   That said, at the end of 2019, there were below 220k.  The Philadelphia and Kansas City Feds publish their November survey results.  Both surprised last month, with the former on the downside and the latter on the upside.  This time it may be the other way around, with the Philly survey showing strength and the KC survey softer.  Canada reports its monthly portfolio flow data ahead of tomorrow's retail sales report.  Mexico and Brazil have light economic calendars.   Canada's Prime Minister Trudeau and Mexico's President AMLO visit Washington today for the North America's Leaders Summit.  There is tension among the "three amigos."  The Build Back Better US initiative contains several elements that favor American producers. A key one is that substantial tax break for Americans buying electric vehicles if they are made in the US.  This would seem to put Canada and Mexico at a disadvantage, given the integration of the auto sector on a continental basis. Mexico and Canada are also concerned that the Biden Administration's interpretation of the domestic content requirement in the USMCA treaty is also narrow and puts them at a disadvantage.   Canada is also concerned about the pipelines after Biden nixed the Keystone Pipeline in one of his first acts in office, and the Line 5 pipeline is being challenged by Michigan.  The US, and to a less extent, Canada, is worried about the efforts by AMLO to increase the power of the state sector energy companies (oil and electricity), deterring private sector efforts.  The US may try pressing against this on environmental grounds.  Climate and immigration are reportedly on the top of today's agenda.  The US dollar reversed higher against the Canadian dollar on Tuesday, posting an outside up day.  Follow-through buying yesterday lifted the greenback a little above CAD1.2620.  It ticked ever so slightly higher today but has come back offered.  Support is seen in the CAD1.2555-CAD1.2575 area.  The $1.04 bln option at CAD1.25 that expires today is too far away to be impactful. Meanwhile, the US dollar remains within Tuesday's range against the Mexican peso (~MXN20.56-MXN20.85).  This range looks set to hold today.   Disclaimer

Overview:  Concerns about the virus surge in Europe cut short the euro's bounce and sent it back below $1.1300 and are also weighing on central European currencies, including the Hungarian forint, despite yesterday's aggressive hike of the one-week deposit rate.  Austria has reintroduced a hard 20-day lockdown.  Germany's health minister warned that the situation deteriorated and vaccines were not enough to break the wave.  He was explicit that a lockdown cannot be ruled out.  The US dollar is trading broadly higher.  Only the yen is resilient on the day, but sterling is the only major currency that has edged higher this week.  The Scandis and euro are off more than 1%.  Speculation that Turkey may announce measures over the weekend to stabilize the lira may be helping to deter new sales today after yesterday's rout.  In the nine-day drop through today, it is depreciated by almost 15%.  The JP Morgan Emerging Market Currency Index is off for the fourth consecutive session to bring this week's loss to more than 2%, the most in five months.  Equities do not know of the consternation in the foreign exchange market.  Disappointing Alibaba results weighed on the Hang Seng (~-1%), while most other large regional bourses but Taiwan and India closed the week on an up note.   Europe's Stoxx 600 snapped a six-day advance yesterday. It was only the second loss since October.  It began firmer today but has reversed lower, putting at risk the six-week rally.   US futures are mixed, with the NASDAQ outperforming.  Bond markets are in rally mode as well.   The US 10-year yield is off three basis points to approach the week's low near 1.53%.  European bonds are off mostly 3-5 basis points, even in the UK, where retail sales surprised on the upside.  Gold is steady, finding support near $1850.  Oil initially extended yesterday's recovery but is reversing lower, leaving the January WTI contract set to test yesterday's low near $76.45.  This is the fourth consecutive weekly fall in crude oil.  European natural gas (Netherlands benchmark) is off 4.4% today, the third drop in a row, and pares the week's gain to almost 19%.  In Singapore, iron ore prices jumped 5.7% to break a five-week slide that saw prices tumble by about 28%.   Copper is firmer and paring this week's loss to around 2%.   Asia Pacific There were two developments in Japan to note.  First, October CPI was largely in line with expectations.  Surging gasoline prices (seven-year highs) helped keep the headline rate positive for the second month (0.1% year-over-year).  Excluding fresh food, the core rate was steady at 0.1%.  However, the deflationary forces are evident when fresh food and energy are removed.  The measure deteriorated to -0.7% from -0.5%, the most since June (-0.9%).    Second, Prime Minister Kishida unveiled an overall package of JPY78.9 trillion (~$690 bln). It is larger than the previous two pandemic packages. "Fiscal measures" refer to spending, investment, and loans, and this is seen worth about JPY55.7 trillion.  It is not clear yet, how much represents new spending as opposed to the reallocation of funds from earlier budgets that were not used. However, it appears to be about JPY32 trillion of new spending.   The Chinese yuan, up a modest 2.1% for the year, is the strongest currency.   Against a trade-weighted basket (CFETS), the yuan is pulling back from a six-year high set earlier this week as the euro recovers a cent.  Consider that the yuan has appreciated by more than 9% against the euro and 11.5% against the yen this year.  That means that investment in China has the same tailwind as the dollar and is compensated a bit for the relative lack of transparency and liquidity.  The Financial Times estimates that foreign holdings of Chinese bonds and stocks rose to around $1.1 trillion at the end of September, about a 13% increase this year.  China's stock market has underperformed this year, and the CSI 300 is off around 7% this year.  On the other hand, China's bonds have fared well.  It is the only 10-year bond that has not weakened this year.  China's figures show foreign direct investment has risen by almost 18% this year through October to nearly $142 bln.   The dollar is posting an outside down day against the Japanese yen by first rising above yesterday's high before reversing and taking out yesterday's low. It is approaching the week's low near JPY113.75 in the European morning.  Below there, support is seen around JPY113.60.  A break would warn of a return to JPY113.00.  The Australian dollar has been sold to its lowest level since October 6, when it recorded a low of almost $0.7225.   It has broken the trendline that connected the August and September lows (~$0.7250).  The September low was around $0.7170 and maybe the next important technical target.  The dollar is trading with a firmer bias against the Chinese yuan, but the greenback remains in the range set on Tuesday (~CNY6.3670-CNY6.3965).  The dollar gained on the yuan four sessions this week, the most since July, but the net gain of less than 0.2% still shows an extraordinarily steady exchange rate.   With the yuan near six-year highs against its trade-weighted basket (CFETS), the PBOC warned against one-way moves and encouraged financial institutions to bolster fx risk management.  It set the dollar's reference rate at CNY6.3825, slightly above expectations (Bloomberg survey) for CNY6.3822.   Europe The stronger than expected October retail sales capped the week's data that points to a rebounding economy and boosts the chances of a rate hike next month.  A strong jobs report was followed by a larger than expected rise in CPI and PPI.  Retail sales jumped 0.8% in October, and the September series was revised to flat from -0.2%. It was the first increase since April.  Pre-Xmas sales were reported.  Separately, the UK government reported that the cost of servicing the national debt has risen more than three-fold over the past year, leaving the budget deficit higher than anticipated.  It appears that the swaps market is pricing in a 15 bp hike at the December 16 BOE meeting, though some are talking about a bigger move.    Several ECB officials, including President Lagarde, have successfully pushed back against expectations of a 20 bp rate hike next year that had appeared discounted by the swaps market earlier this month. The market has pushed it into early 2023.  The implied yield of the December 2022 Euribor futures contract has fallen 20 bp this month.  The December 2022 Eurodollar futures contract is moving in the opposite direction.  The implied yield has risen by about 4.5 bp this month.  The net result is the US premium has increased to over 125 bp, the highest since last March.  In late 2019, the premium was around 180 bp.  This is recognized as a factor helping lift the dollar against the euro, and it appears to have become more salient recently.   The euro's bounce yesterday, its first gain in seven sessions (since the US CPI shocker), stalled near $1.1375, where a 780 mln euro option expires today.   The euro traded quietly in Asia before being sold aggressively as news of the virus hit the wires.  The euro traded through $1.1285 before catching a bid.  Resistance now will likely be encountered around $1.1320.  The euro is posting its first back-to-back weekly of more than 1% since March 2020.  Sterling is also sliding back toward the week's lows, just above $1.3400.  A break could signal a test on the $1.3350 area, but it appears stretched on an intraday basis.  While the euro-sterling cross is practically flat, the euro has punched below CHF1.05 for the first time in six years.  It would not be surprising to learn that the SNB has been intervening.  There appears to be little chart support until closer to CHF1.0250. America The nonpartisan Congressional Budget Office offered its evaluation of the Biden administration's Build Back Better initiative.  It sees $1.636 trillion in spending over the next decade and almost $1.27 trillion in revenue.  That leaves a deficit of $367 bln.  A notable difference between it and the administration is how much more revenue will be generated by increasing the number of IRS agents.  Even if it passes the House of Representatives, it will likely be marked up in the Senate.  The jockeying for position and spin around it will likely dominate the session, which sees no US economic reports outside of the rig count later today.  The Fed's Clarida and Waller speaker today.  It seems that most market participants still see the Fed behind the curve and disagree with our idea that to secure the ability to respond to a wide range of possible outcomes, the Federal Reserve may accelerate its tapering starting in January.   It is not clear exactly when the debt ceiling will be reached, but it is being played.  The Democrats do not want to lift it through the reconciliation process, though they have forced the Republicans to do so in the past.  The Republicans appear to have the discipline and will to oppose.  No one seems to think the US will really default, and getting even this close seems undignified.  Yet, the desire to avoid being caught out encouraged investors to demand a high yield on the four-week bill sold.  Yesterday's auction saw the yield more than double to 11 bp (annualized).  It is the highest yield since July 2020.  In contrast, the eight-week bill, which is thought to be beyond the shenanigans, yield slipped to 4.5 bp from six previously and a higher bid-cover ratio.   Canada reports September retail sales figures today.  After a 2.1% rise in August, some weakness is expected.  Ahead of it, the Canadian dollar is trading at new lows for the week, though it is faring better than the other dollar-bloc currencies.  The US dollar is approaching the (61.8%) retracement objective of the decline since the CAD1.29 level was tested on September 20.  The retracement level is near CAD1.2665, and a break would target CAD1.2700-CAD1.2750.  The upper  Bollinger Band is found near CAD1.2655 today.   The Mexican peso is also under pressure.  It, too, has fallen to a new low for the week today.  The greenback looks set to test the eight-month high set earlier this month near MXN20.98.  Note that the central bank's Deputy Governor warned that inflation was accelerating, and it could rise to 7% this month and 7.1%-7.3% next month.  In October, the CPI stood at 6.24% year-over-year.  Banxico meets next on December 16, the day after the FOMC meeting.  Lastly, we note that the Brazilian real is off for four consecutive sessions coming into today.  The dollar closed above its 20-day moving average against it yesterday and looks poised to probe above BRL5.60 today. The high for the month was closer to BRL5.70.   Disclaimer

Summary:  Equity markets charged higher in the US session to close at new record highs, and the upside extended further in the futures market overnight. In FX, the recent USD strength eased slightly, while oil prices are creeping back higher despite the recent fears of strategic reserve releases. Markets are nervously awaiting the announcement of who US President Biden will nominate to head the Fed after the current Powell term ends in February. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities pushed to new all-time highs yesterday led by technology stocks and strong macro figures across manufacturing surveys and job market data such as jobless claims. Nasdaq 100 futures are trading around the 16,560 level in early European trading with the 16,500 being the intraday day support level. A recent survey among institutional investors shows that a majority is believing in the transitory inflation narrative which can help explain why investors in equities are looking through the latest inflation pressures. EURUSD and EURGBP – the beleaguered euro finally bounced back a bit after its recent remarkable slide, although it is tough to see what could engineer a reversal of the move below the 1.1500 level, which is the key chart resistance now, although Biden announcing Brainard as his pick to head the Fed next February could drive considerable short-term volatility. To stop the euro from a persistent slide, we would need a very different tone from the ECB than it has delivered recently, with no real opportunity to do so until the December 16 ECB meeting. With power prices and a new Covid wave weighing on the outlook, the ECB will very likely be happy to stay firmly dovish. USDJPY – the highs for the cycle near the psychologically important 115.00 look safe as long as US treasury yields at the longer end of the curve remain rangebound, but trading above that level could get volatile if it is broken, as some options structures may be linked to its breaking or not breaking. The next test for the price action is clearly the Fed Chair nomination that appears imminent – possibly today or over the weekend (more below in What are we watching next?). Gold (XAUUSD) has spent the week trading within a relatively narrow range between $1850 and $1870 as it awaits a fresh catalyst following last week’s breakout. The impressive rally that occurred despite headwind from a stronger dollar has stalled with bond yields picking up and the market wondering how the US Federal Reserve will manage the current inflation spike. Silver and especially platinum have both struggled to keep up with gold while ETF investors have yet to show any interest in accumulating exposure. All developments raising the risk of a retracement towards the $1830-35 key area of support. Crude oil (OILUKJAN22 & OILUSDEC21) managed to recover yesterday after the market brushed aside the potential negative price impact of a US SPR release. US attempts to attract wider support from other major importing countries seems to have fallen flat, except for China who is “working” on a release. Having dropped more than five dollars since speculation began, the market has concluded for now that the price impact of a release could be limited. The market, however, may still have to deal with the recent updates from EIA and IEA, in which they both forecast current tight market conditions could start to ease early next year as well as renewed Covid-related reductions in mobility. US Treasuries (IEF, TLT). Yesterday’s 10-year US TIPS auction stopped through, pricing at a record low yield at -1.145%. It is a signal that investors are ever more concerned about inflation risk.  The Treasury also sold 4-week and 8-week T-Bills. While the latter was priced in line with the Reverse Repurchase facility, 4-week T-Bills priced with a yield of 0.11%, more than double the RRP rate. As we approach the day in which the Treasury will run out of cash, we expect volatility in the money market to increase, while long-term yields will remain compressed as they will serve as a safe haven. In the meantime, the move index continues to rise indicating that the bond market remains on the hedge. What is going on? Central Bank of Turkey cut another 100 basis points from the policy rate, lira plunge extends. The Turkish lira has lost more than 10% versus the US dollar this week and trades well over 11.00 after Turkish President Erdogan earlier this week declared himself once again against high interest rates, which he believes cause inflation. Central bank chief Kavcioglu, who is seen as doing Erdogan’s bidding, cut rates for a third time by 1.0% to take the policy rate to 15%, but with the Turkish lira losing over 10% this week alone and more than 30% since Erdogan fired the prior more hawkish central bank head in favour of Kavcioglu, inflation will run far beyond the rate. Not even some guidance that the easing cycle may conclude in December was enough to halt the lira’s slide. US Nov. Philly Fed survey hits 39.0, a very hot reading and fourth highest ever - with Prices Paid at 80 and just missing the 42-year high of 80.7 in June, although the Prices Received was at 62.9, the highest since 1974. Special survey questions in the Novemer  survey included one on inflation expectations, with firms expecting a median 5.3% increase in their own prices, and an increase in wages of 4.8%. The median forecast for 10-year inflation was 3.5%, up from the 3.0% the last time the question was asked in August. The Bloomberg Agriculture Index hit a fresh five-year high this week with food prices likely to stay high in 2022 with labor shortages, La Ninã weather impacts, surging cost of fertilizers being the common denominator across the sector. Recent gains being led by coffee, which we highlighted earlier in the week as a commodity currently seeing multiple price supportive developments. Wheat is heading for a nine-year high in Chicago while hitting record highs in Europe with inventories tumbling amid strong demand from importers and now also a rain threat to the soon-to-be harvested Australian crop. Soybeans have seen a strong bounce after the latest WASDE report showed a tighter than expected outlook for the coming year, and following a recent rush of Chinese buying from the US and South America. Apple doubles down on self-driving cars. The company is aiming to develop fully autonomous driving capabilities for cars by 2025 under the project name Titan. Apple has developed its own chip and is aiming to soon have a car on the roads for testing. However, delivering self-driving cars is a difficult endeavor with Uber Technologies having sold its unit and Waymo (Google’s unit) has been struck by fatigue and key people leaving the project. Tesla is also still struggling to deliver self-driving cars. What are we watching next? Who will US President Biden nominate to head the Fed next February? Powell is still seen as more likely to get the nod that Brainard by roughly two to one, and this Fed Chair nomination issue is hanging over the markets, as the current Fed chair term ends in early February and from comments made earlier this week, an announcement could be made any day now. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell). Vote on $1.7 trillion US fiscal bill today in the House of Representatives after the Congressional Budget office said the bill, which focuses on social spending and climate initiatives, would add some $367 billion to the US Federal deficit (around 1.5% of current US nominal GDP) over the next 10 years. Earnings Watch – there are no important earnings today and this earnings week has been good in the US and Europe, while a bit more mixed among Chinese companies. The list below shows earnings releases next week. Monday: Sino Pharmaceutical, Prosus, Zoom Video, Agilent TechnologiesTuesday: Xiaomi, Kuaishou Technology, Compass Group, Medtronic, Analog Devices, Autodesk, VMWare, Dell Technologies, XPeng, HP, Best Buy, Dollar TreeWednesday: DeereThursday: AdevintaFriday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0830 – ECB President Lagarde to speak1200 – UK Bank of England Chief Economist Huw Pill to speak1330 – Canada Sep. Retail Sales1715 – US Fed Vice Chair Clarida to speak on global monetary policy coordination Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

November 20, 2021 By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday November 16th 2021 and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT Currency data this week is the second straight decline in British pound sterling speculative positions. The pound sterling speculator contracts dropped sharply for the second consecutive week this week and have now fallen by a total of -46,646 contracts over just this two-week time period. These declines have pushed the overall speculative position into a bearish sentiment level of -31,599 contracts which marks the lowest standing of the past seventy-six weeks, dating back to June 2nd of 2020. The GBPUSD currency pair has been under pressure since the middle of October and fallen from around 1.3800 exchange rate to just above the 1.3435 level currently, a drop of almost 400 pips. Data Snapshot of Forex Market Traders | Columns Legend Nov-16-2021 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index EUR 705,698 86 -3,826 34 -26,985 68 30,811 25 JPY 252,897 91 -93,126 10 115,758 94 -22,632 1 GBP 207,099 43 -31,599 51 41,182 54 -9,583 36 MXN 170,102 33 -47,655 2 46,127 99 1,528 50 AUD 166,688 57 -61,153 27 69,858 71 -8,705 31 CAD 148,955 30 8,709 62 -26,717 35 18,008 74 USD Index 59,387 88 34,908 86 -40,455 7 5,547 77 RUB 52,624 58 22,625 67 -23,936 31 1,311 70 CHF 49,320 27 -8,889 54 18,767 52 -9,878 34 NZD 42,945 30 13,965 95 -15,521 6 1,556 70 BRL 31,767 32 -15,698 48 15,743 54 -45 66 Bitcoin 13,648 78 -1,478 69 357 0 1,121 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 34,908 contracts in the data reported through Tuesday. This was a weekly lowering of -540 contracts from the previous week which had a total of 35,448 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.0 percent. The commercials are Bearish-Extreme with a score of 7.4 percent and the small traders (not shown in chart) are Bullish with a score of 77.2 percent. Free Reports: Top 5 Companies Added to Our Stock Watch List this Quarter - Here are the Stock Symbols that stood out so far in the fourth quarter of 2021. Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.   US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.8 3.4 12.8 – Percent of Open Interest Shorts: 22.0 71.5 3.5 – Net Position: 34,908 -40,455 5,547 – Gross Longs: 47,959 2,000 7,621 – Gross Shorts: 13,051 42,455 2,074 – Long to Short Ratio: 3.7 to 1 0.0 to 1 3.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 86.0 7.4 77.2 – COT Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.0 -2.7 -13.6   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of -3,826 contracts in the data reported through Tuesday. This was a weekly reduction of -7,599 contracts from the previous week which had a total of 3,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.8 percent. The commercials are Bullish with a score of 68.1 percent and the small traders (not shown in chart) are Bearish with a score of 25.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.1 57.3 12.8 – Percent of Open Interest Shorts: 28.6 61.1 8.4 – Net Position: -3,826 -26,985 30,811 – Gross Longs: 198,181 404,266 90,261 – Gross Shorts: 202,007 431,251 59,450 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 33.8 68.1 25.4 – COT Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.7 -5.2 -0.0   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -31,599 contracts in the data reported through Tuesday. This was a weekly lowering of -19,506 contracts from the previous week which had a total of -12,093 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.2 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 35.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.4 61.4 11.3 – Percent of Open Interest Shorts: 39.6 41.5 15.9 – Net Position: -31,599 41,182 -9,583 – Gross Longs: 50,443 127,197 23,322 – Gross Shorts: 82,042 86,015 32,905 – Long to Short Ratio: 0.6 to 1 1.5 to 1 0.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 51.2 54.0 35.8 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -8.3 9.2 -8.1   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -93,126 contracts in the data reported through Tuesday. This was a weekly increase of 12,225 contracts from the previous week which had a total of -105,351 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.4 percent. The commercials are Bullish-Extreme with a score of 93.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.8 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.7 80.5 8.6 – Percent of Open Interest Shorts: 46.6 34.7 17.6 – Net Position: -93,126 115,758 -22,632 – Gross Longs: 24,635 203,468 21,790 – Gross Shorts: 117,761 87,710 44,422 – Long to Short Ratio: 0.2 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 10.4 93.7 0.8 – COT Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -18.4 15.5 -4.1   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -8,889 contracts in the data reported through Tuesday. This was a weekly rise of 8,154 contracts from the previous week which had a total of -17,043 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.4 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 34.3 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 11.2 64.2 24.4 – Percent of Open Interest Shorts: 29.2 26.1 44.5 – Net Position: -8,889 18,767 -9,878 – Gross Longs: 5,502 31,663 12,048 – Gross Shorts: 14,391 12,896 21,926 – Long to Short Ratio: 0.4 to 1 2.5 to 1 0.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 54.4 52.0 34.3 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 11.9 -12.2 11.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 8,709 contracts in the data reported through Tuesday. This was a weekly rise of 3,605 contracts from the previous week which had a total of 5,104 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.3 percent. The commercials are Bearish with a score of 34.9 percent and the small traders (not shown in chart) are Bullish with a score of 74.0 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.6 42.1 27.1 – Percent of Open Interest Shorts: 23.8 60.0 15.0 – Net Position: 8,709 -26,717 18,008 – Gross Longs: 44,147 62,689 40,389 – Gross Shorts: 35,438 89,406 22,381 – Long to Short Ratio: 1.2 to 1 0.7 to 1 1.8 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 62.3 34.9 74.0 – COT Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 29.6 -26.4 10.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -61,153 contracts in the data reported through Tuesday. This was a weekly gain of 2,271 contracts from the previous week which had a total of -63,424 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.1 percent. The commercials are Bullish with a score of 71.0 percent and the small traders (not shown in chart) are Bearish with a score of 31.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.5 67.2 11.8 – Percent of Open Interest Shorts: 55.1 25.3 17.1 – Net Position: -61,153 69,858 -8,705 – Gross Longs: 30,760 112,044 19,744 – Gross Shorts: 91,913 42,186 28,449 – Long to Short Ratio: 0.3 to 1 2.7 to 1 0.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 27.1 71.0 31.2 – COT Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 27.1 -29.0 24.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of 13,965 contracts in the data reported through Tuesday. This was a weekly boost of 1,083 contracts from the previous week which had a total of 12,882 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.7 percent. The commercials are Bearish-Extreme with a score of 6.5 percent and the small traders (not shown in chart) are Bullish with a score of 69.7 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 61.4 24.1 11.5 – Percent of Open Interest Shorts: 28.9 60.2 7.8 – Net Position: 13,965 -15,521 1,556 – Gross Longs: 26,388 10,349 4,923 – Gross Shorts: 12,423 25,870 3,367 – Long to Short Ratio: 2.1 to 1 0.4 to 1 1.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 94.7 6.5 69.7 – COT Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 9.9 -11.8 19.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of -47,655 contracts in the data reported through Tuesday. This was a weekly gain of 752 contracts from the previous week which had a total of -48,407 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 1.5 percent. The commercials are Bullish-Extreme with a score of 98.8 percent and the small traders (not shown in chart) are Bearish with a score of 49.5 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 41.1 55.3 3.1 – Percent of Open Interest Shorts: 69.2 28.2 2.2 – Net Position: -47,655 46,127 1,528 – Gross Longs: 69,984 94,074 5,245 – Gross Shorts: 117,639 47,947 3,717 – Long to Short Ratio: 0.6 to 1 2.0 to 1 1.4 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 1.5 98.8 49.5 – COT Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -5.5 5.6 -1.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of -15,698 contracts in the data reported through Tuesday. This was a weekly decrease of -240 contracts from the previous week which had a total of -15,458 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.6 percent. The commercials are Bullish with a score of 54.4 percent and the small traders (not shown in chart) are Bullish with a score of 66.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.7 64.6 8.0 – Percent of Open Interest Shorts: 76.1 15.0 8.2 – Net Position: -15,698 15,743 -45 – Gross Longs: 8,468 20,507 2,545 – Gross Shorts: 24,166 4,764 2,590 – Long to Short Ratio: 0.4 to 1 4.3 to 1 1.0 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 47.6 54.4 66.3 – COT Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -17.9 19.3 -12.9   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 22,625 contracts in the data reported through Tuesday. This was a weekly advance of 1,922 contracts from the previous week which had a total of 20,703 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 66.9 percent. The commercials are Bearish with a score of 30.7 percent and the small traders (not shown in chart) are Bullish with a score of 70.2 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 57.7 37.7 4.6 – Percent of Open Interest Shorts: 14.7 83.2 2.1 – Net Position: 22,625 -23,936 1,311 – Gross Longs: 30,357 19,849 2,418 – Gross Shorts: 7,732 43,785 1,107 – Long to Short Ratio: 3.9 to 1 0.5 to 1 2.2 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 66.9 30.7 70.2 – COT Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.2 -3.3 -20.9   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -1,478 contracts in the data reported through Tuesday. This was a weekly reduction of -11 contracts from the previous week which had a total of -1,467 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.7 percent. The commercials are Bullish with a score of 71.4 percent and the small traders (not shown in chart) are Bearish with a score of 22.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 63.4 5.0 14.7 – Percent of Open Interest Shorts: 74.2 2.4 6.5 – Net Position: -1,478 357 1,121 – Gross Longs: 8,649 678 2,008 – Gross Shorts: 10,127 321 887 – Long to Short Ratio: 0.9 to 1 2.1 to 1 2.3 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 68.7 71.4 22.9 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 0.9 -20.8 4.5 Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Strong US consumption and production figures kept the greenback well supported last week on the heels of the jump in CPI to 6.2%.  Meanwhile, the surge of Covid cases in Europe underscores the divergences with the US, sending the euro to new lows for the year.   At the same time, oil prices headed south for the fourth consecutive week, matching the longest decline in more than two years.  It did not favor the Norwegian krone, the weakest of the majors, with a 2.15% drop.  It brought this year's loss to almost 3.5%, despite it being the first G10 central bank to hike rate, with another likely next month.   The prospects of a Bank of England rate hike next month were lifted by the strong inflation and retail sales figures.  Sterling was the best performing major currency, rising a little more than 0.25% against the dollar.  It also traded at its best level against the euro since March 2020.  At the end of the week, the euro also broke down against the Swiss franc, trading below CHF1.05 for the first time since July 2015.   Japan's October CPI showed that excluding fresh food and energy, the world's third-largest economy has still not broken free of deflation's grip (-0.7% year-over-year).  A weaker yen is not a problem for Japanese policymakers or corporates.  Japan has averaged a monthly trade surplus this year through October of about JPY7.8 bln a month, hardly the stuff that should excite protectionists.  The BIS estimates that eurozone inflation would be closer to 1.5% than the 4.1% reported in October without the supply chain disruptions. The weakness of the euro does not appear problematic for the ECB either.  With the Fed already slowing the pace of its monetary accommodation, a stronger dollar reinforces the policy thrust. Even though net exports shaved Q3 growth by about 1.1 percentage points, it has yet to spur criticism, and September was a record shortfall.   Dollar Index:  The Dollar Index rose for the fourth consecutive week.  It met the (50%) retracement objective of its slide from March 2020 (~103.00) to the January 6 low (~89.20), which is found near 96.10.  DXY stalled ahead of the weekend, just shy of the high set in the middle of the week near 96.25. A move above there targets the next retracement (61.8%), which is close to 97.75.    The MACD is over-extended but still headed higher, while the Slow Stochastic appears to be turning lower.  Support is seen around 95.50.  The market seems to have discounted much of the good news for the dollar and Fed policy.  We note that the US 2-year yield fell almost six basis points last week.  That leaves it off about 4.5 bp this month, despite the strong CPI reading, robust retail sales, and industrial output figures. Euro: The divergence of monetary policy has been the critical weight on the euro, but at the end of last week, it seemed that surge in Covid cases in Europe helped drive the single currency to new lows. It fell to $1.1250 ahead of the weekend to take out the mid-week low near $1.1265.  The weekly loss of about 1.3% is the biggest in five months.  Recall that the $1.1290 area represented the (61.8%) retracement of the rally that began in March 2020.  The momentum indicators are stretched, but a possible bullish divergence is appearing in the Slow Stochastic. A cap seems to be forming around $1.1375.  After repeated tests, and much to the chagrin of the Swiss National Bank, the euro was sold through CHF1.05 ahead of the weekend for the first time since July 2015.  Given its modus operandi, the SNB is likely resisting.  There is little on the charts ahead of CHF1.0250.  In the second half of last week, the euro found support near GBP0.8385, its lowest level since March 2020.  Support is seen close to GBP0.8275-GBP0.8300.  Lastly,  the euro found support near JPY128.00, which has more or less withstood several tests since moving above there in February.   Japanese Yen:  The greenback recorded a new four-year high against the yen, less than a handful of pipis from JPY115 in the middle of last week.  It reversed lower and settled ever so slightly below the previous session's low to leave a key reversal in its wake.  It recorded the week's low ahead of the weekend near JPY113.60.  Since the dollar pushed above JPY112 early last month, we have suggested a JPY113-JPY115 trading range.  It did trade to about JPY112.75 on November 10 and 11 but snapped back into the range.  The US 10-year note futures (December contract) posted a key reversal in the middle of last week, too, and also ended the week at eight-session highs, which, of course, means lower yields.  The dollar-yen exchange rate still seems to be a range-bound creature, more the most part, and heavily influenced by external factors, like US 10-year yield and broader risk appetites.  British Pound:  Sterling outperformed the other major currencies last week, but the 0.3% gain is nothing to write home about.  It remained within the previous week's range. It was unable to sustain the upside momentum after approaching the (50%) retracement objective of the decline since the month's high and outside down day on November 4 (BOE meeting).  That retracement stands at $1.3525.  The strong CPI report on November 17 helped lift sterling to the week's high near $1.3515.  However, the underlying strength of the dollar proved too much, and ahead of the weekend, sterling traded a little below $1.3410.  The momentum indicators have turned higher, and as long as $1.3400 holds, sterling looks attractive.  However, the market appears to have a 15 bp hike at next month's meeting fully discounted.  While it remains a distinct possibility, if not a likelihood, but 100% confidence may leave sterling vulnerable to a reassessment.  Canadian Dollar:  The US dollar rose for the fourth consecutive week against the Canadian dollar, matching the longest advance since early last year.  With the pre-weekend gain, the greenback met the  (61.8%) retracement objective of decline since CAD1.29 was approached on September 20, found near CAD1.2665. The US dollar's broad strength, coupled with the stock market wobble (a proxy for risk), and the drop in crude prices by around 4.25%, the fourth consecutive weekly decline shaved about 0.75% off the Canadian dollar.  The implied yield of the June 2022 Banker Acceptances fell last week and is now about 10 bp lower than at the end of last month.  The MACD is headed up though over-extended, while the Slow Stochastic has flatlined at extreme levels and has not yet confirmed the new highs.  The US dollar continues to hug the upper Bollinger Band, which will begin the new week near CAD1.2650. Australian Dollar:   The Aussie fell for the third straight week, and ahead of the weekend, approached $0.7225, last seen in early October.  As seen with some of the other currency pairs, the MACD is still warning of currency weakness, while the Slow Stochastic is flatlining but over-extended.  The trendline connecting the August and September lows initially held last week. It (~$0.7240) yielded ahead of the weekend, but the Aussie managed to close back above it.   It needs to resurface above $0.7300 to be anything meaningful.  Softer than expected, wage growth may have reinforced the RBA's message to the markets, and the yield of the June 2022 T-bill futures fell seven basis points last week and is now down 31 bp on the month.   Mexican Peso:  Emerging markets currencies remain out of favor in a strong dollar environment.  The JP Morgan Emerging Market Currency Index slumped by more than 2% last week, the most since June.  The Turkish lira collapsed by nearly 11%.  The Indian rupee rose by 0.3%, the strongest in the EM space.  The greenback made a new marginal high in two-and-a-half weeks before the weekend, slightly below MXN20.89.  The momentum indicators are constructive for the dollar, but it is at the upper end of its recent range (~MXN20.12-MXN21.00).  The high for the year was set in March near MXN21.64, and it will come into view when the greenback rises above MXN21.15.   Chinese Yuan:   By shadowing the dollar so tightly, the yuan is dragged higher on a trade-weighted basis in the stronger greenback environment. The yuan is at six-year highs on the basket the PBOC tracks (CFETS).  The PBOC reportedly stressed the importance of exchange risk management ahead of the weekend, and it may be a warning that its willingness to tolerate a stronger yuan is limited.  The yuan slipped an inconsequential 0.12% against the dollar last week.  For nearly the past five weeks, the exchange rate has been mostly confined to a CNY6.38-CNY6.40 range.  It is a fuzzy range and allows for around a big figure in both directions. The index of Chinese companies listed in the US (NASDAQ Golden Dragon Index) fell about 5.7% last week.  The major benchmarks in China, including the CSI 300, posted small gains.  The Hang Seng fell 1.1% last week, and most of that was before the weekend on disappointing earnings from Alibaba (-10.3% in HK).     Disclaimer

Summary:  This week it's all about a surge of Covid-19 cases and inflation. The debt ceiling issue will keep long-term yields in check in the United States while spurring volatility in money markets. Lack of collateral and new lockdown measures are also compressing spreads in the Euro area. Yet, policymakers' engagement to the idea of less accommodative monetary policies on both sides of the Atlantic indicates that yields will not remain rangebound for long. Once the lid is lifted, inflationary pressures will push yields higher. Therefore, it's safe to assume a continuous bear flattening of yield curves. US Treasuries: volatility in money markets will keep long-term yields in check. Yet, inflation concerns continue to grow, pointing to higher rates once the debt ceiling issue is resolved. This week, investors will need to focus on the Fed Minutes released on Wednesday, inflation numbers, and the White House's announcement concerning the Federal Reserve Chair nomination. The Fed’s minutes might unveil details regarding the decision that led to tapering this month and whether FOMC members begin to fret about inflationary pressures. Last week, several Fed’s speakers opened up about accelerating tapering and hiking interest rates in 2022. Among them, Fed Vice Chair Richard Clarida called for a discussion to expedite tapering to enable the central bank to hike interest rates sooner. At the same time, if Biden nominates Leal Brainard as Fed Chair, it could advance inflation worries. Brainard is known to be more dovish than Powell. In the case of her nomination, the market could anticipate interest rates to remain low for longer, implying stickier inflation, provoking a selloff in bonds. The Personal Consumption Expenditure Index, one of the inflation data most looked at after the Federal Reserve, will be released on Wednesday. The PCE core deflator index YoY is expected to rise to 4.1%, the highest in more than 31 years. As we mentioned in earlier editions of “Fixed income market: the week ahead”, we expect inflationary pressures to continue to rise and higher rents, housing and wages to make inflation stickier, putting at odds policymakers’ transitory narrative. Therefore, although the US yield curve has already flattened substantially, we cannot expect anything else than more flattening. The only difference is that once the debt ceiling issue is resolved, long term yields will need to rise together with short term yields, putting at risk weaker credits. The debt ceiling will be a crucial topic for December. Janet Yellen has said that the US Treasury will run out of cash soon after the 3rd of December if an agreement over the debt ceiling is not found. However, money markets have started to price a default during the second half of December. Indeed, last week's 4-week T-Bills auction was priced with a yield of 0.11%, more than double the Reverse Repurchase facility rate. We expect volatility in money markets to continue to remain elevated until the debt ceiling is lifted or suspended. Until then, the long part of the yield curve will serve as a safe haven causing yields to remain compressed. Yet, once the debt ceiling hurdle has cleared, long-term rates will resume their rise. European sovereigns: lack of collateral and a surge in Covid-19 cases will keep yields compressed. Yet, something is changing among policymakers. In Europe, governments are imposing new lockdown measures due to increasing Covid-19 cases, causing yields to drop significantly. Yet, inflationary forces have already been set into motion. Another lockdown might exacerbate inflation further as consumption will switch from services to goods, putting more pressure on prices. Meanwhile, policymakers have started to open to the possibility that upside inflation risk might remain throughout winter. Therefore, near-term hikes expectations are unlikely to reverse despite new lockdown measures. Yet, lack of collateral in the euro area contributes to keeping short-term yields compressed across the euro area, including the periphery. At the same time, swaps with the same maturity have widened as the market prices earlier interest rate hikes. Demand for collateral will remain strong until the end of the year. However, 2022 opens up to widening risk, as demand for bonds will start to wane, and the front part of the yield curve will shift higher according to interest rate hikes expectations. Source: Bloomberg and Saxo Group. However, it looks too early to call for higher yields in the Euro area, as a lot still depends on yields in the US and December's ECB meeting. Suppose more governments across the euro area impose lockdown measures. In that case, the central bank might look to extend the PEPP bond-buying program after March, compressing yields further. The next few weeks preceding Christmas are going to be critical to set direction in European sovereigns. Economic calendar: Monday, the 22nd of November  Spain:  Balance of Trade United States: Chicago Fed National Activity Index, Existing Home Sales (Oct),  2-year Note Auction, 5-year Note Auction Eurozone: Consumer Confidence Flash (Nov) Tuesday, the 23rd of November Germany: Markit Composite, Manufacturing and Services PMI Flash (Nov) Eurozone: Markit Composite and manufacturing PMI Flash (Nov) United Kingdom: market/CIPS Composite, Manufacturing and Services PMI Flash (Nov) United States: Markit Manufacturing PMI flash (Nov), NY Fed Treasury Purchases TIPS 7.5 to 30 years, 2-year FRN Auction, 7-year Note Auction Wednesday, the 24th of November New Zealand: Interest Rate Decision, RBNZ Press Confidence France: Business Confidence Germany: Ifo Business Climate (Nov), 15-year Bund Auction United States: Durable Goods Orders (Oct), GDP Growth Rate QoQ 2nd Est (Q3),  Continuing Jobless Claims, Corporate Profits QoQ Prel (Q3), Durable Goods Orders (Oct),  Goods Trade Balance (Oct), Initial Jobless Claims, Jobless Claims 4-week Average, retail Inventories Ex Autos (Oct), Core PCE Price Index (Oct), Michigan Consumer Sentiment Final (Nov), PCE Price Index (Oct), Personal Income (Oct), Personal Spending (Oct), FOMC Minutes, 4-week and 8- week bill auction Thursday, the 25th of November New Zealand: Balance of Trade Japan: Foreign bond Investment, Coincident Index Final, Leading Economic Index Final (Sep) Germany: GDP Growth Rate YoY Final (Q3), GfK Consumer Confidence (Dec) Sweden: Monetary Policy Report, Riskbank Rate Decision France: Unemployment Benefit Claims Canada Average weekly earnings YoY Friday, the 26th of November Australia: Retail Sales MoM Prel (Oct) South Korea: Interest Rate Decision France: Consumer Confidence Switzerland: GDP Growth Rate YoY (Q3) Italy: Business Confidence (Nov)

NAS 100 pulls back Investors took profit after Jerome Powell’s renomination as US Federal Reserve Chairman. The tech index saw an acceleration in its rally after a break above the previous peak (16450). Strong momentum suggests that buyers are committed to keeping the uptrend intact after a brief pause. However, the RSI’s triple top in the overbought area indicates exhaustion, and a fall below 16550 has triggered a correction. 16300 is the next support from a previous supply zone. A rebound needs to clear 16750 before the rally could resume. AUDUSD struggles for support China’s property slowdown and lower commodity prices weigh on the Australian dollar. The pair has given up most of its gains from the October rally, a sign that support is hard to come by. Nonetheless, a series of lower lows has attracted trend followers’ interest in maintaining the status quo. 0.7220 is an intermediate support. An oversold RSI may prompt the short side to cover, raising bids in the process. However, the bulls will need to lift offers around the former support at 0.7300 before they could expect to turn the tables. NZDJPY seeks support The New Zealand dollar remains under pressure after disappointing retail sales in Q3. The kiwi is seeking support after a surge above last May’s peak at 81.20 led the daily RSI into an overbought situation. Short-term sentiment remains bearish as the pair struggles to achieve a new high. 80.55 is a major resistance after the bulls’ multiple failed attempts. A bullish breakout may pave the way for a reversal towards 82.00. Otherwise, a drop below 79.50 would send the pair towards September’s high at 78.50.

November 23, 2021  $USD, EMU, Federal Reserve, Oil, OPEC+, SPR, UK, US Overview:  The markets are unsettled.  Bond yields have jumped, tech stocks are leading an equity slump, and yesterday's crude oil bounce reversed.  Gold, which peaked last week near $1877, has been dumped to around $1793.  The tech sell-off in the US carried into the Asia Pacific session, and Hong Kong led most markets lower.  The local holiday let Japanese markets off unscathed, though the Nikkei futures are off about 0.4%.  Australia and India managed to post minor gains as the MSCI Asia Pacific Index fell for the fourth time in five sessions.  Europe's Stoxx 600 has slid around 1.5% today, its fourth consecutive decline, but has clawed back nearly half the gains.  It is the longest retreat in two months.  US futures are lower, with the NASDAQ leading the move.   Near 1.64%, the US 10-year yield is at the upper end of this month's range.  Last month it reached 1.70%.  European bond yields are mostly 4-6 bp higher, and peripheral spreads have widened a little.  The dollar is sitting in the middle of the major currencies.  The dollar bloc, sterling, and the Norwegian krone, which are the risk-on, levered to growth currencies, are weaker.  The euro, yen, and Swiss franc are little changed but firmer.  The dollar briefly traded above JPY115.00 in Asia, without Tokyo,  before being pushed back. The steady euro has taken some pressure off most of the regional currencies.  The Turkish lira has been in a virtual freefall following President Erdogan's spirited defense of his efforts to drive down rates.    There was around 10 lira to the dollar in the middle of November.  Today, at its peak, there is about 12.48 lira to the dollar.   Asia Pacific Over the weekend, Japan expressed willingness to cap its strategic reserves.  Press reports indicated yesterday that India is amenable to coordinating a release of some of its oil stocks.  South Korea may also participate.  It has been under consideration for a couple of weeks, at least, in the US, and China appears willing to repeat September's release of crude from its reserves.  However,  it seems naive to have expected OPEC+ to simply standby.  January WTI posted a bearish outside down day ahead of the weekend by trading on both sides of the previous day's range and settling below the previous session's low.  Follow-through selling yesterday took it down about $1.20 from the close, but when OPEC+ announced that a coordinated release of the oil could prompt it to reconsider its own plans.  It is to meet next week to review its strategy. Through yesterday's low, January WTI had retreated by nearly 11% from the October 25 higher near $83.85.   A band of resistance is seen between $78 and $80.   OPEC+ had previously agreed to boost output by 400k barrels a day per month to restore pre-pandemic output levels.  That said, not all the members can produce their quota, leading to a shortfall.  OPEC+, the IEA, and EIA all seem to agree that supply-demand considerations shift in next year, and the market will once again be in oversupply.  Moreover, OPEC+ argues that the real dislocation is not with oil as its with gas.   The US imports about 2.9 mln barrels a day, India, about 4.2 mln, and Japan, about 3.1 mln barrels a day.  South Korea imports around 2.5 mln barrels a day.  Together it is around 12.7 mln barrels a day of imports.   If together, 100 mln barrels are released, about eight days of imports would be covered.  This is a high estimate.  India, for example, has indicated it may release 5 mln barrels.   Australia's flash November PMI was better than expected.  Manufacturing edged up to 58.5 from 58.2, while services rose to 55.0 from 51.8.  This produced a 55.0 composite reading, a gain from 52.1 in October.  Recall, the pandemic and lockdown led to weakness in the economy in the May-August period.  The composite PMI bottomed in August at 43.3.  It has risen for three months but remains well off the peak in April of 58.9.  Separately, New Zealand real retail sales were hit in Q3 by the social restrictions, but the drop was not quite as bad as feared.  Reall retail sales fell 8.1% after a 3.3% increase in Q2.  Economists (Bloomberg median) had anticipated a 10.5% pullback.  The RBNZ meets the first thing tomorrow and is widely expected to hike 25 bp, to lift the cash rate to 0.75%. There is still a slight bias toward a larger move in the swaps market.   The dollar briefly traded above JPY115.00 for the first time since March 2017.  We note that Japanese dealers were on holiday and did not participate in the move.  As risk-off sentiment took over, the dollar was sold back to JPY114.50.  Resistance in Europe has been found near JPY114.80.  Note that there is an option for about $980 mln at JPY115.50 that expires tomorrow.  The Australian dollar initially edged lower to almost $0.7210, its lowest levels since October 1 before steadying. A break of $0.7200 signals a retest of the late September low near $0.7170.  Initial resistance is seen in the $0.7230-$0.7250 area.  The PBOC is sending plenty of verbal signals that it does not want to see strong yuan gains, and today's fixing underscores that point.  The dollar's reference rate was set at CNY6.3929, wider than usual above the market expectation (Bloomberg) for CNY6.3904.  The greenback is firm inside yesterday's range.  Caution is advised here as the PBOC could escalate its disapproval.   Europe The flash EMU November PMI was better than expected.  The aggregate manufacturing PMI rose to 58.6 from 58.3.  The market anticipated a decline.  The service PMI rose to 56.6 from 54.6, also defying expectations for a sequentially weaker report.  The composite snapped a three-month slide and rose to 55.8 from 54.2.   The cyclical peak was in July at 60.2.    A flash release is made for Germany and France.    German manufacturing slowed slightly (57.6 from 57.8) and held up better than expected (Bloomberg median 56.9).  Services actually improved (53.4 from 52.4).  The composite rose to 52.8 from 52.0 to end a three-month downdraft after peaking in July at 62.4.  French numbers were even better.  The manufacturing PMI rose to 54.6 from 53.6.  The service PMI rose to 58.2 from 56.6.   The composite improved to 56.3 from 54.7 to snap a four-month fall.  Recall that yesterday the Bundesbank warned that the German economy may practically stagnate this quarter and that inflation may approach 6% this month.   The UK's flash PMI was more mixed.  The manufacturing PMI had been expected to have slowed but instead improved for the second consecutive month (58.2 from 57.8).  Services were nearly as weak as anticipated slipping to 58.6 from 59.1.  The composite eased slightly to 57.7 from 57.8, ending a two-month recovery from the June-August soft patch.  Meanwhile, Prime Minister Johnson's rambling speech yesterday hurt people's ears, and in terms of substance,  the changes to social care funding that may result in lower-income people having to sell homes to pay for support did not go over well.  It is spurring talk of a possible cabinet reshuffle.  The euro has edged to a new low for the third session today, slipping to almost $1.1225 before catching a bid that lifted it back to $1.1275.  There is an option for around 765 mln euros at $1.1220 that expires today.  The nearby cap is seen in the $1.1290-$1.1310 area.   The euro may struggle to sustain upticks ahead of tomorrow's US PCE deflator report (inflation to accelerate).    Sterling met new sellers when it poked above $1.3400. It has ground lower in the European session, and sterling fell to almost $1.3355.  Note that the low for the year and month was set on November 12, slightly above $1.3350.  We see little chart support below there until closer to $1.3165.   America We suspect many pundits exaggerated the link between the renomination of Powell for a second term and the sell-off in US debt and technology shares.  First, it was not a surprise.  Second, it assumes a substantive difference in the conduct of monetary policy between Powell and Brainard.  There isn't.  The difference was on regulatory issues and on the role of climate change.  Third, the idea that the Fed may accelerate its bond purchases next month was sparked by the high CPI reading on November 10.  Yesterday, Bostic joined fellow Fed President Bullard.  Two governors (Clarida and Waller) also seem to be moving in that direction (Waller may be faster than Clarida). The fact or the matter, nearly all of the high-frequency data for October, including employment, auto sales,  retail sales, industrial production, and inflation, came in higher than expected.  The US sees the preliminary November PMI today.  It is expected to have risen for the second consecutive month after fall June-September.   The reception to yesterday's US two- and five-year note auctions was relatively poor.  The higher yields (compared with the previous auctions) did not produce better bid-cover ratios.  Today the Treasury comes back with $55 bln seven-year notes and re-opens the two-year floater.  Many observers see the debt ceiling constraint being likely an early 2022 problem rather than this year.  Still, tomorrow's sale of the four-week bill may be the test.  Recall that at last week's auction, the 4-week bill yield doubled to 11 bp.   Europe's virus surge and social restrictions became a market factor last week.  Many think that the US is a few weeks behind Europe.  The seven-day infliction rate in the US rose 18% week-over-week.  Several states, including Colorado, Minnesota, and Michigan, are being particularly hard hit.  Nationwide 59% of Americans are reportedly fully vaccinated. However, it leaves about 47 mln adults and 12 mln teens unvaccinated.  The risk-off mood and the drop in oil prices are helping the US dollar extend its gains against the Canadian dollar.  The greenback, which started the month below CAD1.24, is now pushing close to CAD1.2750 to take out last month's high.  A move above here would target CAD1.28 and then the September high near CAD1.2900.  Still, the market is getting stretched, and the upper Bollinger Band is slightly below CAD1.2730.  The risk-off mood does not sit right with the Mexican peso either.  The dollar settled above MXN21.00 yesterday, its highest close in eight months.  The same forces have lifted it to MXN21.1250 today. However, the anticipated gain in September retail sales (0.8% Bloomberg median after a flat report in August) may not give the peso much support if the risk-off continues. The high for the year was set on March 8 near MXN21.6360.   Disclaimer

Summary:  Equity markets closed last week somewhat mixed, but the Asian session was mostly strong on indications that the Chinese PBOC is shifting its attitude on monetary policy toward easing. Elsewhere, the difficult wait for the Fed Chair nomination news continues this week ahead of the US Thanksgiving holiday on Thursday. Crude oil bounced after finding support overnight, but the risk of SPR release and Covid demand worries still linger. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - a new week following a new all-time high in US equities on the close on Friday, which is starting with Nasdaq 100 futures opening up higher trading around the 16,610 level in early European trading. Last week showed that investors and traders are utilizing the Covid-19 lockdown playbook selling off physical companies while buying online companies that are better equipped to navigate new lockdowns in Europe. With the US 10-year yield remaining in a range around the 1.55% there is nothing from preventing equities from extending recent gains. EURUSD and EURGBP – new Covid restrictions across Europe, which has become the center of the latest Covid wave, have crimped sentiment for the euro, as has the still very elevated power and natural gas prices. EURUSD has traded back down toward the lows of the cycle near 1.1265 overnight, with the next psychological magnet lower likely the 1.1000 area as long as the big 1.1500 break level continues to provide resistance. In EURGBP, last week saw the break of the prior major pivot low near 0.8400, with the next objective the post-Brexit vote low near 0.8275. USDJPY – threatened support on Friday on a spike lower in long US treasury, but a reversal of much of that action by this morning in late Asian trading is likewise seeing USDJPY trying to recover back into the higher range, with a focus on the recent top just short of 115.00. We likely need for long US treasury yields to sustain a move higher to support a major foray above this huge 114.5-115.00 chart area, which has topped the market action since early 2017. Meanwhile, if risk sentiment worsens further in EM and darkens the outlook for JPY carry trades there, while US treasuries remains rangebound or head lower, the JPY could squeeze higher as the speculative interest is tilted heavily short. Gold (XAUUSD) extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. However, the price softness on Friday helped attract ETF buying with Bloomberg reporting a 10 tons increase, the biggest one-day jump since January 15. Gold’s biggest short-term threat remains the tripling of futures long held by funds during the past seven weeks to a 14-month. Most of that buying being technical driven with the risk of long liquidation now looming on a break below the mentioned support level.   Crude oil (OILUKJAN22 & OILUSDEC21) opened softer in Asia after Friday’s big drop but has so far managed to find support at $77.85, the previous top from July. The market focus has during the past few weeks shifted from the current tight supply to the risk of a coordinated reserve release, a renewed Covid-driven slowdown in demand and recent oil market reports from the EIA and IEA pointing to a balanced market in early 2022. Speculators who for the last six weeks have been net sellers of crude oil futures cut their combined WTI and Brent long to a three-month low in the week to November 16. Focus on SPR and Covid risks this week US treasuries (SHY, IEF, TLT). Government bond yields worldwide dropped as new lockdown measures were imposed in Austria on Friday. Ten-year yields tumbled to 1.55%, and they are likely to continue to trade range-bound as the debt ceiling issue will continue to compress long-term yields as volatility peaks in money markets. Investors will focus on this week’s PCE index, FOMC minutes and any news regarding a change of leadership of the Federal Reserve. If Brainard is appointed as Fed chair, the market will expect low rates for longer, thus inflation expectations will advance putting upward pressure on yields. Thus, it is unavoidable to continue to see the 5s30s continue to flatten. German Bunds (IS0L). We expect European sovereigns, in general, to continue to benefit from news related to a surge of Covid cases and lack of collateral as the year ends. Yet, the perception of inflation is changing among ECB members with Isabel Schnabel last week saying that the central bank will need to be ready to act if inflation proves more durable. Therefore, as we enter in the new year, and collateral shortages will be eased, we anticipate spreads to resume their widening. What is going on? Fed Vice Chair Clarida suggests faster Fed taper - in comments on Friday, suggesting that the December FOMC meeting could speed the pace at which the Fed will reduce its asset purchases. “I’ll be looking closely at the data that we get between now and the December meeting...It may well be appropriate at that meeting to have a discussion about increasing the pace at which we are reducing our asset purchases.” China’s central bank signals that it may ease policy. In a monetary policy report from Friday, the PBOC dropped language from prior reports, including phrase suggesting that the bank will maintain “normal monetary policy” and a promise not to “flood the economy with stimulus”. This comes in the wake of considerable disruption in the property sector as the government cracks down on an overleveraged property sector. Asian equities were mostly higher on the news, especially in Korea, although the Hang Seng index was slightly in the red as of this writing. Ericsson to acquire cloud provider Vonage in $6.2bn deal. This pushes the Swedish telecommunication company into the cloud communication industry seeking to add more growth to the overall business. Vonage has delivered 11% revenue growth in the past 12 months hitting $1.4bn with an operating margin of 10.4%. Global proceeds from IPOs hit $600bn in record year. This is the biggest amount since 2007 and almost 200% above the level in 2019 highlighting the excessive risk sentiment in equities. More confusing signals from Bank of England. Governor Bailey said in an interview for the Sunday Times that risks to the country are “two-sided” at the moment as growth slows and inflation rises, and that the cause of inflation problems is supply side constraints and that “monetary policy isn’t going to solve those directly.” Similarly, BoE Chief Economist Huw Pill said on Friday that the Bank of England said that the weight of evidence was shifting in favour of rate hikes but that he has not yet made a decision, encouraging observers to focus on the longer term rather than meeting-to-meeting decision. US shared intelligence with allies suggesting potential for Russia to invade Ukraine - according to Bloomberg sources. The intelligence noted up to 100,000 soldiers could be deployed in such a scenario, and that some half of that number are already in position.  Russian president Vladimir Putin denied Russia intends to invade, but seemed to pat himself on the back for “having gotten the attention of the US and is allies, which he accused of failing to take Russia’s ‘red lines’ over Ukraine seriously”, as the article puts it. What are we watching next? Who will US President Biden nominate to head the Fed next February? Powell is still seen as more likely to get the nod that Brainard by roughly two to one, and this Fed Chair nomination issue is hanging over the markets, as the current Fed chair term ends in early February and from comments made last week by President Biden, an announcement could come any day. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell). Will Germany announce a Covid lockdown? - Friday saw some volatility on Austria’s announcement of a full Covid lockdown, with Germany’s health minister saying that a similar move in Germany could not be ruled out. Later that day, that was contradicted by comments from another minister. Meanwhile, resistance against Covid restrictions has turned violent in Netherlands. Earnings Watch – the number of important earnings is falling rapidly, but this week Tuesday is the most important day with key earnings from Xiaomi, XPeng and Kuaishou, both important Chinese technology companies. Also on Tuesday, US companies such as Medtronic, Autodesk and Dell Technologies are worth watching. Monday: Sino Pharmaceutical, Prosus, Zoom Video, Agilent Technologies Tuesday: Xiaomi, Kuaishou Technology, Compass Group, Medtronic, Analog Devices, Autodesk, VMWare, Dell Technologies, XPeng, HP, Best Buy, Dollar Tree Wednesday: Deere, Thursday: Adevinta Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0900 - Switzerland SNB weekly sight deposit data1330 – US Chicago Fed Oct. National Activity Index1500 – US Oct. Existing Home Sales1730 – ECB's Guindos to speak2145 – New Zealand Q3 Retail Sales2200 – Australia Nov. Flash Services & Manufacturing PMI0105 – Australia RBA’s Kohler to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

Summary:  The US dollar remains firm after the news of Fed Chair Powell getting the nod for a second term on Monday, but a more aggressive extension of its recent strength is avoided as US yield rises were tempered yesterday. Elsewhere, a less hawkish than expected RBNZ saw the kiwi sharply weaker as the market removed a chunky bit of forward rate hike expectation on the latest guidance. FX Trading focus: USD follows US yields higher in the wake of Powell getting nod for 2nd term The US dollar strengthening in the wake of President Biden’s announcement that he would tap Jay Powell for a second term as Fed Chair extended modestly yesterday and into this morning, somewhat tempered by a strong US 7-year treasury auction taking the steam out rises in yields yesterday – with the 7-year benchmark actually notching new highs for the cycle before retreating in the wake of the auction. The more widely tracked 10-year US treasury yield benchmark is still rangebound below the October pivot high of 1.7% and the post-pandemic outbreak high of 1.75%  from the end of March. This has kept USDJPY from extending notably above the sticky 115.00 area of the moment. Elsewhere, the euro remains relatively weak despite ECB Vice President de Guindos out speaking and hinting some concern on inflation rises: “the ECB is continuously pointingout that the inflation rebound is of a transitory nature....However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.” But just this morning we also have the ECB’s Holzmann out saying that inflation is likely to slow from next year. Later today we will get the expected German government coalition deal (SPD’s Scholz as Chancellor with Green’s Baerbock reportedly set for the foreign minister post and importantly, the liberal LDP’s Lindner set to lead the finance ministry), with a press conference set for 3 p.m. EURJPY and EURUSD are heavy this morning and note that  the 128.00 level in EURJPY is a well-defined range low, while EURUSD doesn’t have notable  support until well below 1.1200 and arguably not until psychological levels like 1.10. With covid spiking and a galloping energy crisis, I don’t envy the new German leadership. Overnight, the Reserve Bank of New Zealand waxed a bit more cautious than was expected by the market, and not only by raising the rates 25 basis points rather than the 50 basis points that a minority were expecting to see. In the central bank’s new statement, the bank strikes a more cautious tone: yes, clearly further rate hikes are set for coming meetings, but the bank is clearly in a wait and see mode, given the tightening of financial conditions already in the bag and that which the market has already priced in: “the Committee expressed uncertainty about the resilience of consumer spending and business investment....(and) also noted that increases in interest rates to householdsandbusinesses had already tightened monetary conditions. High levels of household debt, and a large share of fixed-rate mortgages re-pricing in coming months, could increase the sensitivity of consumer spending to these interest rate increases.” Later today, we have a stack of US data releases crammed into today because of the Thanksgiving holiday tomorrow (and for most, Friday as well). The most important of these is the October PCE Infation data print. Not expecting much from the FOMC minutes later as all eyes are on whether we are set for an acceleration of the QE taper at the December FOMC meeting, with some arguing that Powell and company have more room to move and administer a bit more hawkish message, if they so desire, as the nomination news is out of the way and this reduces hyper-sensitivity to bringing any message that could risk cratering market sentiment. Chart: AUDNZDThe 2-year yield spread between Australia and New Zealand has risen sharply in recent days and especially overnight, where the more cautious than expected tones from the RBNZ inspired a 14 basis point drop in 2-year NZ yields. The price action in AUDNZD was sympathetic with the rally back toward local resistance near 1.0450, though the rally needs to find legs for a move up to 1.0600 at least to indicate we may have put a structural low in with a double bottom here. A brighter relative outlook for  Australia could be in the cards if China is set to stimulate and raise steel output, the anticipation of which has already sharply lifted iron ore prices this week, a key indicator for the Aussie. No notable expectations for the Riksbank tomorrow – as the central bank is expected to wind down its balance sheet expansion next year, while the policy forecast is thought to be in play (perhaps a late 2024 lift-off built into expectations, though the market is ahead of that as 2-year Swedish swap rates have risen close to 30 basis in recent weeks. This is the area where the Riksbank can surprise in either direction relative to expectations). The EURSEK rally has now reversed the entirety of the prior sell-off leg and double underlines the very weak sentiment on Europe, which remains “non-existential” in nature, i.e., so far the market is keeping this about policy divergence and dark clouds over the economic outlook, not about the longer term viability of the EMU, etc…, which in the past 2010-12 crisis inspired SEK upside as a safe haven. Table: FX Board of G10 and CNH trend evolution and strengthA bit of a relative pick-up in petro-currencies in the wake of yesterday’s oil rally, as the market bought the fact of US President Biden announcing a release of barrels from strategic reserves. Elsewhere, the NZD is losing relative altitude and the USD and especially CNH reign supreme. Table: FX Board Trend Scoreboard for individual pairs.Here, note AUDNZD flipping back to positive - a move that would be “confirmed” by a close solidly above 1.0450. Also note NOKSEK trying to flip positive on the latest oil rally, although beware the Riksbank meeting up tomorrow there. .Upcoming Economic Calendar Highlights (all times GMT) 1330 – US Weekly Initial and Continuing Jobless Claims 1330 – US Oct. Advance Goods Trade Balance 1330 – US Q3 GDP Revision 1330 – US Oct. Durable Goods Orders 1430 – UK BoE’s Tenreyro to speak 1500 – US Oct. PCE Inflation 1500 – US Final University of Michigan Sentiment Survey 1500 – US Oct. New Home Sales 1900 – US FOMC Meeting Minutes

Equities 2021-11-24 13:00 6 minutes to read Summary:  The last two trading days US technology stocks have been impacted by rising interest rates and rising market expectations of Fed rate hikes next year. US technology stocks have interest rate sensitivity due to their high equity valuation, but several other key equity markets such as Netherlands, New Zealand, Singapore, Switzerland, and Denmark are also having high equity valuation and thus high duration. These equity markets would likely underperform next year if the interest rates move considerably higher. In yesterday’s equity note, we showed how Nasdaq 100 and STOXX 600 are the yin and yang of interest rate sensitivity based on equity market reaction this year with Nasdaq 100 underperforming significantly when the US 10-year yield has a large increase. But outside these two major equity indices, investors felt what higher interest rates can do to sentiment. Danish equities were down 3% in its worst day since March 2020 during the panic days of the pandemic and Dutch equities were down 3.1%. What do these two markets have in common? They both have equity valuations that are well above many other markets, which simplistically can be translated into higher duration which means that these equity markets are more sensitive to big changes in interest rates. Why is that? Because high equity valuation implies that a larger part of the present value comes from the terminal value on cash flows (meaning way into the future) and this value is more sensitive to the discount rate. Dutch equities are the most expensive of 26 equity markets in the developed and emerging markets with a 12-month forward EV/EBITDA of 23.3x with Denmark and Switzerland less frothy at 14.3x and 14.7x respectively. If we exclude Australia, India, New Zealand and Singapore from yesterday’s market reaction because of the time delay to the US session then we do observe that equity markets with high equity valuations were hit harder yesterday confirming that we did observe a repricing related to a larger move in interest rates. It is all related to the value vs growth trade which is essentially STOXX 600 vs Nasdaq 100, but which can also be expressed between individual equity indices such as Norway vs Denmark. The main point of yesterday’s equity note and today’s observations is that we have a group of equity markets such as Netherlands, New Zealand, Singapore, USA, Switzerland, and Denmark that are in the high equity valuation group. These markets have higher interest rate sensitivity and would likely underperform in a rising interest rate environment and exacerbated if flows also favour value over growth. In our view the equity market is telling investors that tail risks are rising for high duration equities and in order to mitigate this investors should begin balancing their portfolios better between high valued growth stocks and value stocks such as energy, financials, and mining companies. Appendix: 5-year charts of OMXC25 (Danish equities) and AEX (Dutch equities)

November 24, 2021  $USD, Currency Movement, Germany, Japan, Mexico, RBNZ, Turkey Overview:  The dramatic collapse of the Turkish lira was like an accident one could not help look at, but it was not an accident, but the result of a disregard for the exchange rate and compromised institutions.  The lira was off around 15% at its worst yesterday, before settling 11.2% lower.  After falling for 11 sessions, it has steadied today (~2.7%)  but the capital strike may not be over.  On the other hand, the Reserve Bank of New Zealand delivered the 25 bp rate hike and seemed to give hawkish guidance, and yet the New Zealand dollar was sold and the worst-performing of the major currencies, off 0.65% through the European morning.  The tech losses on Wall Street yesterday weighed on Asia Pacific equities today, where the large markets fell but in China.  Europe's Stoxx 600 is less tech sensitive and is trying to snap a four-day air pocket, but early gains have been reversed. The US futures point to around a 0.5% lower opening.  The greenback has a firmer bias ahead of the full economic calendar ahead of tomorrow's holiday.  The yen is the notable exception.  The greenback rose to a new multi-year high near JPY115.25 but has come back offered and is straddling the JPY115 level in late morning turnover in Europe.  Emerging market currencies are mixed, though the JP Morgan Emerging Market Currency Index is firmer after six consecutive down sessions.  Gold is steadying after a four-day drop that took it from around $1870 to about $1782. Oil extended yesterday's recovery after the concerted agreement to release strategic reserves from six countries but is struggling to sustain the upside momentum.  The market was unimpressed with the new supply and had it (and more?) discounted.  European (Dutch) gas rose 8% yesterday and remains firm today.  Iron ore prices are higher for the fourth session, during which time it has risen by around 20%.  Copper is also firmer for the second session.  It is up about 4.5% from the middle of last week's low.   Asia Pacific The Reserve Bank of New Zealand hiked its cash rate 25 bp to 0.75%.  It was widely expected, and many had leaned to a 50 bp move.  The forward guidance saw the cash rate at 2.0% at the end of next year.  The swaps market had this nearly priced in as well.  This might help explain the profit-taking on the New Zealand dollar.  The 2-year yield fell 14 bp, and the 10-year yield eased by 5.5 bp.  New Zealand stocks defied the regional pressure and rose by about 0.6%.   Japan's economy is recovering. The economy contracted by 0.8% in Q3, but after a slow start, the vaccination program has been successful.  It has allowed a re-opening of the economy.  This is evident in the flash PMI report.  The manufacturing PMI rose to 54.2 from 53.2, and the services PMI improved to 52.1 from 50.7.  The composite new stands at 52.5 (from 50.7) and represents a new cyclical high.  Recall that it bottomed in August at 45.5.  The fiscal support being offered by the supplemental budget is pro-cyclical; it will accelerate the recovery.   The break of JPY115.00 has seen limited follow-through dollar buying.  It peaked near JPY115.25 in Asia and fell to around JPY114.80, where it has found a bid in European dealing.  The nearly $950 mln option that expires today at JPY115 has likely been neutralized (hedged/offset), and the one at JPY115.50 for $1.2 bln may be too far away to be impactful.  Our idea of a JPY113.-JPY115 range is being tested, but recall that earlier this month, the dollar has slipped to almost JPY112.70.  The range is not carved in stone, and some fraying is inevitable.  Still, a move above JPY115.50 would suggest that this consolidation since mid-October is over, and a new and higher range is likely.  Next:  JPY118-JPY120, maybe.  The Australian dollar leaked lower and briefly dipped below $0.7200 for the first time since October 1.  There is an option that is expiring today there for about A$355 mln.  It steadied after early Asia Pacific trading and approached the nearby cap near $0.7230.  A move above here would help the technical tone.  Officials appear to have broken the one-way trading in the yuan.  It has been alternating between gains and losses this week, but the movement has been small, and the yuan is virtually unchanged this week.  The reference rate was set at CNY6.3903, slightly more than the market expected (Bloomberg) of CNY6.3898.   Lastly, we note that South Korea is widely expected to hike the seven-day repo by 25 bp tomorrow, following a similar hike in August.   Europe It has taken the better part of the two months, but the new German coalition appears to have been agreed upon.  However, what the soon-to-be Chancellor Scholz is inheriting is a mess.  The Bundesbank warned recently that the economy may be stagnating this quarter (though the flash PMI yesterday did not confirm this), and inflation may be approaching 6%.  Moreover, the covid infection rate has reportedly doubled in the past two days.  The US CDC put Germany (and Denmark) on a heightened travel advisory.   As one would expect, this is taking a toll on sentiment.  The IFO investor survey showed this.  The current assessment fell to 99.0 from 100.2.  The expectations component eased to 94.2 from 95.4.  The assessment of the overall business climate stands now at 96.5, down from 97.7. After falling for the fifth consecutive month,  it is at the lowest level since April.   The euro's losses were extended to almost $1.12.  The weakness seems most pronounced in Europe, which lends credence to ideas that European financial firms are key sellers, which some related to year-end adjustments.  However, the three-month cross-currency basis swap has steadied since Monday, and pressure on the euro remains.   We note that the two-year US-German interest rate differential rose for the fourth consecutive session yesterday to reach 135 bp, the most since last March, but is steadying today.  Since the convincing break of $1.13, we do not see strong chart support until closer to $1.10.  Sterling made a margin new low for the year yesterday near $1.3345.  It remains stuck near there in quiet turnover.  The $1.3400 area offers nearby resistance.  Here we see little technical support until around $1.3165.  America The US holiday tomorrow is forcing a heavy data release schedule today.  Not all the data is of equal importance.  Of the first set of reports, the weekly jobless claims will command attention.  They have fallen for the past seven weeks and are at their lowest level since the pandemic (268k).  The November national employment report is due at the end of next week, and another 500k jobs were thought to have been filled.  The October trade balance and durable goods orders are notable.  Nearly all the October data has been reported better than expected.  Growth differentials warn of the risk of a wider trade shortfall.  The revisions to Q3 GDP (likely higher) are unlikely to capture much attention as it is too backward-looking.   The second batch of data may see a bigger market reaction, especially in the debt market.  The US is expected to report a jump in personal spending (consumption needs to accelerate if the economy strengthens this quarter).  Income is likely to recover a bit from the 1.0% drop reported in September.  The market may be most sensitive to the deflators.  Here inflation is set to accelerate.  The headline is projected to rise above 5%, while the core should peak above 4%.   Lastly, new homes sales surged 14% in September and maybe lucky to sustain those higher levels in October.  Late in the session, when many in the US may be winding down ahead of the holiday, the FOMC minutes from this month's meeting will be released.  The current focus is on the possibility that the Fed accelerates its tapering next month, and anything that sheds light on this could shape the market's reaction.    The US dollar reversed lower yesterday after reaching CAD1.2745.  It settled near its lows (~CAD1.2670), but there has been no follow-through selling, and the five-day moving average, which it has not closed below since November 15, held (~CAD1.2660). Initial resistance is seen now around CAD1.2700-CAD1.2720.  We note that Canadian bonds are under some pressure, and the 10-year yield is above 1.80%, the highest level since April 2019.  The dollar rose to MXN21.30 yesterday and remains firm, even if off the high today.  News that Mexico's President pulled the nomination of Herrera, the former finance minister, as the next central bank governor, injected some volatility into the peso.  Reports suggest that Herrera's nomination was retracted a few months ago but was kept confidential.  It is not clear what happens next.  Some suspect Herrera may still get the nomination.  It does not appear that any official statement or clarification has been provided.  The median seems to be playing up the likelihood of some announcement in the coming days.  Meanwhile, Mexico reports its bi-weekly CPI figures, and inflation is still accelerating.  Tomorrow's final Q3 GDP is expected to confirm that the economy contracted.  The dollar recorded the high for the year against the peso in March near MXN21.6360.   Disclaimer

Macro 2021-11-24 08:40 6 minutes to read Summary:  US equity markets bounced back from an extension of the sell-off from the highs of Monday, perhaps in part as a firm US 7-year treasury auction saw yields settling back lower, just after that particular benchmark had notched a new high yield for the cycle. Today sees a flurry of US data and the FOMC Minutes all crammed into the last day before the long Thanksgiving weekend in the US, where markets are closed tomorrow and only open for short session on Friday. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - Nasdaq 100 recovered from steep losses late in yesterday’s session which has extended this morning on a positive session in Asia driven by improved sentiment in Chinese equities on good earnings releases. Nasdaq 100 futures are trading 1.4% higher than yesterday’s lows. The key thing to monitor is still the US 10-year yield and the USD for clues of where US equities are going. If Nasdaq 100 futures can extend their momentum today the 16,443 level is the natural gravitational point in this market sitting at the 50% retracement level over the past three trading sessions. USDJPY – The  USDJPY outlook is predominantly a question of “will it or won’t it sustain a break above 115.00?” And the answer to that question is likely coincident with whether long US treasury yields will rise above the 1.75% highs established earlier this year. After a strong 7-year US treasury auction yesterday, US longer yields dipped from session highs, drawing out the suspense on USDJPY direction here. AUDNZD – after the RBNZ meeting proved far less hawkish than the market has priced, it feels as if it will be difficult for the momentum in higher RBNZ rate expectations to return as the bank likely waxed a bit cautious overnight (more below) to give itself more time to assess how quickly the tightening in the bag and a few more planned hikes already priced in are affecting the NZ economy. In Australia, meanwhile, the economy is emerging from lockdowns and rate expectations could close the gap, with an additional possible source of support from China, where stimulus may be on the way, and where the anticipation of a rise in steel output has sharply boosted iron ore prices (Australia’s largest export). AUDNZD may have bottomed out now and we watch for whether this sharply rally off the bottom could have legs for at least 1.0600 as AU vs. NZ yield spreads mean revert. Gold (XAUUSD) trades higher after finding support ahead of $1781. The slump this week below  $1835 area was triggered by rising Treasury yields following the renomination of Jerome Powell as Fed chair. The oversized downside reaction, however, was caused by long liquidation from hedge funds who had been rushing into gold before and after the recent CPI shock. Gold’s short-term ability to bounce will mostly depend on whether the washout has triggered a big enough reduction of recently established and now loss-making positions. A sharp drop in open interest in COMEX gold futures and two days with double the normal trading volume could indicate most of the adjustments have now been executed. Crude oil (OILUKJAN22 & OILUSJAN21) jumped the most in two weeks yesterday after a US initiated release of strategic reserves underwhelmed in its size and details. Most of the oil being offered to refineries will have to be returned at a later date while international contributions were smaller than expected. Refineries are already processing crude near the seasonal pace so the market doubt how much extra oil they may need. Also, and more important, the OPEC+ alliance called the move unjustified given current conditions and as a result they may opt to reduce future production hikes, currently running near 12 million barrels per month. Ahead of today’s EIA stock report, the API last night reported a 2.3 million barrel increase with stockpiles at Cushing also rising US treasuries (SHY, IEF, TLT). At the beginning of the day, the yield curve bear flattened with 7-year yields breaking above 1.55% before the 7-year auction. It led many to believe that it could be a catastrophic bond sale as demand for Monday’s 2-year and 5-year Treasuries was weak. Surprisingly, bidding metrics were strong with the bid-to-cover ratio being the highest since September 2020, and the yield stopping through by 1bps at 1.588%. Following the auction, the yield curve steepened slightly amid lower breakeven rates and less aggressive rate hikes for 2022. We expect the bond market to continue to be volatile as the market adjusts expectations for rate hikes next year. Yet, the long part of the yield curve is likely to remain in check until a resolution to the debt ceiling is not found. Todays’ Personal Consumption Expenditures might revive inflation fears reversing gains in the Asia trading session. Italian BTPS (BTP10). Italian government bonds sold off for the second day in a row as German and French PMI beat expectations, hinting at the inevitable end of the PEPP program. To weaken sentiment in BTPS was also news that President Mattarella is going to vacate his position in January leaving a political vacuum. Parties are pushing Draghi to get that position to get rid of him and go to early elections. If that were to happen, the stability that Italian BTPS enjoyed since Draghi is leading the government will vanish provoking a fast widening of the BTPS-Bund spread. What is going on? EU gas prices surged back above $30/MMBtu (€90/GWh) yesterday in response to rising winter demand, low power production from wind farms and increased competition from Asia which is ramping up its LNG imports. The US imposing additional sanctions aimed at Russia’s Nord Strem 2 pipeline also received some unwelcome attention. Sky-high day ahead prices for power adding to the pain with some countries approaching record highs. Power plants are burning more coal which is cheaper and more profitable and it has helped drive the emissions future (CFIZ1) to a new all-time high this week above €70 per tons. RBNZ hikes only 25 basis points, statement somewhat cautious. The majority of market participants were looking for a 25-basis point hike from the RNBZ overnight, but enough were looking for 50 bps that the 0.25% hike to take the official cash rate to 0.75%  rate triggered a sell-off in the kiwi. But it was the guidance that was a bit more of a surprise than the rate move, as the RBNZ noted that, while further rate rises would be needed, “the Committee expressed uncertainty about the resilience of consumer spending and business investment....(and) also noted that increases in interest rates to households and businesses had already tightened monetary conditions.” The 2-year NZGB yield dropped 14 basis points overnight to 1.94% as the market lowered rate hike expectations out the curve. Turkish lira descent accelerates – yesterday was a wild day for the TRY, which fell almost 20% in a single day yesterday before stabilizing slightly, on fresh rhetoric from Turkish president Erdogan, who complimented the recent Turkish Central Bank decision to cut rates again and who continues to use belligerent rhetoric against the standard EM playbook for dealing with a devaluing currency (vicious belt tightening via rate hikes, etc.). Chinese equities are rebounding on good earnings releases. Yesterday’s earnings releases from Xiaomi, Kuaishou Technology, and XPeng  have lifted sentiment in Chinese equities. Kuaishou was a positive surprise given the technology crackdown in China and XPeng overtook NIO in Q3 on EV deliveries showing that the company can ramp up production. ECB Vice President Luis de Guindos says inflation drivers are becoming more structural. In a speech yesterday in Madrid, the central banker said that “the ECB is continuously pointing out that the inflation rebound is of a transitory nature....However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.” Euribor futures far out into 2024 and 2025 are several ticks lower from recent highs, but also up a few ticks from yesterday’s lows, as the market is only pricing for the ECB to move back to 0% rates by around the beginning of 2025. What are we watching next? Busy US Economic Calendar ahead of long holiday weekend - the majority of US office workers take a long weekend that includes Thanksgiving Day tomorrow and the Friday as well, with a lot of the data that normally would have been spread out over the rest of the week all piled up into a heap in early US hours today. The key number to watch today is the October PCE Inflation numbers, where the headline “PCE Deflator” and “PCE Core Deflator” are expected to show year-on-year readings of 5.1%/4.1% respectively vs. 4.4%/3.6% in September, which would mean the hottest pace of inflation since the early 1990’s. Much later in the day we have the FOMC minutes from the November 3 meeting, which should be interesting for whether the debate on whether the Fed needs to tighten policy more quickly is becoming more heated. Earnings Watch – the rest of the week in terms of earnings will be quite light with today’s focus on Deere which sells equipment to the agricultural sector and thus is a good indicator on this sector. Wednesday: Deere Thursday: Adevinta Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0900 – Germany Nov. IFO Survey 1330 – US Weekly Initial and Continuing Jobless Claims 1330 – US Oct. Advance Goods Trade Balance 1330 – US Q3 GDP Revision 1330 – US Oct. Durable Goods Orders 1430 – UK BoE’s Tenreyro to speak 1500 – US Oct. PCE Inflation 1500 – US Final University of Michigan Sentiment Survey 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Product Inventory Report 1700 – EIA’s Natural Gas Storage Change 1900 – US FOMC Meeting Minutes   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

Macro 2021-11-26 08:30 6 minutes to read Summary:  Fears linked to a new and different covid variant discovered in South Africa helped send a wave of caution over global markets overnight. Stocks in Asia and the US slumped, Treasuries rallied while the dollar traded near a 16-month high. Crude oil shed 3% and gold rose with the detection of the new covid strain. US markets will have a shortened session today as many are still away for the holiday, aggravating liquidity concerns ahead of the weekend. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equity futures shot lower from the moment they opened overnight on the new Covid variant news, a jolting development after Wednesday’s pre-Thanksgiving holiday closed seemed to show risk sentiment trying to make a stand after some early last week, and perhaps in part in anticipation of the traditionally strong seasonal run into the winter holidays in late December. Given poor liquidity today in the US as many are away from their desks for a long holiday weekend and the market is only for a half session, any significant flows by traders looking to reduce risk could mean significant volatility. Stoxx 50 (EU50.I) - the main European equity futures contract is down 3.2% on the news of a new more infectious Covid strain as it increases the probability of new lockdowns to safeguard hospitals. We observe the pandemic playbook in equities with technology and online companies falling less than physical companies such as miners, energy, and retailers. Stoxx 50 futures have broken below the 50% retracement level measured on the recent runup since early October. The next critical support levels are at 4,125 and 4,058. As this is a Friday, the liquidity situation could be significantly worsened and exacerbate intraday moves. USDJPY and JPY crosses – The huge shift in market mood overnight saw risk aversion sweeping across global markets driving US treasuries back higher and US yields lower, and triggering a huge jolt of JPY buying, as the JPY trading up against all of its G10 peers. USDJPY is well back below the 115.00 level that was broken overnight and the classic “risk proxy” AUDJPY was blasted for steep losses, with GPJPY also in particularly steep retreat. Another pair worth watching is EURJPY, where there is a well-defined range low near 128.00. Further risk aversion and falling yields could support a significant extension of the JPY rally if we are seeing a sustained change of mood here. Gold (XAUUSD) traded higher overnight as renewed Covid fears spread to financial markets with US Treasuries trading sharply higher, thereby reducing the threat that earlier in the week helped send gold crashing below $1835. A combination of high inflation and the economic risks associated with the new virus strain could provide renewed demand following the recent washout. US ten-year real yields slumped to –1.09% while the nominal yield dropped to 1.54% just days after threatening to break above 1.7%. From a technical perspective, a break above $1816 would signal renewed strength and a possible fresh challenge towards the $1830-35 resistance area. Crude oil (OILUKJAN22 & OILUSJAN21) slumped on renewed Covid concerns ahead of next week’s OPEC+ meeting. The market got caught up in a wave of caution overnight with Brent falling 3% as the new and fast mutating virus variant drives worries about renewed restrictions on mobility at the time when the existing delta is already triggering renewed lockdowns in Europe. Next week’s OPEC+ decision on production levels for January has suddenly been made extra hard with the risk of weaker Covid-related demand coming on top of the SPR release announcement earlier this week. US treasuries (SHY, IEF, TLT). A new Covid wave is leading investors to fly to safety provoking yields to drop roughly 10bps across the whole US yield curve. However, we expect the bond rally to be short-lived for several reasons. First, the market has learnt through earlier new strains that Covid is temporary. Secondly, a renewal of lockdown measures would make supply chain bottlenecks worse, introducing even more inflationary pressures to the economy. Therefore, it’s necessary for central banks to stop stimulating demand, keeping intact the recent Fed’s hawkish tilt. We expect more aggressive monetary policies beginning with an acceleration of the pace of tapering in December, followed by earlier interest rate hikes expectations. It will be inevitable for yields to resume their rise and the yield curve to bear flatten. Today investors will find poor liquidity in markets due to the Thanksgiving holiday, cautious will be needed. German Bunds (IS0L). The new German government unveiled a governing coalition deal. Among the extensive list of policies, bond investors should focus on the accommodative fiscal policies for 2022 and 2023, the beginning of a “decade of investment” and the rejection of a new lockdown amid a record rise of Covid cases. More spending translates to higher Bund yields. However, yields remain muted as Europe becomes the new epicenter of Covid-19 infections. With news of the new South Africa strain, yields might fall until we’ll have a full picture of what is happening. Italian BTPS (BTP10). Italian government bonds remained in check as governments in Europe move forward to impose new restrictions due to a rise Covid-19 infections. Yet, investors should remain vigilant as the PEPP program will still end in March. To weaken sentiment in BTP’s further is also the news that President Mattarella is going to vacate his position in January leaving a political vacuum. Parties are pushing Draghi to il Quirinale to get rid of him and go to early elections. If that were to happen, the stability that Italian BTPS enjoyed since Draghi entered in Italian politics will vanish provoking a fast widening of the BTPS-Bund spread. What is going on? What we know about the new Covid virus variant that’s hurting markets. The new Covid virus variant, with a scientific description of B.1.1.529 but with no Greek letter yet designated, has been identified in South Africa and observers fear that its significant mutations could mean that current vaccines may not prove effective, leading to new strains on healthcare systems and complicating efforts to reopen economies and borders. Researchers have yet to determine whether it is more transmissible or more lethal than already known variants. As of Thursday, 90% of 100 positive PCR tests in a specific area of South Africa were of the new variant. The South Korean central bank raised its policy rate 25 bps to 1.00% as expected and signaled further rate hikes to come, saying that rates are still accommodative after now having hiked twice for this cycle. The Swedish Riksbank kept rates at 0%, sees lift-off by the end of 2024. This is the first time the bank has indicated a positive rate potential in their policy forecast horizon. SEK tried to rally yesterday, but is stumbling badly overnight, with EURSEK is soaring this morning in correlation with the decline in global market sentiment, as the Swedish krona is very sensitive to the EU economic outlook and a weaker euro and to risk sentiment more generally. The 2021 EURSEK high near 10.33 is suddenly coming into view after the pair traded south of 10.00 less than two weeks ago. Australia Retail Sales leap 4.9% month-on-month versus 2.2% expected, as lockdowns ended across the country, but with the market is not in the right place to celebrate the news as new Covid strain fears elsewhere dominate the news flow and the Aussie traditionally trades weaker when risk sentiment tanks as it has done since last night. What are we watching next? This is a remarkable and violent shift in mood at an awkward time for markets - as the most liquid global market, the US, was out yesterday for a holiday and the Friday after Thanksgiving (today) usually sees the vast majority of traders and investors still on holiday, with the US equity market only open for a half session. Ahead of the weekend and with the new virus news afoot, markets may have a hard time absorbing new trading flows and the risk of gap-like moves rises. Black Friday consumer spending – retail sales during Black Friday today and over the weekend is often a good barometer on consumer confidence and causes big moves in retailers the following week as their weekend sales are announced. Earnings Watch – the new Covid-19 virus strain observed in South Africa is obviously overshadowing the two important earnings releases from Meituan and Pinduoduo, but they are important for investors investing in Chinese technology companies. Despite Chinese companies at the margin have fared better than expected on earnings in Q3, estimates for Q4 and beyond are still coming down. Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0800 – ECB President Lagarde to speak0830 – Sweden Oct. Retail Sales1300 – UK Bank of England Chief Economist Huw Pill to speak1330 – ECB Chief Economist Lane to speak   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

November 26, 2021  $USD, Covid, Currency Movement, Hungary, Mexico, South Korea Overview: Concerns that a new mutation of the Covid virus has shaken the capital markets.  Equities are off hard, and bonds have rallied.  In the foreign exchange market, the Japanese yen and Swiss franc have rallied.  While there may be a safe haven bid, there also appears to be an unwinding of positions that require the buying back of the funding currencies, which is also lifting the euro.  The currencies levered from growth, the dollar-bloc and Scandis are weaker.   Oil has been knocked back by around  6.7%, with January WTI trading near $73. Led by 2%+ losses in Japan, Hong Kong, and India, and 1%+ losses in South Korea, and Taiwan, the MSCI Asia Pacific Index has slumped to its lowest level since July.   Europe's Stoxx 600 gapped lower and is off around 2.4% near midday.  US futures are sharply lower (1.25%-2.5%).  The US 10-year yield has dropped around 12 bp to nearly 1.50%.  While UK Gilts have kept pace with US Treasuries, continental benchmark yields are off 6-8 bp.  The US 2-year yield is about 15 bp lower (~0.49%), while European 2-year yields are mostly 2-5 bp lower.  The 2-year Gilts yield has shed about 12 bp, as the market unwinds some of the chances of a rate hike next month.   Key Development: A new variant of the Covid virus was found.  It is thought to have the most mutations to date.  The EU, UK, Israel, and Singapore have quickly banned travel from South Africa and five neighboring countries.  This is coming on top of and is separate from the outbreak in Europe, where Germany has reported a record number of new cases and several other countries have introduced new restrictions.  Almost a third of Shanghai flights were canceled as three local cases were found.  US infections are also on the rise.  Asia Pacific  As widely expected, South Korea hiked its key 7-day repo rate by 25 bp to 1.0% yesterday.   It follows a 25 bp hike in August.  Consumer inflation rose 3.2% year-over-year in October, while the core rate rose 2.8%.  Growth in Q3 was 4.0%.  With today's roughly 0.3% decline, it brings this year's loss to almost 9%.  Only the yen (~-9.4%) and the Thai baht (~-11%) have performed worse in the region.   Australia reported stronger than expected October retail sales.  The 4.9% month-over-month surge was more than twice the Bloomberg median forecast (2.2%) and follows September's 1.3% gain.  It underscores the recovery that is taking place. The preliminary PMI showed the recovery continuing into November.  The composite rose to 55.0, its highest reading since June.   The dollar was fraying the upper end of the range we anticipated against the yen, pushing against JPY115.50.  The momentum looked to have been at risk of stalling when the news struck.  The dollar was sold to almost JPY113.65.  An option for $710 mln at JPY113.70 expires today.  The price action appears to be stabilizing a bit in the European morning, and the greenback is hovering around JPY114.00.    The trendline connecting the September and the previous two November lows comes in today near there today.  The JPY114.50 area looks to offer initial resistance.  The Australian dollar had been leaking through $0.7200, and the risk-off move sent it slightly through $0.7115, just above the low for the year set on August 20, closer to $0.7105.  A break could spur a move toward $0.7050, which is the (38.2%) retracement of the Australian dollar's recovery since March 2020, when it hit a low near $0.5500.  The $0.7140 area may provide the initial cap for the bounce.   The Chinese yuan is a rock.  It has hardly moved despite the broader developments.  The greenback is slightly (less than 0.05%) firmer and still a little below CNY6.39.  The PBOC set the dollar's reference rate at CNY6.3936, a touch above the CNY6.3934 median projection (Bloomberg survey).   Europe Part of the limited reaction short-end of the European debt market derives from the fact that investors had not expected a change in ECB's monetary policy until the very end of next year, at the earliest.  The surge in the delta strain had already emerged as a weight on the euro.  We had put emphasis on the divergence with the US and saw it captured in the two-year interest rate differential between the US and Germany.  The US premium had risen from around 90 bp in mid-September to 140 bp in the middle of this week.  It has fallen back to about 128 bp today.  Some observers had focused on the year-end adjustments of European banks and the shifting of liquidity through the cross-currency swap basis.   The new German coalition has been announced, and it will have its work cut out.  A record number of new cases have been reported in Germany, and many countries are introducing new social restrictions.  Portugal will try something a bit different.  It is set to require people to work from home in early January for a week to avoid a spike in the virus after the holidays.   Hungary was more aggressive than expected yesterday.  It raised its one-week deposit rate by 40 bp to 2.90%.  Recall that on November 18, it had hiked the one-week deposit rate 70 bp to 2.50%.  Two days earlier, it lifted the base rate 30 bp to 2.10%.  The forint had fallen to a record low against the euro on November 23.   The euro's high was just shy of HUF372, and it fell back to about HUF364.80 yesterday before jumping back to almost HUF369.50 today.  It has steadied around HUF368 in the European morning.   The euro's downside momentum had begun easing as bids below $1.12 were being filled.  The virus developments have spurred what appears to a be short-covering rally that has lifted the single currency thought $1.1280, where a 460 mln euro option expires today.  Nearby resistance is seen near $1.1300 and then last week's high near $1.1375.  Sterling recorded a new low for the year near $1.3280 in late Asian turnover before finding support.  It recovered to about $1.3335 so far.  A move above yesterday's high (~$1.3355) could spur a move to $1.3400-$1.3425.    America The dollar's rally has been fueled by the prospect of a divergence of monetary policy that favored the Fed over the ECB and BOJ.  Indeed, since the November 10 surprise jump in the October CPI to above 6%, we had emphasized the likelihood that the Fed would have to taper quicker to give it the flexibility to lift rates earlier if needed.  Since then, 4-5 Fed officials and several large banks have also underscored this possibility. However, this scenario is being called into question today, which is evident in the swaps markets and the Fed funds futures.  The implied yield of the June 2022 Fed funds futures contract is 7.5 basis points lower, and the December 2022 contract implied yield is down 14.5 bp.  The US dollar rallied to CAD1.2775, its highest level since late September.  It tests a downtrend line connecting the August (~CAD1.2950) and September (~CAD1.2900) highs. A convincing break of the trendline would signal a test on those earlier highs.   We are inclined to see it hold but cannot be confident until CAD1.2720 yields.   The Mexican peso was trampled before today amid concerns about the implications of President AMLO pulling Herrera's nomination for central bank head.  Herrera is a seasoned hand, and although he worked closely with AMLO from the finance ministry, his appointment did not seem to jeopardize the independence of the central bank.  Perhaps the market has been influenced by developments in Turkey, but the nomination of a less experienced and less known candidate has weighed on sentiment.  The dollar, already bid, jumped to MXN22.1550, at its best level since September 2020.   It has pulled back to around MXN21.83, which leaves it up around 1.2%.  This would be the seventh consecutive decline in the peso.  Support is seen around MXN21.60.  Disclaimer

Macro 2021-11-29 08:40 6 minutes to read Summary:  The market is trying to brush off fears that the new omicron covid variant may significantly disrupt the global economy, with only partial success as cases of the variant have been discovered in multiple countries outside of the original outbreak area. Equities and crude oil markets have erased a portion of the enormous losses from Friday, but the Japanese yen strength actually accelerated at times overnight as Japan will move to halt entry by all foreign visitors. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equity futures with especially Nasdaq 100 futures are charging ahead trading above the 50% retracement level based on Friday’s price action. The new Covid variant has for now made the market put monetary tightening on pause for a while until we get a better picture of the new variant and its impact. This is supporting US technology stocks as it puts less upward pressure on interest rates. Stoxx 50 (EU50.I) - European equities were down the most on Friday logically bouncing back the most in today’s session with Stoxx 50 futures trading at the 50% retracement level of Friday’s selloff at the 4,151 level. The next big resistance level on the upside is 4,189. If the new Covid variant ends up restricting mobility and travelling we expect Europe and emerging markets to perform worse than US equities. USDJPY and JPY crosses – The Friday meltdown in risk sentiment saw the Japanese yen rallying strongly, with a classic risk proxy pairing like the AUDJPY suffering its worst single day draw-down since the pandemic outbreak in March of 2020. While other markets tried to put on a hopeful face at the start of the week in Asia today, it is notable that the JPY strength has actually accelerated, perhaps in part as Japan is taking the remarkable step of banning all inbound travel from foreign destinations starting tomorrow. In USDJPY, we watch the important pivot low of 112.73, a fall through which could set up a challenge of the 111.50-111.00 zone that supports the trend from the lows of early 2021. Speculative positioning is quite short the JPY, so there is considerable potential fuel for an extension of this JPY rally. EURJPY has broken down through the important 128.00 area support overnight. EURUSD – the squeeze higher in EURUSD on Friday appears linked with the market moving quickly to remove expectations of Fed rate hikes in the wake of the news of the new omicron covid variant, which improves the equation for the euro from a “yield spread” perspective. For EURUSD to trade to new cycle lows from here, we would likely either need to see a return to new highs for the cycle in Fed expectations or some new meltdown in sentiment that would reward the US dollar more as a safe haven. Resistance is perhaps 1.1350-1.1385. Gold (XAUUSD) failed to attract a strong safe haven bid on Friday to push it through resistance at $1816. This despite multiple tailwinds emerging from the omicron-driven carnage after bond yields slumped while the dollar and the VIX jumped. Instead, a slump across industrial metals spread to silver and platinum, thereby curtailing golds potential upside. Gold trades lower today with other markets making a tentative recovery in the belief Friday’s selloff was overdone. However, until we have more details about the virus (see below) the markets will remain nervous as can be seen in fresh yen strength this Monday (see above). Four failed attempts to break below $1781, a key Fibonacci level, may also offer returning bulls some comfort. Crude oil (OILUKJAN22 & OILUSJAN21) suffered one of its largest one-day crashes on Black Friday in response to worries the new omicron virus variant could drive renewed demand weakness caused by widespread lockdowns and travel bans. Equally importantly was probably the very bad timing with the news hitting the markets on a low liquidity day after the Thanksgiving holiday. The market traded higher in Asia as buyers concluded the selloff was overdone while also speculating OPEC+ may act to support prices when they meet on Thursday. The group may decide to postpone the January production increase or if necessary, temporary cut production into a period that was already expected to see the return of a balanced market. Ahead of the meeting and until we know more about the new strain and its associated risks, the market will remain very volatile. US Treasuries (IEF, TLT). The omicron strain will be in the spotlight this week as well as monetary policies expectations and the non-farm payrolls on Friday. Jerome Powell’s speech tomorrow and on Wednesday will be key as the Coronavirus and CARES act will be discussed. It’s likely that rates will remain compressed across the yield curve as there continue to be uncertainties surrounding the omicron strain. Yet, we expect the Federal Reserve to stick to their hawkish agenda and accelerate the pace of tapering in December as inflation will continue to be a concern. It implies, the yield curve will continue to bear flatten, and could even invert as economic expectations dive, pinning down long-term yields. If the White House looks to add more stimulus, that would imply more bond issuance, putting further pressure in the front part of the yield curve. German Bunds (IS0L) and Italian BTPS (BTP10). This week’s focus will be the Eurozone CPI flash numbers and news concerning Covid lockdowns and restrictions. Friday’s flight to safety provoked yields to drop across the euro area, including among sovereigns with a high beta such as Italy. The reason behind it is that German Bunds are tightly correlated to US Treasuries and that the market was anticipating more accommodative monetary policies from the ECB, which have been benefitting mostly the periphery. Investors should remain cautious. Indeed, inflation remains a big focus and could drive towards less accommodative policies rather than more. What is going on? Market is grappling with what to do about the omicron covid variant. The worst impact so far is from the speed with which countries are moving to halt inbound foreign travel, with many countries stopping all flights from South Africa and other countries in the region, while Japan has taken the dramatic step of halting all inbound foreign travel from tomorrow. More hopeful indications from virologists in the virus origin area are anecdotally that this variant is not particularly virulent, although others point out that too little is known about the virus’ effects on more vulnerable patients. Weak Black Friday spending in the US, particular in-store sales. While up strongly from last year’s virus impacted activity at physical stores, US Black Friday spending in-store was down some 28% from 2019 levels and the online shopping on Friday was at $8.9 billion vs. $9.0 billion in 2019, rather disappointing totals, although some suggest that Americans have brought forward their holiday shopping this year because of widespread fears of shortages of popular products. What are we watching next? Whether market can quickly recover from fresh wave of virus concerns. The virus concerns triggered by the new variant were a jarring development, given the prior focus recently on inflation and central banks having to bring forward tightening plans to stave off inflationary risks. US stocks have been the quickest to try to put a brave face on the situation and there is some support for equities as rate hike expectations from the Fed have dropped sharply and long US treasury yields are also sharply lower, but it will take time to learn how transmissible and virulent this new omicron virus strain is, as well as how much damage will be done to growth and sentiment by new limitations on travel and other restrictions. We also have to recall that prior to this news, Europe was the epicenter of the latest wave of the delta variant and was already trading somewhat defensively. US President Biden is set to speak this evening on the new virus variant. The UN FAO will publish its monthly World Food Price Index on Thursday, and another strong read is expected, although the year-on-year increase look set to ease from 31.3%. November has been another strong month for the grains sector led by wheat due to strong demand and worries about the Australian harvest. Elsewhere Arabica coffee trades near a ten-year high on increased concerns about production in Brazil. Before Friday’s carnage across markets the Bloomberg Agriculture Spot index had reached a 5 ½-year high after rallying by 40% during the past year. Earnings Watch – earnings this week are light with the key ones to watch being Li Auto, Snowflake, Crowdstrike, Elastic, and DocuSign. Monday: Sino Biopharmaceutical, China Gas, Acciona, Li Auto Tuesday: Bank of Nova Scotia, Salesforce, Zscaler, NetApp, HP Enterprise Wednesday: Trip.com, Royal Bank of Canada, National Bank of Canada, Snowflake, Synopsys, Crowdstrike, Veeva Systems, Okta, Splunk, Elastic, Five Below Thursday: Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Cooper Cos, Marvell Technology, DocuSign, Ulta Beauty, Asana, Dollar General, Kroger Friday: Bank of Montreal Economic calendar highlights for today (times GMT) 0830 – Sweden Q3 GDP 0830 – ECB's Guindos to speak 0930 – UK Oct. Mortgage Approvals 1000 – Euro Zone Nov. Confidence Surveys 1130 – ECB's Schnabel to speak 1300 – Germany Nov. Flash CPI 1330 – Canada Oct. Industrial Product Prices 1530 – US Nov. Dallas Fed Manufacturing Survey 1715 – ECB President Lagarde to speak 2000 – US Fed’s Williams (voter) to speak 2005 – US Fed Chair Powell gives opening remarks at conference 2350 – Japan Oct. Industrial Production 0030 – Australia Oct. Building Approvals 0100 – China Nov. Manufacturing and Non-manufacturing PMI 0200 – Australia RBA’s Debelle to speak  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

November 28, 2021  $USD The new covid variant injected a new dynamic into the foreign exchange market.  The World Health Organization cautioned against the need to impose travel restrictions, but policymakers, by and large, do not want to be bitten by the same dog twice.  To err on the side of caution is to minimize one's biggest regret.  The risk is that the uncertainty is not lifted quickly but lingers, which would likely unpin volatility.   US and European benchmark 10-year yields fell sharply ahead of the weekend.  In the US, the market unwound some of its aggressive pricing in of Fed policy.  This is reflected in the commensurate drop at the short-end.  In Europe, the decline in 10-year yield reflected a slowing of growth/inflation as its short-end was largely unchanged.   There are three areas in which market participants cannot be as confident as they were in the middle of last week.  First, the odds of a Bank of England hike next month were diminishing and fell further at the end of last week.  Second, an acceleration in the Fed's tapering seemed increasingly likely given the strength of recent data and the jump in price pressures.  However, the emergence of this new strain makes an aggressive rate hiking campaign less likely.  Third, the prospects for stronger world growth diminished on the margins.  This undermines risk appetites and weakens those currencies that often appear to do better in robust growth phases (e.g., dollar bloc, Scandis, and most emerging market currencies).   Dollar Index:  The Dollar Index put in a new high for the year on November 24, slightly below 97.00. It was confined to a narrow range when the US markets were closed on November 25 and sold off on news of the new variant and imposition of travel controls by several countries.  The setback was sufficient to turn the MACD lower from over-extended territory, though the Slow Stochastic hasn't and remains stretched.  If we assume a correction has begun, a key question is what move is being retraced.  A conservative but logical assumption is that the last leg up, since the November 10 CPI, is in play.  The first (38.2%) target is near 95.75, and then the (50%) retracement is around 95.40.  A break of 95.00 could signal another cent decline.  Euro:  Interest rate differentials and the surge in delta variant cases had sent the euro to almost $1.1185 in the middle of the last week, the lowest since July 2020.  When news of the new variant broke, what appears to be a short-covering rally lifted the euro to almost $1.1325.  The (38.2%) retracement of the leg down since November 10 is near $1.1340.  A more formidable resistance area is in the $1.1375-$1.1400 band.  As was the case with the Dollar Index, the MACD is turning, but the Slow Stochastic is lagging.  Initial support now is seen near $1.1260. With the old and now new variant, the surge accelerated inflation expected to be reported next week may not be the fodder for the ECB has that some anticipated.   Japanese Yen:  We have suggested that the dollar was in a JPY113-JPY115 range.  Earlier this month, it had dipped briefly below JPY112.75 and snapped back.  Indeed, in the first part of last week, it was fraying the upper end of the range and traded slightly through JPY115.50.  However, the pre-weekend turmoil saw the greenback drop back to the lower end of the range (~JPY113.05).  The trendline connecting the August low and the two November lows, found near JPY114.10 ahead of the weekend, was taken out with determination. The MACD is turning down but never recovered from the mid-October-mid-November decline.  The Slow Stochastic is edging back into over-extended territory. British Pound:   As the December short-sterling futures contract rallied, implying a less likely chance of a BOE hike before year-end, the pound fell.  The interest rate futures contract will begin next week with a seven-day rally intact.  Sterling, itself has fallen for six sessions, and a new low for the year was set near  $1.3320 before the weekend.  Here, both the MACD and Slow Stochastic are falling while being over-extended on the downside.   A move above $1.3350 would help stabilize the tone,  but it requires a push above $1.3400 to be notable.  On the downside, we continue to see a risk of a test on the  $1.3165, the first retracement (31.8%) of sterling's rally since Mach 2020.     Canadian Dollar:  Talk about trending currencies; the Canadian dollar fell for the fifth consecutive week following a five-week rally.  Net-net,  it is little changed.  The US dollar settled near CAD1.2765 on September 17, which was between the Bank of Canada meeting and the FOMC.  The greenback reached CAD1.28 ahead of the weekend before settling back near CAD1.2760.  There is little chart resistance until closer to CAD1.29.  As one would expect, the momentum indicators are stretched and frayed the upper Bollinger Band (~CAD1.2770).  It requires a break of the CAD1.2630-CAD1.2640 area to be meaningful.   Australian Dollar:  In the pre-weekend carnage, the Australian dollar came within a whisker of the year's low set in August near $0.7100.  The Aussie, like the Canadian dollar, has been streaking.  Its four-week decline comes are a four-week rally.  The move was underway before the new variant was announced.  The next target is around $0.7050, the (38.2%) retracement of the rally from the March 2020 low (~$0.5500).  Below there is the $0.7000 area, which caught the lows in September and October 2020.   The MACD continues to fall, while the Slow Stochastic has begun to flatline in the trough.  The 25 bp hike by the Reserve Bank of New Zealand, which was fully expected, and disappointed those that looked for a larger move, did little to support the New Zealand dollar.  Indeed, it was the worst-performing major currency last week, losing about 2.5%, more than twice as much as the Canadian dollar and two-thirds more than the Australian dollar.  It also tested the year's low set in August (~0.6800). A break would open the door to steeper losses, but the next area of support may be found in the $0.6760-$0.6780 area.   Mexican Peso:  The peso was the second weakest currency in the world last week (after the Turkish lira), falling around 4.3% to a new low for the year.  It had three strikes against it last week.  First, emerging market currencies broadly are out of favor.   The JP Morgan Emerging Market Currency Index has fallen for 10 of the past 12 weeks.  Second, the new variant and the dramatic risk-off saw the peso's losses accelerate.  Third are domestic considerations.  AMLO's nomination to head the central bank starting next year did not bolster the market's confidence, which was on the heels of the Turkish debacle.  Also, domestic economic conditions have worsened.  The data have been softer than expected, including a downward revision in Q3 GDP showing a contraction of 0.4% rather than 0.2%. At the same time, the bi-weekly CPI rose above 7%.   Ahead of the weekend, the dollar rose to MXN22.1550, and although it pulled back, it found support above the previous session's high (~MXN21.60).  Nearly all the emerging market currencies fell against the dollar (The Brazilian real was a notable exception.  It eked out ~0.5% gain).  However, Mexico seems particularly vulnerable.  The credibility of the central bank may be called into question.  The economic challenge of surging inflation and weak economic activity would seem to require fiscal support, for which AMLO shows little interest.  In April 2020, the greenback reached nearly MXN25.7850, and the MXN22.47 area corresponds to the halfway mark of its subsequent decline.   Chinese Yuan:  Chinese officials appear to have expressed mild displeasure with the foreign exchange market, cautioning against a one-way market and checking prop positions.  Officials would seem to think that the banks are short dollars, while many outside observers, trying to reconcile the large current account surplus with little currency movement and stable reserves, think the large banks are accumulating dollars ostensibly on behalf of officials (hence the talk of stealth intervention). In fact, the one-way market has been broken.  On November 16, the dollar traded between CNY.3670 and CNY6.3965 and has not moved out of that range.  We suspect the risk is for an upside break for the dollar and initially see a move toward CNY6.42.   Disclaimer

November 29, 2021  $USD, Covid, Currency Movement, Federal Reserve, Inflation, Japan Overview: The fire that burnt through the capital markets before the weekend, triggered by the new Covid mutation, burned itself out in the Asian Pacific equity trading earlier today. A semblance of stability, albeit fragile and tentative, has emerged. Europe's Stoxx 600 is up about 1%, led by real estate, information technology, and energy.  US index futures are trading higher, with the NASDAQ leading.  Benchmark 10-year yields are firmer.  The US 10-year Treasury yield has risen about six basis points to 1.53%.  European yields are mostly 1-2 basis points higher, while the UK Gilt yield is up four basis points. The dollar remains, as we say, at the fulcrum of the major currencies, but in an opposite way, with the funding currencies that rallied strongly before the weekend seeing their gains pared today, while the dollar bloc and Scandis trade firmer.  Among the emerging market currencies, the liquid and freely accessible currencies, such as the South African rand, Russian rouble, and Mexican peso are leading the recovery.  The Turkish lira and central European currencies, perhaps dragged down by the softer euro, underperform.  The JP Morgan Emerging Market Currency Index is slightly firmer after falling around 0.4% before the weekend.  Gold held support near $1780 but has been unable to resurface above $1800.  January WTI jumped by about 5% after the 13% drop at the end of last week.  Iron ore surged 6.5%, recouping in full the 5.6% decline in the last session to approach its recent highs.  Winter weather is beginning to be experienced in Europe, and natural gas (Netherlands) is up 7.75% after falling 4.8% ahead of the weekend.  Copper is recouping a little less than half of last Friday's nearly 4% fall.   Asia Pacific Faced with much unknown about the new mutation, several Asia Pacific countries are opting to close their borders to foreign travelers.  Initially, countries limited the travel ban to a handful or so of countries from Southern Africa.  It does appear that the omicron variant has been around before being sequenced in South Africa, and it is has been found in several countries. However, the origin is still not clear.  While some reports from South Africa suggest mild symptoms, there is good reason for the World Health Organization's caution.  If a new vaccine is needed for the variant, reports suggest it could take around 100 days.  Recall that Japan has lifted its formal emergency in late September, and the economy is rebounding as anticipated.  Today's data showed retail sales rose for a second month in October.  The 1.1% increase lifted the year-over-year rate to 0.9%.   Purchases of clothing and food surged by 9.2%.  Auto sales, still hampered by supply chain disruptions, was the only category that fell.  After a frustratingly slow start, Japan's inoculation efforts have been successful, and the vaccination rate is above 75%.   Before news of the new variant broke, the dollar was around JPY115.50.  It fell to nearly JPY113.00 before the weekend.  It recovered in early dealing to almost JPY113.90 before the weakness of the regional equities contributed to its push lower.  Bloomberg pricing data showed it recorded a JPY112.99 low near midday in Tokyo.  It bounced to almost JPY113.65 in late dealings and has been consolidating in the European morning.  The option for $350 mln at JPY113.40 that expires today has likely been neutralized.  The market appears to be waiting for a new development to push it out of the JPY113-JPY114 range.  The Australian dollar held the pre-weekend low slightly below $0.7115 and is making session highs late in the European morning near last Friday's high (~$0.7155).  Nearby resistance is seen in the $0.7180-$0.7200 area. Recall that last week's 1.55% decline was the fourth consecutive weekly loss and the largest in three months.  The greenback gave up its pre-weekend gain against the Chinese yuan and a bit more today.  It did not even trade above CNY6.39 today, settling above it at the end of last week.  As we have noted, it remains within the range set on November 16 of roughly CNY6.3670-CNY6.3965. The PBOC set the dollar's reference rate at CNY6.3872 and continued to set it above expectations (CNY6.3858, via Bloomberg).   Two issues seem to be receiving attention today.  First are the prospects of easing by the PBOC in the face of continuing weakening of the economy. The November PMI will be released starting first thing tomorrow.  Second, China's property developers have an estimated $1.3 bln in debt servicing next month, following $2 bln this month.   Europe Outside of the virus, two issues dominate investors' attention in Europe today.  First are the November inflation reports from Spain and Germany ahead of the preliminary aggregate figures tomorrow.  The other is the increasingly bellicose rhetoric between the UK and France over the channel crossings and fishing.   Spain's harmonized November CPI rose by 0.3% to lift the year-over-year rate to 5.6%.  It is the fastest pace since 1992.  It follows October's 1.6% increase and 5.4% 12-month rate.  Food and energy were the main drivers.  The increase was in line with forecasts.  In September, the central bank's chief economist had anticipated that November could be the peak in inflation and anticipated it falling back below the 2% target in 2022.  German states are reporting their November CPI figures, and the country's measure will be reported late today.  The states' measures are consistent with forecasts calling for the nation's harmonized measure to fall around 0.2%.  However, the year-over-year pace is projected to accelerate to 5.5% from 4.6% due to the base effect.  The EMU aggregate preliminary CPI is forecast (Bloomberg median) to be flat on the month for a 4.5% year-over-year pace (up from 4.1% in October).  The core rate is projected to climb to 2.3% from 2.0%.  The euro poked slightly above $1.1330 at the end of last week and settled just above $1.1315.  It traded near $1.1260 in late Asia/early Europe and caught a bid that brought it back to about $1.1290.  There is a 1.7 bln euro option at $1.13 that expires today.  The intraday momentum indicators are getting stretched, warning of the downside risk in early North American activity.  Sterling recorded a new low for the year ahead of the weekend, near $1.3280. It is trading in about a quarter-cent range today, around $1.3335, and staying within last Friday's range.  The pre-weekend high was closer to $1.3365.   After an eight-day rally, the December short-sterling interest rate futures contract is trading slightly heavier today.  The market expectations have shifted from a good chance of a hike next month to a bit more than a third of a chance.   America The US auto sales and jobs highlight this week, but Fed officials are out in force too.  Today Powell, Williams, and Hasson speak at an innovation conference, and Bowman discusses the central bank and indigenous economies. Tomorrow, Powell and Yellen testify before a Senate committee on the CARES Act.  Their prepared remarks are expected to be released later today that may also work for the testimony on Wednesday on the same topic before a House committee.    Tuesday, Clarida discusses the Fed's independence, while Williams will speak on food security.  The Beige Book, in preparation for next month's FOMC meeting, is due Wednesday too.  No fewer than five Fed officials speak in the second half of the week.  Our initial bias continues to be for faster tapering at the December FOMC meeting. It still seems to be the prudent course to maximize the Fed's ability to respond to a broad range of probable economic outcomes.  The US pending home sales and the Dallas Fed manufacturing survey, due today, are not typically market movers.  And today is unlikely to be an exception.  Canada reports its Q3 current account surplus (expected to be around C$5.7 bln, up from C$3.6 bln in Q2.  It also reports raw material and industrial prices for October.  The week's highlight is tomorrow's September and Q3 GDP, followed by Friday's employment report.  Mexico reports October unemployment figures (median forecast in Bloomberg's survey calls for a 4.07% rate, down from 4.18% in September). Concerns about President AMLO's appointment to the central bank lingers even though the peso may benefit from the correction to the 1.6% pre-weekend drop.   The US dollar spiked to almost CAD1.28 before the weekend.  It fell to nearly CAD1.2720 today.  The pullback was seen in Asia, and it has been consolidating since then.  Still, the greenback looks vulnerable to a further retracement of the pre-weekend gains. Initial potential extends toward CAD.2680-CAD1.2700.   The broader risk appetites may be the key today for both the Canadian dollar and Mexican peso.  The greenback jumped to MXN22.1550 amid the pre-weekend turmoil.  This now marks the high for the year.  It pulled back initially to MXN21.6850 in Asia, but the selling pressure eased, and it traded in an MXN21.7630-MXN21.9000 range in Europe.  We suspect the combination of the trajectory of US monetary policy plus the concerns about the central bank of Mexico boosts the chances that the peso underperforms generally.  Moreover, rising price pressures and a weak economy put officials in a difficult position, especially given AMLO's reluctance to deploy fiscal measures to support the economy.   Disclaimer

Macro 2021-12-01 08:45 6 minutes to read Summary:  Even more whiplash for global markets yesterday as Fed Chair Powell has clearly set an entirely different tone ahead of his new term as Fed Chair, saying that it was time to retire the word transitory when discussing inflation and pointing to accelerating the slowing of Fed asset purchases, among other comments. This led to a sharp repricing of Fed expectations higher just after they had been taken sharply lower by the news of the omicron covid variant. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - the initial reaction to Powell’s statement about retiring “transitory” inflation was lower equities and higher interest rates, but the subsequent price action has not followed through. Nasdaq 100 futures, which are the most interest rate sensitive, are trading at the high end of the recent trading range around the 16,380 level with the obvious resistance level at 16,438. Short-term the price action way be confusing with low signal-to-noise ratio, but our view has been clear for over a year, and that is, that inflation is coming and in size not seen in many decades. This will have a negative effect on the most richly valued equities such as our bubble basket on stocks. Stoxx 50 (EU50.I) - one would think that Powell’s comments on inflation would lift value stocks and interest rates, and thereby creating a bigger rebound in European equities, but that is not what we are observing this morning. Stoxx 50 futures are trading around the 4,100 level with an important resistance level at 4,125; if this level can be overcome then our view is that Stoxx 50 futures could go to 4,200 and test the 200-day moving average. USDJPY and JPY crosses – whiplash for JPY cross traders yesterday, as the hawkish comments from Fed Chair Powell on inflation took Fed expectations for next year sharply back higher. Longer US yields, to which USDJPY is normally more sensitive, were less impacted, somewhat muting the impact on USDJPY, but the development came at a critical time, just after USDJPY had dipped below 112.73 range support yesterday. The reversal is a tentative sign that the pair will avoid pushing lower, but we would likely need to see the entire US yield curve lifting to have support for a renewed rally focusing on the 115.00+ recent top. EURUSD - will the ECB be forced to change its tune? Christine Lagarde’s insistence that inflation is a temporary phenomenon is under severe strain, even as she has been out this week defending this viewpoint, as was the ECB’s Schnabel, who boldly claimed that the November CPI data (more below) would prove the peak of the cycle. EURUSD churned sharply yesterday from a high of 1.1383 to a low of 1.1236 on the Fed Powell comments (below) before rebounding to 1.1336. The resilience later in the day despite a sharp repricing of Fed expectations is an interesting development, but the price action would need to threaten above 1.1500 to point to a technical reversal of the recent large sell-off. Crude oil (OILUKFEB22 & OILUSJAN21) trades sharply higher after hitting a three-month low on Tuesday in response to omicron related demand worries and general weak risk sentiment following Fed chair Powell’s comments on inflation. The market attention now turns to tomorrow’s OPEC+ meeting where the group may decide to pause production hikes while signaling a willingness to cut production should the demand suffer from fresh initiatives to curb mobility, especially for overseas travel. As a sideshow, the EIA will release its weekly inventory report later with the API reporting a 0.7m barrels draw in crude oil stock while fuel stocks rose. Gold (XAUUSD) trades higher after once again recovering from a Powell statement. Yesterday the Fed chair confirmed his recent change in focus away from creating jobs towards increasing efforts to curb elevated inflation. Risk appetite took another setback on the news but has recovered overnight as traders weighed positive regional economic data and divided views from drugmakers over how effective existing vaccines are against omicron. Overall, gold chart looks increasingly messy with no clear signal to be found at present. A break above the 21-DMA at $1820 is needed to spark fresh momentum interest while support continues to be found below $1780. US Treasuries (IEF, TLT). Powell’s testimony in front of the senate put things in perspective: inflation is not transitory, and the Federal Reserve will use its tools to stop it. These words provoked a fast bear-flattening of the yield curve where short term yields rose faster than log-term yields were dropping. We expect this trend to continue throughout winter as a new wave of covid will pin down the long part of the yield curve, but the Fed is likely to accelerate the pace of tapering. An inversion risk cannot be excluded. The 20s30s part of the yield curve is already inverted, while the 7s10s is just 7bps to get inverted. Although the 2s10s and 5s30s spreads are much wider, any flattening can pose a threat to next year’s Fed’s interest rate hike agenda. Powell and Yellen will testify again in front of the Senate today. Job numbers remain a big focus for Friday. US junk bonds (HYG, JNK). According to Bloomberg Barclays indexes, junk bonds’ OAS widened by 30bps to 330bps amid Friday’s selloff reflecting the lack of liquidity in markets. Despite negative real rates continuing to support corporate bond valuations, it’s safe to expect junk bond spreads to widen throughout the end of the year amid poor liquidity. If the volatility in rates remains sustained, the widening of spreads could accelerate, posing a threat also for stocks. German Bunds (IS0L) and Italian BTPS (BTP10). Inflation accelerated more than expected in the Eurozone during the month of November setting the yearly figure to 4.9%. Inflation figures together with the new German government adds to the catalysts of higher Bund yields. However, covid distortions are keeping yield in check. We exclude Bund yield to rise to test 0% until the new wave of covid eases. However, as soon as the worries concerning covid ease, they will resume their rise. What is going on? Fed Chair Powell confirms that Fed emphasis has shifted to inflationary risks. In testimony before a Senate committee yesterday, Fed Chair Powell waxed far more hawkish than the market anticipated on inflation concerns, saying outright that it is time to retire the word “transitory” regarding the description of inflation, that “the risk of higher inflation has increased” and that “the risk of persistent high inflation is also a major risk to getting back to such a labor market.“ (referring to the pre-pandemic labor market). Powell also pointed to the likelihood that the Fed would wind down Fed balance sheet expansion more quickly than previously anticipated: “perhaps a few months sooner”. In response, expectations for Fed rate hikes next year were jolted back higher, just after they had been jolted lower by the omicron covid variant news. Hot EU CPI numbers for November. Preliminary headline November EU CPI was out at 4.9% year-on-year, far above the 4.5% expected and the 4.1% in October and by far the highest inflation print since the launch of the euro. Core CPI rose to 2.6% year-on-year, above the 2.3% expected and the October level of 2.0%. This is also the highest level since the launch of the euro in 1999. Germany’s incoming chancellor Scholz speaks on inflation, compulsory covid vaccination. The political pressure on the ECB to act is ratcheting higher after incoming German chancellor Scholz said that action must be taken if inflation fails to drop, though he seemed now to accept the notion that inflation is linked to covid measures and the spike in energy prices. He also spoke yesterday in favor of mandatory covid shots. Salesforce shares down 6% on Q4 guidance. Investors are used to being spoiled by Salesforce with consistently beating analyst expectations, but last night the cloud application software company disappointed on Q4 guidance with revenue in line and adj EPS at $0.72-0.73 vs est. $0.82. The company also announced that Bret Taylor will become co-CEO next to founder Marc Benioff in a sign that the founder may soon step down like so many other technology founders in recent years. What are we watching next? Markets adjusting to new reality of a more hawkish Fed. In particular if the omicron variant of the covid virus proves a temporary distraction, global markets will need to adjust the major adjustment in the Federal Reserve’s focus and what that could mean for the US dollar and asset valuations ahead. Fed Chair Powell’s rhetoric yesterday likely mean a heightened reactivity to incoming data from here on out, all modulated in the very near term by headline risks in either direction on the omicron variant. The first major data points are the ISM Service index and November jobs report up on Friday. The Average Hourly Earnings could take over in importance from the payrolls change number if it shows more aggressive rises, as it seems clear that labor supply is the chief problem US companies face, as seen in record job availability and “quits” as workers leave jobs for greener pastures. ADP employment figures for November. With the US economy operating at full capacity according to estimates from CBO, continued strong job gains will add fuel to the “inflation fire”, so today’s ADP figures could more interest rates and equities. Economists are looking at 525K vs 571K in October which would be a significant two-month change for an economy that has closed the output gap, but on the other hand, the US economy is still short around 8.5mn jobs from current levels to where employment would have been if we did not have the pandemic. Earnings Watch – growth investors will have their eyes on Snowflake set to report after the market close with analysts expecting FY22 Q3 (ending 31 Oct) revenue growth of 92% y/y. Crowdstrike, being one of the fastest growing cyber security companies in the world, will also be key to watch today. Wednesday: Trip.com, Royal Bank of Canada, National Bank of Canada, Snowflake, Synopsys, Crowdstrike, Veeva Systems, Okta, Splunk, Elastic, Five Below Thursday: Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Cooper Cos, Marvell Technology, DocuSign, Ulta Beauty, Asana, Dollar General, Kroger Friday: Bank of Montreal Economic calendar highlights for today (times GMT) 0730 – Switzerland Nov. CPI 0815-0900 – Euro Zone Final Nov. Manufacturing PMI 1315 – US Nov. ADP Employment Change 1330 – Canada Oct. Building Permits 1445 – US Nov. Final Markit Manufacturing PMI 1500 – US Fed Chair Powell, Treasury Secretary Yellen to testify before House panel 1500 – US Nov. ISM Manufacturing 1530 – DOE’s Weekly Crude Oil and Fuel Inventories 1900 - Fed Beige Book 0030 – Australia Oct. Trade Balance   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

USDCAD seeks support The Canadian dollar edged higher after Q3’s GDP beat expectations. A bullish MA cross on the daily chart indicates a bullish bias in the US dollar’s favor. The break above the resistance at 1.2770 suggests that the bulls retain control of the direction. An overbought RSI has tempered the bullish fever temporarily, which may be an opportunity for buyers to accumulate. September’s high at 1.2900 is the next target. A bullish breakout could trigger an extended rally towards 1.3100. 1.2730 is now fresh support. AUDUSD falls towards 11-month low The Australian dollar bounced back on upbeat GDP in Q3. The break below 0.7170 has negated October’s rally. A bearish MA cross on the daily chart confirms that sentiment has turned sour. The Aussie is heading to October 2020’s low and the psychological level of 0.7000. An oversold RSI has prompted sellers to start to cover in that congestion area. 0.7190 is a resistance from the previous demand zone and trend followers are likely to sell a rebound. Buyers will need to take out those offers to ease the pressure. UK 100 to test daily support The FTSE 100 struggles with doubts about vaccine efficacy against the omicron variant. A drop below the daily support at 7190 triggered a sharp liquidation. Then a short-lived rebound has met stiff selling pressure at 7170. The index is hovering above the origin of the October rally at 6945. The bulls will need to clear the resistance before they could hope for a recovery. Otherwise, a bearish breakout would send the price to test the triple bottom (6830) from the daily timeframe. And that is the key to the uptrend’s integrity in the medium term.

December 01, 2021  $USD, China, Currency Movement, EMU, Federal Reserve, Japan, PMI, South Korea, UK Overview:  Into the uncertainty over the implications of Omicron, the Federal Reserve Chairman injected a particularly hawkish signal into the mix in his testimony before the Senate.  These are the two forces that are shaping market developments.  Travel restrictions are being tightened, though the new variant is being found in more countries, and it appears to be like closing the proverbial barn door after the horses have bolted. Equities are higher.  The MSCI Asia Pacific Index, led by South Korea, and India, rose for the first time in four sessions, and Europe's Stoxx 600 is recouping more of yesterday's loss.  US futures are trading more than 1% higher.  Benchmark yields are higher.  The 10-year US Treasury yield is up four basis points though is still below 1.50%.  European yields are mostly 3-5 bp higher, though Italy's benchmark is 8 bp higher near 1.05%.  The dollar remains the fulcrum of the see-saw, but the funding currencies (yen, Swiss franc, and euro) are lower, and the dollar bloc is higher.  The dollar is pulling back against the Turkish lira after approaching TRY14 yesterday, even though President Erdogan's rhetoric about pushing for even lower rates seemed to have ratcheted up.  Emerging market currencies are more broadly mixed, but the JP Morgan Emerging Market Currency Index is up for the third consecutive session to match the longest advance in nearly three months.  Gold posted an outside down day yesterday, but there has been no follow-through selling today, and the yellow metal is consolidating inside yesterday's range.  January WTI slipped below $65 yesterday and is pushing above $69 today ahead of the OPEC meeting.   Dutch natural gas prices are firm, recouping most of yesterday's loss.  Iron ore and copper prices are also retracing yesterday's weakness.   Asia Pacific China's Caixin manufacturing PMI unexpectedly slipped below the 50 boom/bust level, albeit barely (49.9).  It was expected to be unchanged at 50.6.  It had eased below 50 in August (49.2).  Recall that the world's second-largest economy nearly stagnated in Q3 (0.2% quarter-over-quarter), and it appears to be accelerating here in Q4. Still, many look for the PBOC to provide more stimulus, perhaps in the form of a cut in reserve requirements, as it did this past July.  Separately,  officials seem to be cracking down harder on the "variable interest entity" structure that characterizes offshore listings, especially in the US.   Japan's November manufacturing PMI was revised to 54.5 from 54.2.  It stood at 53.2 in October.  The world's third-largest economy is recovering.  Australia reported Q3 GDP contracted by 1.9%, less than the 2.7% contraction economists had projected (Bloomberg median).  Its economy also is recovering.  The November manufacturing PMI was confirmed at 59.2, up from 58.2 previously.  House prices in Australia and New Zealand rose last month but sequentially at a slower pace.  To round out this regional overview, note that South Korea's exports in November were stronger than expected, pointing to robust foreign demand.  Exports rose 32.1% year-over-year.  Economists (Bloomberg median) expected a 27.2% pace after 24.1% in October.   It is the strongest pace since August.  Imports jumped 43.6% year-over-year, which was also more than expected, and follows a 37.7% increase previously.   The dollar is firm after being sold to its lowest level against the yen yesterday since October 11 (~JPY112.55).  It stalled near JPY113.60 in late Asia, which is slightly lower than the high seen in the US yesterday in response to the Fed's Powell hawkish pivot. However, barring fresh negative impulses, the JPY113 area may offer support again.  The Australian dollar is firm near yesterday's highs after falling to a new low for the year yesterday.  That low (~$0.7065) approached the (38.2%) retracement objective of the Aussie's rally from the March 2020 low near $0.5500.  A move now above $0.7080 would lift the technical tone and target the $0.7120-$0.7150 area.  The greenback initially fell to nearly CNY6.36, just ahead of the year's low recorded in May near CNY6.3570, before recovering to around CNY6.3720.  Resistance may be seen in the CNY6.3750-CNY6.3800 area.  The PBOC set the dollar's reference rate CNY6.3693.  The market (Bloomberg survey) had anticipated CNY6.3682.   Europe Covid was surging in several parts in Europe, including Germany, before the sequencing of the Omicron variant, and things have gotten worse.  The economic impact is beginning to be evident.  Germany's October retail sales, which economists had expected to recover after falling by 1.9% in September, disappointed with a 0.3% decline. The final November manufacturing PMI was revised to 57.4 from the flash 57.6 (and 57.8 in October).  It is the fourth consecutive decline.  The French manufacturing PMI was revised to 55.9 from the preliminary estimate of 54.6 (53.6 in October).  It is the first gain since May.  Economists hoped that Spain's manufacturing PMI was going to rise after falling for two months through October.  Instead, it fell again (51.1 vs. 57.4) to stand at its lowest level since March.  Italy is the standout.  Its manufacturing PMI was stronger than expected, jumping to 62.8 from 59.7, representing a new cyclical peak.  The aggregate for the eurozone as a whole edged up to 58.4 from 58.3 in October, but slower than the 58.6 flash estimate.  Still, it managed to eke out its first gain since June.  The UK's November manufacturing PMI stands at 58.1, down slightly from the preliminary estimate (58.2).  It was at 57.8 in October.  It is the second consecutive monthly gain after falling from June through September.  The UK economy grew by 1.3% in Q3 and is expected to slow to 1.1% this quarter.  The implied yield of the December 2021 short-sterling interest rate futures fell for eight sessions coming into this week.  It has been choppy so far this week, and net-net, the yield is about 1.5 bp higher than at the end of last week.  The overnight index swaps imply about a 40% chance of a hike next month.   The euro traded on both sides of Monday's range yesterday and closed above Monday's high.  However, there has been no follow-through buying today, and a consolidative tone has emerged.  A move above $1.1400 is needed to lift the tone, and it most likely won't happen today.  A 1.2 bln euro option is struck there that expires today.  The focus is on the downside. So far, it has held above $1.13, and support is seen around $1.1290.  Sterling recorded the low for the year yesterday, a little below $1.3200.  It stopped shy of our $1.3165 target, the (38.2%) retracement of cable's recovery from the March 2020 low. Its bounce off yesterday's lows fizzled out near $1.3330. Note that there is a GBP600 mln option at $1.33 that expires tomorrow.   America We have argued that the US October CPI surprise (6.1%) was a pivot point for Fed officials, even a reputed dove like San Francisco's Daly.  We also detected a change in rhetoric, and this point was driven home by Fed Chair Powell yesterday.  He clearly brandished his anti-inflaton credentials. Powell declared that the Fed would use its tools to step inflation from becoming entrenched.  At the same time, he recognized that it cannot assess Omicron now, though it clearly poses a risk.  Still, the next FOMC meeting is two weeks away, and by then, more information will be known.  Powell confirmed that the Fed would discuss the pace of tapering.  While the Fed will stop referring to inflation as transitory, Powell echoed Yellen's recent assessment that price pressures are projected to ease in H2 22.  Of note, the short end of the coupon curve sold off, but the long end remained firm.  The 30-year bond yield slipped to its lowest level since January, and the 2-10 year curve flattened 13 bp to below 90 bp, the flattest in 10 months.   The North American economic calendar is jammed today.  The US sees ADP's private-sector jobs estimate. Around 525k jobs are expected to have been filled, down from 571 in October.  In the last three months, the ADP estimate has undershot the official measures by an average of 23k.  Year-to-date, the average under-estimate is a little more than 50k.  November auto sales are expected to have risen for the second consecutive month after falling from May through September.  The final manufacturing PMI will also be reported.  The flash reading was the first increase since July.  The ISM manufacturing survey will also be published.  It has been a bit more resilient than the PMI.  Late in the session, the Beige Book will be released.  Canada reports October building permits (expected softer after the 4.3% gain in September) and the manufacturing PMI (57.7 in October).  Mexico reports its manufacturing PMI and IMEF surveys.  The central bank's inflation report is also due.  Mexico reports October worker remittances today.  They have averaged $4.15 bln a month this year through September.  The average for the same period in 2020 was $3.33 bln, and in 2019 $3.03 bln.  Note that the average trade deficit this year (through October) is almost $1.2 bln.   After reaching almost CAD1.2840 yesterday, its highest level since the September FOMC meeting, the greenback has come back offered today. It briefly and marginally traded below yesterday's CAD1.2730 low.  It needs to convincingly break below CAD1.2720 to be of any technical significance.  Initial resistance now may be seen near CAD1.2780.  The dollar peaked against the Mexican peso at the end of last week near MXN22.1550.  It is moving lower for the third consecutive session, and found initial support around MXN21.27 today.  The MXN21.20 area is the halfway mark of last month's range.  A move above  MXN21.40 may signal the dollar's downside correction is over.   Disclaimer

Forex 2021-12-01 15:25 4 minutes to read Summary:  Fed Chair Powell cemented recent evidence that the Fed has changed its stripes from a punch bowl refiller for the economy and the labor market to an inflation fighter at large. The market is finding it tough to absorb this message, given the recent market choppiness and virus distractions, but interesting that the US dollar has not found more strength on this momentous pivot. FX Trading focus: Hawkish broadside from Powell Fed Chair Powell cemented the impression that the Fed has shifted firmly into inflation fighting mode with an appearance yesterday before a Fed panel. The rhetoric was direct and of a make-no-mistake variety. Powell said that the end of balance sheet expansion would likely wind down a few  months sooner than originally foreseen, even with the current omicron variant of covid concerns. He also spelled out that it is probably time to retire the word “transitory” when discussing inflation, ad said that the risk of higher inflation has increased. Perhaps most interesting was a comment that persistent higher inflation brought a risk to getting the labor market back to where it was pre-covid. It is crystal clear at this point that the Fed has pivoted to inflation-fighting and tightening and will move in that direction as quickly as it can until the inflation numbers improve markedly. Of course, the market was already adjusting to clear signs that the Fed is moving into a far more hawkish stance early last week, only to be sidelined viciously by the omicron variant worries in recent days. Were it not for that interlude, Fed expectations would likely be at new cycle highs as yesterday’s signals from Powell make the Fed shift as clear as day. As it is, we have only clawed back a majority of the 2022 hikes priced in pricing of Fed rate hikes, still some 8 basis points to go for end of year Fed pricing (the “omicron discount” being perhaps 15 basis points or more?). The two curious things are that the US yield curve continues to viciously flatten and the market continues to price the terminal Fed rate for the coming hiking cycle at 2.00%. The inability for the longer yields to lift higher recently may be reining in the USD upside for. The other indicator besides yield-curve shifts that is making waves here on my radar screen of financial conditions is the measure of corporate credit, where spreads have blown wider, as discussed over the last couple of episodes of the Saxo Market Call podcast. The bluntness from the Fed yesterday may have driven the particularly bad day for junk bonds as the new style from the Fed could lead investors in the riskiest debt to conclude that they may be allowed to twist in the breeze down the road if inflation levels stay high, rather than receiving endless bailouts that keep zombie companies in business and able to forever roll forward their debts. We are set up for an interesting 2022 that will likely look very different from 2021. The shift in Fed rhetoric will make the market extra-sensitive to US data and developments that impact inflation, from energy prices, to the CPI/PCE data itself and the average hourly earnings data perhaps even more than the usual nonfarm payrolls change focus. Today’s Beige Book could be interesting for anecdotal evidence from interviews with companies on their impression of supply constraints, wage adjustments and issues finding qualified workers, etc. Today’s November ADP Payrolls was another strong 500k+ as expected. Chart: USDJPYUSDJPY was handcuffed by developments yesterday – on the one hand with the USD supported by a rise in Fed expectations, but on the other hand, JPY traders finding no fresh reason to bid up the JPY as the long end of the US yield curve remains pinned at quite low yields and there has been no shift in the Fed’s “terminal rate” – where the market sees the Fed rate hike cycle peeking out. So the price action bobbed well back above the 112.73 range pivot level that was broken yesterday, but has a steep wall to climb to threaten the 115.00+ cycle highs again, something that would likely require the entire Fed yield curve to lift, and more aggressively than expectations for policy normalization elsewhere. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strengthAgain, the market is finding the reaction function increasingly difficult to the recent jolts in inputs. Note the huge momentum shift in SEK, where the market overdid the recent squeeze, but the strength there will likely only improve once the euro bottoms and the outlook for EU yields and fiscal improves. Table: FX Board Trend Scoreboard for individual pairs.Well entrenched trends are few and far between, but the EURCNH and EURCHF downtrends stand out, with the latter’s lack of volatility after recent direction changes remarkable. The Swiss franc does well as a safe haven and does well because the SNB can’t be seen weakening the currency when inflation pressures are rising. Upcoming Economic Calendar Highlights (all times GMT) 1500 – US Fed Chair Powell, Treasury Secretary Yellen to testify before House panel 1500 – US Nov. ISM Manufacturing 1530 – DOE’s Weekly Crude Oil and Fuel Inventories 1900 - Fed Beige Book 0030 – Australia Oct. Trade Balance

December 01, 2021  $USD, Macro The pandemic is still with us as the year winds down and has not yet become endemic, like the seasonal flu.  Even before the new Omicron variant was sequenced, Europe was being particularly hard hit, and social restrictions, especially among the unvaccinated, were spurring social strife.  US cases, notably in the Midwest, were rising, and there is fear that it is 4-6 weeks behind Europe in experiencing the surge.  Whatever herd immunity is, it has not been achieved.  Moreover, despite plenty of vaccines in high-income countries, inoculation efforts in many low-income countries won't begin in earnest until next year.   That said, the new variant has injected a new element into the mix, and it is with a heightened degree of uncertainty that we share our December outlook.  Given the unknowns, policymakers can choose the kind of error they are willing to make. They are trying to minimize their maximum regret.  The utmost regret is that the mutation is dangerous and renders the existing vaccines and treatment significantly less effective.  This will leave them vulnerable to accusations of over-reacting if the Omicron turns out to be a contagious but less deadly variation.   Meanwhile, there has been some relief to the supply chain disruptions.  Covid-related factory closures in Asia, the energy shortage, and port congestion are easing. Large US retailers have stocked up for the holiday shopping season, some of which chartered their own ships to ensure delivery. There are also preliminary signs that the semiconductor chip shortage may be past its worst.  Indeed, the recovery of the auto sector and rebuilding of inventories will help extend the economic expansion well into next year, even though fiscal and monetary policy are less supportive for most high-income countries.  The flash November US manufacturing PMI saw supplier delivery delays fall to six-month lows.   We assume that the US macabre debt ceiling ritual will not lead to a default, and even though it distorted some bill auctions, some resolution is highly probable.  The debate over the Build Back Better initiative, approved by the House of Representatives, will likely be scaled back by moderate Democratic Senators and Republicans.  Besides assessing the risks posed by the new variant, the focus in December is back on monetary policy.  Four large central banks stand out.  The Chinese economy has slowed the People's Bank of China quarterly monetary report modified language that signals more monetary support may be forthcoming.  Many observers see another reduction in reserve requirements as a reasonable step.  Unlike in the US and Europe, which saw bank lending dry-up in the housing market crisis (2008-2009), Beijing is pressing state-owned banks to maintain lending, including the property sector.   The Federal Reserve meets on December 15.  There are two key issues.  First, we expect the FOMC to accelerate the pace of tapering to allow it to have the option to raise rates in Q2 22.  The Fed's commitment to the sequence (tapering, hikes, letting balance sheet run-off) and the current pace of tapering deny the central bank the needed flexibility.  The November CPI will be reported on December 10.  The headline will likely rise to around 6.7%, while the core rate may approach 5%.  Second, the new "Summary of Economic Projections" will probably show more Fed officials seeing the need to hike rates in 2022.  In September, only half did.  The rhetoric of the Fed's leadership has changed.  It will not refer to inflation as transitory and is signaling its intention to act.  The European Central Bank and the Bank of England meet the day after the FOMC.  The ECB staff will update its forecasts, and the key here is where it sees inflation at the end of the forecasting period.  In September, it anticipated that CPI would be at 1.5% at the end of 2023.  Some ECB members argued it was too low.   It may be revised higher, but the key for the policy outlook is whether it is above the 2% target.  We doubt that this will be the case.  While the ECB will likely announce that it intends on respecting the current end of the Pandemic Emergency Purchase Program next March, its QE will persist. The pre-crisis Asset Purchase Program is expected to continue and perhaps even expand in Q2 22.  The "modalities" of the post-emergency bond-buying program, size, duration, and flexibility (self-imposed limits) will be debated between the hawks and doves.  With eurozone inflation approaching 5% and Germany CPI at 6%, the hard-money camp will have a new ally at the German Finance Ministry as the FDP leader Linder takes the post.  On the other hand, the Social Democrats will name a Weidmann's replacement at the head of the Bundesbank, and nearly anyone will be less hawkish.   While we correctly anticipated that the Bank of England would defy market expectations and stand pat in November, the December meeting is trickier.  The decision could ultimately turn on the next employment and CPI reports due 1-2 days before the BOE meeting.  The risk is that inflation will continue to accelerate into early next year and that the labor market is healing after the furlough program ended in September.  On balance, we suspect it will wait until next year to hike rates and finish its bonds purchases next month as planned.   Having been caught wrong-footed in November, many market participants are reluctant to be bitten by the same dog twice. As a result, the swaps market appears to be rising in about a 35% chance of a 15 bp move that would bring the base rate up to 25 bp.  Sterling dropped almost 1.4% (or nearly two cents) on November 4, the most since September 2020 when the BOE failed to deliver the hike that the market thought the BOE had signaled.   The combination of a strong dollar and the Fed tapering weighed emerging market currencies as a whole.  The JP Morgan Emerging Market Currency Index fell by about 4.5% in November, its third consecutive monthly decline, bringing the year-to-date loss to almost 10%.  It fell roughly 5.7% in 2020.  Turkey took the cake, though, with the lira falling nearly 30% on the month.  It had depreciated by 15% in the first ten months of the year.  This follows a 20% depreciation last year.  Ten years ago, a dollar would buy about 1.9 lira.  Now it can buy more than 13 lira.  The euro's weakness was a drag, and the geopolitical developments (e.g., Ukraine, Belarus) weighed on central European currencies. The central bank of Hungary turned more aggressive by hiking the one-week deposit rate by 110 bp (in two steps) after the 30 bp hike in the base rate failed to have much impact.  The forint's 3.1% loss was the most among EU members.   Colombian peso was the weakest currency in Latam, depreciating by almost 5%. It was not rewarded for delivering a larger than expected 50 bp rate hike in late October.  Bannockburn's GDP-weighted global currency index (BWCI) fell by nearly 1% in November, the largest monthly decline since June.  It reflected the decline of the world's largest currencies against the dollar.  Three currencies in the index proved resilient  On the GDP-weighted basis, China has immense gravity, with a 21.8% weighting (the six largest EM economies, including China, account for a 32.5% of the BWCI). It appreciated by about two-thirds of a percent. The Brazilian real managed to rise (~0.25%) too.  Since the day before the Omicron variant was sequenced, the Japanese yen gained a little more than 2%, reversing the earlier decline that had brought it to four-year lows.  It rose by  0.7% in November, making it the strongest currency in the index.  Among the major currencies, the Australian dollar fell the most, declining about 5.2%.  The Canadian dollar was next, with around a 3% loss.   As it turns out, the dollar (Dollar Index) recorded its low for the year as shocking events were unfolding in Washington on January 6.  The bottomed against the yen and euro the same day.   The greenback did not bottom against the Australian dollar until February, but it took it until early June to put in a low against sterling and the Canadian dollar.  The BWCI peaked in early June and, by the end of last month, had retreated by about 2.7%.  We suspect it may decline by another 2%, which would return it the levels of late 2019.  That, in turn, implies the risk of a stronger dollar into the first part of next year.     Dollar:  The jump in US CPI to above 6%, and a strong sense that it is not the peak, spurred speculation that the Federal Reserve would likely accelerate the pace of tapering at the December meeting. Several Fed officials seemed sympathetic, including San Francisco President Daly, who is perceived to be a dove. The minutes of the November meeting underscored the central bank's flexibility over the pace of tapering.  At the same time, most of the high-frequency data for October came in stronger than expected, lending credence to ideas that after a disappointing Q3, the world's largest economy is accelerating again in Q4.  The divergence of monetary policy and the subsequent widening interest rate differentials is the primary driver of expectations for dollar appreciation against the euro and yen.  The market had been leaning toward three rates hikes in 2022 before news of the new Covid mutation emerged and trimmed the odds.  Powell was renominated for a second term at the helm of the Federal Reserve, Brainard was nominated to be Vice-Chairman.  There is still the Vice-Chair for supervision and an empty governor seat for President to Biden to fill.  In addition to the changes in leadership, the rotation of the voting members of the FOMC brings in a somewhat more hawkish bias next year.   Euro:  In contrast with the US, eurozone growth is set to slow in Q4. After two quarters that growth exceeded 2% quarter-over-quarter, growth is likely to moderate to below 1% in Q4 21 and Q1 22.  Food and energy are driving inflation higher.  The EC continues to negotiate with the UK over changes to the Northern Ireland Protocol.  The dispute over fishing licenses and migrant crossing of the channel are also unresolved sources of tension with the UK. Tensions between the EC and Poland/Hungary over the rule of law, judicial independence, and civil liberties have also not been settled.  As was the case in the spring, Russia's troop and artillery movement threatened Ukraine, though the tension on the Poland/Belarus border has eased.  The ECB's leadership continues to maintain the price pressures are related to the unusual set of circumstances but are ultimately temporary.  Its December 16 meeting, the last one before Bundesbank President Weidmann steps down, is critical. In addition to confirming the end of the Pandemic Emergency Purchase Program in March 2022, and the expansion of the Asset Purchase Program, the ECB staff will update its inflation forecasts.  The focus here is on the 2023 CPI projection of 1.5%.  There was a push back against it in September, and a slight upward revision is likely. Nevertheless, it will probably remain below the 2% target.  The swaps market is pricing in a 25 bp hike in 2023.   (November indicative closing prices, previous in parentheses)   Spot: $1.1335 ($1.1560) Median Bloomberg One-month Forecast $1.1375 ($1.1579)  One-month forward  $1.1350 ($1.1568)    One-month implied vol  7.1%  (5.1%)         Japanese Yen:  Japan has a new prime minister who has put together a large fiscal stimulus package that will help fuel the economic recovery that had begun getting traction since the formal state of emergency was lifted at the end of September.  After a frustratingly slow start, the inoculation efforts have started bearing fruit, with vaccination rates surpassing the US and many European countries.  Unlike most other high-income countries, Japan continues to experience deflationary pressures.  Food and energy prices may be concealing it in the CPI measure, but the GDP deflator in Q2 and Q3 was  -1.1%. However, the BOJ does not seem inclined to take additional measures and has reduced its equity and bond-buying efforts.  The exchange rate remains sensitive to the movement of the US 10-year note yield, which has chopped mostly between 1.50% and 1.70%. With a couple of exceptions in both directions, the greenback has traded in a JPY113-JPY115 range.  The emergence of the new Covid mutation turned the dollar back after threatening to break higher.  A convincing move above the JPY115.50 area would likely coincide with higher US rates and initially target the JPY118 area.    Spot: JPY113.10 (JPY113.95)       Median Bloomberg One-month Forecast JPY113.30 (JPY112.98)      One-month forward JPY113.00 (JPY113.90)    One-month implied vol  8.2% (6.4%)   British Pound:  Sterling never fully recovered from disappointment that the Bank of England did not hike rates in early November.  Market participants had understood the hawkish rhetoric, including by Governor Bailey, to signal a hike.  The implied yield of the December 2021 short-sterling interest rate futures plummeted by 30 bp by the end of the month, and sterling has not seen $1.36, let alone $1.37, since then.  Indeed, sterling chopped lower and recorded new lows for the year in late November near $1.3200.  Growth in the UK peaked in Q2 at 5.5% as it recovered from the Q1 contraction.  It slowed to a 1.3% pace in Q3 and looks to be slowing a bit more here in Q4.  The petty corruption scandals and ill-conceived speeches by Prime Minister Johnson have seen Labour move ahead in some recent polls.  An election does not need to be called until May 2024, but the flagging support may spur a cabinet reshuffle.  The next important chart point is not until around $1.3165 and then the $1.30 area, which holds primarily psychological significance.       Spot: $1.3300 ($1.3682)    Median Bloomberg One-month Forecast $1.3375 ($1.3691)  One-month forward $1.3315 ($1.3680)   One-month implied vol 7.5% (6.8%)      Canadian Dollar:  The Canadian dollar appreciated by almost 2.4% in October and gave it all back, plus some in November.  Indeed, the loss was sufficient to push it fractionally lower for the year (-0.4%), though it remains the best performing major currency against the US dollar.   The three major drivers of the exchange rate moved against the Canadian dollar last month.  First, its two-year premium over the US narrowed by 17 bp, the most in four years.  Second, the price of January WTI tumbled by around 18.2%.  Commodity prices fell more broadly, and the CRB Index snapped a seven-month rally with a 7.8% decline.  Third, the risk appetites faltered is reflected in the equity markets. The Delta Wave coupled with the new variant may disrupt growth.  Still, the swaps market has a little more than two hikes discounted over the next six months.   The government is winding down its emergency fiscal measures, but the spring budget and election promises mean that the fiscal consolidation next year will be soft.     Spot: CAD1.2775 (CAD 1.2388)  Median Bloomberg One-month Forecast CAD1.2685 (CAD1.2395) One-month forward CAD1.2770 (CAD1.2389)    One-month implied vol 7.2% (6.2%)      Australian Dollar:  The Australian dollar fell by more than 5% last month, slightly less than it did in March 2020.  It did not have an advancing week in November after rallying every week in October.  Australia's two-year premium over the US was chopped to less than 10 bp in November from nearly 28 bp at the end of October.  The Reserve Bank of Australia pushed back against aggressive rate hike speculation.   The unexpected loss of jobs in October for the third consecutive month took a toll on the Australian dollar, which proceeded to trend lower and recorded the low for the year on November 30, slightly below $0.7065.  A break of $0.7050 would initially target $0.7000, but convincing penetration could spur another 2-2.5-cent drop.  The 60-day rolling correlation between- changes in the Australian dollar and the CRB commodity index weakened from over 0.6% in October to below 0.4% in November. The correlation had begun recovering as the month drew to a close.       Spot:  $0.7125 ($0.7518)        Median Bloomberg One-Month Forecast $0.7195 ($0.7409)      One-month forward  $0.7135 ($0.7525)     One-month implied vol 9.7%  (9.1%)        Mexican Peso:  The broadly stronger US dollar and the prospects of more accelerated tapering weighed on emerging market currencies in November, but domestic considerations also weighed on the peso.   The Mexican peso fell by around 4.1%, the most since March 2020.  The economy unexpectedly contracted by 0.4% in Q3.  There is little fiscal support to speak of, while monetary policy is becoming less accommodative too slowly compared with some other emerging markets, such as Brazil.  Price pressures are still accelerating, and the bi-weekly CPI rose above 7% in mid-November. The swaps market discounts nearly a 25 bp hike a month for the next six months.  The government's policies, especially in the energy and service sectors, are not attractive to investors.  President AMLO dealt another blow to investor confidence by retracting the appointment of former Finance Minister Herrera for his deputy to head up the central bank starting in January.  This is seen potentially undermining one of the most credible institutions in Mexico.  Lastly, Mexico's trade balance has deteriorated sharply in recent months and through October has recorded an average monthly trade deficit of nearly $1.2 bln this year.  In the same period, in 2020, it enjoyed an average monthly surplus of almost $2.5 bln, and in the first ten months of 2019, the average monthly trade surplus was a little more than $150 mln.     Spot: MXN21.46 (MXN20.56)   Median Bloomberg One-Month Forecast  MXN21.23 (MXN20.42)   One-month forward  MXN21.60 (MXN20.65)     One-month implied vol 14.9% (9.6%)      Chinese Yuan:  The Chinese yuan has been remarkably stable against the US dollar, and given the greenback's strength, it means the yuan has appreciated sharply on a trade-weighted basis.  Going into the last month of the year, the yuan's 2.6% gain this year is the best in the world.  Chinese officials have signaled their displeasure with what it sees as a one-way market.  At best, it has orchestrated a broadly sideways exchange rate against the dollar, mainly between CNY6.37 and CNY6.40. The lower end of the dollar's range was under pressure as November drew to a close.   Even though the Chinese economy is likely to accelerate from the near-stagnation in Q3 (0.2% quarter-over-quarter GDP), it remains sufficiently weak that the PBOC is expected to consider new stimulative measures.  It last reduced reserves requirements in July, and this seems to be the preferred avenue rather than rate cuts.  Yet, given the interest rate premium (the 10-year yield is around 2.85%), record trade surpluses ($84.5 bln in October), portfolio inflows, and limited outflows, one would normally expect a stronger upward pressure on the exchange rate.    Spot: CNY6.3645 (CNY6.4055) Median Bloomberg One-month Forecast  CNY6.38 (CNY6.4430)  One-month forward CNY6.3860 (CNY6.4230)    One-month implied vol  3.5% (3.5%)    Disclaimer

The US dollar turned in a solid week's performance, rising against most currencies and recording a marginal new high for the year against the euro.  Sterling and the Australian dollar competed for the worst performer.  Both central banks pushed against market expectations for aggressive near-term tightening.  The central banks triggered a short squeeze in the bond market, where 10-year benchmark yields from 10 bp in the US to 34 bp in Italy.  UK 10-year Gilts and French Oats yields fell nearly 22 bp.  Germany lagged with an almost 18 bp decline.  The speculative market had its largest net short Treasury note futures position since March 2020.  It has swung from its largest net long position in four years (~181k contracts) in early October to a net short position of almost 270k as of November 2.  The macro focus shifts back to inflation next week with American and Chinese reports.  Rising inflation in the world's two largest economies may arrest the rally in the bond markets. We anticipated the dollar to move broadly higher this month, and the move we envision does not appear over.  However, important support has been approached in a sharp thrust that has penetrated Bollinger Bands, suggesting some patience may be needed.  The dollar did close relatively softly, especially given the stronger than expected employment report.   Dollar Index: A new high for the year was recorded after the employment report was slightly above 94.60.  The momentum indicators are trending higher, and the five-day moving average crossed back above the 20-day moving average.  Recall that the 94.50 area is (38.2%) retracement of the sell-off since the March 2020 peak (~103).  The high from last September was closer to 94.75, but above there, nothing stands out until the 95.70-96.10 band. Yet ahead of the weekend, it finished poorly and formed a potential bearish shooting star candlestick.  Initial support is seen around 93.80.   Euro:   The single currency was virtually flat last week, but it does not hide the fact that a new low for the year (~$1.1515) was recorded.  The MACD and Slow Stochastic are moving lower, and the price action has been poor.  The $1.1490 area corresponds to the (50%) retracement objective of the rally from the March 2020 low (~$1.0635).  The next retracement (61.8%) is found a little below $1.13.  The euro finished on a firm note near session highs, suggesting scope for some corrective gains at the start of the new week. The new momentum shorts are frustrated with the lack of follow-through and maybe in weak hands.  A close above $1.1620 would lift the technical tone.  Japanese Yen:  The Japanese yen was the strongest of the major currencies, gaining an inconsequential 0.25% against the dollar.  The decline in US rates helped drag the dollar lower against the yen.  In terms of market positioning, short-yen carry trades had become momentum trades, too and the unwind was also supportive of the yen.   The dollar-yen exchange rate continues to track US 10-year yields.  The 10-year yield fell below 1.50% for the first time in a month ahead of the weekend, and the dollar made a new low for the week near JPY113.30.  Recall that in the big picture, we have suggested a range-trading affair between around JPY113.00 and JPY114.50-JPY115.00.  That still seems reasonable.  However, we note the dollar's momentum is flagging, and the five-day moving average slipped below the 20-day for the first time since late September.   The Slow Stochastic and MACD are trending lower.  A break of JPY113.00 signals the next leg down into the JPY112.00-JPY112.50 band.  British Pound: After the Bank of England confounded market expectations, sterling was spanked, falling more than 1% for only the second time this year (the other was on September 28, which arguably was more of a dollar move).  Expectations, partly facilitated by official comments, for tighter monetary policy spurred a roughly 4.3-cent rally in sterling last month.  If the BOE is saying, "sorrow about the mate, you misunderstood the conditionality and our job," it seems only fitting that sterling return to the late-September low near $1.3400.  It did so ahead of the weekend to $1.3425.  Ahead of the weekend, it settled below the lower Bollinger Band for the second consecutive session.  The momentum indicators are still falling. However, it managed to close near session highs, and a potential hammer candlestick may have been formed.  However, if $1.34 does not hold, it is difficult to find much chart support ahead of the $1.3165-$1.3200 area should $1.3400 be convincingly broken.  Canadian Dollar:  The Canadian dollar fared better than the other dollar-bloc currencies but still lost about 0.5% against the US dollar.  Since meeting the head and shoulders objective near CAD1.23, the US dollar has been consolidating and forming a rounded bottom.  The five-day moving average crossed back above the 20-day for the first time in a month.  The greenback finished the week bumping against the 200-day moving average (CAD1.2480), while the momentum indicators suggest there is more to come.  A retracement (38.2%) of the greenback's slide since September 20 high (~CAD1.29) is found near CAD1.2520, and the next retracement (50%) is slightly below the neckline of the head and shoulders pattern (~CAD1.2600).     Australian Dollar:  The Australian dollar's pullback has been more profound than the other majors.  It dropped almost 2.6% from the late October higher (~$0.7555), which was its best level since early July, and retraced half of last month's rally at the pre-weekend low (~$0.7360).  The momentum indicators are still falling, and the five and 20-day moving averages have crossed for the first time in nearly a month.  The next (61.8%) retracement target is closer to $0.7315.  Still, it closed firmly and with a possible bullish hammer candlestick, suggesting a bounce early next week is likely. The $0.7430-$0.7450 area may be the first important hurdle.  The Reserve Bank of Australia, like many other central banks, is emphasizing labor market developments in their forward guidance. Given the gap between what the RBA is saying (no hike likely until 2024) and what the market is saying (the swaps market implies nearly 70 bp of tightening over the next 12 months), next week's October jobs data may have greater impact.  Australia lost almost 285k jobs in August and September amid the lockdown.  A modest recovery is expected. In fact, the worst was probably in August. Full-time positions increased by almost 27k in September.   Mexican Peso:   The peso staged a brilliant recovery last week, but only after first falling to its lowest level since March.  The fall in US rates helped take pressure off the peso and emerging markets more broadly.  The strong US employment report bolstered risk appetites and lifted the JP Morgan Emerging Market Currency Index, which had been lower on the week, ahead of the data.  The dovish FOMC tapering announcement saw the dollar record a key downside reversal against the peso by reversing lower after making new highs and closing below the previous session's low.  Modest follow-through selling pushed the dollar through the (61.8%) retracement objective (~MXN20.46) of the rally that had begun in late October (from ~MXN20.21), ahead of the FOMC meeting and jobs report.  Before the weekend, it settled at the lows for the week (~MXN20.30).  Initial support is seen near MXN20.20.  The central bank meets next week (November 11).  Most expect a 25 bp hike, but an acceleration in CPI last month ( to be reported on November 9) may boost the risk of a 50 bp move.   Chinese Yuan:  The yuan's 2% gain this year puts it in third place globally, behind the Russian ruble (4.5%) and the Canadian dollar (2.3%).  The yuan has drifted higher in recent weeks.  It has risen for the past three months for a cumulative gain of a little less than 1%.  For the past several weeks, the PBOC consistently set the dollar's reference rate above market expectations (median projection in Bloomberg's survey) but did not do so ahead of the weekend.  Last week the dollar traded quietly within the range seen in the past two weeks.  The dollar recorded four-month lows in October in front of CNY6.38.  Given the official penchant for stability, the issue now is the upper end of the range, and it seems to be CNY6.40-CNY6.41.  Since late September, the dollar has not settled above the 20-day moving average (~CNY6.4075), the middle of the Bollinger Bands.  China's 10-year bond yields peaked in mid-October near 3.05% and last week finished below 2.90% for the first time in several weeks. It is the only country whose 10-year yield has fallen this year (~25 bp).  The October inflation gauges are the market's focus, but trade and lending figures may generate more insight into the economic drivers.   Disclaimer

Forex 2021-11-29 13:00 4 minutes to read Summary:  The Friday meltdown in USDJPY and JPY crosses was all about position squaring as we had just come from a place of anticipating a more hawkish shift from central banks, particularly the US Fed. The sense of whiplash was most acute in USDJPY, which had just been up testing multi-year highs before the deleveraging across markets on the new omicron covid variant clouding the outlook. FX Trading focus: Narrative whiplash for JPY traders on omicron variant concerns The news of the new omicron variant of covid could not have come at a more difficult time for the market to absorb for at least two reasons. First, of course, was the poor liquidity when US markets were closed Thursday and only open part of Friday due to the Thanksgiving holiday. Second was that we had just earlier the same week seen Fed Chair Powell and Brainard elevating the relative focus and position of grappling with inflation in their acceptance speeches, which had sent Fed rate hike expectations to new highs for the cycle early last week before the news hit. That ratcheting up of Fed rate anticipation had helped take USDJPY to new highs since early 2017 above 115.00 and EURUSD to new lows below 1.1200. But the positioning build-up in USDJPY has been far more extreme and the reaction in JPY crosses on Friday was fully in fitting with the JPY’s old status as a safe haven. Note that AUDJPY had its worst single-day drop since the heart of the pandemic outbreak panic in March of last year, while EURJPY has poked below the important 128.00 area that would suggest a break-down if the move holds. EURUSD rose sharply, as the sudden repricing of the Fed saw the EU-US yield spread tightening sharply, but the move would have to extend as far as 1.1500 to start having more profound technical implications. Has the market taken the news too far? That is not for me to judge, as it will take some time to assess the status of the reach of the current outbreak transmissibility, virulence and vaccine-evading characteristics of this new variant, all while real damage is being done as some countries are limiting travel, some merely from the areas where the new variant was discovered in southern Africa, while Japan has announced a full ban on inbound travel starting tomorrow. US President Biden will speak on the new variant later today. What does the best outcome look like? The omicron variant proves very transmissible, but is considerably milder and/or not particularly good at getting around the existing vaccines. Worst case involves some combination of significant vaccine evading characteristics and virulence that is anywhere similar to prior variants. I suspect that without immediate good news (real news surely requires at least a week from here?), the uncertainty could see risk-correlated trades dragged lower before things can improve, but a significant further deterioration in risk assets would likely require actual bad news emerging rather than merely an extension of the uncertainty. Regarding a timeline for learning more about the risks from the omicron variant, it’s best perhaps to admit that I have no clue, but a Reuters article suggests the major vaccine makers may be able to determine efficacy of existing vaccines in about two weeks. Chart: USDJPYWhile other JPY crosses were bigger movers on Friday, the technical development in USDJPY was the most remarkable, as it came off new cycle- and multi-year highs. The damage is significant locally, but would turn more severe if the 112.73 pivot low from October is broken and then goes on to challenge the more structurally significant 111.50-111.00 area. Source: Saxo Group Looking at the week ahead, we would normally be touting the importance of the next set of US survey numbers (November Consumer Confidence and November ISM Manufacturing on Wednesday and ISM Services on Friday) and November jobs and earnings numbers on Friday, but instead, we’ll have to juggle the ongoing news flow and headlines from the new virus variant and may have to file these data away for a later “pent-up” reaction if the omicron variant impact dissipates. Besides the US dollar and the JPY, I will watch all points on the US yield curve and risk sentiment measures closely for how the market is reading the situation. Powell is out today with opening remarks at some event - more interesting is testimony tomorrow, together with Treasury Secretary Yellen, on the policy response to the pandemic, which could see interesting exchanges on inflation, etc.  Table: FX Board of G10 and CNH trend evolution and strengthThe JPY is in a very different place from where it was a week ago or even two trading sessions ago and looks to remain the high-beta currency to whether the virus news drags market sentiment. The SEK reading looks extreme, but difficult to fade in terms of picking levels – downside put spreads in EURSEK the cautious way to proceed for those interested in fading this move now rather than waiting for a reversal pattern to develop. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Talking trends is treacherous business when the market goes into headline reactivity mode, but note that USDJPY and CNHJPY turning negative (if they close lower today) would make it a clean sweep for the JPY across the board. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1300 – Germany Nov. Flash CPI 1330 – Canada Oct. Industrial Product Prices 1530 – US Nov. Dallas Fed Manufacturing Survey 1715 – ECB President Lagarde to speak 2000 – US Fed’s Williams (voter) to speak 2005 – US Fed Chair Powell gives opening remarks at conference 2350 – Japan Oct. Industrial Production US President Biden to speak about omicron variant 0030 – Australia Oct. Building Approvals 0100 – China Nov. Manufacturing and Non-manufacturing PMI 0200 – Australia RBA’s Debelle to speak

December 03, 2021  $USD, Australia, Canada, China, Currency Movement, EMU, FOMC, Inflation, Japan, jobs, UK Overview:  The Omicron variant has been detected in more countries, but the capital markets are taking it in stride.  Risk appetites appear to be stabilizing.  The MSCI Asia Pacific Index rose for the third consecutive session, though Hong Kong and Taiwan markets did not participate in the advance today.  Europe's Stoxx 600 is struggling to hold on to early gains, while US futures are narrowly mixed.  The US 10-year yield is a little near 1.43%, down around six basis points this week.  European yields are slightly softer. Core yields are off 5-6 bp this week.  The dollar is firm ahead of the jobs data.  The Antipodeans and Swedish krona are the heaviest, falling around 0.6% through the European morning.  The Swiss franc and euro are up about 0.1% and are the most resilient so far today.   The JP Morgan Emerging Market Currency Index is trading lower for the third session and is set to extend its losing streak for the fourth consecutive week.  Accelerating inflation is the latest drag on the Turkish lira.  The 0.6% decline today brings the week's drop to around 10.5%.  Gold is little changed within yesterday's range.  Last week, it settled a little above $1802.  Now it is below $1775  Oil is extending yesterday's recovery. Although OPEC+  unexpectedly stuck with plans to boost output by 400,000 barrels a day next month, it warned it could change its collective mind at any point.  January WTI recovered from around $62.40 yesterday to close at $66.50.  It is trading close to $68.20 before US markets open.  US natural gas fell nearly 25.5% over the past four sessions but is bouncing by around 3.7% today. European gas (Dutch) is stabilizing after yesterday's 5.6% decline.  Still, it is posting gains for the fifth consecutive week and is up more than 35% over the run.  Iron ore and copper prices are little changed.   Asia Pacific At the same time that Chinese officials are cracking down on the "variable interest entity" form of offshore listings for domestic companies, the US SEC is moving to enforce the 2002 laws that require foreign companies to allow greater scrutiny by US regulators.  Didi, the ride-hailing service, which listed in the US over local official objections, is now in the process of reversing itself.  The press reports that China and Hong Kong companies are the only ones to refuse to acquiesce to US demands.  This seems to be another facet of the decoupling meme.  Note that the NASDAQ Golden Dragon Index that tracks 98 Chinese companies listed in the US has fallen for five consecutive sessions coming into today, for a cumulative loss of about 10%.  China's Caixin service PMI was weaker than anticipated at 52.1, down from 53.8.  This, coupled with the softer manufacturing reading, shaved the composite to 51.2 from 51.5.   In contrast, Japan and Australia's flash service and composite PMIs were revised higher.  In Japan, the service PMI was revised to 53.0 from 52.1 and 50.7 in October.  The composite was revised to 53.3 from 52.5, to rise for its third consecutive month.  Australia's service PMI stands at 55.7, up from the flash reading of 55.0 and 51.8 in October.  The composite PMI is at 55.7, its third consecutive monthly rise as well.  Japan and Australia's PMI contrasts with the disappointment in China and Europe, and the US. This is because they are recovering from the long emergency (Japan) and lockdowns (Australia).   Trading remains choppy, and market confidence is fragile.  The dollar remains in the range set against the yen on Tuesday((~JPY112.55-JPY113.90).  Today's high has been just below JPY113.50, where options for $520 mln expire today.   Options for around $1.3 bln at JPY113.00 also will be cut today.  The greenback settled last week slightly below JPY113.40.  The Australian dollar has been sold to new lows for the year a little lower than $0.7050.  We have noted that this area corresponds to the (38.2%) retracement of the Aussie's rally from the March 2020 low near $0.5500.  The next area of support is seen around $0.7000.  It is the fifth consecutive weekly decline that began in late October above $0.7500.  The US dollar's two-day rise against the Chinese yuan is ending with a minor loss today. Similarly, the greenback posted gains for the past two weeks and has given it all back this week.  The PBOC set the dollar's reference rate at CNY6.3738, just below the median (Bloomberg survey) projection of CNY6.3740.   Offshore investors appear to have bought the most Chinese stocks today via the connect-link in a couple of weeks.  Also, note that China extended the tax exemption for foreign institutional investors from the interest tax through the end of 2025.    Europe German and French PMIs were revised lower, while Spain and Italy surprised on the upside.  The revisions shaved the gains initially reported for the service and composite PMIs.  Still, the German composite rose for the first time in four months to stand at 52.2 from 52.0.  The French composite PMI stands at 56.1, up from 54.7.  It is the first increase since June.  Separately, France reported a 0.9% rise in October industrial output, which is better than expected, but the September contraction was revised to -1.5% from -1.3%.   Spain's service PMI rose to \59.8 from 56.6 and was well above expectations.  The composite reading is 58.3, up from 56.2.  It is the first gain in five months and is the highest since August.  Italy's service PMI rose to 55.9 from 52.4.  Economists had expected something closer to 54.5.  The composite rose to 57.6 from 54.2.  It has softened in September and October, and the November reading is the best since August.   The UK's service and composite PMI were revised to show a slightly larger decline than initially seen in the flash report.  The service PMI slipped to 58.5, from 58.6 preliminary estimate and 59.1 in October.  The composite PMI was shaved to 57.6 from the 57.7 initial estimate and 57.8 in October.  The November weakness was disappointing after rising in September and October to snap a three-month decline.  The December short-sterling interest rate futures consolidated in a choppy activity this week after the implied yield fell for eight consecutive sessions previously.  The market is discounting about a 1 in 3 chance of a hike at the BOE meeting on December 16.  The euro slipped to a three-day low slightly above $1.1280 in late Asian turnover before resurfacing the $1.1300 area in the European morning.  Still, we suspect the upside is limited.  The 20-day moving average is near $1.1350, and the single currency has not traded above it since November 9.  The euro remains within the range set on Tuesday (~$1.1235-$1.1385).  Given the divergence of monetary policy, resistance looks stronger than support.  For its part, steering is holding barely above its three-day low near $1.3260.  It, too, remains within Tuesday's range (~$1.3195-$1.3370).  Recall that the $1.3165 area corresponds to the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.  Meanwhile, the euro is pressing below CHF1.04.  It has not closed below there in six years.   America Fully cognizant of the irony here, but barring a shockingly poor report, today's US employment data may have little last impact on the market.  If there was any doubt about it before, since Federal Reserve Chair Powell spoke, there isn't.  The Fed has shifted from helping to facilitate recovery to preventing inflation expectations from getting entrenched.  That means that even a mediocre report today will be overshadowed by next week's CPI, which will likely show that inflation is still accelerating.  Conventional wisdom holds that the White House prefers doves at the Fed, but that does not hold now.  President Biden's public approval rating is low, and the Vice President's is lower still. Polls suggest that inflation is a knock against the administration.  When Biden announced the re-nomination of Powell and Brainard's nomination to Vice-Chair, both candidates reaffirmed their commitment to combat inflation.  What is true of the employment data also holds for the final services and composite PMI, factory orders, and the service ISM.  There may be headline risk but little implication for policy.  The Senate passed the stop-gap measures to keep the federal government funded through February 18.  Meanwhile, the debt ceiling is expected to hit between December 21 and late January.   Canada's labor market has recovered quicker than the US.  Today's another constructive report will likely solidify expectations that the Bank of Canada may hike rates in the March-April period.  The Bank of Canada meets next week.  Of course, it may be cautious with the unknowns surrounding the Omicron variant, but the economic recovery is solid after the weakness in Q2.  Trade tensions with the US are rising.  The US doubled its anti-dumping and countervailing tariffs on Canadian softwood imports (almost 18%).  US January lumber prices were limit up ($45) Wednesday and yesterday and have risen by more than 19% so far this week to reach five-month highs. There is a dispute over Canadian potato exports as well.  There are also disputes over some US initiatives' "Buy American" thrust, including electric vehicles.   The US dollar is at its best level against the Canadian dollar since late September.  It is pushing near CAD1.2840. The September high was closer to CAD1.29, and the late August high, which is also the high for the year, was near CAD1.2950. Barring a reversal, this will be the sixth consecutive week of the greenback's gains.  The swaps market has the first hike discounted for March 2022.  The US dollar began the week with a seven-day advance against the Mexican peso in tow.  It ended with a 1%+ pullback on Monday and again on Tuesday.  It consolidated Wednesday and fell another 1%+ yesterday.  It is little changed today near MXN21.29.  Next week, the November CPI will be reported.  It looks set to accelerate from about 6.25% to around 7.25%.  The central bank meets on December 16, after the FOMC meeting.  A 25 bp rate hike is the consensus, but an argument can be made for a 50 bp increase from the current 5.0% target.   Disclaimer

Omicron: In today’s weekly I’ll be dedicating some digital ink for the latest information on the new variant omicron. Ok so what are the major points of importance. New admissions to hospitals in Gauteng increased by 144% last week (hospitalisations lag cases by around 1-3 weeks). So far the early data shows the majority of these hospitalisations are from the unvaccinated (if that trend remains that’s positive). However, a recent study released from South Africa indicates reinfection risk is 3 times higher than previous variants. In terms of the deadliness of this variant, the early data looks good with Australia’s Chief Medical Officer Paul Kelly stating that of the 300 cases recorded worldwide all were very mild or had no symptoms at all. However, the sample size is too small so we can’t draw solid conclusions at this stage. The major vaccine makers have offered timelines of two to six weeks for assessing the vaccine escape properties of omicron via in-vitro lab tests. Interestingly, Moderna is less optimistic than Pfizer about expecting current vaccines needing to be tweaked to fend off the omicron variant. Volatility will remain high as the market remains on tenterhooks as new information drips through. Dollar Index (DXY): The greenback is flat on the week, with many quite perplexed by the lack of gains (particularly against the euro) given the hawkish Fed pivot and risk sentiment remaining on edge. The dollar coming in flat is a combination of gains against high-beta cyclical companies offset by losses against traditional safe haven currencies. Just take a look at the charts of USDJPY and AUDUSD. In terms of the euro, I’ll chat more about that below in the EURUSD paragraph. The big domestic news for the dollar this week was Jerome Powell’s hawkish rhetoric. The word transitory is to be retired as he admits the threat of persistently higher inflation has grown. On the QE purchases side of things, he remains open to it being wrapped up earlier than originally expected with a discussion on a faster pace taking place in 2 weeks at their December meeting. He elucidated his thoughts on the employment side of their mandate, stating that a great labour market requires a protracted expansion and in order to achieve this price stability has to occur. I see this as inflation now taking primacy over employment goals, indicating a shift in the Fed’s thinking with regards to inflationary pressures. The hawkish commentary from FOMC members this week such as Daly, Quarles, Barkin and Bostic would certainly suggest this is the case. STIRs are showing rate lift-off for practically June 2022 (96%) and over 2.5 hikes through December 2022. All attention now falls to the Non-Farm Payrolls number out today. The preliminary indicator such as ISM manufacturing index, ADP and jobless claims all pointing towards decent numbers from the jobs report today disappointed as NFP numbers missed expectations by a significant amount. Price moves have been muted as traders may be reluctant to place any fresh positions on and chase with the risk of adverse news over the weekend regarding omicron. Bottom line - traders should expect cross-asset volatility to remain higher over December. Next week we’ll receive November US inflation data, which is expected to remain elevated. DXY has regained the upper trend line of its ascending channel, putting some distance between price and its moving averages. The 21-day EMA continues to provide some dynamic support to price dips. The RSI has held above the key 55 level of support. Targets wise keep an eye out on the 96.5 on the upside and to the downside the 21-day EMA and former support around 95.5. EURUSD: So why did EURUSD strengthen on the market sell-off due to omicron on Friday and has remained fairly defensive throughout this week? It’s certainly not because the euro is a safe-haven currency in times of risk aversion. This price action has more to do with its use as a funding currency. Traders borrow euros to search for higher yield globally which is a decent strategy when risk conditions are favourable, however, when that risk dial flips in other direction we see the typical carry trade unwind, leading to flows back into the euro. Additionally, because expectations for rate hikes with regards to the eurozone are already significantly low, it’s at much less risk of a dovish repricing working favourably in terms of spread differentials with the dollar. Political pressure is rising on the ECB to act, particularly from Germany. A Reuters article out mid-week pointed towards some members wanting to rather hold off declaring their asset purchase intentions at this December meeting due to uncertainty caused by omicron. However, the ECB's Muller stated that he doesn’t think omicron is a reason to shift the scheduled end date for PEPP. Following this line of thought just today Madame Lagarde expressed that she feels certain that PEPP will cease in March as planned, saying markets require clarity in December. On the data front we had better than expected inflation prints from Germany (5.2% YoY) and the eurozone (4.9% YoY). It’s quiet in terms of economic data next week with the ZEW survey out as we lead up to a crucial ECB meeting in two weeks. EURUSD is drifting lower from its 21-day EMA. The RSI has stalled around the 40 level. Looking at the technicals clearly EURUSD is in a downtrend. Rallies in my opinion should be short lived with sellers coming in. Key levels to monitor in both directions are 1.135 (21-day EMA) and on the downside 1.12. GBPUSD: With a vacuum of economic data for the UK, the words of central bankers took centre stage. Bailey didn’t provide much meat at his speech this Wednesday. However, Saunders (leans hawkish) who spoke today has caused a repricing lower in the probability of a 15bps rate hike come December (only an additional 4bps now from around 8bps pre-speech). He expressed the need for potentially taking a patient approach with the uncertainty from omicron. Cable is lower as a result. On the virus front, the UK regulator has given the green light for booster doses to be offered to all adults. Additionally, the government has signed a contract for 114 million vaccine doses from Pfizer and Moderna, including access to modified vaccines if they're needed to tackle omicron and other future variants of concern. On the political front, domestically the Tories held the seat of Old Bexley and Sidcup, however, with a reduced majority. On Brexit, it’s been quiet of late with some optimism around the granting of additional fish licences to French fisherman in Guernsey, Jersey is the more important zone though prone to flare ups in tension. However, temperatures remain high between France and the UK on issues related to immigration. Next week sees UK October GDP data released. EURGBP has been moving higher on the back of dovish commentary (given he’s a hawk) from Saunders as well as benefiting from any souring in risk-sentiment. The 200-day SMA isn’t far aware, which has previously capped price gains. Cable continues to -plumb fresh YTD lows and is now nearing 1.32. The RSI is near to oversold territory but with some room remaining to eke out further losses. Moving averages are all pointing downwards. Targets wise, on the upside the 1.335 and above there former support around 1.34 (21-day EMA too). USDJPY: This pair continues to trade on US 10-year yield moves and now it’s status as a safe-haven currency has kicked back in. Early Friday morning has seen a bid coming in, which could be some pre NFP positioning on expectations of a move higher in the back end of the US yield curve. Put EURJPY on your radar, price is at a key support level around 128. USDJPY is finding support around its 50-day SMA, 113 round number and the 38.2% Fibonacci level. Price is trying to overcome resistance from the 50-day SMA. The former range support is providing some resistance around 113.5. The RSI is trying to get back into its range support around 46. Targets wise on the upside, 114 will be important and on the downside 112.5 (this week's lows). Gold: Gold has slipped below the $1775 support level as the hawkish fed leads to higher short term rates, kryptonite for the shiny yellow metal. Fears over inflation have failed to help gold stay propped up as well as risk-off fears from omicron. Inflation data out from the US next week will be a risk event for gold traders as well as the Fed meeting the following week. Today’s NFP hasn’t ignited much excitement in gold markets. Gold is trying to reclaim the $1775 support level. The 50-day SMA has made a very minor cross above the 200-day SMA. The 21-day EMA has been capping further gains. The RSI is in no man's land around 38. Targets wise, if $1775 is cleared then $1800 opens up (moving averages just below there). On the downside, $1750 comes into view. Oil: Crude fell sharply into a bear market this week as risk-off, Fed tightening, fears over further lockdowns and travel bans from the new omicron variant led to a repricing on the demand side of the equation. OPEC+ the main event for crude traders this week, decided to stick to their scheduled 400k bpd for January, but caveated this with the meeting remaining in “session”, meaning changes to the supply side could be made before their 4 January meeting if omicron causes a further deterioration. This led to yo-yo style price behaviour. Until there is more clarity regarding omicron, I expect oil’s price to remain choppy without a solid price trend. Backwardation spreads have narrowed, indicating a more balanced supply and demand equation. Iranian Nuclear Negotiations began the week positively, but sentiment turned pessimistic towards the end of this week, providing further short-term bullish tailwinds to crude’s price. JPM has some very bullish forecasts with the bank expecting crude to hit $150 by 2023. Oil is having a run at its 200-day SMA. The RSI has moved out of overbought territory and is a fair distance below its 50-day SMA (some mean reversion). Right now price will remain choppy within a range as omicron news flow prevents a trend from forming. Targets wise, on the upside the 200-day SMA and $73.50 dollar mark will be key. On the downside $68 support is important.

Macro 2021-12-06 08:45 6 minutes to read Summary:  Friday saw global markets weakening again in another violent direction change from the action of the prior day. With futures for the broader US indices up this morning, the damage is somewhat contained, even if nerves are ragged. At the weekend, cryptocurrencies suffered a major setback in what looked like a run on leveraged positions that erased 20 percent or more of the market cap of many coins before a bit more than half of the plunge was erased with a subsequent bounce. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - despite the US 10-year yield pushed lower on Friday on the string of strong macro numbers, Nasdaq 100 futures are oddly weak in early European trading hours sitting around the 15,700 price level. The 100-day moving average down at 15,400 is the key price level to watch should the weakness in US technology and bubble stocks continue today. We see clear exposure overlap between cryptocurrencies and growth stocks, and with the steep plunge in Bitcoin over the weekend the risk-off might not be over. Stoxx 50 (EU50.I) - Stoxx 50 futures continue to be in a tight trading range sitting just above the 4,100 level this morning with little direction as traders are still digesting the US labour market report and Omicron news which at the margin seems to be improving somewhat, although expectations are still that jet fuel demand will be impacted. The weaker EUR is also short-term helping some of the exporters in Europe and generally leading to positive sentiment in early trading with European equities up 1%. USDJPY and JPY crosses – USDJPY closed the week near 112.50-75 support that was tested multiple times last week, but is once again rebounding overnight, while JPY crosses elsewhere continue to trade heavily, with the likes of AUDJPY, a traditional risk proxy, cementing the reversal back lower and GBPJPY closing the week near a significant zone of support into 148.50-149.00. Safe haven seeking in US treasuries at the long end of the curve are the key coincident indicator driving the JPY higher, with Friday’s weak risk sentiment driving fresh local lows in US long yields, with the 30-year T-bond yield at its lowest since January, below 1.75%. AUDUSD – the AUDUSD slide accelerated Friday in what looks like a capitulation ahead of tonight’s RBA meeting, where the feeling may be that there is a high bar for a surprise, given that the RBA has declared it would like to wait for the February meeting before providing guidance on its ongoing QE. Weak risk sentiment and uninspiring price action in commodities (with the partial exception of the very important iron ore price for the Aussie recently) are weighing and the price action has taken the AUDUSD pair to the pivotal 0.7000 level, an important zone of support and resistance both before and after the pandemic outbreak early last year. Crude oil (OILUKFEB22 & OILUSJAN21) trades higher following its longest stretch of weekly declines since 2018. Today’s rise apart from a general positive risk sentiment in Asia has been supported by Saudi Arabia’s decision to hike their official selling prices (OSP) to Asia and US next month. Thereby signaling confidence demand will be strong enough to absorb last week's OPEC+ production increase at a time when mobility is challenged by the omicron virus. For now, both WTI and Brent continue to find resistance at their 200-day moving averages, currently at $69.50 and $72.88 respectively. Speculators cut bullish oil bets to a one-year low in the week to November 30, potentially setting the market up for a speculative-driven recovery once the technical outlook turns more friendly. US natural gas (NATGASUSJAN22) extended a dramatic collapse on Monday with the price down by 7% to a three-month low at $3.84 per MMBtu, a loss of 31% in just six trading day. Forecasts for warmer weather across the country have reduced the outlook for demand at a time where production is up 6.3% on the year. A far cry from the tight situation witnessed in Europe where the equivalent Dutch TTF one-month benchmark on Friday closed at $29.50 while in Asia the Japan Korea LNG benchmark closed at $34. Gold (XAUUSD) received a small bid on Friday following the mixed US labor market report, but overall, it continues to lack the momentum needed to challenge an area of resistance just above $1790 where both the 50- and 200-day moving averages meet. Focus on Friday’s US CPI data with the gold market struggling to respond to rising inflation as it could speed up rate hike expectations, leading to rising real yields. A full 25 basis point rate hike has now been priced in for July and the short-term direction will likely be determined by the ebb and flow of future rate hike expectations. US Treasuries (IEF, TLT). This week traders’ focus is going to be on the US CPI numbers coming out on Friday, which could put pressure on the Federal Reserve to accelerate tapering as the YoY inflation is expected to rise to 6.7%. Yet, breakeven rates started to fall amid a drop in commodity prices, indicating that the market believes that inflation is near peaking despite we are just entering winter. It is likely we will continue to see the yield curve bear flattening, as the short part for the yield curve is adjusting to the expectations of more aggressive monetary policies, and long-term yields are dropping as economic growth is expected to slow down amid a decrease in monetary stimulus and the omicron variant. Last week, the 2s10s spread suffered the largest drop since 2012 falling to 74bps. The 5s30s spread dropped to 53bps. What is going on? COT on commodities in week to November 30. Hedge funds responded to heightened growth and demand concerns related to the omicron virus, and the potential faster pace of US tapering, by cutting their net long across 24 major commodity futures by 17% to a 15-month low. This the biggest one-week reduction since the first round of Covid-19 panic in February last year helped send the Bloomberg Commodity index down by 7%. The hardest hit was the energy sector with the net long in WTI and Brent crude oil falling to a one year low. Following weeks of strong buying, the agriculture sector also ended up in the firing line with broad selling being led by corn, soybeans, sugar and cocoa. Evergrande plunges 16% to new low for the cycle. The situation among Chinese real estate developers is getting more tense with Evergrande’s chairman being summoned by Guangdong government on Friday as the company is planning a larger restructuring with its offshore creditors. The PBOC has said that they are working with the local government to defuse risk from a restructuring and the regulator CSRC said over the weekend that risks into capital markets are manageable. This week another real estate developer Kaisa Group is facing a deadline on debt which will be critical for the Chinese credit market. US Friday data recap: Services sector on fire, November jobs report stronger than headlines suggest. The November ISM Services report showed the strongest reading in the history of the survey (dating back to 1997) at 69.1, suggesting a red-hot US services sector, with the Business Activity at a record 74.6, while the employment sub-index improved to 56.5, the highest since April. The November employment data, on the other hand, was somewhat confusing. Payrolls only grew 235k vs. >500k expected, but the “household survey” used to calculate the unemployment rate saw a huge growth in estimated employment, taking the overall employment rate down to 4.2% vs 4.5% expected and 4.6% in October. The Average Hourly Earnings figure rose only 0.3% month-on-month and 4.8% year-on-year, lower than the 0.4%/5.0% expected, though the Average Weekly Hours data point ticked up to 34.8 from 34.7, increasing the denominator. Twitter sees exodus of leaders. Part of Jack Dorsey stepping down as CEO at Twitter is a restructuring of the leadership group which has seen two significant technology leaders at engineering and design & research steeping down. The new CEO Agrawal is setting up his own team for Twitter which if done right could make a big positive impact on the product going forward. What are we watching next? Study of omicron variant and its virulence, new covid treatment options. Discovery of omicron cases is rising rapidly, with some anecdotal hopes that the virulence of the new variant is not high, but with significant more data needed for a clearer picture to emerge. Meanwhile, a new covid treatment pill from Merck (molnupiravir) may be available in coming weeks in some countries as it nears full approval. Next week’s earnings: The earnings season is running on fumes now few fewer important earnings left to watch. The Q3 earnings season has shown that US equities remain the strongest part of the market driven by its high growth technology sector. Today’s focus is on MongoDB which is expected to deliver 36% y/y revenue growth in Q3 (ending 31 October). Monday: Sino Pharmaceutical, Acciona Energias, MongoDB, Coupa Software, Gitlab Tuesday: SentinelOne, AutoZone, Ashtead Group Wednesday: Huali Industrial Group, GalaxyCore, Kabel Deutschland, Dollarama, Brown-Forman, UiPath, GameStop, RH, Campbell Soup Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0830 – Sweden Riksbank Meeting Minutes 0900 – Switzerland Weekly Sight Deposits 1130 – UK Bank of England’s Broadbent to speak 0330 – Australia RBA Cash Rate Target   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

December 06, 2021  $USD, China, Currency Movement, EU, Hungary, Italy, Russia Overview:  The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week.  Asia Pacific equities traded heavily, and among the large markets, only South Korea and Australia escaped unscathed today.  Europe's Stoxx 600 is trading higher, led by energy, financials, and materials.  US futures are narrowly mixed.  Similarly, Asia Pacific bonds played a little catch-up with the large Treasury rally ahead of the weekend.  The US 10-year had approached 1.30% but is now up almost four basis points to almost 1.39%.  European yields are also a little firmer, though Italian bonds are outperforming after the pre-weekend credit upgrade by Fitch. The dollar is mixed.  The yen and Swiss franc are the heaviest, while the Scandis lead the advancers.  Among the emerging market currencies, most liquid and freely accessible currencies are higher, while India, Indonesia, and Turkey are trading lower.  The JP Morgan Emerging Market Currency Index has a four-week drop in tow and is starting the new week with a small gain.  Gold initially moved higher but is now little changed.  Iron ore and copper remain firm.  January WTI is trading firmly within the pre-weekend range, while natural gas, which collapsed by 24% in the US last week, extended its sell-off today.  European natural gas (Dutch benchmark) is trading lower after rising for the past five weeks.   Asia Pacific As tipped by Chinese Premier Li last week, the PBOC cut reserve requirement by 0.5%.  This frees up an estimated CNY1.2 trillion.  Many market participants had anticipated the timing to help banks pay back borrowing from the Medium-Term Lending Facility.  Banks owe about CNY950 bln on December 15 and another CNY500 bln on January 15.   Separately, several property developers have debt serving payments due and Evergrande is at the end of a grace period today.  Lastly, the US and a few other countries are expected to announce a diplomatic boycott of the Winter Olympics.  This is seen as largely symbolic as few diplomats were going to attend due to the severe quarantine imposed by Chinese officials.   China needs bargaining leverage if it is going to influence US policy.  It might come from an unexpected source.   While recent press reports focused on China's attempt to project its power into Africa, they have missed a potentially more impactful development.  Consider the Caribbean, which the US often acts as if it is theirs.  Barbados became a constitutional republic last week, though it is still a member of the UK Commonwealth.  The left-of-center government is friendly toward Beijing.  Under the Belt Road Initiative, Barbados and Jamaica have received several billion dollars from China.  Moreover, a recent US State Department report found that the two countries have voted against the US around 75% of the time at the UN last year.   This week, the regional highlights include the Reserve Bank of Australia (outcome first thing tomorrow in Wellington) and the Reserve Bank of India (December 8).  The RBA may revise up its economic outlook, yet, it is likely to continue to push against market expectations for an early hike.  The derivatives market appears to have the first hike priced in for late next summer.    India is expected to be on hold until early next year but could surprise with a hike.  China is expected to report trade figures tomorrow and the November CPI and PPI on Wednesday.  Lending figures may be released before the weekend.  Japan's highlights include October labor earnings and household spending tomorrow, the current account, and the final Q3 GDP on Wednesday.   The dollar's range against the yen on November 30 (~JPY112.55-JPY113.90) remains dominant.  It has not traded outside of that range since then.  The rise in US yields and equities has helped the dollar regain a toehold above JPY113.00.  The pre-weekend high was near JPY113.60, which might be too far today.  The Australian dollar traded below $0.7000 before the weekend and again today, but the selling pressure abated, and the Aussie has traded to about $0.7040. A band of resistance from $0.7040 to $0.7060 may be sufficient to cap it today.   The dollar has been in essentially the same range against the Chinese yuan for three sessions (~CNY6.3670-CNY6.3770).  If the dollar cannot get back above CNY6.38, a new and lower range will appear to be established.  The PBOC set the dollar's reference rate at CNY6.3702.  The market (Bloomberg median) had projected CNY6.3690.   Europe Germany's new government will take office in the middle of the week.  It has three pressing challenges.  First is the surge in Covid, even before the Omicron variant was detected.  Second, the economy is weak.  Last week's final PMI reading picked up some deterioration since the flash report and the 0.2 gain in the composite PMI more than 10.0 point fall in the previous three months. Third, today Germany reported dreadful factory orders.  The market had expected a slight pullback after the 1.3% gain in September.  The good news is that the September series was revised to a 1.8% gain.  However, this is more than offset by the 6.9% plummet in October orders.  If there is a silver lining here, it is that domestic orders rose 3.4% after falling in August and September.  Foreign orders plunged 13.1%, and orders from the eurozone fell by 3.2% (after falling 6.6% in September).  Orders outside the euro area collapsed by 18.1%.  The sharp drop in factory orders warns of downside risk to tomorrow's industrial production report.  Industrial output fell by 3.5% in August and 1.1% in September. Before today's report, economists were looking for a 1% gain.  Germany also reports the December ZEW survey tomorrow. Again, sentiment is expected to have deteriorated.  The third issue is Russia.  Reports suggest the US has persuaded Europe that Russia is positioned to invade Ukraine early next year.  US intelligence assessment sees Russia planning a multifront offensive.  Putin and Biden are to talk tomorrow.  Meanwhile, Putin makes his first foreign visit today in six months.  He is in India.  India is buying an estimated $5 bln of Russian weapons, including the S-400 anti-aircraft system that Turkey purchased to the dismay of Washington, which banned it from the F-35 fighter jet program.  India is a member of the Quad (with the US, Japan, and Australia), a bulwark against China.  A Russian official was quoted in the press claiming India sent a strong message to the US that it would not tolerate sanctions against it.  The regional alliances are blurry, to say the least. The US maintains ties with Pakistan.  India has had border skirmishes with China.  Russia and China have joint military exercises.   Before the weekend, Fitch upgraded Itay's credit rating one notch to BBB.  It cited the high vaccination rate, increased public and private spending, and confidence in the Draghi-led government's ability to spend the 200 bln euro funds from the EC prudently.  Recall that last week's composite PMI rose to 57.6 to snap a two-month decline.  The market (Bloomberg median) sees the Italian economy as one of the strongest in Europe this year, expanding around 6.3%.  The IMF sees it at 5.8%. The euro has been confined to about a quarter-cent range on both sides of $1.1300.  It is within the pre-weekend range (~$1.1265-$1.1335).  It was offered in Asia and turned better bid in the European morning.  Still, the consolidative tone is likely to continue through the North American session.  A move above the 20-day moving average (~$1.1335), which has not occurred for over a month, would help lift the technical tone.  Sterling tested $1.3200 before the weekend, and it held.  The steadier tone today saw it test the $1.3265 area.  It will likely remain in its trough today, though a move above the $1.3280-$1.3300 area would be constructive.   America Today's US data includes the "final" look at Q3 productivity and unit labor costs.  These are derived from the GDP and are typically not market-movers.  The US also reported that the October trade balance and improvement have been tipped by the advance merchandise trade report.  October consumer credit is due late in the session, and another hefty rise is expected ($25 bln after nearly $30 bln in September.  Consumer credit has risen by an average of $20.3 bln this year.  It fell last year and averaged $15.3 bln in the first nine months of 2019.  No Fed officials speak this week, and the economic highlight is the November CPI report at the end of the week.   Canada reports October trade figures and IVEY survey tomorrow.  The highlight of the week is the Bank of Canada decision on Wednesday.  It is not expected to do anything, but officials will likely be more confident in the economic recovery, especially after the very strong jobs report before the weekend.  The Canadian dollar's challenge is that the market has five hikes already discounted for the next 12 months.  Mexico reports November vehicle production and exports today.  The economic highlights come in the second half of the week.  November CPI on Thursday is expected to see the headline rate rise above 7%.  Last month alone, consumer prices are projected to have risen by 1%.  On Friday, Mexico is expected to report that industrial output rose by 0.9% in October after falling 1.4% in September.  Brazil reports its vehicle production and exports today and October retail sales on Thursday before the central bank meeting.  A 150 bp increase in the Selic rate, the second such move in a row, has been tipped and will put the key rate at 9.25%.  Ahead of the weekend, the IPCA measure of inflation is due.  It is expected to have ticked up closer to 11% (from 10.67%).  Lastly, we note that Peru is expected to deliver another 50 bp increase to its reference rate on Thursday, which would lift it to 2.5%.   The US dollar posted an outside up day against the Canadian dollar ahead of the weekend.  The risk-off mood overwhelmed the positive implications of the strong jobs data.  There has been no follow-through selling of the Canadian dollar today.  The pre-weekend US dollar low near CAD1.2745 is key.  Last Wednesday's range remains intact for the greenback against the Mexican peso (~MXN21.1180-MXN21.5150).  So far today, it has been confined to the pre-weekend range.   Initial support is seen near MXN21.16.  The cap around MXN21.50 looks solid.  Meanwhile, the US dollar closed above BRL5.60 for six consecutive sessions coming into today.   Disclaimer

Commodities 2021-12-06 10:50 Summary:  Futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 30. A week that encapsulated the markets very nervous reaction to the Omicron virus news as well as Jerome Powell's increased focus on combatting inflation. While global stocks and US long end yields dropped, a 7% correction in the Bloomberg commodity index helped trigger the biggest and most widespread hedge fund exodus since February 2020. Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 30. The reporting week encapsulated the markets very nervous reaction to the Omicron virus news as well as Jerome Powell confirming inflation is no longer being transitory. His comments to the Senate banking committee raised expectations for faster tapering with the first full 0.25% rate hike now priced in for July next year. The US yield curve flattened considerably with virus related safe-haven demand driving down the yield on 10-year US treasury notes by 22 basis point. Global stocks slumped with the VIX jumping 8%. Hardest hit, however was the commodity sector after the Bloomberg commodity index slumped by 7%, thereby triggering the biggest and most widespread hedge fund exodus since February 2020. Commodities Hedge funds responded to heightened growth and demand concerns related to the omicron virus, and the potential faster pace of US tapering, by cutting their net long across 24 major commodity futures by 17% to a 15-month low at 1.8 million lots. This the biggest one-week reduction since the first round of Covid-19 panic in February last year was triggered by net selling of all but three livestock contracts. Energy: Hardest hit was the energy sector where renewed demand concerns sent the prices of WTI and Brent down by more than 15%. In response to this, hedge funds accelerated their pace of futures selling with the combined net long slumping by 90k lots to a one-year low at 425k lots. The loss of momentum following the late October peak has driven an eight-week exodus out of oil contracts, culminating last week, and during this time the net length has seen a 35% or 224k lots reduction. Potentially setting the market up for a strong speculative driven recovery once the technical and fundamental outlook turns more friendly.Latest: Crude oil (OILUKFEB22 & OILUSJAN21) trades higher following its longest stretch of weekly declines since 2018. Today’s rise apart from a general positive risk sentiment in Asia has been supported by Saudi Arabia’s decision to hike their official selling prices (OSP) to Asia and US next month. Thereby signaling confidence demand will be strong enough to absorb last week's OPEC+ production increase at a time when mobility is challenged by the omicron virus. For now, both WTI and Brent continue to find resistance at their 200-day moving averages, currently at $69.50 and$72.88 respectively.  Metals: Gold was net sold for a second week as speculators continued to reduce exposure following the failed breakout attempt above $1830. With Fed chair Powell signaling a change in focus from job creation to fighting inflation, sentiment took another knock, thereby driving a 13.7k lots reduction to a four-week low at 105k lots. Industrial metals also suffered with the net long in HG copper slumping by one-third to a three-month low at 13.4k lots. Copper’s rangebound trading behavior since July has sapped hedge funds involvement with the current net length a far cry from the 92k record peak seen this time last year.Latest: Gold (XAUUSD) received a small bid on Friday following mixed US data, but overall, it continues to lack the momentum needed to challenge an area of resistance just above $1790 where both the 50- and 200-day moving averages meet. Focus on Friday’s US CPI data with the gold market struggling to respond to rising inflation as it could speed up rate hike expectations thereby putting upward pressure on real yields which are inverse correlated to gold's performance.  A full 25 basis point rate hike has now been priced in for July and the short-term direction will likely be determined by the ebb and flow of future rate hike expectations. Agriculture: The whole sector with the exception of livestock took a major hit, just one week after funds had increased bullish bets on grains and softs by the most in 15 months. Both sectors suffered setbacks of more than 5% with recent highflyers like wheat and cotton taking big hits. As mentioned, selling was broad and led by corn, soybeans, sugar and cocoa, with the latter together with palladium being the only two contracts where speculators hold an outright short position.This week the grain market will be focusing on weather developments in Australia and its potential impact on the wheat harvest, as well as the monthly World Agriculture Supply & Demand report (WASDE) from the USDA.  Forex In forex, speculators reacted to renewed virus concerns by increasing bullish dollar bets against ten IMM currency futures and the Dollar Index to an 18-month high at $27.9 billion. Speculators were buyers of JPY (18.4k lots or $2 billion equivalent) but sellers of everything else, including euros (6.8k) and the two commodity currencies of AUD (16.9k) and CAD (10.9k). These changes resulting in the aggregate dollar long rising by $2.3 billion. In terms of extended positioning, a euro short at 23k lots was last seen in March 2020, the GBP short at 39k lots was a two-year high while the 60k lots MXN short was the highest since March 2017. What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming

December 07, 2021  $USD, Canada, China, Currency Movement, Germany, Hungary, Japan, Mexico, RBA, Russia, US Overview:  A return of risk appetites can be seen through the capital markets today, arguably encouraged by ideas that Omicron is manageable and China's stimulus.  Led by Hong Kong and Japan, the MSCI Asia Pacific rose by the most in three months, while Europe's Stoxx 600 gapped higher, leaving a potentially bullish island bottom in its wake.  US futures point to a gap higher opening when the local session begins.  The bond market is taking it in stride.  The US 10-year Treasury is slightly firmer at 1.44%, while European yields are 1-3 bp higher.  The dollar-bloc currencies and Norway are leading the move higher among most major currencies.  The yen and euro are softer.  Sterling struggles to sustain upticks. Among emerging markets currencies, the Turkish lira is bouncing, while most central European currencies are being dragged lower by the weaker euros.  The JP Morgan Emerging Market Currency Index is slightly higher after four consecutive losses.  Gold is trading within yesterday's narrow range.  Oil continues to recover, and the January WTI contract is up around 2.5% (after yesterday's 4.9% advance) and is above $71.50 a barrel.  US natgas prices dropped 11.5% yesterday and have come back firmer today, while the European benchmark (Dutch) is up 7% today (~+0.5% yesterday) to near last week's highs.  Iron ore prices jumped 7.7% today after 2.5% yesterday, perhaps encouraged by strong Chinese import figures.  Copper prices are also firm.    Asia Pacific The Reserve Bank of Australia stuck to its stance. It may take two years to reach the 2-3% inflation target, and the uncertainties surrounding the Omicron variant also favor a cautious approach. This was in line with expectations.  The swaps market still has about 75 bp of higher rates discounted next year.   The Australian dollar's gains reflect the risk-on mood.   Japan's economy is on the mend.  Household spending rose 3.4% month-over-month in October.  Paradoxically, outlays on medical care actually fell (-5.7%) year-over-year in October.  Meanwhile, Labor cash earnings rose by 0.2% year-over-year, the same as in September, but less than expected.  Households headed by a worker rose 0.5% year-over-year.   China's trade surplus fell to $71.7 bln in November from $84.5 bln in October.  The US accounted for a little more than 50% of the surplus (~$37 bln).  Exports rose by 22% year-over-year, less than the 27.1% increase in October.  But, what really stood out were China's imports.  They surged, jumping 31.7% from a year ago after a 20.6% increase in October.  Commodity imports were robust.  The 35 mln tons of coal imported was the most this year. Oil imports were at three-month highs.  Iron ore imports reached a 13-month high,  Gas purchases were the highest since January.  Copper imports appear to be a record.  Separately, China reported that the value of its foreign exchange reserves rose by a minor $4.7 bln to $3.222 trillion.  Economists (Bloomberg survey median) had expected around an $11 bln decline.   The dollar has forged what appears to be a solid base now around JPY112.55.  So far, today is the first session since November 26 that the greenback has held above JPY113.00.  It has been confined to a narrow range between JPY113.40 and JPY113.75.  The dollar looks poised to move higher but may stall around JPY114.00, where an option for around $865 mln expires today.  The Australian dollar rose about half of a cent yesterday and is up around another half-cent today to test $0.7100.  An option for A$1.04 bln expires today there ($0.7100).  It is also the (61.8%) retracement objective of last week's drop.  A move above there would target the $0.7130 area and possibly $0.7200.  The reduction in Chinese banks' reserve requirements and the divergence with the direction the Fed appears headed did not deter the yuan from strengthening.  The dollar held CNY6.38 yesterday and is near CNY6.3660 now.  The low for the year was set at the end of May near CNY6.3570.  The dollar's reference rate was set at CNY6.3738, a touch higher than the models (Bloomberg survey) projected of CNY6.3734.   Europe According to the proverb, for want of a nail, a kingdom was lost.  US intelligence warns that Russia is poised to invade Ukraine.  Beijing continues to act as a bully in the South China Sea.  US President Biden is hosting a "Summit for Democracy" December 9-10.   Reportedly 110 countries will be represented, even Taiwan, which the US officially does not recognize as a country.  All of the EU members have been invited but Hungary.  Hungary, like Poland, is in a serious fight with the EC over the rule of law.  It is being fined for failing to comply with the European Court of Justice over its harsh treatment of asylum seekers.  Poland, which is invited to the summit, is also being fined a record 1 mln euros a day for deviations from the EU standards of the rule of law.   Yet Hungary's exclusion is needlessly antagonistic.  Hungary will hold parliamentary elections in April (though possibly May), and the opposition is united behind the center-right Marki-Zay.  Most polls show him ahead of Orban.   It is an insult to the EU, and Orban used his veto to block the EU from formally participating and prevented it from submitting a position paper.  It is a vulnerable position for the US to be the judge and jury about democracy and the rule of law.   Laura Thorton, director of the Alliance for Securing Democracy of the German Marshall Fund of the United States, expressed shock and dismay in a recent Washington Post op-ed over developments in Wisconsin. She wrote, "If this [where the GOP is seeking to replace the bipartisan oversight of elections with just its party's control] occurred in any of the countries where the US provides aid, it would immediately be called out as a threat to democracy.  US diplomats would be writing furious cables, and decision-makers would be threatening to cut off the flow of assistance."  Separately, the US embassy in Tokyo warned Japan about "racially profiling incidents" following the closure of its borders to new foreign entries into the country.   The US response to the Russian aggression in Georgia in 2008 and the annexation of Crimea in 2014 was soft.  Despite bringing NATO to Russia's door in the Baltics, the US recognized by its actions that it is difficult to defend what Russia calls its near-abroad. Ukraine is different.  When Ukraine gave up its nuclear weapons, the Budapest Memorandum  (1994), Russia, the US, and the UK committed to respecting its independence and territorial integrity.  Russia clearly violated the agreement, but the US says it is not legally binding.  Nevertheless, reports indicate that the Biden administration is contemplating new sanctions against Russia and Putin's inner circle.  Reportedly under consideration is removing Russia from the SWIFT payment system and new sanctions of Russia's energy companies, banks, and sovereign debt.  In late April, the European Parliament approved a non-binding resolution to exclude Russia from the SWIFT if it attacked Ukraine.  Russia is a heavy user of SWIFT, as few foreign banks, including the Chinese, are willing to use Russia's own payment system.  After a dismal factory orders report, the market had been prepared for a poor industrial output report today.  Instead, Germany surprised with its strongest gain for the year.  Industrial output surged 2.8% in October.   It is only the third monthly gain this year.  Moreover, September's decline of 1.1% was halved to 0.5%.  It appears auto production (capital goods) may be behind the improvement in activity.  Separately, the ZEW survey was mixed.  The expectations component was stronger than expected, but still, at 29.9, lower than November's 31.7 reading.  The assessment of the current situation deteriorated sharply to -7.4 from 12.5.  It has been declining since September, but this is the lowest since June.  On November 30, the euro spiked higher and has subsequently worked its way lower.  Today, it reached almost $1.1250, its lowest level since November 30, low near $1.1235. The 20-day moving average (~$1.1320) continues to block the upside.  It has not closed above it for a little more than a month.  The low for the year so far was recorded on November 24 near $1.1185.  For its part, sterling remains in its trough. The low for the year was set on November 30, slightly below $1.32.  Before the weekend, it was in a roughly $1.3210-$1.3310 range and remains well within that range yesterday and today.  It has been blocked ahead of $1.3300.  There is an option for about GBP450 mln at $1.3250 that expires today.   America The US is expected to report that productivity fell in Q3 by 4.9% rather than the 5% that was initially reported.  Productivity increased by 2.4% in Q2 and 4.3% in Q1.  It averaged 2.6% last year and 2.3% in 2019.  Unit labor costs are the most holistic measure, including wages, benefits, and output.  Looking at a four-quarter moving average, unit labor costs rose 1.6% in 2018 and 1.45% in 2019.  They jumped to 6.25% last year and fell by an average of 0.85% in H1 21.  The initial estimate for Q3 was an 8.3% surge.   The US also reports the October trade balance.  The preliminary goods balance signaled a likely improvement from the $80.9 bln deficit in September.  The median forecast (Bloomberg) sees a deficit of slightly less than $67 bln.  Through September, the monthly average was nearly $71 bln, up from $53.3 bln in the same period last year and less than a $50 bln average in the first nine months of 2019. Late in the session, the US reports October consumer credit, and another substantial increase is expected.  It jumped almost $30 bln in September.  It has averaged $20.275 bln a month through September.  Last year was too distorted, but in the first three quarters of 2019, consumer credit rose by an average of $15.3 bln a month.    Canada reports its October merchandise trade figures today, ahead of the Bank of Canada meeting tomorrow  The median forecast in Bloomberg's survey call for a C$2.08 bln surplus, which, if accurate, would the be third largest surplus since 2008.  The June surplus was larger at C$2.26, as was the December 2011 surplus of C$2.12 bln.   Canada's goods trade balance through September swung into surplus with an average of C$703 mln.  In the same period in 2020, the monthly deficit averaged C$3.1 bln and  C$1.4 bln in 2019.  The merchandise surplus may be sufficient to lift the current account too.  Canada has been running a current account deficit since 2009.   The OECD forecasts a surplus this year of 0.3% of GDP and projects it to be in balance next year.  Canada and Mexico have expressed concerns about the credits for electric vehicles in the Build Back Better US initiative.  They claim it violates the USMCA.  Europe has expressed similar problems, and the EU Trade Commissioner Dombrovskis has reportedly sent a formal letter warning that the Biden administration's efforts may also violate WTO rules.  Meanwhile, there is talk that the initiative may be blocked this year.  If this is the case, the odds of passage next year seem even slimmer.  On a different front, Mexico's controversial energy reforms, which expand the state sector, over some objections by US energy companies, look to be delayed due to lack of support.  The US dollar posted an outside up day against the Canadian dollar before the weekend, despite Canada's strong employment report.  There was no follow-through yesterday, and the greenback recorded an inside day and settled on its lows.  The US dollar has been sold to around CAD1.2700 today.  Initial support is around CAD1.2675, but the more significant test is near CAD1.2640.  A break would strengthen the conviction that a high is in place.  Meanwhile, the greenback continues to consolidate against the Mexican peso.  It remains within the range set last Wednesday (~MXN21.1180-MXN21.5150).  Thus far today, it is holding above yesterday's low (~MXN21.1720), which was- above the pre-weekend low (~MXN21.1625).            Disclaimer

Macro 2021-12-08 08:30 6 minutes to read Summary:  Equity markets blasted sharply higher yesterday as the market rushed to erase the concerns triggered by the omicron virus outbreak, as well, perhaps as due to the recent clear shift into a more hawkish stance from the US Federal Reserve. Overnight, the Chinese renminbi strengthened to match its strongest level this year versus the US dollar as China has been sending stronger signals that it is set to stimulate growth next year. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - global equities were significantly lifted yesterday due to more positive evidence over the Covid-19 variant Omicron with Nasdaq 100 futures up 3.1% and extending the momentum today in early European trading hours. This was the biggest single day rally in US technology stocks in nine months. The key resistance level is at the 16,435 level which was the local resistance level a couple of times back in late November. USDCNH – The USDCNH rate has plunged to match the lows of the year just above 6.35 after yesterday saw the USD weakening sharply on a resurgence of risk sentiment. A break of the lows would shift the focus to the post-2015 foreign exchange regime shift lows of 2018. It is notable that China has maintained a strong renminbi policy even as the USD has strengthened recently amidst the more hawkish Fed shift and despite weak EM currencies elsewhere. The stronger price action since yesterday may be on hopes that China’s growth is set to pick up on its new apparent shift toward more stimulus and as omicron covid news has eased some of the initial uncertainties. USDCAD – the USD has turned lower on the resurgence of risk appetite after initial blows from the omicron variant news, that particularly hit oil prices hard, taking CAD and other oil-sensitive currencies down with it. The last two sessions have seen a sharp repricing of USDCAD from above 1.2800 to well below 1.2700 yesterday, ahead of today’s Bank of Canada meeting (previewed below). Whether USDCAD can continue to erase the rally off the sub-1.2300 lows will likely depend on the degree to which global markets can get back on track with pricing a stronger economic outlook and a full return of the commodities bull market, led by oil prices. The Bank of Canada will likely fulfill market expectations of hawkish guidance as it is likely warming up for a January hike. Gold (XAUUSD) trades higher for a second day but has so far found resistance at the 200-day moving average, currently at $1792.50. A general improvement in risk appetite has supported a steady but so far unimpressive recovery from last week’s slump. Focus on silver (XAGUSD) which is also trying to establish support at $22 following its recent 13% drop. Focus on omicron developments through its indirect impact on bonds and the dollar. Copper (COPPERUSMAR22) meanwhile remains stuck in a relatively tight range, but supported by Chinese trade data which showed a strong pickup last month. The metal’s loss of momentum during 2H-21 has seen the speculative long being cut to near an 18-month low. Crude oil (OILUKFEB22 & OILUSJAN22) trades lower after an industry report pointed to the biggest gain in US stockpiles of oil and products since February. Overall, the market has put in a strong performance since last week's slump in the belief the omicron variant is unlikely to derail the global recovery. Flare-ups around the world resulting in temporary lockdowns is however likely to prevent the market from returning to pre-omicron levels at this point. The API last night reported a 3.1-million-barrel build in oil stocks with a 2.4 million rise at Cushing helping send the WTI prompt spread down to just $0.2/b after trading close to $2 in early November. The EIA in its Short-term energy outlook lowered its 2022 Brent average price to $70 as the agency still sees a surplus emerging next year. US Treasuries (IEF, TLT). The front part of the US yield curve rose yesterday, with 3-year yields breaking above 1% ahead of the US treasury auction. The move helped to attract high demand from investors. The 3-year note sale was priced at 1%, the highest auction yield since February 2020. Following the auction, yields fell slightly with news concerning the debt ceiling contributing to this trend. The house passed a bill that makes the debt ceiling faster to raise, it will be necessary to have a simple majority vote at the senate. It decreases the chances of default in mid-December easing the compressing forces on long-term yields. However, the expectations of tighter monetary policies continue to put upward pressure on short-term yields, while long-term yields remain compressed by Covid distortions. Therefore, we continue to see scope for a bear flattening of the yield curve. Today, the focus is going to be on the 10-year US Treasury auction. What is going on? Pfizer covid vaccine offers partial protection from omicron variant, according to early study. Researchers in South Africa saw a very large reduction in the production of antibodies for patients who had received two doses of the Pfizer vaccine who were infected with the omicron variant of covid, suggesting that immune protection is far lower, but not completely lost. US President Biden warns Russian President Putin on Ukraine attack – in a video conference call lasting some two hours yesterday, Biden said that the US and its allies would support Ukraine with “strong” measures if attacked, both in the form of “defensive material” and economic measures while Putin blames NATO and its overtures to Ukraine for the tense situation. Sources indicate that the US could push to have the Nord Stream 2 pipeline shut off if Russia invades Ukraine. US House Approves Bill that would allow Senate to raise debt ceiling with a simple majority vote. This avoids the prospect of brinksmanship over the debt ceiling issue, as the Democrats can pass the vote in the Senate without Republican help. The debt ceiling issue was set to hit crunch time as early as next week and could theoretically have raised the specter of a US default. How high the Democrats could raise the debt ceiling via this process is not yet known. HelloFresh warns of lower operating profit in 2022. The fresh meal-kit company says that it sees FY22 adjusted EBITDA of €500-580mn vs est. €630mn expected by analysts driven by rising input costs. What are we watching next? Today’s Bank of Canada meeting, which is likely to tilt hawkish. With the US Fed having made a clear switch to focusing on inflation fighting, and after Bank of Canada governor Macklem penned an op-ed in the Financial Times on the need for a being ready to respond with the appropriate tools if inflation proves more sustained, the market is leaning for more hawkish Bank of Canada guidance at today’s meeting at minimum, with a minority of observers actually looking for a rate hike at today’s meeting, though most expect a “set-up” meeting for a rate hike in January. This week’s earnings: Today’s focus is UiPath which is part of the bubble stocks segment and the meme stock GameStop as both stocks are a good barometer on risk sentiment. Analysts expect UiPath to deliver 42% revenue growth in Q3 (ending 31 October). Wednesday: Huali Industrial Group, GalaxyCore, Kabel Deutschland, Dollarama, Brown-Forman, UiPath, GameStop, RH, Campbell Soup Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0815 – ECB President Lagarde to speak0830 – ECB’s Guindos to Speak1310 – ECB's Schnabel to speak1500 – Canada Bank of Canada Rate Decision1500 – US JOLTS Job Openings survey1530 – US Weekly DoE Crude Oil and Product Inventories2130 – Brazil Selic Rate Announcement2205 – Australia RBA Governor Lowe to speak0001 – UK Nov. RICS House Price Balance0130 – China Nov. CPI / PPI   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

EURUSD seeks support The euro bounced higher after the bloc’s Q3 GDP beat expectations. A previous rebound was capped by the 20-day moving average, suggesting that the bearish sentiment still prevails. The RSI’s double top in the overbought area has prompted short-term buyers to take profit. The pair has met support above 1.1240. The bulls will need to lift offers around 1.1330 before they could attract momentum buyers. A bearish breakout would send the price to the floor at 1.1190. Its breach would trigger a new round of sell-off. AUDUSD breaks higher The Australian dollar soared after the RBA remained optimistic about the economic recovery. The pair saw strong buying interest at the psychological level of 0.7000, which also sits near November 2020’s lows. An oversold RSI on the daily chart compounds the ‘buying-the-dips’ behavior. An initial pop above 0.7070 forced bearish trend followers to cover their latest bets. 0.7170 would be the next target though the RSI’s overbought situation may limit the surge. 0.7040 is the first support for buyers to regroup and accumulate. USDJPY attempts to rebound The yen stalled after Japan’s GDP showed an unexpected contraction in Q3. A break below the daily support at 112.70 has put the bulls on the defensive. The latest consolidation is a sign of indecision as to whether the correction would continue. The greenback found support over 112.50 and a close above 113.95 could help the bulls regain the upper hand. Then the psychological level of 115.00 would be the next step before the uptrend could resume. On the downside, a fall below 113.10 would retest the key support at 112.50.

December 08, 2021  $USD, Bank of Canada, Currency Movement, Germany, India, Japan, Poland, Russia Overview:  The capital markets are calmer today, and the fear that was evident at the end of last week remains mostly scar tissue. Led by gains in Japan, China, Australia, New Zealand, and India, the MSCI Asia Pacific Index extended yesterday's gains.  Europe's Stoxx and US futures are firm.  The US 10-year yield is softer, around 1.43%, while European yields are mostly 1-2 bp lower.  The Norwegian krone and euro lead major currencies higher against the greenback, but the New Zealand dollar and sterling are underperforming. Most of the emerging market currencies are enjoying an upside bias. The Turkish lira is giving back a little more than half of yesterday's 2.25% bounce.  Gold is edging higher and is near the 200-day moving average (~$1792).  January WTI is off $1 around  $71 after rallying around 8% in the past two sessions.  API reported a three million barrel drawdown in inventories but a big jump in Cushing.   US natural gas is consolidating and paring Monday's 11.5% drop.  Europe (Dutch) natural gas prices are rising for the third consecutive session and around 10% this week.  Iron ore has extended this week's rally and is at the highs since October.  Copper is flat.   Asia Pacific Australia has joined the US in the diplomat boycott of the winter Olympics in Beijing.  South Korea and Japan have not formally decided yet.  China's quarantine policies made it difficult for many diplomats to attend in any event, and many apparently will not attend.  Beijing threatens unspecified retaliation.   Japan reported an increase in its October current account, rising to JPY1.18 trillion from JPY1.03 trillion in September.  The swing in the trade balance from a JPY230 bln deficit to a JPY167 bln surplus more than accounted for it.  Japan also revised Q3 GDP to a 0.9% contraction (from -0.8%).  The composition changed.  Consumption was a greater drag (-1.3% quarter-over-quarter rather than -1.1%), and inventories contributed less (0.1% vs. 0.3%) and net exports were flat (rather than contribute 0.1 percentage points).  Business investment was less a drag (-2.3% vs. -3.8%).  Still, there is reason to be more optimistic about the outlook for the world's third-largest economy.  Social restrictions have eased, the vaccination rate is among the best, and the government is providing fresh stimulus.  The Kishida government is expected to finalize its fiscal efforts toward the end of the week. A key issue is the tax incentive (subsidy) for companies that boost wages by 3%, which has not happened since 1997.   India left its key rate corridor on hold today.  The repo rate is 4%, and the reverse repo rate is 3.35%.  Some observers saw the possibility of a hike in the reverse repo rate.  The monetary policy committee voted unanimously to keep the repo rate steady.  The reverse repo rate is a broader issue decided by the central bank, not the MPC.  The emergence of Omicron may have encouraged the central bank to maintain a steady hand, while the cut in the excise duty and VAT for petrol and diesel may help ease price pressures.  It made some technical changes in its liquidity management, which some see as a prelude to a hike in February 2022, when the central bank meets again.   The dollar is consolidating in a narrow 30-point range above JPY113.35 against the Japanese yen.  Yesterday's high was just below JPY113.80.  An option for about $550 mln will roll off today at JPY114.25, while there is a nearly $1.5 bln option at JPY114.00 that expires tomorrow.  The JPY114 area also holds the 20-day moving average, which the dollar has not closed above since November 25. The Australian dollar began the week flirting with the $0.7000 area.  It is rising for its third consecutive session and has reached almost $0.7145 today.  Last week's highs were set a little above $0.7170.  Despite words of caution by Chinese officials and the cut in reserve requirements, the yuan continues to march higher.  It is at new three-year highs today.  The dollar has been sold down to almost CNY6.3455.  Local dollar bonds and bonds below investment grade have rallied as officials signal a focus on supporting the economy.  Today the rate for re-lending to rural and small businesses was cut by 25 bp.  The PBOC has also been generous with its liquidity provisions.  The reference rate for the dollar was set at CNY6.3677, a little firmer than expected (CNY6.3665, Bloomberg survey).    Europe An era is formally over today as Germany's new government takes office.  The challenges it faces are profound.  The virus was surging even before the Omicron variant was detected.  The economy has been hobbled.  Inflation is high (6% on the harmonized measure in November) and without the fiscal stimulus seen in the US, where CPI is up 6.2% from a year ago (October).  This year, the German deficit is estimated to be about 5.8% and seen falling to 2.5% next year.  The US deficit is around 12.5% this year and is expected to fall to around 6.5% in 2022. Russia is amassing troops, and fears that it will invade Ukraine early next year are running high.  Germany reportedly will nix the controversial Nord Stream II pipeline if Russia carries through with its threat as part of the economic sanctions being considered.  Italy's Draghi has had a bit of a honeymoon, but that will change.  Two of the three largest unions will strike on December 16 to protest Draghi's budget, which must be passed by the end of the month.   Moreover, the selection of a new Italian president in January may mark the beginning of the political process that will lead to a new parliamentary election by the middle of 2023.  The president of Itlay is chosen by the Italian Parliament and regional representatives.  The current president, Mattarella, has declined to run for a second term.  Draghi does lead any political party, but the latest surveys show the center-left Democratic Party is in first place, polling a couple percentage points higher than it got in the last election at 21.4% support.  The Brothers of Italy on the right are in second place with slightly less than 20% support.  The Five Star Movement has seen its fortunes slip to about 15%.  Poland's central bank is set to hike its base rate today.  It will be the third consecutive increase.  The base rate was slashed from 1.50% last year to 10 bp.  It was hiked by 40 bp in October and 75 bp last month to stand at 1.25%. The headline CPI surged from 2.4% at the end of last year to 7.7% in November. Czech and Hungary have been more aggressive in raising rates.  Last month, Czech's central bank delivered a 125 bp increase to lift its key two-week repo rate to 2.75%.   It was at 25 bp to start the year.  Its CPI is near 6%.  Hungary has raised its base rate every month since June and taken it from 60 bp to 2.10%.  It has also taken its one-week deposit rate from 75 bp to 3.10%, with 130 bp delivered in the past three weeks. Earlier today, it reported that CPI rose to 7.4% last month from 6.5%.  Most look for a 50 bp increase from Poland's central bank today.   The euro briefly dipped below $1.1230 yesterday but recovered in the North American afternoon.  It is extending the recovery today and traded $1.1300 in the European morning.  The $1.1310-$1.1320 offers nearby resistance.  The UK government is being embarrassed by reports about its holiday party a year ago in violation of the social restrictions in place at the time.  It adds to the sleaze factor that has weakened it.  The latest polls show that the Labour Party is extending its lead.  Also, ideas that the BOE could raise rates next week have diminished and been pushed into next February.  Sterling is heavy, near $1.3200.  We have warned of near-term risk toward $1.3165, the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.   America A deal appears in the works to lift the US debt ceiling.  The maneuver requires 60 votes to allow the debt ceiling to pass with a simple majority.  The Republican leadership appears willing to go along with this.  It will likely set a new precedent that will be used and possibly expanded when control of Congress changes.  PredictIt.Org shows that the Republicans are favored to win control of both houses in next year's mid-term election.   The US calendar today features the JOLTS report on job openings.  The week's highlight, the November CPI, is out on Friday, and both the headline and core rates are expected to accelerate.  Fed officials are in the blackout period ahead of next week's FOMC meeting.  Today's North American feature is the Bank of Canada meeting.  No one expects a change in rates.  It is more about the rhetoric.  Despite the uncertainty surrounding the Omicron variant, Bank of Canada officials are likely to be more confident about the strength of the recovery.  Last week's jobs data adds to the positive impulses.  Moreover, the government is providing more fiscal support.  The biggest challenge is that the market has discounted five hikes over the next 12 months.  This is aggressive and difficult for the central bank to get ahead of market expectations. Even after the strong Canadian jobs data at the end of last week, the US dollar closed firmly above CAD1.28, showing the Loonie's vulnerability to the risk-off wave.  However, as cooler heads have prevailed, the Canadian dollar has bounced back.  The US dollar closed below the 20-day moving average yesterday (~CAD1.2670) for the first time in a month and was sold to about CAD1.2620 today. The (38.2%) retracement of the greenback's rally since the October 21 low (below CAD1.23) is found near CAD1.2640. The next retracement (50%) is around CAD1.2570.  Initial resistance now is likely by CAD1.2680.  The greenback also closed below its 20-day moving average against the Mexican peso yesterday for the first time since November 9.  It has slipped below MN21.00 today for the first time in about two-and-a-half weeks.  With today's loss, the US dollar has retraced (61.8%) of its rally from November 9 low (~MXN20.2750). The move seems exaggerated, and consolidation is likely.  Nearby resistance is seen in the MXN20.05-MXN20.10 area.  Disclaimer

Forex 2021-12-08 14:45 4 minutes to read Summary:  Risk sentiment is well on its way to erasing the reaction to the news of the omicron variant of covid, with most reactions across FX adjusting as one would expect on an improved outlook, with commodity currencies performing best, while safe haven JPY and CHF trade weaker and the euro is unable to figure out what it wants to do. Adding to a more hopeful stance and a weaker US dollar overnight was China allowing its currency to push to new highs for the year, beyond the highs established back in May. FX Trading focus: CNY new highs for the year, strong resurgence in risk sentiment The US dollar has pushed lower this week on a resurgence in risk sentiment, led by fading omicron fears – particularly yesterday – but also on hopes that China is set to support the global growth outlook and signaling confidence by allowing the renminbi to push to new highs for the year versus the US dollar. The weaker US dollar elsewhere this week explains the timing of the large move to new lows in USDCNH, as the CNH has actually underperformed resurgent commodity FX and some EM FX this week even while it outperformed the strong US dollar this year on balance. If the USD is to weaken further from here, it would be no surprise to see CNH continuing higher versus the US dollar – perhaps even beyond the 2018 lows in USDCNH – while keeping it somewhat weaker versus other currencies against which it has appreciated so aggressively this year. China is clearly interested in defending the stability and purchasing power of the CNH versus the USD and its basket, but the extent of the revaluation is getting stretched if we look at the official CNY basket. In G10 FX, the resurgence in risk sentiment has boosted the usual suspects and weighed against the other usual suspects, although a couple of unusual situations stick out: GBP and SEK: Sterling is in danger of breaking down versus the euro here after testing new lows for the year this morning in GBPUSD despite sterling’s former correlation with risk appetite, perhaps as a lot of air has been taken out of Bank of England expectations as the market has shifted the expected lift-off meeting to February of next year after pricing as early as November a couple of months ago. Late last week, the BoE’s normally hawkish Saunders sounded cautious on lifting off next week, while the day before yesterday Deputy Governor Broadbent advised looking “a couple of years ahead” in predicting that “these pressures on traded goods prices are more likely to subside than intensify”, although he did say wages could be an inflation driver. Chart: EURGBPEURGBP is poking at the 200-day moving average from the downside for the third time in recent months, and the less hawkish BoE may help trigger a further squeeze higher, especially if the 0.8600 prior pivot high falls. Next focus higher still comes in at the range highs from April-May near 0.8720. Source: Saxo Group SEK has traded sideways today rather than rallying, as one would expect, on the strong comeback in risk sentiment. The krona is historically one of the most highly risk sensitive currencies. Sure, the euro is largely stuck in the water here and the EU growth outlook has plenty of clouds over it with covid shut-downs etc, but EURSEK looks “wrong” relative to other reaction to the improved mood across markets, and should be lower. A statement today by Riksbank dove Jansson that it is hard to justify rate hikes and that a more active fiscal policy is the way forward likely held back SEK, as perhaps NOKSEK buying, judging from the last couple of session in that cross. In other developments, AUDNZD has cleared the important 1.0500 level, EURCHF is trying to pull higher but is still some way from challenging the important 1.0500 level. The CHF has not behaved anything like the JPY in recent months, failing to show sensitive in EURCHF, at least, to large shifts in safe haven years. Likely, to get EURCHF off the mat, we’ll need to see a broader EUR rally that includes EURUSD on a brightening outlook for EU growth. Hard to see how it gets much worse, on a relative basis, at present (covid shutdowns, energy crunch, etc…) The Bank of Canada is out just after pixel time for this article. The market is leaning for hawkish guidance for a sure rate hike at the January meeting, which is very likely what it will get. The degree to which CAD can continue to rally will also depend on whether the now suddenly very CAD-supportive backdrop extends. USDCAD needs to bash back below 1.2500 to suggest a full reversal of the rally move off the sub-1.2300 lows in October is in the cards. Looking ahead, the next critical event risks are the Friday US November CPI print, and then the exercise next week in seeing how the market reacts to the crystallization of the now hawkish Fed’s adjustments to its new monetary policy statement and to the “dot plot” of its policy forecasts. Table: FX Board of G10 and CNH trend evolution and strengthStill mean reverting from the prior trends in most currencies, but far more upside needed from commodity currencies to fully reverse the prior trends. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.A strong move higher in EU yields taking EURJPY back well above the important 128.00 level of contention lately – watching whether the trend can flip positive in the week ahead. Elsewhere, note again that AUDNZD has pulled above the important 1.0500, that USDCHF flipped positive (even if it is mid-range after surviving another test of the 200-day moving average), and that NOKSEK is trying flipping positive after a very sharp rebound from recent lows. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1500 – Canada Bank of Canada Rate Decision 1500 – US JOLTS Job Openings survey 2130 – Brazil Selic Rate Announcement 2205 – Australia RBA Governor Lowe to speak 0001 – UK Nov. RICS House Price Balance 0130 – China Nov. CPI / PPI

December 09, 2021  $USD, Brazil, Canada, China, Currency Movement, Germany, Japan, Portfolio flows, UK Overview: The euro has come back offered after its seemingly inexplicable advance yesterday.  The dollar is firmer against most major currencies today, with the yen an exception after JPY114.00 held on yesterday's advance.  Most emerging market currencies are also softer, with a handful of smaller Asian currencies proving a bit resilient.  Most large bourses advance in the Asia Pacific region, except Japan and Australia.  Europe's Stoxx 600 is steady after retreating late yesterday while US futures are pointing to a softer opening.  After rising for the past three sessions (~18 bp), the yield of the 10-year US Treasury is consolidating by hovering a little below 1.5%.  European yields are 3-5 bp softer.   Gold is little change.  This week's quiet tone contrasts with the sharp moves in Bitcoin and Ethereum.  Oil is consolidating after the three-day advance that lifted January WTI by around 8.5%.  US and European natural gas is also softer after the rally over the last few days.  Iron ore, which rallied over 10% in the first two sessions this week, edged lower yesterday and is off 3% today.  Copper's three-day rally is in jeopardy.   Asia Pacific The number of countries participating in a diplomatic boycott of the Beijing Winter Olympics is growing.  In addition to the US, Lithuania, Australia, New Zealand, Canada, and the UK have joined.  While it may annoy Chinese officials, it is symbolic.  Given Chinese quarantine protocols, many diplomats were not going to attend in the first place.  Also, the impact on China's human rights will likely be negligible.  The moral righteousness is signaling to domestic constituencies.  Yet, treatment of the Peng Shuai and the jailing of reporters needless antagonized the already precarious situation.  China's consumer inflation rose less than expected while producer prices rose more.  Owing to a jump in vegetable prices (30.6%), November CPI rose 2.3% from a year ago. The median forecast (Bloomberg survey) was for a 2.5% increase.  It is the fastest pace since August 2020. The decline in pork prices (-32.7% year-over-year) is slowing.  Excluding pork, the CPI would have risen by 3%.  Service prices remain soft.  Excluding food and energy, the core CPI is up 1.2% over the past year (1.3% previously).  Producer price inflation slowed from 13.5% in October to 12.9% in November.  Economists had forecast a 12.1% pace.  Recall officials moved to boost supplies, including coal, helping to ease the strong upside pressures.   Officials have moved to a more pro-growth stance, which means that inflation will not stand in the way of further easing monetary policy (via reserve requirements even if not interest rates) next year. Meanwhile, Evergrande and the Kaisa Group have formally missed debt-servicing payments on dollar obligations. Still, unlike the end of the property bubble in the US and Europe, China is forcing banks to continue to lend. This keeps the proverbial treadmill going.   The lending figures for November, released today, illustrate it.  New yuan loans, which track bank lending, rose by 50%+ to CNY1.27 trillion from CNY826 bln in October.  Aggregate financing, which adds shadow banking activity to bank lending, rose to CNY2.61 trillion from CNY1.59 trillion.  Note that just before publishing this report, the PBOC announced a two percentage point hike in the reserve requirement for foreign currency deposits.  This will likely weigh on the yuan, initially.    Japanese weekly portfolio flows were unusually large last week.  Data from the Ministry of Finance showed that Japanese investors were large sellers of foreign bonds for the second consecutive week.  The JPY1.18 trillion in sales followed the divestment of JPY1.34 trillion the previous week. It was the most selling in a two-week period since February.  From a high level, most of the selling last week did not require net yen buying as Japanese investors essentially shifted into foreign equities, snapping up JPY1.2 trillion.  This is the most since the time series began in 2005.  Separately, foreign investors bought JPY2.0 trillion of Japanese bonds, which appears to be the second-highest on record (after the JPY2.57 trillion bought in early July).   For the third consecutive week, foreign investors were small sellers of Japanese shares.  The dollar approached JPY114.00 yesterday and was turned back, falling to JPY113.35 today.  The JPY114 area is "defended" by a $2.2 bln option at JPY114.10 that expires today and a $1.15 bln option at JPY114.25 that expires tomorrow.  A break of JPY113.25-JPY113.35 could signal a test on JPY113.00, but the market will likely be cautious ahead of tomorrow's US CPI report.  The Australian dollar's recovery faltered earlier today slightly above $0.7185, the 20-day moving average, which it has not traded above since November 4.  The first retracement (38.2%) of this week's bounce is near $0.7115, but initial support is seen in the $0.7140 area.  The greenback edged slightly lower against the Chinese yuan (~CNY6.3430) before steadying and turning marginally higher.  It is caught between two large options expiring today.  One set is for around $2.5 bln at CNY6.34, and another set is for about $950 mln at CNY6.35.  The PBOC's reference rate for the dollar today (CNY6.3498) was the largest gap with the median projection (Bloomberg, CNY6.3467) since the middle of October.   Europe Germany's October trade figures are maybe too dated to have much market impact, but the growth of imports and exports is a constructive development.  The 4.1% rise in exports, the most since July 2020, were well above expectations, as was the 5% jump in imports (most since August 2020).  For Germany, it translates into a smaller than expected trade surplus (12.8 bln euros).  The monthly average surplus this year through October is 15.5 bln euros, which is a little above the average for the same period last year (14.4 bln euros), but off average in 2019 (through October) of 19 bln euros.   On the heels of "party-gate," UK Prime Minister Johnson has announced Plan B in the face of the new infection surge that calls for people to work from home again.  It has created much furor. Businesses have called for more government support, and unions want the furlough program to be re-instituted.  Any lingering ideas of a rate hike next week by the Bank of England have faded.  The short-sterling interest rate futures contract expiring shortly is implying the lowest yield (11 bp) in three months.   Short-covering appeared to lift the euro to $1.1355 yesterday, and it settled above its 20-day moving average for the first time since November 3.  However, this was not a harbinger of a breakout, and the euro's gains are being pared today. Initial support is seen around $1.13 and then $1.1275 area.  Sterling recorded new lows for the year yesterday slightly below $1.3165, the (38.2%) retracement of the rally since March 2020 low.  Today, it is in less than a quarter-cent range capped near $1.3215.  It is consolidating weakly.  There are options at $1.32 that expire today (~GBP370 mln) and tomorrow (GBP600 mln) that are likely neutralized.   America The US reports weekly initial jobless claims, wholesale trade and inventories, and Q3 household net worth. These are not market movers, especially today. Instead, investors' focus will likely be on equities as it waits for tomorrow's CPI.  US inflation is still accelerating, and the headline CPI is likely to move closer to 7%, setting the stage for a hawkish FOMC meeting next week.  An acceleration in tapering and more officials will likely see the need for more hikes.  Recall that in September, the last time officials updated their forecasts, half did not see a need to hike rates next year.  The market has done much of the heavy lifting for the Federal Reserve.  The implied yield of the December 2022 Fed funds futures contract has risen around 50 bp since the September FOMC meeting.  The Bank of Canada left policy on hold yesterday, as widely expected.  However, the market was disappointed that it did not upgrade its forward guidance to reflect the strong data.  The swaps market is pricing in five hikes over the next 12 months, and the central bank said nothing to encourage such an aggressive stance.  This leaves the Canadian dollar somewhat vulnerable, we think.   Brazil did not disappoint.  The central bank hiked the Selic rate by 150 bp for the second consecutive month and signaled another hike of the same magnitude in February when it meets again.  It has lifted the Selic rate by 750 bp this year.  It is being driven by rising inflation, and the economy contracted in Q2 and Q3.  The Selic rate stands at 9.25%.  The IPCA inflation measure is due tomorrow, and it is expected to have risen to 10.9% (Bloomberg survey) from 10.67% in October.   Peru is expected to hike its reference rate by 50 bp to 2.5%. It would be the third 50 bp in a row.   Its November CPI, reported at the start of the month, is slightly above 5.6%.   Mexico reports its November CPI figures today.  It is expected to rise from about 6.25% to 7.25% and set the stage for another 25 bp rate hike next week in the overnight rate to 5.25%.   The US dollar is trading firmly against the Canadian dollar, and the heavier equities may be helping it.  While initial resistance is seen near CAD1.2700, we suspect there is scope toward CAD1.2730-CAD1.2750.  The greenback fell to almost MXN20.8860 yesterday, its lowest level since November 23, and the five-day moving average crossed below the 20-day moving average for the first time since early last month.  The move appears to have exhausted itself, but the dollar needs to resurface above the MXN21.05 area to boost confidence that a low is in place.  Disclaimer

Equities 2021-12-09 13:30 8 minutes to read Summary:  Nubank is set to start trading today on NYSE after closing one of the largest IPOs this year raising $2.6bn. Nubank is a digital first and Brazil's fastest growing bank expected to grow net revenue by 100% in 2021 and backed by Berkshire Hathaway, and will be seen as a major test of the fintech business model and investor risk appetite for this type of businesses. We also take a look at the Belgian-based Umicore which is an unique company set to gain from the green transformation and especially the adoption of electric vehicles. The company has just signed a major JV with Volkswagen. The most valuable bank in Latin America Nubank is a Brazilian-based digital first bank with 40 million accounts and net revenue growth of almost 100% expected in 2021. The bank lists Berkshire Hathaway, Sequoia Capital and Tencent as its shareholders, and is raising $2.6bn in its IPO after reducing its valuation by 20% last week a demand was weaker than estimated. The shares were priced yesterday at $9 and will start trading today on NYSE with the Saxo ticker code NU:xnys. The bank is still not profitable but will still get a market value close to $42bn making Nubank the most valuable publicly listed bank in Latin America ahead of Itau Unibanco. This is a major milestone for the fintech industry and if the IPO turns out to be well-priced and Nubank delivers on expectations in the coming years then it will pave the way for many more fintech companies going public. The overall industry is still lacking to become profitable on a broad scale and Nubank will be the first test. What is interesting about Nubank is that it is rare to see a bank with revenue of $1.04bn in the last 12 months going so fast as investors are used to look at banks being low growth. The deal also highlights that Berkshire Hathaway is slowly changing its behaviour as it was also part of the Snowflake IPO (pure cloud infrastructure play) showing that the investment company famous for not investing in digital technology companies is increasing exposure in these newer technologies. Source: Bloomberg Umicore signs long-term supplier contract with VW The Belgian company Umicore is likely unknown to most but with a market value of €10bn and a very green transformation oriented business strategy, it is a company investors will get used to hear about in the future. Yesterday, Umicore shares were down 9% because the company downgraded its outlook for its battery materials unit, but at the same time it announced a joint-venture (JV) with Volkswagen on supply of cathode materials to Volkswagen’s battery production. The JV expects to ramp up production from an initial output of 20 GWh to 160 GWh by the end of the decade, which is equivalent to power 2.2mn electric vehicles. Volkswagen has planned to build six battery factories in Europe to control the supply chain of the most key component of electric vehicles as the German carmaker drastically ramps up EV production. Back in October Umicore signed Lithium supply deals with Ganfeng Lithium, one of China’s largest producers, and Vulcan Energy Resources from Australia. Source: Saxo Group With the JV, Umicore is positioning itself as gaining a lot growth from adoption of electric vehicles which is expected to deliver very growth rates this decade. Besides its battery materials unit, it also has business units within emission control for traditional cars and materials recycling. Umicore is well positioned to grow with the green transformation and for a better understanding of Umicore’s business the June 2021 investor presentation gives a good overview. In the short-term the business is facing headwinds from lower production and new car registrations across key markets in North America, Europe, and China. Like our Green Transformation basket, Umicore is up 4% following a strong start to the year up 55% by August as the company had the right green profile, but green transformation has suffered lately in terms of sentiment as many green companies have difficulties lifting profitability. Umicore is expected to deliver €1.17bn in EBITDA in 2022 which means that the company is valued at 10x on EV/EBITDA 1-year forward, which is roughly a 25% discount to the MSCI World Index. The consensus sell-side target price is €46. As we wrote in our recent equity note Things are not adding up any longer in the car industry, the valuations on EV-makers have reached levels where expectations are likely exceeding what can be achieved in the coming years due to supply constraints. In our note, we suggest that investors might indirect ways to get exposure to the electrification of the transportation sector such as getting exposure to semiconductor manufacturers to the car industry, lithium miners, battery manufacturers, and Umicore also fits this group of alternatives for investors.

Equities 2021-12-10 00:00 4 minutes to read Summary:  Markets are facing speed bumps again as investors await key inflationary numbers and the Feds meeting outcome, key catalyst that will ultimately change market dynamics, with fiscal stimulus being taking away. The US benchmark the top 500 stocks fell from record high territory, falling for the first time in 4 days, while the ASX200 fell for the second day, dipping below its 50 day moving average. Growth names are being sold down and safe haven assets, bonds, the USD, the JPY, are gaining appeal. It is for three important reasons. Here is what you need to know and consider, plus the five elements to watch today. Firstly, investors are holding their breath ahead of key events: Friday’s US inflation data (tipped to show inflation rose 6.8% YOY in November), plus we are also seeing investors pre-empt that the Federal Reserve next week, will map out tapering and interest rate hikes for 2022. A poll by Reuters showed that 30 of the 36 economists expect the Fed to hike rates sooner than thought, rising rates four times from the third quarter of the year 2022 to the second quarter of 2023 (expecting rates to be 1.25-1.50%). This explains why investors took profits from nine of the major 11 US sectors overnight. So growth stocks and sectors that thrive in low interest rates; consumer discretionary, real estate and information technology, saw the most selling as a result. From a stock perspective Tesla fell 6%, Semiconductor giant Advanced Micro Devices, and Etsy-the e-commerce vintage store, both fell 5%, and chip maker Nvidia fell 4%. If you look at Saxo Markets themes that we track, you can also see the most money on a month-on-month basis, has come out of semiconductors, while the other themes we track are posting monthly gains. Secondly, it’s critical to be aware, the UK Prime Minister announced restrictions to curb Omicron’s spread -  so the UK entered new work-from-home guidance, that could cost the UK economy $2.6 billion a month (according to Bloomberg). Meanwhile, a study by a Japanese scientist found the new variant to be 4.2 times more transmissible in its early stage than delta. As such some companies are responding like Lyft saying their workforce can work remotely in 2022, while Jefferies asked staffers to WFH. This means, travel and tourism stocks could see short term pressure, Australian and US stocks that are exposed to the UK could also see pressure, while oil could see demand weakness here. Plus, it could be time to again rethink exposure to the office property sector, as it’s a likely to remain squeezed, while industrial and logistics real estate remain supported given the likely new shift to WFH. Thirdly – be aware of volatility. A measure of this, VIX CBOE Volatility Index rose for the first time in four days, rising back above the 50 day average. Volatility has fallen from its 12-month high and remains contained right now as Pfizer said its vaccine can neutralize the new COVID strain Omicron after three doses (two doses offer protection again severe disease). However, keep your ears to the ground. If tomorrow’s inflation data from the US is worse than expected, expect volatility to spike, and growth stocks to see further selling and expect safe haven assets (USD, bonds, USDJPY) to gain more attraction. Aside from the above – here’s 5 things to watch today; Firstly - let's go over Fortescue Metals (FMG) 1.FMG’s CEO, Elizabeth Gains just announced she is standing down, right in the thick of iron ore having a murky outlook. It’s not been an easy 12 month for FMG holders. FMG trades 7% lower this year, but it’s a far cry from its all-time high, down 30% from its peak as iron ore price remains in a bear market (down 40% from May). 2. FMG’s trading range has been restricted for two weeks as the world holds its breath to learn more about China’s property sector. FMG shares have broken out above their 50 day moving average but its trading has been even more so restricted over the last three days as its stock hit a key resistance level awaiting news from China. If good news comes, FMG could break out higher. But it looks murky. Majority of FMG revenue (94%) comes from iron ore, and its majority sold to China (90%) (unlike BHP that now diversifies its sales to other countries). And now… we are getting mixed signals from China, making iron ore’s outlook look hazy. 3. On the positive side; week-on-week Australian iron ore exports are up. China has increased its monthly imports of Australian iron ore in November, more than expected. This has supported the iron ore price rising 8.9% this week. 3. But on the negative side - Evergrande, one of China’s biggest property developers was just officially downgraded -labelled a defaulter by Fitch Ratings after failing to meet two coupon payments after a grace period expired Monday. This may now trigger cross defaults on Evergrande’s $19.2 billion of dollar debt. Also at the same time JP Morgan downgraded its outlook for iron ore expecting the iron ore to fall 7% to $92, while Citi expects seaborne iron ore prices to fall 60-$80/t in 2022 on Chinese policy changes. 4. However, Fortescue has been in the news this week, for its shift to a green future. Was this a tactic? A smoke Bomb? Yesterday FMG announced its Future Industries department signed a pact with the Indonesia to explore hydrogen projects. The day before Fortescue Future Industries (FFI) and AGL Energy (AGL) teamed up to explore repurposing NSW coal-fired power plants and turning them into green hydrogen production facilities – to hopefully create renewable electricity production, 250 megawatts (which will generate 30,000 tonnes of green hydrogen per year). AGL and FMG will undertake a feasibility study to repurpose AGL’s Liddell and Bayswater power stations, that both accounted for 40% of NSW’s carbon dioxide emissions. Sheesh. Secondly  – Australian analyst rating changes to consider ANZ AU: Reiterated as a Bell Potter BUY, PT $30.00, RRL AU: Regis Resources Raised to Outperform at RBC; PT A$2.50 EBO NZ: EBOS Raised to Outperform at Credit Suisse; PT NZ$43.14 FMG AU: JPMorgan downgrades FMG from Overweight to Neutral, dropping its PT from $22 to $20. RIO AU: JPMorgan downgrades RIO from Overweight to Neutral, dropping its PT from 113.00 to 102. MIN AU:  Reiterated as JPMorgan hold/neutral, dropping its PT from $47 to $40 Thirdly  - what else to watch today Annual General Meetings: HMC AU, PDL AU, PH2 AU, SOL AU Other Shareholder Events: AOF AU, HMC AU THL NZ: Tourism Holdings Halted in NZ Pending Proposed Transaction ADPZ NA: APG Buys 16.8% Stake in Ausgrid from AustralianSuper EBO NZ: Ebos Successfully Raises A$642m From Share Placement Fourthly - Economic news out 8:30am: (NZ) Nov. Business NZ Manufacturing PMI, prior 54.3 8:45am: (NZ) Nov. Card Spending Total MoM, prior 9.5% 8:45am: (NZ) Nov. Card Spending Retail MoM, prior 10.1% Fifthly - Other news to keep in mind: Australia Seen Facing Steeper Borrowing Costs If Slow on Climate RBA Likely to Stick With QE Until Election Over, BofA Says      ---   Markets - the numbersUS Major indices fell: S&P 500 -0.7% Nasdaq -1.7% Europe indices closed lower: Euro Stoxx 50 lost 0.6%,London’s FTSE 100 lost 0.2% flat, Germany’s DAX fell 0.3%Asian markets closed mixed: Japan’s Nikkei fell 0.5%, Hong Kong’s Hang Seng rose 1.1%, China’s CSI 300 rose 1.7%. Yesterday Australia’s ASX200 fell 0.3% Futures: ASX200 hints of a 0.14% fall today Commodities: Iron ore rose 1.3% to $110.50. Gold fell 0.4%, WTI crude fell 2% to  $70.94 per barrel. Copper fell 1.4% Currencies: Aussie dollar trades 0.4% lower at 0.7146 US. Kiwi down 0.3% to 0.6788 per US$ Bonds: U.S. 10-year yield fell 3.5bps to 1.4871%,Australia 3-year bond yield fell 0.8bps to 0.95%, Australia 10-year bond yield rose 6bps to 1.68%

December 12, 2021  $USD US yields and the dollar softened after the release of the November CPI figures before the weekend.  The data were in line with expectations showing the headline rate accelerated to 6.8% and the core rate to 4.9%.  The price action likely reflected positioning rather than a reassessment of the outlook for next week's FOMC meeting.  Nearly everyone recognizes the likelihood that the pace of tapering is quickened, and the individual forecasts reflect a more aggressive tightening path than anticipated in September.  With the diverging monetary policy impulses are evident in the shifting two-year interest rate differentials in the US favor, it is increasingly expensive to resist a stronger greenback.  A critical part of the backdrop is that market participants feel more comfortable that the Omicron variant may not be as disruptive as feared in Europe and the US (where the current surge is notable in its own right). As a result, those major currencies that tend to do well when risk appetites are strong, namely the dollar bloc and Scandis, are outperforming.  At the same time, the traditional funding currencies, the yen, and Swiss franc, were out of favor.  The euro falls in the latter camp.  A return to working from home, the evaporation of speculation that the BOE would raise rates in the week ahead, and a disappointing October GDP report pinned sterling in its trough.   It is difficult to see the market getting significantly more aggressive about the next year's outlook for the Fed.  The futures market is pricing in two hikes entirely and around two-thirds of a third hike.  A similar logic has turned us more cautious about the Canadian dollar.  There the market has discounted 125 bp of hikes over the next 12-months, which seems too aggressive.   Dollar Index:  The Dollar Index has been moving broadly sideways, though it rose for the seventh consecutive week.  For the first eight sessions of December, it has traded within the range set on November 30 (~95.50-96.65).   The momentum indicators have trended lower but appear to be stabilizing near mid-range.  The next big target is slightly below 97.75, which is the high from June-July 2020, and the (61.8%) retracement target of the decline since the March 2020 high near 103.00.   Euro:  The single currency briefly traded below the November 30 low (~$1.1235) last Tuesday before short-covering lifted it to the week's high ($1.1355) the following day.  It finished the week on a firm note after wobbling initially after the US CPI report.  With a brief exception, the euro has chopped between $1.12 and $1.14 since mid-November.   The broad sideways movement has seen the momentum indicators correct from over-extended territory.  Since November 10, when the US reported the jump in CPI to 6.2%, the US 2-year premium over Germany rose by roughly 18 bp to 1.40%,  to set the year's high.  It stalled.  The consolidative phase may continue ahead of the FOMC meeting.  Given what the market is pricing in, it may be difficult for the Fed to get ahead of market expectations for next year when it meets on December 15.   Japanese Yen: After testing support near JPY112.55 to start last week, the dollar recovered to almost JPY114.00 in the middle of the week before moving sideways.  It continued to track the movement of US 10-year yields.  As yields rose in the first part of the week, the dollar traded higher against the yen, and when yields slipped min the second half of the week, so did the greenback.  The MACD has flatlined, while the Slow Stochastic is trending higher.  A break of JPY113.00 retargets the lows.  On the topside, the JPY114.00-JPY114.30 area offers nearby resistance. British Pound:  Little is going sterling way.  Support for the Prime Minister has fallen, and polls show Labour opening its largest lead in years.  It has opted for "Plan B," with people returning to working from home, though no new government support was offered.  The economic growth slowed more than expected in October, which was before the Covid wave intensified and the Omicron variant was detected.  The rate hike that looked so likely in November now seems off the table until at least February.  Meanwhile, the fishing row and the attempt to change the Northern Ireland Agreement remain unresolved but causing enough consternation to deter the US from lifting the steel and aluminum tariffs that Trump imposed, let alone discussing a free-trade agreement.  Sterling made a marginal new low for the year last week (slightly below $1.3165, which met the (38.2%) retracement objective of the rally from the March 2020 low.  The next retracement (50%) is around $1.2830.  The momentum indicators are not generating a strong signal presently.  It finished last week on a firm note but a move above $1.3300-$1.13350 is needed to signal anything important.   Canadian Dollar:  The Canadian dollar's recovery fizzled after the central bank failed to provide fresh encouragement to the market, with 125 bp of hikes priced into the swaps market over the next 12 months.  The US dollar, which had rallied and closed above CAD1.28 on December 3 despite the diverging jobs reports, fell nearly CAD1.26 before catching a good bid.  Ahead of the weekend, it had recovered to the middle of the week's range (~CAD1.2730).  A move above the CAD1.2760 area could signal another run at the highs. The MACD pulled back, but it looks like it may try turning higher, while the Slow Stochastic is still falling.  The five-day moving average is set to slip below the 20-day moving average for the first time in a month.  Canada reports November CPI figures on December 15, and the year-over-year pace is set to accelerate from the 4.7% 12-month clip seen in October.  Inflation is also likely rising even faster this month.   Australian Dollar: The Australian dollar rose almost 2.5% last week to end a five-week slide that shook a nickel from it.  The Aussie recovered from the year's low slightly below $0.7000 (December 3), the measuring objective of the potential head and shoulder pattern traced out in H1 21. However, the recovery stalled shy of $0.7190.  The initial retracement of the leg lower that began in late October was closer to $0.7210. Still, the anticipation of a strong employment report (December 15) could help underpin the Aussie.  Provided it holds above the $0.7120 area, the Australian dollar can work its way higher.  The MACD and Slow Stochastic are trending higher.   Mexican Peso: While the Australian dollar was the strongest of the major currencies, the Mexican peso led the emerging market currencies a nearly 2% gain.  Last week, Latam provided three of the four strongest emerging market currencies (Colombian peso +1.25%) and the Brazilian real (0.95%).  The Thai baht was in third place with a 1.25% gain.  Banixco meets on December 16.  It is widely expected to hike by another 25 bp.  The central bank of Chile meets on December 14 and is expected to hike 125 bp to 4.0%.  The last move in October was also for 125 bp.    The Colombian central bank meets on December 17.  Most anticipate a 50 bp hike to 3.0% after initiating the tightening cycle with a 75 bp move in October.  Mexico's central bank appears to be a laggard in this cycle, but the peso's 4.5% loss this year makes it the top performer in the region.  The US dollar fell to a new three-week low slightly below MXN20.85 before the weekend.  The momentum indicators are trending lower, and the five-day moving average crossed below the 20-day for the first time since mid-November.  Initial support is seen in the MXBN20.70-MXN20.75 band. Chinese Yuan:  Chinese officials have delivered verbal warnings and cautioned banks and businesses to adopt good foreign exchange hedging practices and avoid a one-way market.  It signaled displeasure as the yuan rose to new three-year highs against the dollar by setting the daily reference rate.  It cut reserve requirements ahead of the expected FOMC decision next week to accelerate its tapering and bring forward its first rate hike.  The PBOC also raised the reserve requirement for foreign currency deposits.  Yet, the yuan rose in all but one session last week and eked a small gain on the week.  This month, the dollar's high was set ahead of the weekend near CNY6.3835,  but the positive greenback momentum was not sustained.  The dollar finished around CNY6.3700.  In the grand scheme of things, these are small moves, yet this is where the lines are being drawn.  Some observers have argued that state-owned banks in China have operated on behalf of the central bank (stealth intervention).  If this is true,  one must ask what happened to them now or why is that channel not working?  Still, with policy divergence on the PBOC's side, the risk-reward does not seem to favor fighting it now.  If the PBOC wants to drive home its message, the dollar needs to rise above CNY6.40.  Portfolio inflows and the large trade surplus need to be offset by increased capital outflows if officials want to remove the upside pressure on the currency.  That said, if there is an escalation ladder here, officials dominate nearly every rung.  In the long game, officials cannot be seen as losing, and if the carrots do not work, the will appears to be there to use the stick.   Disclaimer

December 13, 2021  $USD, Australia, Canada, China, Currency Movement, FOMC, Japan, Mexico, South Korea, Switzerland, Turkey, UK   Overview: Equities, bonds, and the dollar begin the new week on a firm note.  Japanese, Chinese, Australian, and New Zealand equities advanced in the Asia Pacific region.  Europe's Stoxx 600 is snapping a three-day decline, and US futures are 0.25%-0.35% higher.  The US 10-year yield is a little softer at 1.48%. European benchmark yields are mostly 1-2 bp lower, and near 0.71%, the UK Gilt's yield is at a three-month low.  The dollar is rising against all the major currencies and is 0.3%-0.45% higher against most.  The Canadian dollar and sterling are the most resilient.  Among emerging market currencies, the Chinese yuan continues to defy official signals to eke out a small gain.  The Turkish lira is off more than 2%, after having dropped 4% initially. Intervention at the end of last week failed to have a lasting impact, and the central bank is expected to cut rates again later this week.  The JP Morgan Emerging Market Currency Index is giving back last week's 0.2% gain plus more today.  It was the first weekly gain in five weeks.  Gold is quiet in the upper end of the pre-weekend range, holding above $1780.  January WTI is firm but capped near the 20-day moving average (~$72.80).  US natgas is firm after falling 5% last week.  Dutch gas is up 8% to new two-month highs.  It has a six-week rally in tow, during which time it has gained a little more than 60%.  Industrial metals are higher too.  Iron ore snapped a three-day air pocket and gained it all back and more with its 6.5% rally today.  Copper has steadied after falling almost 2.5% in the last two sessions.   Asia Pacific The results of Japan's Tankan survey were in line with the talk we have picked up that while the new government, vaccination efforts, and fiscal stimulus are helping fuel the economic recovery, businesses are not yet convinced that significant change is taking place.  Sentiment among large manufacturers was steady at 18, and the outlook ticked lower.  The improvement in sentiment among the large non-manufacturers was more pronounced (9 vs. 2). However, the outlook was subdued at 8 (from 3).  Capex plans from the large businesses were softer than expected at 9.3% (from 10.1%).  Sentiment among the small companies improved, but the diffusion index and the outlook remained negative.  South Korea reported strong traded numbers for the first ten days of December (exports 20.4% and imports 42.3% year-over-year).  Seoul was busy.  Its foreign minister met with high Japanese counterpart on the sidelines of the G7 meeting and struck a cooperative tone. South Korea's President Moon met with Australia's Prime Minister Morrison and struck a A$1 bln weapon deal for self-propelled howitzers (which have already been purchased by other countries, including India and Turkey).  South Korea, however, will not be participating in the diplomatic boycott of the Winter Olympics, citing the need for Beijing's cooperation to denuclearize the peninsula.   The US dollar remains within its recent range against the Japanese yen (~JPY113.20-JPY113.95).  The 20-day moving average is at the top of the range, and it has not traded above it this month yet.  An option for almost $400 mln at JPY114.00 expires today.  It is the fifth session that the dollar has not traded below JPY113.20.  The Australian dollar's rally stalled near $0.7185 last week and is testing the lower end of its three-day range (~$0.7130) in the European morning.  Support is seen in the $0.7090-$0.7115 area.  The highlight of the week is the November jobs report, which is expected to show a strong bounce after three months of Covid-related declines.  More problems among China's property developers and activity in the manufacturing hub in Zhejiang were suspended due to an outbreak of the virus that failed to trigger a retreat in the yuan.  The dollar spent most of the local session below the pre-weekend low (~CNY6.3615).  The PBOC set the dollar's reference rate at CNY6.3669.  The market (Bloomberg survey) expected CNY6.3649.   Europe The UK appeared to make two concessions over the weekend.  First, it signaled that it was no longer seeking to exclude a role for the European Court of Justice in enforcing the Northern Ireland protocol.  Second, new fishing licenses were made available to the EU and French fishers. Jersey and the UK issued another 23 licenses, and although Paris was seeking more, it seemed sufficient to de-escalate the situation.   The UK government is under pressure from many sides.  The "partygate" scandal is a culmination of miscues by the Prime Minister, who has struggled with a Peppa Pig speech and a Kermit the Frog speech at the UN.  Several petty sleaze scandals have also marred the government.  Recent polls put Labour ahead of the Conservatives. This Thursday, the special election could see the Tories defeated in a traditional stronghold (ie Lib-Dems a protest vote for disenchanted Tories?).  The UK's stance toward the EU and the risk to the Good Friday Agreement have estranged the US government to some extent, which has not lifted Trump's steel and aluminum tariffs and put much energy into a free-trade agreement between the two special allies.   Turkey reported a large than expected October current account surplus ($3.16 bln) current account surplus.  While the currency's sharp depreciation would be expected to help the trade account, it also scares international investors.  It reported a net outflow of $2.2 bln portfolio capital in October.  Industrial output surprised on the upside in October, rising by 0.6%.  Economists (Bloomberg survey) expected a 0.1% decline after a 1.5% fall in September.  Turkey appeared to intervene in the foreign exchange market at the end of last week.  The dollar held below TRY14 but jumped to almost TRY14.76 today before pulling back.  The Swiss National Bank also looks like it intervened last week.  The euro held above CHF1.04 after having been sold to about CHF1.0375 earlier this month, its lowest level since July 2015.  Swiss domestic sight deposits rose by CHF1.12 bln, the biggest increase in three weeks.  Note that after buying euros against the franc, the SNB is believed to sell euros for dollars to maintain the allocation of its reserves.  The euro peaked last week near $1.1355.  It has been sold to a four-day low of $1.1260 today.    There is an option for 1.44 bln euros at $1.1250 that expires today.  The low for the year was set on November 24 near $1.1185, while last week's low was slightly below $1.1230.  With diverging impulses expected from the Fed and ECB this week, the euro looks vulnerable.  Sterling closed on its highs before the weekend and is on the defensive today.  The market appears to be absorbing bids that might be related to the expiration of a couple of options today (~GBP500 mln at $1.3235 and ~GBP560 mln at $1.3200).  The low for the year was set last week (December 8) near $1.3165, but initial support today is around $1.3220.  The odds of a BOE rate hike later this week have fallen to less than a 1 in 5 chance.   America The highlight of the week is the FOMC meeting.  Nearly everyone expects the Fed to accelerate its tapering and for individual forecasts to shift, matching the more hawkish rhetoric seen since the October CPI print jumped above 6% (November 10).  November's CPI, reported at the end of last week, accelerated to 6.8%.  Before we get to the FOMC meeting, though, this US reports PPI (the heading is expected to accelerate above 9% and the core above 7%) and November retail sales (a solid gain is anticipated of around 0.8% but off the heady 1.7% pace seen in October).  After the mid-week FOMC meeting conclusion, the US reports November housing starts, industrial production, and the Philly Fed's December survey.  The preliminary December PMI estimates are also due Thursday.  The week's data highlight for Canada is the mid-week estimate of November CPI.  Prices may have edged up by 0.2% on the month, but the year-over-year rate is expected to be little changed from the 4.7% pace seen in October.  The underlying measures may have edged up a little.  Price pressures are elevated but do not appear to be accelerating, as seen in the US.  Tomorrow, the new central bank mandate will be announced.  The mandate is reviewed every five years.  The press reports that the 2% inflation target will be retained, but the mandate may include a component of the labor market as it takes what is expected to be a small step toward a dual mandate like the Fed's.   Mexico's central bank meets on Thursday.  It is widely expected to lift the overnight rate target by 25 bp to 5.25%. In Bloomberg's survey of  17 economists, three forecast a 50 bp hike.  It would be the fourth hike in the cycle that began in August.  Chile and Colombia's central banks also are expected to hike rates this week.  Chile, which hiked by 125 bp in October after a 75 bp increase in August, is expected to make another 125 bp adjustment tomorrow.  It would lift the policy rate to 4%. It holds the second round of its presidential election on December 19.  Colombia's central bank meets on December 17.  A 50 bp increase would lift the repo rate to 3.0%.  The first increase in the cycle was 75 bp in October (to 2.5%).  November's CPI was a little above 5.25%.   The US dollar is rising against the Canadian dollar for the fourth consecutive session.  It is poking above CAD1.2750 in the European morning, where an option for almost $450 mln expires today (and another for $515 mln expires tomorrow).  A convincing move above CAD1.2760 could retarget the month's high (~CAD1.2855).  The market has 125 bp of hikes discounted over the next 12 months, but little new encouragement from the central bank.  The greenback fell against the peso in four of last week's five sessions.  It is little changed today, trading above the pre-weekend low (~MXN20.8430).  The next support area is seen closer to MXN20.70.  Still, the market is likely to be cautious extending short US dollar positions ahead of the Fed.   Disclaimer

Macro 2021-12-14 08:35 6 minutes to read Summary:  Risk sentiment soured yesterday, with some attributing the market nervousness to uncertainty on how hawkish a pivot the Fed is set to make at the FOMC tomorrow, although Fed rate expectations for next year as expressed in the most liquid futures have eased from recent highs. That meeting is the most significant major macro event risk for the 2021 calendar year, although important ECB and BoE meetings are set for Thursday. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - yesterday was a very disappointing session for US technology stocks with Nasdaq 100 futures looking to push higher early during the session but ended on the lowest close in four trading sessions. Nasdaq 100 futures are trading around the 16,110 level this morning with the 50-day average around the 15,810 level as the key support level to watch on the downside should risk-off continue. EURUSD – the EURUSD supermajor continues to coil in a tight range ahead of the FOMC meeting tomorrow and ECB meeting on Thursday, both of which are set to bring refreshed forecasts for the economy and policy. The FOMC meeting is likely to carry more weight in terms of the market reaction, especially if the Fed waxes more hawkish than expected (more below) and takes Fed rate expectations for next year to new highs for the cycle. The lines in the sand on the chart include the 1.1186 lows of November, while the recent pivot highs of 1.1355 and 1.1384 bar the upside, with 1.1500 a more structural resistance/pivot zone. AUDUSD – watching the US dollar closely over the next couple of sessions, particularly in the wake of tomorrow’s FOMC meeting and what it brings in the way of a crystallization of the Fed’s hawkish shift (more below) and in the market reaction. If the meeting brings a spike in market volatility, traditionally risk-correlated currencies like the Aussie could show high beta to swings in the US dollar in either direction (I.e., if the Fed waxes more hawkish than expected and this triggers risk-off and a stronger USD). AUDUSD recently broke down through the prior 2021 lows near 0.7100 and tested the huge 0.7000 level before staging a sharp bounce. That 0.7000 level could serve as a kind of “bull-bear” line from here. Crude oil (OILUKFEB22 & OILUSJAN22) has settled into a relatively narrow range with Brent finding resistance at $76, the 21-day moving average while support remains the 200-day moving average at $73.15. OPEC in its monthly oil market report maintained their 4.2 million barrels per day demand growth outlook for 2022 with current omicron-related weakness being offset by a strong recovery during Q1. The Saudi energy minister said the energy transition will cause an oil-price spike later this decade while also warning traders against shorting the market at a time where large speculators have reduced their Brent crude oil long to a 13-month low. On tap today we have IEA’s Monthly Oil Market Report. Gold (XAUUSD) remains stuck just below its 200-day moving average at $1794 with focus on what 20 central bank meetings this week will deliver in terms of inflation fighting measures at a time where the omicron variant continues to cloud the economic outlook. With US inflation rising at the fastest pace since the 1980’s, Wednesday’s FOMC meeting remains the top event. The market is currently pricing in three rate hikes next year with the first one due around June. The other semi-investment metals of silver (XAGUSD) and platinum (XPTUSD) both struggling with the latter’s 850-dollar discount to gold, near a one year high, potentially deserving some attention. US Treasuries (TLH, TLT). The US yield curve bulled flatten yesterday with 10-year yields falling by 7bps to test support at 1.41%. To contribute to this move was news of the first omicron death in the UK, and the winding done of short US Treasury positions before the end of the year. Price action will remain volatile ahead of the Federal Reserve meeting, where Powell is expected to announce an acceleration of the pace of tapering. The focus is going to be also on the Dot plot, where longer term projections might be moved higher, pushing up the long part of the yield curve. However, long-term yields can move higher only that much, as omicron distortions will continue to keep them compressed. It looks likely that 10-year yields will continue to trade rangebound between 1.40% and 1.70% until the end of the year. European sovereign bonds (IS0L, BTP10). The Bund yield curve bull flattened yesterday led by safe-haven buying amid concerns over omicron. Italian BTPS gained the most as the market pushes back on interest rate hikes in 2022. The focus, however, continues to be on the ECB meeting on Thursday. An announcement of the end of the PEPP program in March 2022 is widely anticipated. What’s not clear is whether it will be announced that bond purchases will be compensated by another scheme, such as the APP. It is likely that the ECB will stall as members are torn between inflation and a new wave of Covid infections. If investors feel the support of the central bank is fading, European yields might resume their rise with the periphery and Italian BTPS leading the way. Yet, the move will be contained as yields will remain compressed by covid concerns. UK Gilts (IGLT, IGLS). The BOE might not deliver on a 10bps interest rate hike this week as members are divided concerning Covid restrictions. Michael Saunders, one of the most hawkish MPC members, said that he will need to think about it twice before voting for a rate hike. As expectations for interest rate hikes in the UK are the most aggressive among developed economies. It is possible that if the central bank does not hike, the Gilt yield curve will be steeping with short-term Gilts gaining the most as the market pushes back on next year’s rate expectations. What is going on? China reports first omicron variant case of covid - bringing fears of supply chain disruptions due to the country’s zero tolerance policy on virus cases that can mean profound shutdowns in response to outbreaks. Chinese property developers under new pressure, with the focus this time on Shimao Group Holdings, whose Hong-Kong listing is down over 75% this year and down over 30% over the last week on concerns that a deal between the company’s business units is a sign of financial stress for the company. The company’s 2030 USD-denominated bonds lost almost 13% overnight as the yield rose above 10%. Other Chinese property developer shares were also under pressure overnight. Tesla shares down 5% as growth stocks are under pressure. Tesla shares pushed below $1,000 yesterday adding further pressure to related assets in the Ark Innovation ETF and Bitcoin is also seen lower this morning. Elon Musk sold $907mn worth of shares yesterday according to a filing overnight in order to pay taxes on another round stock options that were exercised. Toyota finally pushes into EV. Japan’s largest carmaker wants to compete with Tesla and Volkswagen announcing $35bn of investments into battery electric vehicles showing the first sign that Toyota is acknowledging that this is the future of the industry. Toyota has so far pursued hybrids on the ground of being more economical, but this push into BEV with 30 new models validates BEVs once and for all, even though Toyota is still saying that it does not know which technology will win. US Harley-Davidson set to spin-off EV motorcycle unit – the plan to spin off Harley’s EV business via a SPAC saw Harley-Davidson shares spike 19% before surrendering most of the gains. Harley’s LiveWire EV business unit will combine with SPAC AEA-Bridges Impact to form a new publicly traded company. The move is meant to take advantage of the premium the market is willing to pay for pure-play EV companies. EU diplomats suggest time running out on Iran nuclear deal - as Iran is progressing rapidly toward enriching uranium for potential use in nuclear weapons. The diplomats worry that without a breakthrough soon, the original 2015 agreement “will very soon become an empty shell.” What are we watching next? The Wednesday FOMC as the year’s final major macro event risk. The FOMC meeting tomorrow is set to bring a very different monetary policy statement from the prior statement after the Fed’s clear pivot to inflation fighting mode. As well, the meeting will see an update of economic forecasts and interest rate policy forecasts (the “dot plot” in which 19 Fed members forecast where the Fed funds rate will likely be in 2022-24 and in the longer term). Most interesting will be the degree to which Fed members have raised their policy rate forecasts relative to what the market is predicting, which is for just under three rate hikes through the end of next year. Prior forecasts have generally come in lower than market expectations. The baseline expectation for the pace of QE “tapering”, or slowing of purchases, is that the Fed will double the pace of tapering, which would mean the Fed’s balance sheet is set to stop growing by the end of March. Anything that suggests a faster pace of tapering than this doubling (for example, a promise to wind down before March) and that hints that a hike at the March FOMC meeting is possible would be a hawkish surprise. The European Council meets on Thursday, and apart from having to deal with Covid-19 and the Russian threat on its eastern borders, the council is also set to decide whether investments in gas and nuclear energy should be labelled climate friendly. The design of the EU green investment classification system is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition, especially given the need to reduce the usage of coal, the biggest polluter. Earnings Watch – the earnings calendar is getting very thin this week and no major earnings expected today. Wednesday: Inditex, Toro, Lennar, Heico, Trip.com, Nordson Thursday: FedEx, Adobe, Accenture Economic calendar highlights for today (times GMT) 0830 – Sweden Nov. CPI 1000 – Euro Zone Oct. Industrial Production 1100 – US Nov. NFIB Small Business Optimism 1300 – Hungary Central Bank Rate Decision 1330 – US Nov. PPI 1900 – New Zealand RBNZ Governor Orr before parliament committee 2130 – API Weekly Report on US Oil and Fuel Inventories 2330 – Australia Dec. Westpac Consumer Confidence 0200 – China Nov. Retail Sales 0200 – China Nov. Industrial Production During the day: IEA’s Monthly Oil Market Report   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

Macro 2021-12-10 08:30 6 minutes to read Summary:  Risk sentiment has consolidated after sharp gains earlier this week as the market nervously eyes the US November CPI release today from the US and whether this will trigger a more hawkish FOMC meeting next week. The US White House has already been out attempting damage control from the inflation headlines today, saying that the data will not reflect recent declines in gasoline and other prices.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities and particularly tech stocks consolidated a significant chunk of the sharp gains from earlier this week, with speculative sectors getting the worst of it on the day, although most stocks were down on the day. A high US November CPI release today could spook investors as it would raise the anticipation of an even more hawkish FOMC meeting next week. EURUSD – The EURUSD rally attempt from Wednesday faltered in what now looks a mere tactical squeeze ahead of today’s US November CPI report (more below). Given that the slide in EURUSD has largely tracked with the rise in Fed expectations, the degree to which those expectations are adjusted higher or lower in the wake of today’s US CPI data and then next week in the wake of the FOMC meeting Wednesday and ECB meeting Thursday will likely correlate with EURUSD direction, where the focus is on the cycle lows just below 1.1200 for a possible run at 1.1000 on a break lower and the tactical pivot high near 1.1380. USDJPY and JPY crosses – the omicron variant news of some two weeks ago triggered a huge slide in USDJPY just after it was trying to engineer a break above multi-year highs near 114-50. Similar to developments in crude oil and longer US yields, USDJPY has failed to get back to the upper reaches of the recent range since that sell-off, which bottomed out near the 112.50 area – the current trigger zone for a possible further sell-off wave (most like in a scenario of cratering risk sentiment and US treasuries serving as a safe-haven) that could poke at the important 111.00-50 downside pivot zone. Elsewhere, JPY crosses backed up very sharply this week on hopes that the omicron variant will prove mild and won’t impact the growth outlook, but the scale of the rally or squeeze has been modest relative to the prior sell-off. Watching areas like 127.50-128.00 in EURJPY and 79.00 in AUDJPY in coming sessions for whether another wave of JPY strength is in the cards. Crude oil’s (OILUKFEB22 & OILUSJAN22) week-long rally hit the buffers yesterday with Brent and WTI retracing back towards support at their 200-day moving averages at $73 and $69.80 respectively. A study finding the omicron variant is 4.2 times more transmissible than the delta combined with new restrictions among several nations helped weaken the sentiment, and with end of year approaching many traders are increasingly becoming more risk adverse, potentially leading to more fluctuations. Focus today on omicron news, US inflation data and whether the mentioned support level can be maintained. Wheat (WHEATMAR22 & ZWH2) trades near five-week low following three days of losses which accelerated yesterday after the USDA raised its outlook for global stocks. The 3% drop in Chicago also helped drag down the recent highflyers futures for Kansas and Paris milling wheat. Global stock levels at the end of the 2022-23 season received a boost from production upgrades in Russian (1mt) and Australian (2.5mt) while US export slowed with high prices curbing demand. US Treasuries (TLH, TLT).  Yesterday’s 30-year auction showed that the market is not willing to buy long-term US Treasuries at current low yields. The 30-year auction was priced with a high yield of 1.895%, tailing by 3.2bps. Although the tail was smaller than last month’s 5.2bps, it would have been enough to cause a selloff in long-term Treasuries. However, covid distortions kept yields compressed, hence volatility in rates was avoided. Today’s CPI numbers are in focus as a high number is likely to contribute to more upward pressure in the yield curve. What is going on? The US White House was already out attempting damage control on inflation before today’s CPI release. A White House official, economic adviser Brian Deese, was out late yesterday saying that today’s US November CPI release won’t reflect recent drops in the price of key commodities, especially gasoline and natural gas as it is “backward looking”. China property developers formally declared to have defaulted - as Fitch Ratings noted missed interest payments on Evergrande and Kaisa Group Holdings USD bonds as it downgraded these issues to restricted default. USDCNY and USDCNH bounce sharply a day after posting new low for the year - China fixed the USDCNY level at a far weaker level than expected and announced an FX reserve ratio increase to 9%, forcing domestic banks to maintain higher reserves of foreign currencies.  These are rather obvious signals that China would like to avoid a further rise in its currency after a powerful and broad rally that saw both the offshore and onshore yuan posting new highs for the US dollar for the year just this Wednesday. Bitcoin and other cryptocurrencies close sharply lower – with Bitcoin closing at its lowest levels on a weekday since September. Technically, the 40-45k zone looks important for avoiding a more significant capitulation lower after the recent weekend meltdown that took the price some 20% lower to below 43k before support was found. According to coinmarketcap.com, the market cap of the nearly 15.5k cryptocurrencies is currently near $2.26 trillion after peaking near $2.93 trillion in November, a drawdown of over 22%. What are we watching next? US November CPI data release today, expected at 6.8% year-on-year for the headline number and 4.9% at the core, both of which would be the highest readings in decades. Given that expectations are so high, would a slightly hotter than expected number move the needle on a Friday ahead of next week’s important FOMC meeting? A significant beat to the upside just might make a difference, given that the Fed has clearly made a shift toward fighting inflation and would probably need to bring a March 2022 rate hike possibility into its forward guidance. Fed rate expectations for next year are poised near the high for the cycle, suggesting a 0.8% Fed Funds rate (vs. currently 0-0.25%) is priced in through the December 2022 Fed meeting. The EU is set to decide by December 22 whether investments in gas and nuclear energy should be labelled climate friendly. The design of the EU green investment classification system is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition, especially given the need to reduce the usage of coal, the biggest polluter. Economic calendar highlights for today (times GMT) 0905 – ECB President Lagarde, others speaking at panel discussion1300 - Poland National Bank of Poland meeting minutes1330 – US Nov. CPI1500 – US Dec. Preliminary University of Michigan Sentiment Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher

December 14, 2021  $USD, Canada, Chile, Currency Movement, EMU, Hungary, Japan, Mexico, UK Overview:  Activity in the capital markets is subdued today, ahead of tomorrow's FOMC meeting conclusion and the ECB meeting on Thursday.  The MSCI Asia Pacific equity index fell for the third consecutive session.  European bourses are heavy after the Stoxx 600 posted an outside down day yesterday. Today would be the fifth consecutive decline. Selling pressure on the US futures indices continues after yesterday's losses.  Australia and New Zealand bonds played catch-up to the large drop in US Treasury yields yesterday, while European benchmark yields are edging higher.  The 10-year US Treasury yield is around 1.43%.  The dollar is mixed against the major currencies.  The Canadian and Australian dollars and Norway are softer, while the Swiss franc and euro lead with around a 0.25%-0.35% gain.  Most emerging market currencies are little changed, though the Turkish lira is paring yesterday's intervention-fueled gains.  Led by the Hungarian forint ahead of the outcome of the central meeting, and helped by a firm euro, central European currencies lead the emerging markets.  The JP Morgan Emerging Market Currency Index is off for a second session after breaking a four-week slide last week.  Gold continues to consolidate and is within yesterday's range ($1782-$1791).  Oil is also trading quietly, with the January WTI contract in a $70.50-$72.00 range.  European (Dutch) natural gas is rising for the sixth session of the past seven, during which time it has increased by nearly a third.  US natgas has fallen by almost 30% in the past two weeks and is off for about 4.4% this week already.  Iron ore is paring yesterday's 6.5% gain, while copper is drifting lower and is extending its loss into the fourth consecutive session.   Asia Pacific Year-end pressures are evident in Japan's money markets, and the BOJ responded by arranging an unscheduled repo operation for the second consecutive session.  Yesterday's overnight operation was for JPY2 trillion (~$17.5 bln) after the repo rate rose to two-year highs.  The repo appeared to have been lifted by dealers securing funding for bill purchases.  Today the BOJ offered to buy JPY9 trillion of bonds under the repo agreement.   The US has offered to lift the steel and aluminum tariffs on Japan on similar terms as the deal struck with the EU.   A certain amount, based on some historical market share, can be shipped to the US duty-free, but over that threshold, a levy will be imposed.  Unlike the EU, Tokyo did not impose retaliatory tariffs.  Estimates suggest that Japan shipped around 5% of its steel to the US, though some might have made its way through Mexico.   The regional highlights for the week still lie ahead.  Tomorrow, China reports November retail sales, industrial production, new home prices, investment, and the surveyed jobless rate.  Retail sales are expected to have slowed, while industrial output may have firmed.  Investment in property and fixed assets may have stalled.  Japan has its tertiary index (October) tomorrow, a November trade balance on Thursday (it nearly always deteriorates from October), and the Friday BOJ meeting.  The BOJ is expected to extend some of its emergency facilities.  Australia reports its November jobs data first thing Thursday morning in Canberra.  After three months of job losses, a strong report is expected as social restrictions were lifted.   Today, the dollar is confined to about a quarter of a yen range above JPY113.50.  It has not traded above JPY114.00 this month so far.  Nor has it traded below JPY113.20 since last Monday.  An option for $760 mln at JPY1113.85 rolls off today.  The Australian dollar tested the session high near $0.7135 in the European morning but met a wall of sellers, perhaps, related to the nearly A$600 mln option at $0.7130 that expires today. It has traded down to a five-day low around $0.7090, which is the halfway point of last week's rally.  The next retracement (61.8%) is near $0.7065. The dollar continues to struggle to sustain upticks against the Chinese yuan. It is trading heavily today, its seventh loss in the past eight sessions.   Still, the greenback held above yesterday's low (~CNY6.3580).  It was unable to poke above CNY6.37.   The PBOC's dollar fixing was set at CNY6.3675, while the market (Bloomberg survey) anticipated CNY6.3666.   Europe The UK reported solid employment data.  The November claimant count rate eased to 4.9% from a revised 5.0% (initially 5.1%), representing a nearly 50k decline after the October decline was revised to 58.5k from -14.9k.  The pace of earnings growth slowed to 4.9% from 5.9% (three-month, year-over-year).  Employment rose by nearly 150k (three months) after a 247k increase previously.  Tomorrow, the UK sees November CPI and PPI.  Both are expected to have quickened from October.  Nevertheless, the BOE is now seen on hold until February.   Hungary's central bank is set to hike the base rate today.  A 40 bp increase would follow last month's 30 bp hike.  Today's move would be the sixth in a row.  The base rate began the year at 60 bp, and today's hike would lift it to 2.50%.  On Thursday, Hungary likely hiked the one-week deposit rate.  It has been hiked for the last four weeks.  It had been at 75 bp until June, when it was hiked by 15 bp.  It was lifted by 30 bp in July and again in August.  It reverted to 15 bp increases in September and October.  The one-week deposit rate was raised several times last month to 2.90%.  It is up another 40 bp so far this month, and it is expected to be lifted by another 20 bp this week.   In October, industrial output in the euro area rose 1.1% after a 0.2% decline in September.  The preliminary PMI will be reported on Thursday, ahead of the ECB meeting.  Activity likely slowed. The focus of the ECB meeting is on the guidance about bond-buying next year.  The emergency facility is expected to wind down at the end of Q1, but given that it will still be buying bonds, tapering may not be as necessary or pronounced as, say, with the Federal Reserve.  The ECB staff will also update forecasts, including a sharp upward revision to next year's while extending the projections to 2024.  There is also interest in what the ECB will do about its long-term loans (TLTRO).    The euro has firmed in the European morning but remains mired in a narrow range.  Indeed, the range over the past five sessions is a little less than a cent (~$1.1260-$1.1355). There is an option for nearly 500 mln euros at $1.1330 that expires today.  For the past month, the euro has been in a $1.12-$1.14 trading range, with the notable exception on November 24, when the low for the year was recorded (~$1.1185).   Sterling slipped below $1.32 in late Asian turnover but found bids lurking there, and Europe has extended its recovery toward $1.3235.  Resistance is seen in the $1.3260-$1.3275 area. Sterling has not traded above $1.33 since December 3, yet a move above there is necessary to lift the technical tone.   America The US reports November producer prices today.  The headline rate is expected to push above 9%, while the core rate pokes through 7%.  The market is understandably more sensitive to consumer prices than producer prices.  Tomorrow, ahead of the FOMC statement, the November retail sales (softer than the 1.7% headline increase in October) and the December Empire manufacturing survey will be released.   Although the Senate is expected to maneuver to lift the debt ceiling today, the Treasury is planning a large bill pay down (~$175 bln) to ensure it would have the space to settle the coupon auctions.  That said, the supply of bills is likely to improve through Q1 22, according to estimates.  By most accounts, the Treasury has overfunded itself, and this will allow it to cut back further on new supply, just as the Federal Reserve is expected to accelerate its tapering.   The Bank of Canada was told its inflation target remains 2% but that it can overshoot to support "maximum sustainable employment."  The central bank's language is important.  It said it would "continue" to support the labor market objective, suggesting that yesterday's adjustment to the mandate will have a minor operational impact.  In fact, with inflation (October CPI 4.7%, an 18-year high), Governor Macklem quickly indicated that this was not the situation when it could probe for the maximum sustainable employment.  Still, the new mandate requires that the central bank explain when it is using its new flexibility and how labor market outcomes are incorporated into monetary decisions.  Separately, Canada is proposing alternatives to the US proposed tax incentives for electric vehicles in the Build Back Better initiative.  Canada and Mexico claim that it violated the USMCA and throws a wrench in the 30-year auto integration.  The EU trade commissioner has also expressed concerns about whether the legislation would break the WTO rules too.   Late today, Chile's central bank is expected to deliver a 125 bp rate hike, the same as in October.  The overnight target rate began the year at 50 bp.  It was hiked by 25 bp in July and 75 bp in August.  With today's hike, it will stand at 4%.  More work is needed as November CPI was at 6.7%.  Chile holds the run-off presidential election this weekend.  In the first round last month, the conservative Kast drew 28% support while the left candidate Boris garnered 26%.  Chile's innovation during Covid was to allow people to withdraw funds from their pensions (yes, like a farmer eating their corn seed).  Three withdrawals were granted, but a fourth effort was rebuffed earlier this month.  The World Bank and the IMF expressed concern about the pension fund industry, which had been among the best in the region.  The Chilean peso is among the worst-performing emerging market currencies this year.  It has fallen nearly 15.5% and has only been "bested" by the Argentine peso (~17.3%) and the Turkish lira (-48%).   The Canadian dollar's retreat is being extended for the fifth consecutive session.  The greenback has largely held above CAD1.2800 and is drawing near the high seen after the employment reports on December 3 (~CAD1.2855).  We usually see the exchange rate is driven by 1) general risk appetite, 2) commodity prices, and 3) rate differential.  Here we note that Canada's 2-year premium has fallen from about 60 basis points at the start of last month to around 27 bp now.  Over the same time, the 10-year premium has wholly disappeared.  It was almost 20 bp on November 1 and currently is trading at a four basis point discount.  Meanwhile, the greenback is consolidating against the Mexican peso. For the fifth consecutive session, it has been mainly chopping in a MXN20.85-MXN21.08 range.   On Thursday, Banxico is expected to hike its overnight rate by 25 bp.  We continue to think it is more likely to hike by 50 bp than standpat.  Since June, it has lifted the target rate by 100 bp to 5%.   November CPI stood at 7.37%.     Disclaimer

  First a pandemic, then inflation, and now an energy crisis. Should you buy gold when preparing for the winter? Brace yourselves, winter is coming! And this time I’m deadly serious, as there is a global energy crisis. Not only does gold lack energy to fuel its rally right now, but people from all over the world lack it to fuel their operations and to heat their houses. Apparently, the coronavirus pandemic wasn’t enough, so we also have to deal with inflation, supply bottlenecks, and the energy crisis. I guess there is nothing else to do now but wait for the frogs to start falling from the sky. But let’s not give the gods ideas and focus on the energy crisis today. What is it about? A picture is worth a thousand words, so please take a look at the chart below, which presents the Dutch Title Transfer Facility, Europe’s leading benchmark for natural gas prices. As you can see, future prices for European natural gas have skyrocketed to a record level in October 2021, surging several times from their low in May 2020. The persistence and global dimension of these price spikes are unprecedented, as natural gas prices have also surged in Asia and America (although to a lesser degree). What caused such a spike? Well, as a trained economist, I cannot resist answering that it’s a matter of demand and supply! Yeah, thank you, Captain Obvious, but could you be a little more specific? Sure, so on the demand side, we have to mention a fast recovery from the epidemic and cold fall that increased the use of energy. Oh, and don’t forget about the ultra-low interest rates and the increase in the money supply that boosted spending on practically everything. The increased demand for energy is hardly surprising in such conditions. On the supply side, there were unpredictable breakdowns of gas infrastructure in Russia and Norway that decreased deliveries. The former country reduced its exports due to political reasons. What’s more, the reduction in the supply of CO2 emission rights and unfavorable weather didn’t help. The windless conditions in Europe generated little wind energy, while drought in Brazil reduced hydropower energy. More fundamentally, the decline in energy prices in response to the economic crisis of 2020 prompted many producers to stop drilling and later supply simply didn’t catch up with surging demand. You can also add here the political decisions to move away from nuclear and carbon energy in some countries. Last but not least, the butterfly’s wings flapped in China. Coal production in that country plunged this year amid a campaign against corruption and floods that deluged some mines. Middle Kingdom therefore began to buy significant amounts of natural gas, sharply increasing its prices. China’s ban on importing coal from Australia, of course, didn’t help here. Great, but what does the energy crisis imply for the global economy and the gold market? First, shortages of energy could be a drag on global GDP. The slowdown in economic growth should be positive for gold, as it would bring us closer to stagflation. Second, the energy crisis could cause discontent among citizens and strengthen the populists. People are already fed up with pandemics and high inflation, and now they have to pay much higher energy bills. Just imagine how they will cheer when blackouts occur. Third, the surge in natural gas prices could support high producer and consumer inflation. We are already observing some ripple effects in the coal and oil markets that could also translate into elevated CPI numbers. Another inflationary factor is power shortages in China, as they will add to the supply disruptions we are currently facing. All this implies more persistent high inflation, which should provide support for the yellow metal as an inflation hedge, although it also increases the odds of a more hawkish Fed, which is rather negative for gold. It’s true that a replay of the 1970s-like energy crisis is remote, as today’s economies are much less energy-consuming and dependent on fossil fuels. However, the worst is possibly yet to come. After all, winter hasn’t arrived yet – and it could be another harsh one, especially given that La Niña is expected to be present for the second year in a row. Meanwhile, gas stocks are unusually low. You can connect the dots. So far, gold has rather ignored the unfolding energy crisis, but we’ve already seen that market narratives can change quickly. It’s therefore possible that prolonged supply disruption and high inflation could change investors’ attitude toward the yellow metal at some point. The weak gold’s reaction stems from the limited energy crisis in the US and from the focus on the Fed’s tightening cycle. But investors’ attention can shift, especially when the Fed starts hiking federal funds rate. Brace yourselves! Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

AUDUSD sees limited rebound The Australian dollar softens over dovish RBA meeting minutes. The pair has met stiff selling pressure near the 30-day moving average (0.7220). On the hourly chart, a bearish MA cross and a break below 0.7100 indicate weakness in the latest rebound. An oversold RSI may cause a brief rally, but the bears may sell into strength around 0.7160. 0.7050 at the base of the initial breakout is an important support. A lack of bids could send the Aussie to 0.6990 with the reversal attempt at stake. XAGUSD to test demand area Silver drops as the US dollar inched higher across the board. A bullish RSI divergence suggests a loss of momentum in the sell-off. Then the recent surge has broken above multiple levels of resistance, prompting the short side to cover some of their bets. However, the bulls may need to defend their gains after the initial push overextended. The demand zone between last September’s low (21.40) and 21.80 is critical in keeping the rebound valid. 22.65 is now a fresh resistance before a full-blown recovery could materialize. US 30 struggles for support The Dow Jones retreated as major countries imposed curfews ahead of the holiday season. Following a double top under 36200, a drop below 35450 has broken buyers’ attempt to resume the rally. The index is struggling to hold above the base of the December recovery (34800) which coincides with the 61.8% Fibonacci retracement level of the rally from 34000. Buyers will need to lift 35620 before they could attract followers’ attention. 34000 is the daily support to safeguard the bullish bias in the medium-term.

TSLA shares shot up 7.5% on Wednesday after Elon Musk claimed he was done selling. NHTSA investigates 580,000 Teslas over video game safety issue. Tesla secures four-year supply of graphite for battery anodes from Australian company. Tesla (TSLA) did not underwhelm those expecting a banner session on Wednesday. TSLA shares careened up 7.5% after Elon Musk added even more color to Tuesday's statement about soon ending his season of selling. Specifically, he said there were a few tranches left, but that he was "almost done." The stock is trading up 1% in Thursday's premarket at $1,019. Tesla Stock News: Tesla secures graphite supply Tesla secured the majority of battery-grade graphite from a new Louisiania processing plant owned by Australia-based Syrah Resources, according to Bloomberg. The processor will have an initial supply capacity of 10,000 short tons a year, and Tesla will have first right to any increased supply capacity. Graphite is used for battery anodes, and China currently produces most of the world's battery-grade graphite. Syrah Resources will supply its graphite from Mozambique on the other hand. Syrah says it could raise its output from Mozambique to 40,000 tons by the middle of this decade. Early Wednesday morning the National Highway Traffic Safety Administration (NHTSA) announced a safety investigation into 580,000 Tesla vehicles sold since 2017 that come equipped with video games that can be played on the center console touchscreen. The NHTSA says that prior to December 2020, the games could only be played when the vehicle was in park. Starting a year ago, however, the agency claims the games were made available to the front passenger when the vehicle was in drive, which "may distract the driver and increase the risk of a crash," the NHTSA said. Musk's tweet on Wednesday that he was "almost done" with selling shares refers to his promise in early November that he would sell 10% of his stake in the EV maker. On a podcast on Tuesday, the Tesla CEO had said he had "sold enough" TSLA stock to meet his 10% goal. Wednesday's admission that he was "almost done" sounds closer to the truth, and some observers think he has sold about 15 million shares thus far with about 2 million to go. TSLA key statistics Market Cap $1.02 trillion Price/Earnings 330 Price/Sales 25 Price/Book 38 Enterprise Value $1.02 trillion Operating Margin 10% Profit Margin 7% 52-week high $1,243.49 52-week low $539.49 Short Interest 3% Average Wall Street Rating and Price Target Hold, $849.64   Tesla Stock Forecast: this is what a reversal looks like On Wednesday, Tesla's share price bounded past December's top trend line that has herded TSLA stock lower since December 1. Before the market opened on Wednesday, FXStreet wrote: "To confirm the reversal, TSLA price must close above the December 17 swing high at $960.61. Further confirmation that the three-week price decline is over would be a close above the December 16 high of $998.54." Indeed, the market has seen both levels broken in a single session. Now TSLA faces resistance at $1,020 from December 10. If bulls can break above this price, then the target will become December 8's $1,072 resistance point. Overpowering here will bring $1,165 into view, which provided resistance on November 30 and December 1. TSLA 1-hour chart

AUDUSD falls back for support The Australian dollar pulls back as risk assets tread water amid low liquidity. A break above the previous high at 0.7220 reveals a strong bullish bias. However, the RSI’s repeatedly overbought situation may have prompted short-term buyers to take some chips off the table. In turn, this left price action vulnerable to retracement. 0.7200 is the closest support. Its breach would trigger a deeper correction towards 0.7120. A close above 0.7250 may resume the reversal and carry the Aussie to the daily resistance at 0.7360. USDCHF tests consolidation range The US dollar softens over weaker Treasury yields. The pair’s latest rebound has met aggressive selling at the upper bound of the consolidation range near 0.9250. That is a sign of lingering bearish pressure. The greenback is testing the lower bound near 0.9160. Range traders were eager to buy the dip as the RSI ventured into the oversold zone. 0.9210 is an intermediate hurdle leading to the upper limit where a breakout could trigger a bullish reversal towards 0.9350. Otherwise, a drop below 0.9160 may send the pair to 0.9100. EURJPY breaks higher The Japanese yen weakened after Japan’s jobless rate rose to 2.8% in November. The long side has gained the upper hand after they pushed above 129.60. A bullish MA cross following a brief consolidation indicates an acceleration in the upward momentum. A break above the psychological level of 130.00 would set 130.60 as the next target, clearing the path for a rally to 131.30. An overbought RSI may cause a temporary pullback. 129.20 from the previous supply zone has become a fresh support.

Equities 2021-12-01 00:00 7 minutes to read Summary:  Hello December...Traditionally the second most bullish month for equites with the ASX200 rising 1.7% on average in December (since 1993/inception), while the S&P500 index has risen 1.5% on average (since 1950). Now the question is, will this December be different? Probably yes, as there is much uncertainty; markets are weary of Omicron (awaiting vaccine makers to develop a new vaccine), while retail sales are growing slower than expected (going against the grain as sales generally ramp up this time of year). So what’s next? We cover what to watch today and potential trading considerations. So volatility is indeed picking up right? And add in the fact that US Fed Chair said overnight, that the bond-buying taper process could wrap up “few months sooner than expected”…which opens the door to interest rates hikes thereafter. Powell also said “it’s probably a good time to retire” the world “transitory” to describe inflation. While global equities remain on tender hooks, keep an eye on volatility, and consider possible hedges. Iron ore breaks above its 30-DMA for the first time since 26 October. Watch the Aussie dollar with GPD data ahead. Markets and what you need to know    Equites: In the US: The Dow Jones fell 1.8%, the S&P500 lost 1.9%. Apple rose 3.1%. Pfizer rose 2.5% Salesfore.com fell 4%. Travellers fell 3.6% In Europe: the Euro Stoxx 50 fell 1.1%, the FTSE 100 down 0.7%. Yesterday most Asian markets fell, with the Australian market being the exception, rising 0.2% Commodities: Gold spot down 0.5% to $1,775.45, erasing gains after Powell’s comments on Taper, Inflation Keep an eye on Newcrest (NCM AU), Northern Star (NST AU), Evolution (EVN AU), Regis Resources (RRL AU), Resolute Mining (RSG AU), OZ Minerals (OZL AU):  WTI crude down 5.4% Oil Falls Below $65 With Powell signaling faster end to tapering Keep an eye on Woodside (WPL AU), WorleyParsons (WOR AU), Oil Search (OSH AU), Beach Energy (BPT AU), Karoon (KAR AU), Origin Energy (ORG AU), Santos (STO AU):  Copper down 1.4% Iron ore fell 0.4% after rising 6.8% the prior day Keep an eye on BHP (BHP AU), Rio Tinto (RIO AU) and Fortescue (FMG AU) Currencies: Aussie down 0.4% to 0.7118 per US dollar (Australia, NZ dollars record biggest monthly drops since pandemic) Kiwi down 0.1% to 0.6817 per US dollar Bonds: U.S. 10-year yield fell 6.2bps to 1.4375% Company News: Volvo Cars shares rose 13.6%; The company released first quarterly property since listing on the stock market a year ago and confirm a dip in revenue and profit. Volvo also flagged the sector-wide semiconductor shortage would continue into next year Apple shares +3.1% after reported Best Apple Cyber Monday. The tech giant is also working on a charger that powers multiple devices, an iPhone, AirPods, and Watch simultaneously. Orocobre shares rose 6% to a record high. Trading volume quadruped. The company expects lithium demand to grow materially through to 2040 due to electric vehicle adoption amid the global transition to carbon neutrality. This is expected to lead to a widening deficit over the next two decades, with demand predicted to be more than twice as great as supply by 2040. Major news, in case you missed it; Australian borders won’t reopen today (1 December), they’ll reopen 15 December Moderna CEO says current vaccines are less effective against new variant and it may take months before a new variant-specific jab is at scale. The World Health Organization said Omicron presents as ‘very high global risk’. Latest economic news: In Australia: The Australian economy is slowing: Private credit grew less than expected; showing Aussies are businesses borrowing less (credit grew 0.5% in October, vs 0.6% expected). Consumer confidence fell on a weekly basis In Asia – China’s manufacturing unexpected grew in November. First rise in activity since Aug. Japan industrial output rose for first time in four months, auto production rebounds on an easing of supply constraints Considerations for today and what to watch Volatility: New information is driving the markets short term direction, so keep an eye out. We’re in an illiquid part of the season, so volatility is high at the moment with news dictating the market moves. Some fund managers are taking money off the table and increasing their hedging To minimise volatility you could consider hedging for the next couple of weeks; perhaps consider currency options which is what we are seeing some clients trade at the moment, they are Buying dollar yen. Iron ore:  The Iron ore price to surged to a one month high, rising back above $100. Also of note, we are seeing clients increasing buy iron ore stocks (Fortescue, BHP and Rio Tinto). What’s new: Brazilian iron ore giant, Vale lowered its production outlook for year, while Rio Tinto announced it sees demand stabilizing is 2022 and underlying demand remaining robust expecting, China to take action to avoid a property hard land. Basically it seems iron ore supply will be coming out of market (from Vale), and demand is picking up in China. From a technical perspective, the iron ore price has held above its 15 and 30 day average, while the MACD technical indicator suggest that buying could pick up again in iron ore. This is definitely something to watch. It appears the 15 day moving average could also cross above the 30 day moving average, which would trigger a gold cross event, a technical event that often results in a bull run forming/continuing as quant traders/investors typically buy into positions when such an event occurs.   Source: TradingView, Saxo Markets Events to watch today: Local: Australian GPD data out 11:30am - expected to show Australian GPD slowed YoY, est. 3.0%, prior 9.6%. QoQ, est. -2.7%, prior 0.7%. So keep an eye on the Australian dollar. If the data is weaker than expected the Aussie dollar would likely fall US tonight: November ADP employment, November MBA purchase index, November ISM manufacturing PMI, crude oil inventories, Federal Chair Jerome Powell testimony What else? OPEC meets on Thursday - we could see production cuts, which could cause a rally in oil   Australian analyst rating changes to consider: CKF: Collins Foods Cut to Neutral at Jarden Securities; PT A$14.16 FMG: Fortescue Cut to Neutral at Citi GNC: GrainCorp Cut to Sell at Bell Potter; PT A$6.15 HPG: Hipages Group Rated New Overweight at Barrenjoey; PT A$4.65 JHX: James Hardie GDRs Rated New Overweight at Barrenjoey; PT A$63 TPG: TPG Telecom Rated New Overweight at Barrenjoey; PT A$7.50 TSI: Top Shelf International Rated New Speculative Buy at Canaccord   Ex-Dividends today on ASX:  Incitec Pivot, United Malt, Aristocrat Leisure

USDCHF tests daily support The US dollar softens over increased risk appetite. A drop below the lower band of the consolidation range at 0.9160 confirms a lack of interest in the greenback. The pair is testing the major demand zone around 0.9100 from the daily chart. A bearish breakout could jeopardize the pair’s rebound over the past quarter. It could also trigger a sell-off towards the psychological level of 0.9000. The bulls may be tempted to buy the dip. 0.9180 would be the first resistance to lift before they could turn the downbeat inertia around. AUDUSD consolidates gains The Australian dollar finds support from rising commodity prices. A bullish MA cross on the daily chart indicates improvement in underlying sentiment. The former supply zone between 0.7210 and 0.7220 has turned into a demand zone. Buyers may be eager to join the rally after the RSI returned to the neutrality area. 0.7290 is a fresh resistance, and a combination of profit-taking and fresh selling could temporarily weigh on the Aussie. 0.7120 is a second line of defense in case of a deeper retracement. EURGBP falls below daily support The pound outperforms the euro over diverging monetary policies. The break below the daily support at 0.8380 is an invalidation of the rebound in late November. The RSI’s repeatedly oversold situation has attracted some buying interest, but not enough to sustain a meaningful bounce. 0.8420 is now a fresh resistance. And only its breach could prompt sellers to cover. On the downside, 0.8365 is a fragile support. A breakout would further deteriorate sentiment and send the euro to February 2020’s lows near 0.8280.

January 03, 2022  $USD, autos, Canada, China, Currency Movement, Inflation, jobs, Mexico, PMI, Trade Overview:  The New Year begins slowly.  Japan, mainland China, Australia, New Zealand, and the UK markets remain closed.  While Hong Kong shares traded heavily, Taiwan, South Korea, and India moved higher.  Led by consumer discretionary and staple sectors, Europe's Stoxx 600 is up about 0.6%.  US futures are 0.4%-0.6% higher.  European yields have drifted lower, with the periphery doing bettter than the core.   The US 10-year yield will begin the local session at 1.51%.  The dollar is mostly firmer, after weakening broadly at the end of last year.   The Norwegian krone and New Zealand dollar are the most resilient,  while the Canadian dollar is off nearly 0.3% to pare the year-end gains, followed by the euro, which is in the middle of its $1.1335-$1.1380 range.  The greenback is holding above JPY115.00.  Emerging market currencies are mixed but mostly softer.  Higher than expected inflation is weighing on the Turkish lira. The South Korean won leads the other softer EM currencies. It is off about 0.25%.  The South African rand (~0.7%) and Russian ruble (0.5%) lead the advancers.  The JP Morgan Emerging Market Currency Index rose by about 2.5% in the last two weeks of 2021 and is slightly firmer today (~0.2%).  Iron ore is higher for the third consecutive session and rallied more than 45% from the middle of November through Xmas, before falling 5.3% last week.  Copper has a four-week 4.6% rally in tow but is slightly softer today.  Gold is stalling near $1830, the (61.8%) retracement of its sell-off from $1880 mid-November high.  Oil rallied for the last two weeks, with February WTI gaining about 6.2%.  OPEC+ meets tomorrow and WTI is up a nearly 1.5% to push above $76.  US natural gas gained slightly more than 1% in the past two weeks and is hovering around little changed level.  Recall that diverted shipments from the US and Asia to Europe saw natural gas prices collapse from above 180 euros on December 21 to 65.5 euros at the end of last week.   Asia Pacific China's property developers remain in the spotlight. Bloomberg estimates that the sector's debt servicing costs, including deferred wages, and maturing obligations are at $197 bln this month.  Evergrande shares were suspended in Hong Kong.  When the problems, bubbling below the surface for some time, emerged last September, global risk appetites were shaken, and many observers made comparisons to the Great Financial Crisis.  However, so far, the problems seem localized and unlike the US and Europe, new lending has not frozen.   The macro data highlights include China's Caixin PMI after the official one surprised on the upside. The preliminary PMIs for Australia and Japan steal the thunder from the final report. Japan's weekly MOF report on portfolio flows may be noteworthy. Foreign investors have been on a buying spree, buying the most Japanese bonds over the first three weeks of December in at least 20 years.   The dollar has risen for the past four weeks against the Japanese yen.  It closed the last two sessions slightly above JPY115.00 and remains above it today.  Recall, last year's high, set in late November, was near JPY115.50.  Today's high thus far is about JPY115.35.  The market may be reluctant to push the dollar much higher before Tokyo returns.  The Australian dollar advanced almost 2% in the second half of December.  It is stalling near the (50%) retracement of its decline from around $0.7555 in late October, found close to $0.7275.  Support is ahead of $0.7200.  Thin trading on New Year's Eve saw the dollar plunge to its low for the year near CNY6.34 before settling slightly above CNY6.3560.  Chinese officials have signaled their desire to avoid further yuan appreciation. If the divergence of monetary policy and higher fx reserve requirements are not sufficient, investors must be wary that other tools can be deployed.   Europe The uptick in Germany's December manufacturing PMI was revised away, leaving it unchanged from November at 57.4.  The flash estimate put it at 57.9.  In contrast, the French reading was revised up to 55.6 from 54.9.  This pared the decline from 55.9 in November.   Italy's manufacturing PMI held in better than expected, slipping to 62.0 from 62.8, the post-Covid high.  Spain, on the other hand, disappointed, with its manufacturing PMI falling to 56.2 from 57.1, its lowest since last February.  The net result was the flash aggregate estimate of 58.0 was sustained (58.4 in November).   The final Eurozone aggregate PMI is of passing interest. The main takeaway from the preliminary estimate continues to resonate:  the economic activity was slowing. The flash estimate put the composite at 53.4 (down from 55.4), the lowest since March. It has risen once in the last five months. More notable for the market will be the preliminary estimate of December inflation. Consumer prices are expected to have stabilized after reaching 4.9% year-over-year in November (2.6% core).   The Turkish government has tried to absorb the currency-risk that it has unleashed by forcing the central bank to cut key interest rates by 500 bp since mid-September.  It managed to spur a powerful short-covering squeeze in the lira, which saw the dollar fall from around TRY18.36 on December 20 to nearly TRY10.25 on December 23.  The greenback recovered to nearly TRY14.00 today, its sixth consecutive advance.  Today's CPI report blew away expectations.  Just in the month of December, Turkish consumer prices jumped nearly 13.6%.  This sent the year-over-year rate to almost 36.1%.  The core rate rose about 31.9% year-over-year.  Short covering helped lifted the euro a little more than 1.1% over the past two weeks.  It reached about $1.1385 on New Year's Eve.  It has not traded above $1.14 since mid-February.  Ahead of this week's two key economic reports (EMU CPI and US employment), the market may not have the conviction necessary to extend its year-end gains.  Sterling gained about 2.1% in the last two weeks.  It reached $1.3550 at the end of last week, its best level since mid-November.  It is little changed today.  The $1.3575 area corresponds to the (50%) retracement of its sell-off from $1.3835 area in late October.  Initial support is seen in the $1.3455-$1.3465 area.   America The US economic diary is jammed packed to begin the New Year. The highlight is the jobs report at the end of the week. The median forecast (Bloomberg survey) calls for a 400k increase after being disappointed with the 210k increase in November. The unemployment rate is expected to ease to 4.1% from 4.2%, and average earnings growth likely moderated. At the end of last year, an article in the Financial Times made two important observations. First, the uniqueness of the covid-impact renders seasonal adjustments suspect. The response rate was less than two-thirds, the lowest for the month of November in more than a decade. In November, the raw establishment survey showed a 778k gain in nonfarm payrolls, but the BLS adjustment cut a record 568k. Second, also complicating the data is the participation by businesses. The response rate was less than two-thirds, the lowest for the month of November in more than a decade.   The monthly auto sales report seems under-appreciated as a broad economic indicator. The supply chain disruptions depressed auto production and, in turn, auto consumption (not just in the US). However, late in the year, there seemed to be some improvement. The median forecast (Bloomberg survey) December US auto sales (seasonally adjusted annual rate) at 13.1 mln, which would then be the most since July. Elsewhere, the preliminary goods trade balance, like the flash PMI, is the real new news. The final reading tends not to be very meaningful. In any event, the trade deficit will widen considerably. The goods deficit widened to a record $97.8 bln from $83.2 bln.   Lastly, the FOMC minutes will be looked at especially for clues about the timing of the first hike. March? It is unreasonable to expect Canada to match the nearly 154k job increase reported for November. The median forecast is 25k. Canada also reports November trade figures. Canada's trade balance has steadily improved since March 2020, and the 12-month moving average through October was the highest in around six years. The swaps market has a little more than half of the first hike (25 bp) priced in at the January 26 Bank of Canada meeting.   Mexico's data highlights include worker remittances, which could be the most important source of private capital inflows. Without meaningful fiscal support and in the face of tightening monetary policy, the economy lacks much momentum. The December CPI is expected to have edged higher toward 7.5%. Monetary policy is where the drama will be as the new central bank governor takes the reins (Rodriguez). The 50 bp hike in December lifted the overnight target to 5.5%. If the market is concerned about a policy mistake or possible erosion of its independence, you would not know it from looking at the peso. It was the strongest currency in the world in December, rising almost 4.5% against the dollar.   The Canadian dollar rallied about 2% over the past two weeks.  This saw the US dollar retrace half of its rally from the mid-October low below CAD1.23 that peaked on December 20 by CAD1.2965.  That retracement came it near CAD1.2625.  The momentum indicators are still headed down, but the greenback is recovering today.  Initial resistance is seen around CAD1.2700.  A move above CAD1.2750 warns that a low may be in place.  The Mexican peso has rallied for the past five weeks, and despite the poor close at the end of the year, it is bid today.  The US dollar was sold from near MXN20.55 to MXN20.45 in the European morning but has found a bid near midday.  The low from New Year's Eve was set around MXN20.3070 and the 200-day moving average is closer to MXN20.27.    Disclaimer

January 05, 2022  $USD, auto sales, Currency Movement, Omicron, PMI, technology Overview:  The tech sell-off in the US yesterday, ostensibly driven by higher rates, carried over into trading today.  South Korea, China, and Hong Kong led the regional sell-off.  News that China's zero Covid tolerance led to a lockdown of the city of Xian with a population of around 13 mln played on fears of more supply chain disruptions.  A second city, Yuzhou, considerably smaller, has also been lockdown.  Japan, India, and several smaller markets gain.  European bourses, where tech is less prominent have edged higher and the Stoxx 600 is extending its gain for the third consecutive session.  US futures are softer.  Asia and most European bonds yields have risen today, while the US 10-year is steady around 1.64%.  Of note, with Italian politics rising as an issue ahead of the presidential contest later this month, maybe helping lift the 10-year BTP to new six-month highs near 1.22%.  The US dollar is seeing its recent gains trimmed against the major currencies.  The Japanese yen is recovering a little after falling to five-year lows yesterday.  The Canadian dollar is the laggard today, amid a sell-off in its bonds.   The emerging market currency complex is mixed, and the JP Morgan EM FX index is recouping about half of yesterday's 0.35% loss.  Gold is firm but remains within Monday's range (~$1798.50-$1832). Among the industrial metals we monitor, iron ore bounced back after yesterday's minor loss and is at its best level since Xmas eve.  Copper is being turned back after yesterday's rally stalled near the $448 cap.  Crude oil is consolidating yesterday's gain and February WTI is near $77.00.  US LNG firm but within the $3.50-$4.00 range, while European (Dutch) is extending yesterday's dramatic gain (31.6%). Asia Pacific While China has moved quickly to impose lockdowns where cases of the virus appear, the tech sector is off to a poor start.  The Heng Seng Tech Index fell 4.6% today, the most since July, and the third consecutive drop.  Tencent is reducing its investments, and this took a toll on companies it backed.  Some link Tencent decision to Beijing's push against anti-competitive practices.  The NASDAQ Golden Dragon Index, which tracks Chinese lists companies fell 4.3% yesterday.  The tech sell-off was also clear in the US where the NASDAQ shed 1.3%.   Japan's "Mothers" gauge weighted toward small and medium-sized software and technology companies fell 5% to its lowest level since May 2020.  In the last hours of trading, after HK tightened social restrictions, the equity loss intensified.   Japan reported that December auto sales were 10.2% lower than a year ago.  Yesterday, the US reported disappointing December auto sales.  Auto sales were expected to have risen to their best level since August but instead fell to a 12.44 mln unit annual pace.  It was the lowest since September and reflects a 23.6% decline from December 2020.  Last year, US auto sales averaged 14.93 mln a month compared with 14.41 mln in 2020 and 16.91 mln in 2019.  Although supply is argued to be a bigger problem than demand, some producers, like GM, have reported a substantial rebuilding of inventories.   The dollar closed above JPY116.00 yesterday but has failed to sustain the upside momentum.  It peaked near JPY116.35 and is approaching support at the previous resistance around JPY115.50.  A break of JPY115.00, which seems unlikely ahead of the US jobs data on Friday, would lend credence to the idea that it was a false breakout.  The Australian dollar is firm near $0.7250 after recovering from the dip below $0.7200.  Still, it needs to resurface above $0.7275-$0.7280 to be notable.  We suspect the Aussie will pullback in North America and see initial support around $0.7220.  Outside of the dramatic year-end session, the Chinese yuan continues to trade quietly in a well-worn range.  The dollar continues to trade mostly between CNY6.3660 and CNY6.3830.  The PBOC set the dollar's reference rate at CNY6.3779.  The (Bloomberg) survey found a median expectation for CNY6.3773.  Note that offshore yuan (CNH) swaps/forward points are at their lowest level since April 2020 amid reports that overseas branches of state-owned banks are continuing to lend out CNH.  Lastly, we note that the China Securities Journal plays up the possibility that the PBOC eases policy ahead of the Spring Festival holiday (January 31).   Europe The main economic news from the eurozone today is the final reading of the December service and composite PMI.  The takeaway is that it is a little softer than the preliminary estimate.  On the aggregate level, the service PMI eased to 53.1 from 53.3 flash estimate and 55.9 in November.  The composite eased from 55.4 in November to 53.4 preliminary estimate and 53.3 final.  It is the lowest since March and is the fourth decline in five months.  While the German services PMI was revised higher, it remains below 50 boom/bust (48.7) and this coupled with the weakness in manufacturing saw the composite revised to 49.9 from 50.0 initially and 52.2 in November.  It is the weakest composite reading since June 2020.   France's service PMI slipped to 57.0 from the 57.1 flash reading and 57.4 in November.  The composite was revised higher to 55.8 from 55.6.  It stood at 56.1 previously.  Italy and Spain disappointed with readings of both the service and composite below expectations.  The Italian composite stands at 54.7 down from 57.6.  Spain's composite is at 55.4 from 57.6 in November.   Intervention by the Swiss National Bank draws attention as the euro traded at six-year lows at the end of last year.  Sight deposits rose by CHF3.37 bln in December after CHF2.27 bln and CHF2.57 bln in November and October, respectively.  Overall, sight deposits rose by CHF18.85 bln in 2021 after surging CHF119.3 bln in 2020.  Denmark also anchors its monetary policy in the exchange rate peg to the euro.  Its central bank sold DKK47 bln (~$7.1 bln) in December to defend the peg.  It was the largest intervention in seven years.  Although inflation is running a little below 4%, there is some speculation that the Danish central bank may have to cut rates as its next defense of the peg.   The euro is trading inside yesterday's (~$1.1270-$1.1320) range.  It is difficult for bulls or bears to find much to like with it hovering around the middle of the two-cent range that has confined it for nearly two months.  The 480 mln euro option at $1.1290 that expires today has likely been neutralized, but there are options at $1.1275 for 1.3 bln euros that expires tomorrow that may be in play still.  Sterling is steady at the upper end of yesterday's range when it briefly poked above $1.3555.  It is the highest it has been since November 10.  An option for GBP375 mln at $1.3505 expires tomorrow.  Initial support is seen near $1.3520, and a break could test support in the $1.3480-$1.3500 area.   America ADP 's private sector jobs estimate is the early feature in the US today.  The median estimate (Bloomberg survey) is for an increase of 410k after 534k in November.  The final PMI will likely draw little attention.  The FOMC minutes from last month's meeting, at which officials announced the acceleration of tapering will be looked upon for insight into the Fed's balance sheet and any signal that it may allow maturing issues to roll-off soon.  Besides the rate hikes, for which the market has priced in three this year, the balance sheet is quickly emerging as the new focus.   Also, on tap today is the EIA inventory data.  The API reportedly showed a large rise in gasoline inventories but another drop (6.4 mln barrels) in crude stocks.   Canada's build permits are not typically a market mover.  Tomorrow it reports the November trade balance, and the highlight is Friday's jobs data.  It is difficult to envision a report as strong as November’s nearly 154k increase.  Proportionately, it would be as if the US nonfarm payrolls rose by around 1.7 mln.  Mexico reports December domestic auto sales.  In November, its auto sales were off about 13.5% year-over-year.  The highlight of the week is Friday's CPI figures.  The year-over-year pace is expected to have edged up from 7.37% in November.   The US dollar is trading inside yesterday's range against the Canadian dollar (~CAD1.2665-CAD1.2765), which was inside Monday's range (~CAD1.2630-CAD1.2780).  It is trading around CAD1.2720 near midday in London.  The intraday technical indicators seem to favor a retest of the greenback's highs.  The US dollar's performance against the Mexican peso is similar.  It is inside yesterday's range, which was inside Monday's range (~MXN20.41-MXN20.65).  The US dollar looks soft and could test the December 31 low near MXN20.33.   The 200-day moving average is near MXN20.27 and the greenback has not traded below it in a little more than two months.    Disclaimer

AUDUSD attempts reboundThe Australian dollar bounces back over strong retail sales in November. The pair saw bids near a previous trough (0.7130).The RSI’s double-dip into the oversold area attracted some traders in taking up the bargain. A bullish RSI divergence suggests a deceleration in the downward momentum. And a jump above 0.7180 could be the first step towards a bounce.The Aussie may surge to the daily resistance at 0.7360 if buyers succeed in lifting offers around 0.7270. Otherwise, the price could test the critical floor at 0.7080.USDJPY tests supportThe Japanese yen rose as risk appetite fades across markets.A bullish MA cross on the daily chart indicates that the dollar’s rally gained traction. However, an overbought RSI means that a pullback could be an opportunity for the bulls to buy dips.The dollar is testing the psychological level of 115.00, the origin of the rally above the November peak (115.50). An oversold RSI has brought in some buying interest. A bearish breakout could trigger a correction to 114.30. Then, the bulls will need to reclaim 115.90 in order to resume the uptrend.US 30 continues to retreatThe Dow Jones tumbled as US Treasury yields hit a two-year high on hike bets.A bearish RSI divergence foreshadowed the current sell-off. A drop below 36300 prompted leveraged positions to close out, driving up volatility as short-term sentiment deteriorated. Rebounds could be opportunities for the bears to sell into strength.35700 is an area of interest, as it lies in a former supply zone and along the 30-day moving average. 35200 would be a second layer of support, while 36400 is the immediate resistance.

XAUUSD breaks resistance Gold surged over geopolitical tensions between the West and Russia over Ukraine. Following a three-week-long sideways grind, the break above the triple top at 1830 indicates strong commitment from the buy-side. 1850 is the next level to clear, which would lead to November’s peak at 1877. The RSI has shot into the overbought area, and some profit-taking could briefly drive the price lower. Buyers may see a pullback as an opportunity to join in. 1820 near the base of the recent rally is a key support in this case. AUDUSD seeks support The Australian dollar climbed back after the unemployment rate dropped to 4.2% in December. A surge above 0.7270 was the bulls’ attempt to initiate a reversal. As sellers covered their bets, the way might be open for a meaningful rebound. The follow-up correction met solid buying interest at 0.7170. Sentiment would remain upbeat as long as price action stays above this key support. 0.7290 is an important hurdle and its breach could trigger a runaway rally towards 0.7420. US 30 tests major support The Dow Jones 30 retreats as traders take profit ahead of next week’s Fed meeting. The index has given up all its gains from the late December rally and fell through the daily support at 34700. This bearish breakout could extend losses to the psychological level of 34000, a critical floor to prevent a deeper correction in the medium-term. The RSI’s oversold situation may attract some buying interest. Nonetheless, the bulls will need to lift offers around 35500 in a show of force, in order to turn sentiment around.

Australian crypto miner Iris Energy (IREN) secured a 600-megawatt connection for a new Texas crypto mining facility, the company said on Friday.The company said in a filing with the U.S. Securities and Exchange Commission (SEC) that it has executed a binding connection agreement with utility provider AEP Texas.Iris Energy paid $19 million for the security deposit and the connection fee, the filing said. The data centers in Texas are expected to be energized in the first quarter of 2023, the miner said.Iris Energy has secured a 300 acre freehold site in the Texas Panhandle, the state's northernmost region, which will be connected directly to the grid through a 345-kilovolt transmission line, the filing said.Iris Energy recorded a hashrate of 748 petahash per second (PH/s) in December 2021. It plans to add 2.9 exahash per second (EH/s) across two sites in British Columbia, with mining rigs it has already secured, by the end of 2022. Another 11.6 EH/s are planned for 2023, including 10.6 EH/s in the Panhandle facility.The company could add another 7 EH/s in the Texas facility if it secures more mining rigs, bringing its total computing power to 22 EH/s - almost 14% of the bitcoin network's current hashrate.Read more: Iris Energy’s December Hashrate Rises 14% as Revenue Falls Again

GBPUSD remains under pressure The sterling struggles as global markets remain risk-off. A limited rebound has fought to hold above 1.3570 and the sell-off accelerated after a bearish breakout. The pair is testing a previous low at 1.3440 which sits along the 30-day moving average. There could be buying interest in this congestion area after the RSI plunged into the oversold band. 1.3570 is now a fresh resistance, then the bulls will need to lift 1.3660 before they could turn sentiment around. On the other hand, a deeper correction may send the price to 1.3400. AUDUSD in bearish reversal The Australian dollar recovered after the Q4 CPI beat expectations. However, the latest rally took a bearish turn after the price slipped below 0.7170. The lack of commitment to hold onto recent gains suggests a weak risk appetite. A fall below the daily support at 0.7130 further weighs on the Aussie and prompts buyers to bail out. The RSI’s oversold situation helped lift the pair temporarily. Nonetheless, the bears might be eager to sell into strength near 0.7210. 0.7080 would be the next stop as the trend turns south. GER 40 tests critical support The Dax 40 plunges amid rising tensions in Ukraine. The index has given up all gains from the rebound in late December and cut through the major demand zone around 15070. The RSI’s repeatedly oversold situation attracted a buying-the-dips crowd. Nevertheless, there is no sign of improvement in the market mood. And price action has not stabilized yet. A grind of last October’s low at 14820 would test the bulls’ resolve in the medium-term. On the upside, 15600 is the first hurdle to lift.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday January 25th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further gains of bullish bets in the Euro currency futures contracts. Euro speculators raised their bullish bets for a sixth consecutive week this week and for the seventh time in the past eight weeks. Over the last six-week time-frame, Euro bets have improved by a total of +43,439 contracts, going from -11,879 net positions on December 14th to +31,560 net positions this week. This week’s net speculator standing marks the highest level for Euro bets since August 17th, a span of twenty-three weeks. Joining the Euro (6,976 contracts) with positive changes this week were the yen (12,606 contracts), US Dollar Index (427 contracts), Australian dollar (5,181 contracts), Swiss franc (2,014 contracts), Canadian dollar (4,825 contracts) and Bitcoin (515 contracts). The currencies with declining bets were the British pound sterling (-7,516 contracts), New Zealand dollar (-2,442 contracts), Brazil real (-1,247 contracts), Russian ruble (-2,478 contracts) and the Mexican peso (-5,710 contracts). Data Snapshot of Forex Market Traders | Columns Legend Jan-25-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 52,328 72 36,861 89 -42,505 4 5,644 78 EUR 682,952 77 31,560 45 -56,258 60 24,698 15 GBP 182,040 27 -7,763 68 16,842 40 -9,079 37 JPY 197,830 53 -68,273 25 82,863 77 -14,590 18 CHF 39,742 14 -8,796 55 13,479 46 -4,683 50 CAD 146,448 28 12,317 60 -19,581 44 7,264 44 AUD 190,020 75 -83,273 8 97,749 92 -14,476 17 NZD 53,316 50 -10,773 53 13,281 51 -2,508 23 MXN 150,142 26 -790 27 -1,478 72 2,268 53 RUB 46,883 48 3,944 23 -4,288 76 344 44 BRL 46,657 54 -12,616 52 11,258 48 1,358 83 Bitcoin 11,756 64 -34 100 -478 0 512 25   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 36,861 contracts in the data reported through Tuesday. This was a weekly rise of 427 contracts from the previous week which had a total of 36,434 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.4 percent. The commercials are Bearish-Extreme with a score of 4.0 percent and the small traders (not shown in chart) are Bullish with a score of 78.3 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.8 3.4 14.6 – Percent of Open Interest Shorts: 9.4 84.6 3.8 – Net Position: 36,861 -42,505 5,644 – Gross Longs: 41,772 1,777 7,658 – Gross Shorts: 4,911 44,282 2,014 – Long to Short Ratio: 8.5 to 1 0.0 to 1 3.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 89.4 4.0 78.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 9.7 -9.8 3.0   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 31,560 contracts in the data reported through Tuesday. This was a weekly rise of 6,976 contracts from the previous week which had a total of 24,584 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.7 percent. The commercials are Bullish with a score of 59.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.5 11.6 – Percent of Open Interest Shorts: 26.6 63.8 8.0 – Net Position: 31,560 -56,258 24,698 – Gross Longs: 213,408 379,154 79,273 – Gross Shorts: 181,848 435,412 54,575 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 44.7 59.8 15.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 13.3 -11.2 -6.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -7,763 contracts in the data reported through Tuesday. This was a weekly lowering of -7,516 contracts from the previous week which had a total of -247 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.4 percent. The commercials are Bearish with a score of 39.6 percent and the small traders (not shown in chart) are Bearish with a score of 36.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.1 64.7 13.7 – Percent of Open Interest Shorts: 24.4 55.5 18.7 – Net Position: -7,763 16,842 -9,079 – Gross Longs: 36,666 117,812 24,909 – Gross Shorts: 44,429 100,970 33,988 – Long to Short Ratio: 0.8 to 1 1.2 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 68.4 39.6 36.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 31.0 -31.7 22.0   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -68,273 contracts in the data reported through Tuesday. This was a weekly advance of 12,606 contracts from the previous week which had a total of -80,879 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 24.9 percent. The commercials are Bullish with a score of 77.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 81.0 9.1 – Percent of Open Interest Shorts: 42.5 39.1 16.4 – Net Position: -68,273 82,863 -14,590 – Gross Longs: 15,866 160,178 17,950 – Gross Shorts: 84,139 77,315 32,540 – Long to Short Ratio: 0.2 to 1 2.1 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 24.9 77.3 18.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -9.3 5.9 6.4   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,796 contracts in the data reported through Tuesday. This was a weekly gain of 2,014 contracts from the previous week which had a total of -10,810 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.6 percent. The commercials are Bearish with a score of 46.0 percent and the small traders (not shown in chart) are Bearish with a score of 49.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.0 69.4 25.2 – Percent of Open Interest Shorts: 27.2 35.5 36.9 – Net Position: -8,796 13,479 -4,683 – Gross Longs: 1,999 27,591 9,996 – Gross Shorts: 10,795 14,112 14,679 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 54.6 46.0 49.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -0.8 -1.5 5.2   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 12,317 contracts in the data reported through Tuesday. This was a weekly increase of 4,825 contracts from the previous week which had a total of 7,492 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.6 percent. The commercials are Bearish with a score of 43.5 percent and the small traders (not shown in chart) are Bearish with a score of 44.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.3 39.3 21.5 – Percent of Open Interest Shorts: 27.9 52.6 16.6 – Net Position: 12,317 -19,581 7,264 – Gross Longs: 53,129 57,492 31,539 – Gross Shorts: 40,812 77,073 24,275 – Long to Short Ratio: 1.3 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 59.6 43.5 44.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 24.7 -12.1 -15.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -83,273 contracts in the data reported through Tuesday. This was a weekly rise of 5,181 contracts from the previous week which had a total of -88,454 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 7.6 percent. The commercials are Bullish-Extreme with a score of 91.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.1 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 80.7 8.6 – Percent of Open Interest Shorts: 51.8 29.3 16.2 – Net Position: -83,273 97,749 -14,476 – Gross Longs: 15,121 153,386 16,371 – Gross Shorts: 98,394 55,637 30,847 – Long to Short Ratio: 0.2 to 1 2.8 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 7.6 91.8 17.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -4.1 -0.5 12.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -10,773 contracts in the data reported through Tuesday. This was a weekly decline of -2,442 contracts from the previous week which had a total of -8,331 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.2 percent. The commercials are Bullish with a score of 50.9 percent and the small traders (not shown in chart) are Bearish with a score of 23.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.9 63.2 5.2 – Percent of Open Interest Shorts: 50.1 38.3 9.9 – Net Position: -10,773 13,281 -2,508 – Gross Longs: 15,948 33,712 2,784 – Gross Shorts: 26,721 20,431 5,292 – Long to Short Ratio: 0.6 to 1 1.7 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 53.2 50.9 23.1 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -8.2 7.9 -2.2   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -790 contracts in the data reported through Tuesday. This was a weekly decrease of -5,710 contracts from the previous week which had a total of 4,920 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.0 percent. The commercials are Bullish with a score of 72.2 percent and the small traders (not shown in chart) are Bullish with a score of 52.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.3 51.6 3.9 – Percent of Open Interest Shorts: 44.8 52.6 2.4 – Net Position: -790 -1,478 2,268 – Gross Longs: 66,449 77,473 5,892 – Gross Shorts: 67,239 78,951 3,624 – Long to Short Ratio: 1.0 to 1 1.0 to 1 1.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 27.0 72.2 52.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 4.2 -5.8 17.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -12,616 contracts in the data reported through Tuesday. This was a weekly lowering of -1,247 contracts from the previous week which had a total of -11,369 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.7 percent. The commercials are Bearish with a score of 48.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.2 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.9 45.6 7.6 – Percent of Open Interest Shorts: 73.0 21.5 4.7 – Net Position: -12,616 11,258 1,358 – Gross Longs: 21,434 21,274 3,541 – Gross Shorts: 34,050 10,016 2,183 – Long to Short Ratio: 0.6 to 1 2.1 to 1 1.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.7 48.4 83.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -10.7 8.4 21.0   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 3,944 contracts in the data reported through Tuesday. This was a weekly decrease of -2,478 contracts from the previous week which had a total of 6,422 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.7 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bearish with a score of 43.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.4 63.3 4.3 – Percent of Open Interest Shorts: 24.0 72.4 3.6 – Net Position: 3,944 -4,288 344 – Gross Longs: 15,179 29,669 2,015 – Gross Shorts: 11,235 33,957 1,671 – Long to Short Ratio: 1.4 to 1 0.9 to 1 1.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 22.7 75.7 43.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -29.8 30.5 -20.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of -34 contracts in the data reported through Tuesday. This was a weekly boost of 515 contracts from the previous week which had a total of -549 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 24.6 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.8 2.4 12.5 – Percent of Open Interest Shorts: 74.1 6.5 8.1 – Net Position: -34 -478 512 – Gross Longs: 8,678 285 1,469 – Gross Shorts: 8,712 763 957 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 100.0 0.0 24.6 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 16.9 -60.9 -0.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

November 22, 2021  $CHF, $USD, BOE, China, Currency Movement, FOMC, Japan, Philippines, Russia Overview:  The US dollar has come back bid from the weekend against most currencies following the talk by a couple of Fed governors about the possibility of accelerating the tapering at next month's FOMC meeting.  The weekend also saw protests against the social restrictions being imposed by several European countries in the face of a surge in Covid cases.  The Swedish krona, yen, and sterling are the weakest, while the dollar-bloc currencies are resisting the greenback's tug. Most of the freely accessible and liquid currencies among emerging market currencies, including Russia, Hungary, South Africa, and Mexico, are heavy. At the same time, the Turkish lira recoups a little of the ground lost last week, and the Chinese yuan shrugged off apparently warnings from the PBOC to post its first gain in three sessions.  Equity markets in the Asia Pacific area mostly fell, though China and South Korea were notable exceptions.  Europe's Stoxx 600 snapped a six-week advance last week but has begun the news week with a small gain through the European morning.  US futures are trading higher.  The bond market is heavy, with the 10-year US Treasury up about three basis points to around 1.58%.  European benchmark yields are 2-3 bp higher.  Gold finished last week on a softer note and edged lower today to trade below $1840 for the first time since November 10.  Resistance is around $1850.  News that Japan may join the US to release oil from reserves saw January WTI slip below $75 but recover back above $76.  It met the (38.2%) retracement of the rally from the late August low near $60.75.  European natural gas (Netherlands) is lower for the fourth consecutive session, during which time it has fallen around 11%.   Iron ore extended the 5.6% gains before the weekend with another 4% gain today.  On the other hand, copper rose 3.3% in the past two sessions and has come back offered today.  Lastly, the CRB Index eased less than 1% last week and is off two of the past three weeks.  Its seven-month rally is at risk.   Asia Pacific Despite China's economic success, it remains clumsy and heavy-handed.   As the US and some other countries were considering a symbolic diplomatic boycott of the winter Olympics in Beijing, the tennis star Peng Shuai is being censored or worse for allegations against a former Politburo member.  Meanwhile, at the end of last week, three Chinese coast guard vessels launched water cannons against two Filipino boats sent to resupply a garrison on the Second Thomas Shoal (Ayungin Shoal), which is within the Philippines' Kalayanan Island Group.  The aggressive harassment brought a rebuke by the US, which reminded Beijing of its mutual defense agreement with Manila.   The Philippines will attempt to bring provision again this week.  Separately, note that after being notified by the US of the military nature of the Chinese construction project in the UAE, the project has been halted.   With the yuan at six-year highs against a trade-weighted basket, Chinese officials have begun expressing more concern about the one-way market.  The FX Committee, composed of industry participants, wants members to do a better job monitoring prop trading, and it follows the PBOC works of caution about risk management at the end of last week.  In its quarterly monetary review, the PBOC made a few tweaks that suggest it could ease policy.   Japan's Prime Minister Kishida acknowledged that releasing oil from its strategic reserve was under discussion.  China indicated it would tap its reserves last week for the second time since September, while it is still under review in the US.  Currently, Japan keeps reserves that are intended to last 90 days, while the private sector must hold reserves to last 70 days, according to reports.  Japan is considering selling oil and using the funds to subsidize the rising gasoline prices.  It may also reduce the duration of the reserves.   The dollar is straddling the JPY114.00 level as its hugs the pre-weekend range (~JPY113.60-JPY114.55).  The JPY114.30 area offers initial resistance, while the focus in early North America may be on the downside.  Still, it appears to be going nowhere quickly.   The Australian dollar finished last week at its lowest level since early October.  That low, just below $0.7230, held, and momentum traders covered shorts, helping lift the Aussie back to session highs near $0.7260.  A move above here allows gains into the $0.7270-$0.7290 area.  The PBOC set the dollar's reference rate at CNY6.3952 today.  The market (Bloomberg survey median) had projected a CNY6.3931 fix.  Although the dollar is softer today, it held above last week's lows as consolidation is evident.  It remains within the range set last Tuesday (~CNY6.3670-CNY6.3965).   Europe With the Swiss franc appreciating to six-year highs against the euro, it would not be surprising to see the SNB intervene.  The first place to look for it is in the weekly domestic sight deposits.  They rose by CHF2.58 bln, the second-most in the past three months.  Recall the mechanics.  The SNB buys euros but just sitting on them distorts the allocation strategy.  So it needs to either sell some euros for dollars or Swiss francs for dollars.  If it does the latter, its overall level of reserve growth accelerates.  Many suspect it will do the former, i.e., sell some euros for dollars.   The US continues to warn that Russia's troop and equipment movement is consistent with a rapid large-scale push into Ukraine from multiple spots simultaneously.  The suggestion, according to reports, is that the operation could take place early next year.  Both Ukraine and Georgia are seeking more US assistance.  Recall Russia invaded Crimea in February 2014.   Bank of England Governor Bailey has toned down his rhetoric, though he blames the market for misconstruing his remarks last month.  He warns now that next month's decision is finely balanced and that the price pressures are emanating primarily from supply-side disruptions for which monetary policy is less directly effective.   The implied yield of the December 2021 short-sterling interest rate futures contract is slipping for the fourth consecutive session.  Today's yield of about 21 bp is the lowest since early October.  The yield peaked in mid-October near 62 bp.  Lastly, while progress on the UK-EU talks has been reported, the two sides are still far apart.  Talks between Frost and Sefcovic will resume at the end of this week.   The prospect that a new German government could be announced this week has not helped the euro very much.  The single currency, which was sold through $1.14 and $1.13 last week, is struggling to find a base.  It has held above the pre-weekend low near $1.12560 but only barely (~$1.1260), and the attempt to resurface above $1.1300 was rebuffed. A move above $1.1320 may suggest some near-term consolidation, perhaps ahead of Wednesday's US PCE deflator report.  That said, tomorrow's flash PMI composite reading for the eurozone is expected to have weakened for the fourth consecutive month.  Sterling could not rise 15 ticks from its pre-weekend close (~$1.3450).  The downside was also limited (~$1.3420).  It caught a bid in the European morning that could extend into the US morning.  Still, the $1.3460-$1.3480 band may be a sufficient cap.  The market does not appear inclined to see trigger the $1.3395 option that expires today for about GBP425 mln.   America President Biden's announcement on the Fed's leadership could come as early as tomorrow, as he is set to deliver a speech on the economy tomorrow.  But it probably would be a separate announcement.  Given the expiration of the terms of the two vice-chairs, changes among a few of the regional presidents, and the challenging situation, President Biden is likely to follow Treasury Secretary Yellen's recommendation to re-appoint Powell.  Moreover, a tradition goes back to Volcker of one party making the initial nomination and the other party approving of another term.  This helped "depoliticize" monetary policy.  Trump broke with that tradition, and as Biden has done in a number of other areas, is restoring some traditions.  Lastly, we suspect that if Bernanke or Yellen, or Brainard were at the helm of the Fed, there would not be substantive monetary policy differences.   Vice-Chair Clarida and Governor Waller joined regional Fed President Bullard to suggest that Fed may consider accelerating the pace of tapering at next month's FOMC meeting.  We suspect others will be sympathetic after this week's October PCE and deflator news.  The economy is rebounding in Q4 from the disappointing 2% annualized pace in Q3 (which is likely to be revised higher on Wednesday), and a critical part is consumption.  Personal consumption expenditures are expected to rise by 1% after a 0.6% increase in September.  The headline PCE deflator, which the Fed targets 2% on average, which Governor Brainard reportedly helped devise, is expected to jump above 5% from 4.4% in September.  The core rate is expected to exceed 4%.  No Fed officials are slated to speak this week, but the minutes from the November 3 FOMC meeting will be released on November 24.   El Salvador caught the crypto world's attention again.  It is the first country to make Bitcoin legal tender.  It announced plans to issue a $1 bln bond, and half the proceeds will be used to buy Bitcoin (~2000 coins).  The other half will be used to fund infrastructure projects to build the infrastructure of more Bitcoins.  It will offer a 6.5% coupon, which is lower than current dollar issues.  It looks like one pays a lot for BTC exposures.  El Salvador is rated BB+ of the equivalent by the top three rating agencies.  This makes El Salvador bonds risky, to begin with, and adding Bitcoin on top of that would seem to preclude most retail and institutional investors.  It seems like a desperate act that only an impoverished country can try.  The idea that other countries will quickly follow seems to be a stretch.  There is a good reason why Tesla had few corporate followers to buy Bitcoins with reserve funds.  The same principle would seem to apply to countries.   The economic calendar for North America begins off slowly this week.  Today's main feature is the US existing home sales report.  A pullback after September's heady 7% gain is expected, the strongest in a year.  After a weak start to the year, existing home sales have recovered.  They averaged 5.66 mln (seasonally adjusted annual rate) last year and have averaged more than 6.0 mln for the past three months.  The Canadian dollar has weakened for the past four weeks.  It briefly poked above CAD1.2660 ahead of the weekend to reach its best level since early October.  The greenback is in about a 15-tick range on either side of CAD1.2645 today.  Support is seen in the CAD1.2600-CAD1.2620 area, but it may take a break of CAD1.2585 to boost confidence that a high is in place.  The US dollar rose 1.5% against the Mexican peso last week.  It was the third weekly gain in the past four weeks.  The greenback is trading above last week's high (~MXN20.89) and looks set to test the high set earlier this month near MXN20.98.  Lastly, the Chilean presidential election will go to a run-off next month, as widely expected between the far-right and far-left candidates.   The dollar snapped a five-week pullback against the Chilean peso last week, rising 3.6%, the most in three months.  Year-to-date, the peso is off nearly 14.25%.   Disclaimer

AUDUSD recoups losses The Australian dollar recovered after the RBA signaled an end to its bond-buying program. The recent sell-off below the daily support and psychological level of 0.7000 further weighed on market sentiment. As the RSI dipped again into the oversold territory, short-term sellers’ profit-taking has driven the price higher. The bears could be looking to fade the current rebound unless the bulls succeed in pushing past 0.7180. 0.7030 is a fresh support and 0.6970 a major floor before June 2020’s lows near 0.6800. USDCAD tests support The Canadian dollar advanced after November’s GDP exceeded expectations. A break above the supply zone at 1.2730 has put the US counterpart back on track. Nonetheless, the rally came to a halt at the daily resistance at 1.2790. The greenback needed a breather as the surge prevented buyers from chasing after volatility. 1.2580 is a key support and an oversold RSI may raise buyers’ interest again. A close above the said resistance could propel the pair to December’s high at 1.2950. NZDUSD sees limited rebound The New Zealand dollar bounced back after the Q4 jobless rate dropped to 3.2%. The pair saw bids over September 2020’s lows around 0.6530. The RSI’s repeated oversold situation has caught bargain hunters’ attention. However, the directional bias remains bearish. The kiwi could find resistance at 0.6700 near the 20-day moving average as trend-followers look to sell into strength. 0.6400 would be the next target if the US dollar makes a comeback across the board.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the decline for the US Dollar Index in the currency futures contracts. Dollar Index speculators cut back on their bullish bets this week for the third time in the past four weeks after previously pushing their bullish bets to a 117-week high on January 4th. Since that high-point, bullish bets have fallen by a total of -4,507 contracts and have now dropped the overall standing to a seven-week low. Despite the recent slide, the US Dollar Index bullish bets are still near the top of their range over the past three years with a speculator strength index score of 85.4 percent which is considered extremely bullish (strength index is the current speculator standing compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme). The Dollar Index price has had a volatile couple of weeks with a sharp rise to 97.22 on January 28th and then a sharp drop to 95.23 on February 3rd and closed the week at approximately 95.48. The currencies with positive changes this week were the Japanese yen (7,633 contracts), Swiss franc (557 contracts), Canadian dollar (5,947 contracts), Russian ruble (10,207 contracts), Bitcoin (175 contracts), Australian dollar (3,444 contracts) and the Mexican peso (1,520 contracts). The currencies with declining bets were the US Dollar Index (-2,290 contracts), Euro (-1,844 contracts), British pound sterling (-15,842 contracts), Brazil real (-737 contracts) and the New Zealand dollar (-925 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,477 81 34,571 85 -41,884 5 7,313 97 EUR 685,431 78 29,716 44 -57,467 59 27,751 20 GBP 184,007 28 -23,605 57 28,891 47 -5,286 45 JPY 194,435 51 -60,640 30 79,353 76 -18,713 9 CHF 41,054 16 -8,239 56 16,541 49 -8,302 39 CAD 145,082 27 18,264 65 -25,622 39 7,358 44 AUD 196,913 80 -79,829 11 96,098 91 -16,269 13 NZD 58,467 60 -11,698 52 14,019 52 -2,321 25 MXN 141,352 22 730 28 -3,848 71 3,118 56 RUB 46,358 47 14,151 47 -14,451 52 300 43 BRL 76,175 100 -13,353 51 10,467 47 2,886 100 Bitcoin 9,948 51 141 100 -491 0 350 21   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 34,571 contracts in the data reported through Tuesday. This was a weekly decrease of -2,290 contracts from the previous week which had a total of 36,861 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.4 percent. The commercials are Bearish-Extreme with a score of 5.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.7 3.8 16.3 – Percent of Open Interest Shorts: 16.5 78.0 3.3 – Net Position: 34,571 -41,884 7,313 – Gross Longs: 43,897 2,141 9,203 – Gross Shorts: 9,326 44,025 1,890 – Long to Short Ratio: 4.7 to 1 0.0 to 1 4.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.4 5.0 96.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.9 -2.6 22.9   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 29,716 contracts in the data reported through Tuesday. This was a weekly fall of -1,844 contracts from the previous week which had a total of 31,560 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.1 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 20.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.0 12.2 – Percent of Open Interest Shorts: 26.8 63.4 8.2 – Net Position: 29,716 -57,467 27,751 – Gross Longs: 213,563 376,805 83,675 – Gross Shorts: 183,847 434,272 55,924 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.1 59.5 20.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.2 -11.8 3.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -23,605 contracts in the data reported through Tuesday. This was a weekly decline of -15,842 contracts from the previous week which had a total of -7,763 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.0 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 44.7 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.1 68.8 13.5 – Percent of Open Interest Shorts: 28.9 53.1 16.4 – Net Position: -23,605 28,891 -5,286 – Gross Longs: 29,597 126,536 24,845 – Gross Shorts: 53,202 97,645 30,131 – Long to Short Ratio: 0.6 to 1 1.3 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 57.0 46.8 44.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.6 -25.0 16.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -60,640 contracts in the data reported through Tuesday. This was a weekly rise of 7,633 contracts from the previous week which had a total of -68,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 75.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 82.5 8.2 – Percent of Open Interest Shorts: 38.7 41.7 17.8 – Net Position: -60,640 79,353 -18,713 – Gross Longs: 14,510 160,358 15,958 – Gross Shorts: 75,150 81,005 34,671 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 29.7 75.6 9.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.3 4.1 0.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,239 contracts in the data reported through Tuesday. This was a weekly boost of 557 contracts from the previous week which had a total of -8,796 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 49.4 percent and the small traders (not shown in chart) are Bearish with a score of 38.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 1.7 73.5 24.6 – Percent of Open Interest Shorts: 21.8 33.2 44.8 – Net Position: -8,239 16,541 -8,302 – Gross Longs: 698 30,161 10,103 – Gross Shorts: 8,937 13,620 18,405 – Long to Short Ratio: 0.1 to 1 2.2 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 49.4 38.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.7 0.7 -4.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 18,264 contracts in the data reported through Tuesday. This was a weekly gain of 5,947 contracts from the previous week which had a total of 12,317 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 39.4 percent and the small traders (not shown in chart) are Bearish with a score of 44.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.1 39.6 21.6 – Percent of Open Interest Shorts: 23.5 57.3 16.5 – Net Position: 18,264 -25,622 7,358 – Gross Longs: 52,386 57,524 31,356 – Gross Shorts: 34,122 83,146 23,998 – Long to Short Ratio: 1.5 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 39.4 44.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 27.3 -22.9 9.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -79,829 contracts in the data reported through Tuesday. This was a weekly advance of 3,444 contracts from the previous week which had a total of -83,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.8 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.8 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.6 78.8 9.2 – Percent of Open Interest Shorts: 50.1 30.0 17.5 – Net Position: -79,829 96,098 -16,269 – Gross Longs: 18,835 155,124 18,128 – Gross Shorts: 98,664 59,026 34,397 – Long to Short Ratio: 0.2 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 10.8 90.6 12.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.5 -1.4 3.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -11,698 contracts in the data reported through Tuesday. This was a weekly decrease of -925 contracts from the previous week which had a total of -10,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.0 4.8 – Percent of Open Interest Shorts: 52.9 37.0 8.7 – Net Position: -11,698 14,019 -2,321 – Gross Longs: 19,205 35,644 2,783 – Gross Shorts: 30,903 21,625 5,104 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 52.0 25.3 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 7.9 4.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 730 contracts in the data reported through Tuesday. This was a weekly increase of 1,520 contracts from the previous week which had a total of -790 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.7 percent. The commercials are Bullish with a score of 71.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.2 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.0 57.2 4.5 – Percent of Open Interest Shorts: 37.5 59.9 2.3 – Net Position: 730 -3,848 3,118 – Gross Longs: 53,767 80,885 6,378 – Gross Shorts: 53,037 84,733 3,260 – Long to Short Ratio: 1.0 to 1 1.0 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.7 71.2 56.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.4 -4.3 20.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -13,353 contracts in the data reported through Tuesday. This was a weekly decline of -737 contracts from the previous week which had a total of -12,616 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bearish with a score of 47.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 47.6 46.3 6.0 – Percent of Open Interest Shorts: 65.2 32.6 2.2 – Net Position: -13,353 10,467 2,886 – Gross Longs: 36,293 35,263 4,562 – Gross Shorts: 49,646 24,796 1,676 – Long to Short Ratio: 0.7 to 1 1.4 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 47.4 100.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.1 4.3 42.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 14,151 contracts in the data reported through Tuesday. This was a weekly lift of 10,207 contracts from the previous week which had a total of 3,944 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 52.4 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.0 41.5 4.4 – Percent of Open Interest Shorts: 23.5 72.7 3.7 – Net Position: 14,151 -14,451 300 – Gross Longs: 25,048 19,255 2,024 – Gross Shorts: 10,897 33,706 1,724 – Long to Short Ratio: 2.3 to 1 0.6 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 52.4 42.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.1 -10.5 -26.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 141 contracts in the data reported through Tuesday. This was a weekly advance of 175 contracts from the previous week which had a total of -34 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.3 3.1 12.4 – Percent of Open Interest Shorts: 78.8 8.0 8.9 – Net Position: 141 -491 350 – Gross Longs: 7,984 304 1,232 – Gross Shorts: 7,843 795 882 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 20.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.4 -43.4 -11.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the decline for the US Dollar Index in the currency futures contracts. Dollar Index speculators cut back on their bullish bets this week for the third time in the past four weeks after previously pushing their bullish bets to a 117-week high on January 4th. Since that high-point, bullish bets have fallen by a total of -4,507 contracts and have now dropped the overall standing to a seven-week low. Despite the recent slide, the US Dollar Index bullish bets are still near the top of their range over the past three years with a speculator strength index score of 85.4 percent which is considered extremely bullish (strength index is the current speculator standing compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme). The Dollar Index price has had a volatile couple of weeks with a sharp rise to 97.22 on January 28th and then a sharp drop to 95.23 on February 3rd and closed the week at approximately 95.48. The currencies with positive changes this week were the Japanese yen (7,633 contracts), Swiss franc (557 contracts), Canadian dollar (5,947 contracts), Russian ruble (10,207 contracts), Bitcoin (175 contracts), Australian dollar (3,444 contracts) and the Mexican peso (1,520 contracts). The currencies with declining bets were the US Dollar Index (-2,290 contracts), Euro (-1,844 contracts), British pound sterling (-15,842 contracts), Brazil real (-737 contracts) and the New Zealand dollar (-925 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,477 81 34,571 85 -41,884 5 7,313 97 EUR 685,431 78 29,716 44 -57,467 59 27,751 20 GBP 184,007 28 -23,605 57 28,891 47 -5,286 45 JPY 194,435 51 -60,640 30 79,353 76 -18,713 9 CHF 41,054 16 -8,239 56 16,541 49 -8,302 39 CAD 145,082 27 18,264 65 -25,622 39 7,358 44 AUD 196,913 80 -79,829 11 96,098 91 -16,269 13 NZD 58,467 60 -11,698 52 14,019 52 -2,321 25 MXN 141,352 22 730 28 -3,848 71 3,118 56 RUB 46,358 47 14,151 47 -14,451 52 300 43 BRL 76,175 100 -13,353 51 10,467 47 2,886 100 Bitcoin 9,948 51 141 100 -491 0 350 21   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 34,571 contracts in the data reported through Tuesday. This was a weekly decrease of -2,290 contracts from the previous week which had a total of 36,861 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.4 percent. The commercials are Bearish-Extreme with a score of 5.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.7 3.8 16.3 – Percent of Open Interest Shorts: 16.5 78.0 3.3 – Net Position: 34,571 -41,884 7,313 – Gross Longs: 43,897 2,141 9,203 – Gross Shorts: 9,326 44,025 1,890 – Long to Short Ratio: 4.7 to 1 0.0 to 1 4.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.4 5.0 96.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.9 -2.6 22.9   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 29,716 contracts in the data reported through Tuesday. This was a weekly fall of -1,844 contracts from the previous week which had a total of 31,560 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.1 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 20.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.0 12.2 – Percent of Open Interest Shorts: 26.8 63.4 8.2 – Net Position: 29,716 -57,467 27,751 – Gross Longs: 213,563 376,805 83,675 – Gross Shorts: 183,847 434,272 55,924 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.1 59.5 20.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.2 -11.8 3.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -23,605 contracts in the data reported through Tuesday. This was a weekly decline of -15,842 contracts from the previous week which had a total of -7,763 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.0 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 44.7 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.1 68.8 13.5 – Percent of Open Interest Shorts: 28.9 53.1 16.4 – Net Position: -23,605 28,891 -5,286 – Gross Longs: 29,597 126,536 24,845 – Gross Shorts: 53,202 97,645 30,131 – Long to Short Ratio: 0.6 to 1 1.3 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 57.0 46.8 44.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.6 -25.0 16.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -60,640 contracts in the data reported through Tuesday. This was a weekly rise of 7,633 contracts from the previous week which had a total of -68,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 75.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 82.5 8.2 – Percent of Open Interest Shorts: 38.7 41.7 17.8 – Net Position: -60,640 79,353 -18,713 – Gross Longs: 14,510 160,358 15,958 – Gross Shorts: 75,150 81,005 34,671 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 29.7 75.6 9.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.3 4.1 0.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,239 contracts in the data reported through Tuesday. This was a weekly boost of 557 contracts from the previous week which had a total of -8,796 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 49.4 percent and the small traders (not shown in chart) are Bearish with a score of 38.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 1.7 73.5 24.6 – Percent of Open Interest Shorts: 21.8 33.2 44.8 – Net Position: -8,239 16,541 -8,302 – Gross Longs: 698 30,161 10,103 – Gross Shorts: 8,937 13,620 18,405 – Long to Short Ratio: 0.1 to 1 2.2 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 49.4 38.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.7 0.7 -4.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 18,264 contracts in the data reported through Tuesday. This was a weekly gain of 5,947 contracts from the previous week which had a total of 12,317 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 39.4 percent and the small traders (not shown in chart) are Bearish with a score of 44.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.1 39.6 21.6 – Percent of Open Interest Shorts: 23.5 57.3 16.5 – Net Position: 18,264 -25,622 7,358 – Gross Longs: 52,386 57,524 31,356 – Gross Shorts: 34,122 83,146 23,998 – Long to Short Ratio: 1.5 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 39.4 44.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 27.3 -22.9 9.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -79,829 contracts in the data reported through Tuesday. This was a weekly advance of 3,444 contracts from the previous week which had a total of -83,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.8 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.8 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.6 78.8 9.2 – Percent of Open Interest Shorts: 50.1 30.0 17.5 – Net Position: -79,829 96,098 -16,269 – Gross Longs: 18,835 155,124 18,128 – Gross Shorts: 98,664 59,026 34,397 – Long to Short Ratio: 0.2 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 10.8 90.6 12.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.5 -1.4 3.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -11,698 contracts in the data reported through Tuesday. This was a weekly decrease of -925 contracts from the previous week which had a total of -10,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.0 4.8 – Percent of Open Interest Shorts: 52.9 37.0 8.7 – Net Position: -11,698 14,019 -2,321 – Gross Longs: 19,205 35,644 2,783 – Gross Shorts: 30,903 21,625 5,104 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 52.0 25.3 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 7.9 4.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 730 contracts in the data reported through Tuesday. This was a weekly increase of 1,520 contracts from the previous week which had a total of -790 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.7 percent. The commercials are Bullish with a score of 71.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.2 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.0 57.2 4.5 – Percent of Open Interest Shorts: 37.5 59.9 2.3 – Net Position: 730 -3,848 3,118 – Gross Longs: 53,767 80,885 6,378 – Gross Shorts: 53,037 84,733 3,260 – Long to Short Ratio: 1.0 to 1 1.0 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.7 71.2 56.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.4 -4.3 20.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -13,353 contracts in the data reported through Tuesday. This was a weekly decline of -737 contracts from the previous week which had a total of -12,616 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bearish with a score of 47.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 47.6 46.3 6.0 – Percent of Open Interest Shorts: 65.2 32.6 2.2 – Net Position: -13,353 10,467 2,886 – Gross Longs: 36,293 35,263 4,562 – Gross Shorts: 49,646 24,796 1,676 – Long to Short Ratio: 0.7 to 1 1.4 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 47.4 100.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.1 4.3 42.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 14,151 contracts in the data reported through Tuesday. This was a weekly lift of 10,207 contracts from the previous week which had a total of 3,944 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 52.4 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.0 41.5 4.4 – Percent of Open Interest Shorts: 23.5 72.7 3.7 – Net Position: 14,151 -14,451 300 – Gross Longs: 25,048 19,255 2,024 – Gross Shorts: 10,897 33,706 1,724 – Long to Short Ratio: 2.3 to 1 0.6 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 52.4 42.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.1 -10.5 -26.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 141 contracts in the data reported through Tuesday. This was a weekly advance of 175 contracts from the previous week which had a total of -34 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.3 3.1 12.4 – Percent of Open Interest Shorts: 78.8 8.0 8.9 – Net Position: 141 -491 350 – Gross Longs: 7,984 304 1,232 – Gross Shorts: 7,843 795 882 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 20.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.4 -43.4 -11.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

AUDUSD breaks higher The Australian dollar climbs as traders wager on a hawkish shift from the Reserve Bank of Australia. On the daily chart, a break above the 30-day moving average suggests improved sentiment in the short term. The pair extended its gains after it broke the supply area around 0.7170. As sellers scramble to cover their bets, driving up bids, the rally is heading to the next resistance at 0.7210. The RSI’s overbought situation may cause a temporary pullback with 0.7110 as the first support. EURGBP seeks support The euro consolidates gains amid mixed messages from the ECB. The pair found support at February 2020’s low at 0.8290, and a bullish MA cross on the daily chart suggests a potential turnaround. A break above the daily resistance at 0.8405 has put the single currency back on track. An overbought RSI led momentum traders to take profit. The current pullback is testing the 38.2% Fibonacci retracement level (0.8405) which used to be a resistance. 0.8475 is the main hurdle for the reversal to gain traction. USOIL tests support WTI crude bounces higher after the EIA reported a sharp drop in US inventories. Price action is looking to consolidate its gains above the psychological level of 90.00. Sentiment remains upbeat though the bulls need to take a breather after the latest vertical ascent. 88.00 on the 20-day moving average is the immediate support. An oversold RSI may attract buying interest. A deeper retracement would test 85.00. A recovery above 92.30 could trigger momentum buying once again and resume the rally towards 95.00.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 8th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the strong gains in bullish bets for the Brazilian Real currency futures contracts. Real speculators boosted their bullish bets this week by the largest one-week amount (+33,599 contracts) on record, according the CFTC data going back to 1995. This surge in bullish sentiment pushed the overall net speculator standing for Brazilian Reals into bullish territory for the first time in nineteen weeks, dating back to September 28th. There has been a surge of trading going on in this market over the past couple of weeks with open interest increasing dramatically. Open interest (OI) for the Brazilian currency jumped on February 2nd to a total of 76,175 contracts which marked the highest OI level of the previous 381 weeks, dating all the way back to September of 2014. The previous ten weeks had seen an average open interest of less than half (ten week average of 33,492 contracts) of the February 2nd total. This week’s open interest fell a bit to 64,283 contracts but still was the second highest open interest of the past thirty-six weeks and with all this activity going on, this is a currency to watch. Joining the Brazil real (33,599 contracts) with positive changes this week were the Euro (9,126 contracts), Japanese yen (1,492 contracts), British pound sterling (15,060 contracts), New Zealand dollar (1,332 contracts), Mexican peso (514 contracts) and the Russian ruble (1,292 contracts). The currencies with declining bets were the US Dollar Index (-806 contracts), Australian dollar (-5,912 contracts), Canadian dollar (-3,378 contracts), Swiss franc (-1,160 contracts) and the Bitcoin futures (-460 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-08-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 53,603 75 33,765 84 -40,826 7 7,061 94 EUR 700,098 83 38,842 47 -73,252 55 34,410 31 GBP 197,948 37 -8,545 68 9,323 35 -778 54 JPY 196,478 53 -59,148 31 75,957 74 -16,809 13 CHF 41,481 16 -9,399 54 16,918 50 -7,519 41 CAD 145,208 27 14,886 62 -16,958 45 2,072 34 AUD 196,403 80 -85,741 5 98,357 92 -12,616 22 NZD 54,877 53 -10,366 54 12,733 50 -2,367 25 MXN 134,257 19 1,244 28 -4,073 71 2,829 55 RUB 39,233 35 15,443 50 -16,839 47 1,396 72 BRL 64,283 81 20,246 96 -22,432 4 2,186 92 Bitcoin 9,886 50 -319 90 -189 0 508 24   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 33,765 contracts in the data reported through Tuesday. This was a weekly fall of -806 contracts from the previous week which had a total of 34,571 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 84.0 percent. The commercials are Bearish-Extreme with a score of 6.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 75.3 5.9 16.5 – Percent of Open Interest Shorts: 12.3 82.0 3.3 – Net Position: 33,765 -40,826 7,061 – Gross Longs: 40,370 3,150 8,841 – Gross Shorts: 6,605 43,976 1,780 – Long to Short Ratio: 6.1 to 1 0.1 to 1 5.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 84.0 6.8 93.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.2 2.7 15.2   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 38,842 contracts in the data reported through Tuesday. This was a weekly increase of 9,126 contracts from the previous week which had a total of 29,716 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 55.0 percent and the small traders (not shown in chart) are Bearish with a score of 31.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.3 54.6 12.5 – Percent of Open Interest Shorts: 25.7 65.1 7.6 – Net Position: 38,842 -73,252 34,410 – Gross Longs: 218,973 382,426 87,725 – Gross Shorts: 180,131 455,678 53,315 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 55.0 31.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 14.0 -15.5 15.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -8,545 contracts in the data reported through Tuesday. This was a weekly gain of 15,060 contracts from the previous week which had a total of -23,605 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 67.8 percent. The commercials are Bearish with a score of 35.2 percent and the small traders (not shown in chart) are Bullish with a score of 54.0 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.6 60.7 13.6 – Percent of Open Interest Shorts: 26.9 56.0 14.0 – Net Position: -8,545 9,323 -778 – Gross Longs: 44,709 120,220 26,951 – Gross Shorts: 53,254 110,897 27,729 – Long to Short Ratio: 0.8 to 1 1.1 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 67.8 35.2 54.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 30.4 -30.0 17.8   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -59,148 contracts in the data reported through Tuesday. This was a weekly boost of 1,492 contracts from the previous week which had a total of -60,640 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.7 percent. The commercials are Bullish with a score of 73.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 81.2 9.0 – Percent of Open Interest Shorts: 38.1 42.6 17.5 – Net Position: -59,148 75,957 -16,809 – Gross Longs: 15,692 159,601 17,609 – Gross Shorts: 74,840 83,644 34,418 – Long to Short Ratio: 0.2 to 1 1.9 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 30.7 73.9 13.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.8 1.8 5.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -9,399 contracts in the data reported through Tuesday. This was a weekly decline of -1,160 contracts from the previous week which had a total of -8,239 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.5 percent. The commercials are Bearish with a score of 49.9 percent and the small traders (not shown in chart) are Bearish with a score of 41.2 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 3.0 72.8 23.7 – Percent of Open Interest Shorts: 25.6 32.1 41.8 – Net Position: -9,399 16,918 -7,519 – Gross Longs: 1,234 30,215 9,838 – Gross Shorts: 10,633 13,297 17,357 – Long to Short Ratio: 0.1 to 1 2.3 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.5 49.9 41.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.3 1.9 -8.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 14,886 contracts in the data reported through Tuesday. This was a weekly decline of -3,378 contracts from the previous week which had a total of 18,264 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.1 percent. The commercials are Bearish with a score of 45.4 percent and the small traders (not shown in chart) are Bearish with a score of 33.9 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 37.7 40.2 18.9 – Percent of Open Interest Shorts: 27.5 51.9 17.5 – Net Position: 14,886 -16,958 2,072 – Gross Longs: 54,762 58,404 27,480 – Gross Shorts: 39,876 75,362 25,408 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 62.1 45.4 33.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.4 -16.7 -2.2   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -85,741 contracts in the data reported through Tuesday. This was a weekly reduction of -5,912 contracts from the previous week which had a total of -79,829 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.3 percent. The commercials are Bullish-Extreme with a score of 92.3 percent and the small traders (not shown in chart) are Bearish with a score of 21.7 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.8 79.0 9.9 – Percent of Open Interest Shorts: 52.5 28.9 16.3 – Net Position: -85,741 98,357 -12,616 – Gross Longs: 17,323 155,203 19,485 – Gross Shorts: 103,064 56,846 32,101 – Long to Short Ratio: 0.2 to 1 2.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 5.3 92.3 21.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.7 -0.8 12.5   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -10,366 contracts in the data reported through Tuesday. This was a weekly increase of 1,332 contracts from the previous week which had a total of -11,698 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.9 percent. The commercials are Bullish with a score of 50.0 percent and the small traders (not shown in chart) are Bearish with a score of 24.7 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.3 61.2 5.6 – Percent of Open Interest Shorts: 50.2 38.0 10.0 – Net Position: -10,366 12,733 -2,367 – Gross Longs: 17,168 33,591 3,097 – Gross Shorts: 27,534 20,858 5,464 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.9 50.0 24.7 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.3 4.1 -7.9   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 1,244 contracts in the data reported through Tuesday. This was a weekly gain of 514 contracts from the previous week which had a total of 730 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.9 percent. The commercials are Bullish with a score of 71.1 percent and the small traders (not shown in chart) are Bullish with a score of 55.0 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.6 61.3 4.5 – Percent of Open Interest Shorts: 32.7 64.3 2.4 – Net Position: 1,244 -4,073 2,829 – Gross Longs: 45,097 82,287 6,067 – Gross Shorts: 43,853 86,360 3,238 – Long to Short Ratio: 1.0 to 1 1.0 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.9 71.1 55.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.4 -5.2 9.1   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of 20,246 contracts in the data reported through Tuesday. This was a weekly rise of 33,599 contracts from the previous week which had a total of -13,353 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.7 percent. The commercials are Bearish-Extreme with a score of 3.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 91.7 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.5 17.6 5.7 – Percent of Open Interest Shorts: 45.0 52.5 2.3 – Net Position: 20,246 -22,432 2,186 – Gross Longs: 49,170 11,336 3,666 – Gross Shorts: 28,924 33,768 1,480 – Long to Short Ratio: 1.7 to 1 0.3 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 95.7 3.5 91.7 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 34.2 -37.2 28.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 15,443 contracts in the data reported through Tuesday. This was a weekly boost of 1,292 contracts from the previous week which had a total of 14,151 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.9 percent. The commercials are Bearish with a score of 46.9 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 50.1 43.4 6.5 – Percent of Open Interest Shorts: 10.7 86.3 3.0 – Net Position: 15,443 -16,839 1,396 – Gross Longs: 19,657 17,021 2,555 – Gross Shorts: 4,214 33,860 1,159 – Long to Short Ratio: 4.7 to 1 0.5 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.9 46.9 72.5 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.5 -15.9 -0.7   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -319 contracts in the data reported through Tuesday. This was a weekly reduction of -460 contracts from the previous week which had a total of 141 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.9 percent. The commercials are Bearish with a score of 24.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.4 3.8 14.9 – Percent of Open Interest Shorts: 81.6 5.7 9.8 – Net Position: -319 -189 508 – Gross Longs: 7,751 376 1,474 – Gross Shorts: 8,070 565 966 – Long to Short Ratio: 1.0 to 1 0.7 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 89.9 24.8 24.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.9 2.9 -5.9   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

February 17, 2022  $USD, Australia, Canada, Currency Movement, Japan, Norway, Oil, Russia Overview: US intelligence claims that Russia is still mobilizing for an attack on Ukraine is sapping risk appetites and lifting gold to its highest level since last June around $1885-$1890.  Asia Pacific equities advanced, except in Japan.  Europe's Stoxx 600 is nursing a small loss, while US futures are off around 0.4%-0.6%.  The 10-year US Treasury yield is hovering slightly above 2.0%.  European benchmark yields are 2-4 bp lower.   The Scandis and euro are bearing the brunt of the risk-off move among the major currencies, while the Antipodeans, yen, Swiss franc, and sterling have pushed higher.  Emerging market currencies are mostly lower, led by Russia and central European currencies, but the JP Morgan Emerging Market Currency is edging higher for the fourth consecutive session, recovering from earlier weakness.  Hungary left its one-week repo rate steady at 4.3% and Turkey is expected to also stand pat (14%).   April WTI is retracing most of yesterday's 1.8% gain and is straddling $90 a barrel.  US natural gas is falling for the first time this week.  Europe's benchmark is up about 10% since Tuesday's 16% slide.  Iron ore slumped 7% after it rose 3.2% yesterday.  Copper is slipping for the first session in four.  Asia Pacific Japan reported weaker than expected exports and stronger than expected imports drove the trade deficit to JPY2.19 trillion. It was a third larger than expected.  Seasonally, Japan's January trade balance always (20-years-plus) deteriorated from December.  Yet, there is something more going on.  Rising energy and commodity prices more generally are deteriorating Japan's terms of trade.  It shares that with the eurozone that reported its largest trade deficit in 13 years earlier this week. EMU's trade balance also typically deteriorates in January from December, but surge in energy prices appears to have aggravated the seasonal pattern.  Meanwhile, nearly every day that passes now means that a significant disruption of Russia's gas supplies could have a diminishing impact on Europe as spring approaches.  Australia's jobs market held up better than expected last month.  It created almost 18k jobs.  The market expected a flat report.  The positions created were all part-time posts, while full-time positions fell by 17k after increasing 41k in December.  Australia grew an average of almost 3 full-time jobs last year after losing a little more than 8k a month in 2020.  While the unemployment rate was steady at 4.2%, the participation rate ticked up to 66.2% from 66.1%.  The virus (sick-leave) and extended time-off (vacations) saw the hours worked fall 8.8% month-over-month.  Australia's employment report is unlikely to impact expectations.  The market continues to price in the first hike around mid-year.  Rather than ratify market expectations, the central bank continues to pushback.  The US dollar slipped through JPY115.00 for the first time since February 7.  The low was recorded in early European turnover.  The intraday momentum indicators are stretched, but a break of the JPY114.90 could see JPY114.60.  There is an option for nearly $1.1 bln struck there that expires today.  The JPY115.20 area may offer the immediate cap.  The Australian dollar was initially sold from around $0.7210 down to $0.7150 before finding good bids.  It recovered back to session highs before stalling.  It is straddling the $0.7200 area in late morning turnover in Europe, leaving it little changed on the day.   The greenback briefly and shallowly slipped through CNY6.33 and rebounded to almost CNY6.34.  For the third session in a row, the PBOC set the dollar's reference rate a little softer than expected (CNY6.3321 vs. CNY6.3325, median projection in Bloomberg's forecast).   Europe The US claims that rather than withdraw troops as previously reported, Russia has mobilized another 7k troops.  Moscow denies it.  Russia is involved in military exercises.  The operations in the Crimea appeared to have ended, but the ones with Belarus are expected to last through the weekend. It seems like Russian troop movement next week may be more telling.  The G7 foreign ministers are meeting on Saturday.   NATO chief Stoltenberg's term ends in October.  He will serve out his term before heading home to lead the central bank.  Norges Bank Olsen's term ends next month.  Deputy Governor Ida Bache who vied for the top job will act as interim head until Stoltenberg is ready.  The Norges Bank Governor also leads the $1.3 trillion sovereign wealth fund.  Last month, the central bank signaled its intention to hike rates in March.  The swaps market has 100 bp of tightening priced in over the next 12 months.   The euro was sold slightly through $1.1325 in Asia after holding below $1.14 yesterday.  The $1.1380-$1.1400 area looks to still cap upticks. The 1.7 bln euro in options struck in the $1.1435-$1.1450 area look set to roll-off today.  If uncertainty over Russia's intentions is a negative for the euro, the narrowing of the US two-year premium over Germany for the third consecutive session is a supportive development.  Sterling is bid.  It is trading above $1.36, which it has not settled above in nearly a month. The intrasession high this month was set near $1.3645.   The UK reports January retail sales tomorrow and a bounce is expected after January's large fall.  The euro has fallen to back to around GBP0.8350 near where it bottomed on Monday.  America How prices respond to fundamental news is often revealing.  Yesterday, the US reports stronger than expected January retail sales and industrial output figures.  But the two-year yield fell five basis points and the implied yield of December Fed funds futures contract shed 4.5 bp.  The two-year yield is another 3.5 bp lower today and is about 1.5 bp lower on the week (slightly above 1.48%).  With today's five basis point slippage, the December Fed funds futures implies an average effective yield of 1.53% at the end of the year, which is about 6.5 bp lower than where it finished last week after the US warned of a possible Russian attack on Ukraine in days.  Europe, Russia, and Iran are seemingly more optimistic than the US a deal with Iran may be near. With OPEC+ struggling to fulfill their commitments to boost output by 400k barrels a day and low inventories among many of the large consuming countries, new supply from Iran would help ease address the global shortage that has lifted price to almost $100 a barrel.  Saudi Arabia is believed to have about 2 mln barrels a day in spare capacity is reluctant to jeopardize the six-year agreement under the OPEC+ framework. The US EIA reported an unexpected build of US oil inventories yesterday, but Cushing saw an almost 2 milt barrel draw.  The US reports January housing starts and permits.  Both are expected to have softened but remain at historically elevated levels.  Although adverse weather may have impacted starts, the concern is rising rates and commodity prices (e.g., March lumber has risen by around 25% this month alone) will weaken demand.  The US also sees the Philadelphia Fed's manufacturing survey and weekly initial jobless claims.   Canada's January CPI surprised on the upside yesterday.  The 5.1% year-over-year headline pace was the highest since 1991, while the monthly increase of 0.9% was the largest since January 2017.  Gasoline prices rose 3.2%, meat jumped a little more than 10%, and homeowner equivalent expenses jumped 13.5%.  The Bank of Canada is set to hike rates on March 2.  The market has about a 1-in-3 chance of a 50 bp move discounted.  For about a week, the US offered a premium over Canada for two-year money, but it slipped back into a discount yesterday and is a little larger today.  Oil is firmer, but the general risk-off mood, given the uncertainties in Eastern Europe, weighs on the Loonie.  Meanwhile, the Canadian police have sent written warnings to hundreds who decamped in Ottawa.  It appears to be a prelude to arrests. The US dollar remains confined to a CAD1.2650-CAD1.2660 to CAD1.2800 trading range.  It approached the lower end of the range yesterday and is checking out the air above CAD1.27 near midday in Europe.  The greenback finally took out the 200-day moving average against the Mexican peso.  It is trading at its lowest level since last October (~MXN20.25-MXN20.26).  There is little chart support ahead of MXN20.12.  Still, the intrasession momentum indicators are stretched, warning against chasing it in early North American activity.    A bounce can carry the dollar back to the MXN20.30-MXN20.33 area.     Disclaimer

AUDUSD attempts to break out The Australian dollar finds support from a low jobless rate in January. The pair has previously hit resistance in the supply zone around 0.7250. This is a daily resistance from the sell-off in late January. Then a recovery above 0.7180 suggests solid buying pressure before a bearish mood could take hold again. A break above the key hurdle could initiate a bullish reversal above this year’s peak (0.7310). Otherwise, a prolonged consolidation may test the demand area between 0.7100 and 0.7150. NZDUSD tests resistance The New Zealand dollar climbed higher as the RBNZ can lift its cash rates next week. Price action came under pressure on the 30-day moving average (0.6730). However, strong support at 0.6590 builds a case for a potential reversal. A break above 0.6690 is an encouraging sign leaving 0.6730 as the last obstacle before a bullish extension. A broader rally would bring the kiwi back to January’s high at 0.6890. In the meantime, an overbought RSI caused a brief pullback towards 0.6660. SPX 500 consolidates The S&P 500 struggles as the Russia-Ukraine crisis persists. The previous rebound has met stiff selling pressure over the 30-day moving average (4590). A pullback has sent the RSI into the oversold territory, triggering some buyers’ interest in racking up the bargain. The rebound is still valid as long as the index stays above the critical area of 4280. A break above 4480 may extend gains to the double top at 4590 which is an important resistance. 4360 is the immediate support if the sideways action lingers.

Ever think of commodities when trading currencies? Or vice-versa? What do Brazilian reals have to do with soybeans, or Indian rupees with diamonds? Let’s start by defining what could be called a commodity currency (or commodity pair). Generally, a commodity currency represents a currency from a country or geographical zone that produces specific commodities which will account for most of its exports. Some examples of currencies which could be considered as commodity currencies are presented in the following table: Currencies Top Material Exports Argentine peso (ARS) Soybean meal ($8.81B), corn ($6.19B), delivery trucks ($3.83B), soybeans ($3.47B), soybean oil ($3.38B), bran ($292M), other vegetable residues and waste ($232M), and ground nut oil ($131M) Australian dollar (AUD) Iron ore ($67.5B), coal briquettes ($51.5B), petroleum gas ($34.1B), gold ($25.4B), aluminium oxide ($5.6B), sheep and goat meat ($3.07B), and wool ($2.26B) Brazilian real (BRL) Soybeans ($26.1B), crude petroleum ($24.3B), iron ore ($23B), corn ($7.39B), sulfate chemical wood pulp ($7.35B), poultry meat ($6.55B), frozen bovine meat ($5.67B) and raw sugar ($5.33B) Canadian dollar (CAD) Crude petroleum ($67.8B), cars ($40.9B), gold ($14.6B), refined Petroleum ($12.3B), vehicle parts ($10.8B), sawn wood ($6.35B), raw aluminium ($5.45B), potassic fertilizers ($5.27B), rapeseed ($3.23B), and rapeseed oil ($2.6B) Indian rupee (INR) Refined petroleum ($39.2B), diamonds ($22.5B), packaged medicaments ($15.8B), jewellery ($14.1B), cars ($7.15B), Rice ($6.9B), Crustaceans ($4.67B), and Non-Retail Pure Cotton Yarn ($2.86B) Indonesian rupiah (IDR) Coal briquettes ($20.3B), palm oil ($15.3B), petroleum gas ($8.32B), cars ($4.52B), gold ($4.01B), lignite ($2.91B), stearic acid ($2.76B), uncoated paper ($2.37B), and coconut oil ($1.9B) Malaysian ringgit (MYR) Integrated circuits ($63B), refined petroleum ($17.8B), petroleum gas ($11.5B), semiconductor devices ($9.65B), palm oil ($8.91B), rubber apparel ($4.37B), other vegetable oils ($1B), copper powder ($873M), asphalt mixtures ($417M), and platinum clad metals ($127M) Mexican peso (MXN) Cars ($53.1B), computers ($32.4B), vehicle parts ($31.2B), delivery trucks ($26.9B), crude petroleum ($26.6B), tractors ($10.7B), beer ($5.07B), tropical fruits ($3.6B), and railway freight cars ($3.57B) New Zealand dollar (NZD) Concentrated milk ($5.73B), sheep and goat meat ($2.62B), rough wood ($2.31B), butter ($2.29B), frozen bovine meat ($2.09B), casein ($613M), and honey ($237M) Nigerian naira (NGN) Crude Petroleum ($46B), petroleum gas ($7.78B), scrap vessels ($2.26B), flexible metal tubing ($2.1B), and cocoa beans ($715M) Peruvian nuevo sol (PEN) Copper ore ($12.2B), gold ($6.76B), refined petroleum ($2.21B), zinc ore ($1.65B), and refined copper ($1.62B), animal meal and pellets ($1.54B), lead ore ($1.01B), fish oil ($434M), and buckwheat ($139M) Russian ruble (RUB) Crude petroleum ($123B), refined petroleum ($66.2B), petroleum gas ($26.3B), coal briquettes ($17.6B), wheat ($8.14B), semi-finished iron ($6.99B), coal tar oil ($4.49B), raw nickel ($4.03B), and nitrogenous fertilizers ($3.05B) South African rand (ZAR) Gold ($16.8B), platinum ($9.62B), cars ($7.61B), iron ore ($6.73B), and coal briquettes ($5.05B), manganese ore ($3.16B), chromium ore ($1.92B), titanium ore ($583M), and niobium, tantalum, vanadium, and zirconium ore ($480M) Swiss franc (CHF) Gold ($59B), packaged medicaments ($46.2B), blood, antisera, vaccines, toxins, and cultures ($32.9B), base metal watches ($13.6B), jewellery ($10.9B), precious metal watches ($7.32B), and hydrazine or hydroxylamine derivatives ($501M) US dollar (USD) Refined petroleum ($84.9B), crude petroleum ($61.9B), cars ($56.9B), integrated circuits ($41.4B), vehicle parts ($41.2B), medical instruments ($29.5B), gas turbines ($28.1B), aircraft parts ($16.3B), and orthopedic appliances ($12.1B) Vietnamese dong (VND) Broadcasting equipment ($42.3B), telephones ($18.2B), integrated circuits ($15.5B), textile footwear ($10.6B), and leather footwear ($6.43B), coconuts, Brazil nuts, and cashews ($3.16B), fuel wood ($2.05B), cement ($1.39B), metal-clad products ($1.37B), and cinnamon ($175M) West African CFA franc (XOF) Gold ($11.66B), cocoa beans ($3.84B), refined petroleum ($2.64B), rubber ($1.08B), raw cotton ($1.04B), and crude petroleum ($941M), cocoa paste ($795M), other oily seeds ($407M), Phosphoric Acid ($346M), coconuts, Brazil nuts, and cashews ($280M), ground nuts ($192M), zinc ore ($173M), raw zinc ($155M), electricity ($141M), cocoa shells ($115M), calcium phosphates ($95.7M), radioactive chemicals ($59.6M), rough wood ($59.5M), raw copper ($49.4M), Petroleum Gas ($42.5M), non-fillet frozen fish ($356.1M), other vegetable residues ($25.4M), and aluminium ore ($3.17M) Data: The Observatory of Economic Complexity (OEC) (Bold: products which the country/economic area was the world’s biggest exporter in 2019) For active trading purposes, the ones highlighted in yellow would be characterised as freely floating and more liquid currencies. Thus, they would also be more accessible and less costly (with lower fees) to trade. For hedging purposes, the others would present some advantages to the commercialisation of their associated natural resources, even though they would rather be considered more exotic currencies. Charts: Here is a representation of some key commodity currencies presented in the above table on a weekly timeframe against the US dollar (reference currency): Each chart was represented within 2-standard deviation Bollinger Bands based on a 20-period simple moving average (in orange), a 50-period simple moving average (blue curve), a 200-period simple moving average (the black curve) and in the pane below is a 14-period relative strength index (in blue) to which was applied a 9-period simple moving average (red curve). All those charts are displayed over a 2-year historical period. In the next article I’ll focus on highlighting some correlations which may exist between key natural resources and the currencies in which they are usually traded. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien BischeriOil & Gas Trading Strategist * * * * * The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 15th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the gains in the Euro currency futures contracts. Euro speculators boosted their bullish bets for a second straight week this week and for the eighth time out of the past nine weeks. Over this nine-week time-frame, Euro bets have jumped by a total of +59,460 contracts, going from -10,162 net positions on December 21st to +47,581 net positions this week. These gains in the Euro sentiment have now brought the speculator positioning to the highest level in the past twenty-six weeks, dating back to August 17th. Joining the Euro (8,739 contracts) with positive changes this week were the US Dollar Index (1,621 contracts), Brazil real (3,514 contracts), Mexican peso (7,730 contracts),  British pound sterling (10,782 contracts), New Zealand dollar (1,033 contracts), Russian ruble (721 contracts) and the Bitcoin futures (104 contracts). The currencies with declining bets were the Japanese yen (-7,014 contracts), Canadian dollar (-2,716 contracts), Australian dollar (-953 contracts) and the Swiss franc (-316 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-15-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,283 77 35,386 87 -41,548 6 6,162 84 EUR 702,047 84 47,581 50 -85,057 52 37,476 36 GBP 195,302 36 2,237 76 2,874 31 -5,111 45 JPY 199,425 55 -66,162 26 86,256 79 -20,094 6 CHF 45,522 22 -9,715 53 18,888 52 -9,173 36 CAD 144,815 27 12,170 59 -15,116 47 2,946 36 AUD 192,578 77 -86,694 4 97,684 92 -10,990 26 NZD 64,105 71 -9,333 56 12,020 49 -2,687 21 MXN 151,098 26 8,974 31 -12,054 68 3,080 56 RUB 38,960 35 16,164 52 -17,239 46 1,075 64 BRL 67,288 85 23,760 100 -26,225 0 2,465 95 Bitcoin 10,646 56 -215 92 -213 0 428 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 35,386 contracts in the data reported through Tuesday. This was a weekly rise of 1,621 contracts from the previous week which had a total of 33,765 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.8 percent. The commercials are Bearish-Extreme with a score of 5.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.9 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.0 5.0 14.5 – Percent of Open Interest Shorts: 12.8 81.5 3.2 – Net Position: 35,386 -41,548 6,162 – Gross Longs: 42,349 2,717 7,897 – Gross Shorts: 6,963 44,265 1,735 – Long to Short Ratio: 6.1 to 1 0.1 to 1 4.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 86.8 5.6 83.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.4 5.3 5.7   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 47,581 contracts in the data reported through Tuesday. This was a weekly boost of 8,739 contracts from the previous week which had a total of 38,842 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.6 percent. The commercials are Bullish with a score of 51.7 percent and the small traders (not shown in chart) are Bearish with a score of 36.5 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.0 54.7 12.7 – Percent of Open Interest Shorts: 24.3 66.8 7.4 – Net Position: 47,581 -85,057 37,476 – Gross Longs: 217,899 383,827 89,120 – Gross Shorts: 170,318 468,884 51,644 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.6 51.7 36.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.1 -16.6 15.7   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of 2,237 contracts in the data reported through Tuesday. This was a weekly boost of 10,782 contracts from the previous week which had a total of -8,545 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.6 percent. The commercials are Bearish with a score of 31.4 percent and the small traders (not shown in chart) are Bearish with a score of 45.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.7 58.8 12.4 – Percent of Open Interest Shorts: 24.5 57.4 15.0 – Net Position: 2,237 2,874 -5,111 – Gross Longs: 50,151 114,901 24,257 – Gross Shorts: 47,914 112,027 29,368 – Long to Short Ratio: 1.0 to 1 1.0 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 75.6 31.4 45.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 29.8 -27.6 10.8   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -66,162 contracts in the data reported through Tuesday. This was a weekly lowering of -7,014 contracts from the previous week which had a total of -59,148 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.2 percent. The commercials are Bullish with a score of 79.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.2 83.6 9.5 – Percent of Open Interest Shorts: 38.4 40.3 19.6 – Net Position: -66,162 86,256 -20,094 – Gross Longs: 10,425 166,645 18,973 – Gross Shorts: 76,587 80,389 39,067 – Long to Short Ratio: 0.1 to 1 2.1 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 26.2 79.0 6.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.5 0.7 5.2   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -9,715 contracts in the data reported through Tuesday. This was a weekly fall of -316 contracts from the previous week which had a total of -9,399 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.0 percent. The commercials are Bullish with a score of 52.1 percent and the small traders (not shown in chart) are Bearish with a score of 36.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 72.6 19.0 – Percent of Open Interest Shorts: 29.4 31.2 39.2 – Net Position: -9,715 18,888 -9,173 – Gross Longs: 3,652 33,069 8,654 – Gross Shorts: 13,367 14,181 17,827 – Long to Short Ratio: 0.3 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.0 52.1 36.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.3 4.8 -11.9   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 12,170 contracts in the data reported through Tuesday. This was a weekly lowering of -2,716 contracts from the previous week which had a total of 14,886 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.5 percent. The commercials are Bearish with a score of 46.6 percent and the small traders (not shown in chart) are Bearish with a score of 35.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 37.6 40.4 19.5 – Percent of Open Interest Shorts: 29.2 50.9 17.5 – Net Position: 12,170 -15,116 2,946 – Gross Longs: 54,424 58,524 28,287 – Gross Shorts: 42,254 73,640 25,341 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.5 46.6 35.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.5 -16.4 0.9   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -86,694 contracts in the data reported through Tuesday. This was a weekly reduction of -953 contracts from the previous week which had a total of -85,741 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 4.4 percent. The commercials are Bullish-Extreme with a score of 91.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.6 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.1 81.0 10.2 – Percent of Open Interest Shorts: 51.1 30.2 15.9 – Net Position: -86,694 97,684 -10,990 – Gross Longs: 11,692 155,928 19,706 – Gross Shorts: 98,386 58,244 30,696 – Long to Short Ratio: 0.1 to 1 2.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 4.4 91.8 25.6 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.5 -2.3 1.1   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -9,333 contracts in the data reported through Tuesday. This was a weekly increase of 1,033 contracts from the previous week which had a total of -10,366 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 48.9 percent and the small traders (not shown in chart) are Bearish with a score of 21.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.9 55.3 4.4 – Percent of Open Interest Shorts: 53.4 36.5 8.6 – Net Position: -9,333 12,020 -2,687 – Gross Longs: 24,923 35,432 2,838 – Gross Shorts: 34,256 23,412 5,525 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 48.9 21.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.8 2.6 -13.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 8,974 contracts in the data reported through Tuesday. This was a weekly rise of 7,730 contracts from the previous week which had a total of 1,244 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 67.8 percent and the small traders (not shown in chart) are Bullish with a score of 56.1 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 39.4 56.0 4.1 – Percent of Open Interest Shorts: 33.4 64.0 2.1 – Net Position: 8,974 -12,054 3,080 – Gross Longs: 59,485 84,673 6,250 – Gross Shorts: 50,511 96,727 3,170 – Long to Short Ratio: 1.2 to 1 0.9 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 67.8 56.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.9 -8.0 3.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of 23,760 contracts in the data reported through Tuesday. This was a weekly rise of 3,514 contracts from the previous week which had a total of 20,246 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 95.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.1 16.5 6.1 – Percent of Open Interest Shorts: 41.8 55.5 2.4 – Net Position: 23,760 -26,225 2,465 – Gross Longs: 51,868 11,101 4,095 – Gross Shorts: 28,108 37,326 1,630 – Long to Short Ratio: 1.8 to 1 0.3 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 95.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 33.1 -36.1 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 16,164 contracts in the data reported through Tuesday. This was a weekly lift of 721 contracts from the previous week which had a total of 15,443 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bearish with a score of 46.0 percent and the small traders (not shown in chart) are Bullish with a score of 63.8 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 50.8 42.2 6.9 – Percent of Open Interest Shorts: 9.4 86.4 4.2 – Net Position: 16,164 -17,239 1,075 – Gross Longs: 19,808 16,440 2,700 – Gross Shorts: 3,644 33,679 1,625 – Long to Short Ratio: 5.4 to 1 0.5 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 46.0 63.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.9 -19.2 -12.7   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -215 contracts in the data reported through Tuesday. This was a weekly advance of 104 contracts from the previous week which had a total of -319 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 92.2 percent. The commercials are Bearish with a score of 22.8 percent and the small traders (not shown in chart) are Bearish with a score of 22.7 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.0 3.5 12.8 – Percent of Open Interest Shorts: 80.0 5.5 8.8 – Net Position: -215 -213 428 – Gross Longs: 8,307 369 1,364 – Gross Shorts: 8,522 582 936 – Long to Short Ratio: 1.0 to 1 0.6 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 92.2 22.8 22.7 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.5 -9.8 -6.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Positions of large speculators according to the COT report as at 15/2/2022 Total net speculator positions in the USD index rose by 1,621 contracts last week. This change is the result of an increase in long positions by 1,979 contracts and an increase in short positions by 358 contracts. Growth in total net speculator positions occurred last week in the euro, the British pound and the New Zealand dollar. Decrease in total net positions occurred in the Australian dollar, the Japanese yen, the Canadian dollar, and the Swiss franc. In the event of a Russian invasion to Ukraine, markets would move into risk-off sentiment. This means that investors would sell risk assets, which include stock indices, and shift their resources into assets that are considered as safe havens in such situations, which include US government bonds and gold. In currency terms, this means that the US dollar, the Japanese yen and the Swiss franc in particular could then appreciate in such a situation. Commodity currencies (especially AUD, NZD) might weaken. The positions of speculators in individual currencies The total net positions of large speculators are shown in table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators Date USD Index EUR GBP AUD NZD JPY CAD CHF Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Jan 18, 2022 36434 24584 -247 -88454 -8331 -80879 7492 -10810 Jan 11, 2022 37892 6005 -29166 -91486 -8604 -87525 -7376 -7660 Note: The explanation of COT methodolody is at the end of this report. Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish Jan 18, 2022 691882 211901 187317 24584 9589 7540 -11039 18579 Bullish Jan 11, 2022 682293 204361 198356 6005 4075 5288 -2271 7559 Bullish         Total change 23829 18826 -30309 49135     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1 The total net positions of speculators reached 47,581 contracts last week, up by 8,739 contracts compared to the previous week. This change is due to a decrease in long positions by 1,074 contracts and a decrease in short positions by 9,813 contracts. Total net speculators positions have increased by 49,135 contracts over the past 6 weeks. This change is due to speculators closing 30,309 short positions and adding 18,826 long positions. This data suggests continued bullish sentiment for the euro. However, the rising open interest, which increased by 1,949 contracts in the last week, shows the opposite, as the euro fell down last week and this decline is supported by the rising number of open interest contracts. So more bearish traders were in the market. So we have conflicting information here. The euro weakened slightly last week on fears of an escalation of the conflict between Russia and Ukraine. Long-term resistance: 1.1461 – 1.15 Support: 1.1280 - 1.1300. Next support is near 1.1220 - 1.1240. A strong support is in 1.1120-1.1140. The British Pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish Jan 18, 2022 183234 39760 40007 -247 -17259 9254 -19665 28919 Weak bearish Jan 11, 2022 200493 30506 59672 -29166 486 4526 -5479 10005 Weak bearish         Total change -4705 24171 -17237 41408     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators reached 2,237 contracts last week, up by 10,782 contracts compared to the previous week. This change is due to an increase in long positions of 5,442 contracts and a decrease in short positions of 5,340 contracts. Total net positions have increased by 41,408 contracts over the past 6 weeks. This change is due to speculators exiting 17,237 short positions and adding 24,171 long positions. This data suggests bullish sentiment for the pound. Open interest, which fell by 2,646 contracts last week, is indicating that the bullish price action that occurred in the pound last week was not supported by volume and therefore it is weak. Risk off sentiment in US equities could have a negative effect on the Pound as well as the Euro, which could then send the Pound towards support which is at 1.3380. Long-term resistance: 1.3620-1.3640. Next resistance is near 1.3680 – 1.3750. Support: 1.3490 – 1.3520. A next support is near 1.3320 – 1.3380 and then mainly in the zone near 1.3200. The Australian dollar   Date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish Jan 18, 2022 181136 9051 97505 -88454 -4317 -3332 -6364 3032 Weak bearish Jan 11, 2022 185453 12383 103869 -91486 5346 -249 1871 -2120 Bearish         Total change 12471 -940 -3612 2672     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 Total net speculator positions last week reached -86,694 contracts, down 953 contracts from the previous week. This change is due to a decrease in long positions of 5,631 contracts and a decrease in short positions of 4,678 contracts. This data suggests continued bearish sentiment on the Australian dollar, which is confirmed by the downtrend. Total net positions have increased by 2,672 contracts over the past 6 weeks. This change is due to speculators exit of 3,612 short contracts while exiting 940 long contracts at the same time. However, last week saw a decrease in open interest of 3,825 contracts. This means that the upward price action that occurred last week was weak in terms of volume because new money did not flow into the market. The Australian dollar is very sensitive to the international geopolitical situation. If the conflict between Russia and Ukraine escalates, we can expect it to weaken especially on the AUDUSD pair and also the AUDJPY. Long-term resistance: 0.7200-0.7250 and especially near 0.7270-0.7310. Long-term support: 0.7085-0.7120. A strong support is near 0.6960 – 0.6990. The New Zealand dollar   Date Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long Change Short Change Net Positions Sentiment Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish Jan 18, 2022 44727 11612 19943 -8331 2661 652 379 273 Weak bearish Jan 11, 2022 42066 10960 19564 -8604 1764 1543 1302 241 Weak bearish         Celková změna 23803 15506 15994 -488     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 9,333 contracts, having increased by 1,033 contracts compared to the previous week. This change is due to an increase in long positions by 7,755 contracts and an increase in short positions by 6,722 contracts. This data suggests that the bearish sentiment for the New Zealand Dollar continues, but has started to weaken over the past week. Total net positions have declined by 488 contracts over the past 6 weeks. This change is due to speculators adding 15,994 short positions and adding 15,506 long positions. Open interest rose significantly last week, increasing by 9,228 contracts. The rise in the NZDUSD price action that occurred last week is therefore supported by volume and therefore the move was strong. The reason for the NZD strengthening last week is that the Reserve Bank of New Zealand is likely to raise interest rates to 1% on Feb 23, 2022. However, if the conflict in Ukraine escalates further, the NZDUSD could more likely weaken. The reason for the NZDUSD's decline from a technical analysis perspective could also be that the NZDUSD price has reached horizontal resistance and also the upper downtrend line from the daily chart. Long-term resistance: 0.6700 – 0.6740 and then 0.6850 – 0.6890. Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530. Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.

So, the week is coming to an end, but markets stay awake all days long. Right after midnight we’re all welcomed to join our friends from Australia in reviewing Private New Capital Expenditure (QoQ) (Q4) (Prev. -2.2%). Afterwards, at 7.30 a.m. Swiss Employment Level (Q4) will be released. Heading to Oceanic Area, India will release RBI MPC Meeting Minutes, followed by Brazilian Unemployment Rate (Prev. 11.6%) Released half an hour later. Back to Europe, shortly after midday ECB McCaul is going to declare. At 1 a.m. Russia will release their Central Bank Reserves and 15 minutes later BoE Gov Bailey is going to give a speech. At 2.40 p.m. ECB Supervisory Board Member Fernandez-Bollo is going to speak. Isabel Schnabel will take her turn more than hour later. USA – At 1.30 p.m. GDP (QoQ) (Q4) (Prev. 6.9%), GDP Price Index (Prev. 7.0%) and Initial Jobless Claims (Prev. 248K) will be released. In the same time, but in Canada, we will meet the latest Manufacturing Sales (MoM) (Prev. 0.7%). In the afternoon we will get to know US New Home Sales (MoM) and Crude Oil Inventories (Prev. 1.121M) and Cushing Crude Oil Inventories. Some would say that 24/02 is the day of speeches what is not exaggerated as FOMC Members speaks from 4 p.m. to 6 p.m. We will get the Thursday ended with New Zealand’s Core Retail Sales (QoQ) (Prev. -6.7%), Retail Sales (QoQ) (Q4) (Prev. -8.1%), Trade Balance (YoY) (Jan) (Prev. -6.780M) followed by Tokyo Core CPI (YoY) (Feb) (Prev. -0.2%) and CPI Tokyo Ex Food And Energy (MoM) (Feb) (Prev. -0.3%) Source: Investing.com Tiime: GMT

USOIL continues to climb WTI crude surged after Russia launched a military operation in eastern Ukraine. The latest market jitters met support over 90.70 which sits next to the 20-day moving average. Sentiment would stay optimistic as long as price action is above this demand zone. A previous horizontal consolidation allowed the bulls to catch their breath and accumulate for the current push. A close above 95.50 would send the price towards the landmark 100.00. An overbought RSI may cause a brief pause if momentum traders take profit. NZDUSD hits resistance The New Zealand dollar jumped after the RBNZ raised rates for the third time in a row. The pair met selling pressure in the supply zone (0.6810) from the sell-off in late January. An overextended RSI led short-term bulls to take profit in that congestion area. However, the rebound trajectory may attract buying interest with the current pullback seen as an opportunity. 0.6680 is the next support after a drop below 0.6730. A deeper correction may test 0.6600, which is important support from the daily chart. AUDUSD seeks support The Australian dollar retreats amid cautious market sentiment. A break above the recent peak at 0.7245 suggests a strong bullish commitment. The pair is heading towards January’s high at 0.7310. A bullish breakout could turn things around in the medium term. After the RSI ventured into the overbought area, the bullish impetus stalled as intraday buyers took profit. 0.7165 is the next support as the RSI swings into the oversold area. Further down, 0.7100 is a key floor to keep the rebound intact.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 22nd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further rise in bullish bets in the Euro currency futures contracts. Euro speculators raised their bullish bets for a third straight week this week and for the ninth time in the past ten weeks. Over this ten-week time-frame, Euro bets have gained by a total of +71,185 contracts, going from -10,162 net positions on December 12th to a total of +59,306 net positions through this Tuesday the 22nd of February (please note that this is a couple days before the Russian invasion of Ukraine). Overall, the current Euro standing is at the most bullish level of the past thirty-two weeks, dating back to July 13th when the net position was at +59,713 contracts. Joining the Euro (11,725 contracts) with positive speculator changes this week were the yen (2,975 contracts), Brazil real (685 contracts), US Dollar Index (698 contracts), Australian dollar (2,614 contracts), Russian ruble (3,353 contracts) and the Mexican peso (7,851 contracts). The currencies with declining bets were the Swiss franc (-1,272 contracts), British pound sterling (-8,046 contracts), New Zealand dollar (-2,218 contracts), Canadian dollar (-2,917 contracts) and Bitcoin (-68 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-22-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,922 78 36,084 88 -41,368 6 5,284 74 EUR 696,682 82 59,306 53 -98,050 48 38,744 39 GBP 188,443 31 -5,809 70 10,070 36 -4,261 47 JPY 194,169 51 -63,187 28 82,480 77 -19,293 8 CHF 47,339 24 -10,987 51 19,110 52 -8,123 39 CAD 140,305 24 9,253 57 -14,143 47 4,890 40 AUD 192,579 77 -84,080 7 96,072 91 -11,992 23 NZD 56,636 56 -11,551 52 13,908 52 -2,357 25 MXN 171,299 36 16,825 35 -21,038 64 4,213 61 RUB 38,673 34 19,517 60 -20,053 40 536 49 BRL 94,577 100 24,445 100 -27,081 0 2,636 97 Bitcoin 11,007 59 -283 91 -256 0 539 25   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 36,084 contracts in the data reported through Tuesday. This was a weekly lift of 698 contracts from the previous week which had a total of 35,386 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.0 percent. The commercials are Bearish-Extreme with a score of 5.9 percent and the small traders (not shown in chart) are Bullish with a score of 74.3 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.6 5.0 12.7 – Percent of Open Interest Shorts: 13.9 80.3 3.1 – Net Position: 36,084 -41,368 5,284 – Gross Longs: 43,726 2,742 6,969 – Gross Shorts: 7,642 44,110 1,685 – Long to Short Ratio: 5.7 to 1 0.1 to 1 4.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.0 5.9 74.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.1 4.6 -10.6   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 59,306 contracts in the data reported through Tuesday. This was a weekly rise of 11,725 contracts from the previous week which had a total of 47,581 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.2 percent. The commercials are Bearish with a score of 48.0 percent and the small traders (not shown in chart) are Bearish with a score of 38.6 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.7 54.5 12.8 – Percent of Open Interest Shorts: 22.2 68.6 7.3 – Net Position: 59,306 -98,050 38,744 – Gross Longs: 214,195 379,583 89,334 – Gross Shorts: 154,889 477,633 50,590 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.2 48.0 38.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.4 -18.3 18.8   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -5,809 contracts in the data reported through Tuesday. This was a weekly lowering of -8,046 contracts from the previous week which had a total of 2,237 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 69.8 percent. The commercials are Bearish with a score of 35.6 percent and the small traders (not shown in chart) are Bearish with a score of 46.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.4 61.8 12.8 – Percent of Open Interest Shorts: 25.5 56.4 15.1 – Net Position: -5,809 10,070 -4,261 – Gross Longs: 42,249 116,372 24,154 – Gross Shorts: 48,058 106,302 28,415 – Long to Short Ratio: 0.9 to 1 1.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 69.8 35.6 46.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.8 -16.5 9.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -63,187 contracts in the data reported through Tuesday. This was a weekly rise of 2,975 contracts from the previous week which had a total of -66,162 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.1 percent. The commercials are Bullish with a score of 77.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 8.1 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.7 83.5 9.2 – Percent of Open Interest Shorts: 38.2 41.0 19.1 – Net Position: -63,187 82,480 -19,293 – Gross Longs: 10,976 162,044 17,881 – Gross Shorts: 74,163 79,564 37,174 – Long to Short Ratio: 0.1 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.1 77.2 8.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.4 -12.8 3.4   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -10,987 contracts in the data reported through Tuesday. This was a weekly decline of -1,272 contracts from the previous week which had a total of -9,715 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bullish with a score of 52.3 percent and the small traders (not shown in chart) are Bearish with a score of 39.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 71.2 20.5 – Percent of Open Interest Shorts: 31.2 30.9 37.6 – Net Position: -10,987 19,110 -8,123 – Gross Longs: 3,785 33,718 9,691 – Gross Shorts: 14,772 14,608 17,814 – Long to Short Ratio: 0.3 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 52.3 39.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.8 4.0 -0.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of 9,253 contracts in the data reported through Tuesday. This was a weekly lowering of -2,917 contracts from the previous week which had a total of 12,170 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 56.6 percent. The commercials are Bearish with a score of 47.3 percent and the small traders (not shown in chart) are Bearish with a score of 39.5 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.0 41.6 21.6 – Percent of Open Interest Shorts: 27.4 51.7 18.1 – Net Position: 9,253 -14,143 4,890 – Gross Longs: 47,661 58,345 30,327 – Gross Shorts: 38,408 72,488 25,437 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 56.6 47.3 39.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.1 -11.2 -1.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -84,080 contracts in the data reported through Tuesday. This was a weekly lift of 2,614 contracts from the previous week which had a total of -86,694 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 6.9 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.0 81.7 9.6 – Percent of Open Interest Shorts: 49.7 31.9 15.8 – Net Position: -84,080 96,072 -11,992 – Gross Longs: 11,553 157,416 18,459 – Gross Shorts: 95,633 61,344 30,451 – Long to Short Ratio: 0.1 to 1 2.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 6.9 90.6 23.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.9 -5.6 0.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -11,551 contracts in the data reported through Tuesday. This was a weekly reduction of -2,218 contracts from the previous week which had a total of -9,333 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bullish with a score of 51.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.6 62.6 4.6 – Percent of Open Interest Shorts: 51.0 38.1 8.8 – Net Position: -11,551 13,908 -2,357 – Gross Longs: 17,343 35,481 2,608 – Gross Shorts: 28,894 21,573 4,965 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.9 51.8 24.8 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.9 5.6 -7.5   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 16,825 contracts in the data reported through Tuesday. This was a weekly lift of 7,851 contracts from the previous week which had a total of 8,974 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.5 percent. The commercials are Bullish with a score of 64.0 percent and the small traders (not shown in chart) are Bullish with a score of 60.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 42.5 53.0 4.1 – Percent of Open Interest Shorts: 32.7 65.3 1.7 – Net Position: 16,825 -21,038 4,213 – Gross Longs: 72,846 90,784 7,091 – Gross Shorts: 56,021 111,822 2,878 – Long to Short Ratio: 1.3 to 1 0.8 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 34.5 64.0 60.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.1 -9.3 4.2   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 24,445 contracts in the data reported through Tuesday. This was a weekly lift of 685 contracts from the previous week which had a total of 23,760 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 55.0 40.2 4.8 – Percent of Open Interest Shorts: 29.1 68.9 2.0 – Net Position: 24,445 -27,081 2,636 – Gross Longs: 51,990 38,039 4,541 – Gross Shorts: 27,545 65,120 1,905 – Long to Short Ratio: 1.9 to 1 0.6 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 97.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 46.6 -49.2 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 19,517 contracts in the data reported through Tuesday. This was a weekly lift of 3,353 contracts from the previous week which had a total of 16,164 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.6 percent. The commercials are Bearish with a score of 39.6 percent and the small traders (not shown in chart) are Bearish with a score of 49.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 58.5 35.9 5.6 – Percent of Open Interest Shorts: 8.0 87.8 4.2 – Net Position: 19,517 -20,053 536 – Gross Longs: 22,625 13,895 2,152 – Gross Shorts: 3,108 33,948 1,616 – Long to Short Ratio: 7.3 to 1 0.4 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.6 39.6 49.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 23.4 -20.6 -25.0   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of -283 contracts in the data reported through Tuesday. This was a weekly lowering of -68 contracts from the previous week which had a total of -215 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.7 percent. The commercials are Bearish-Extreme with a score of 19.3 percent and the small traders (not shown in chart) are Bearish with a score of 25.2 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.2 2.9 12.2 – Percent of Open Interest Shorts: 79.8 5.3 7.3 – Net Position: -283 -256 539 – Gross Longs: 8,501 322 1,338 – Gross Shorts: 8,784 578 799 – Long to Short Ratio: 1.0 to 1 0.6 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 90.7 19.3 25.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.1 -6.1 -0.5   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Economic Calendar by FXMAG.COM - 02/03/2022 Europeans may stay awake as shortly after midnight Australian GDP (QoQ) (Q4) is going to be announced. The previous indicator hit -1.9% Heading to Europe – at 8:55 a.m. we get to know German Unemployment Change (February) which previously reached -48K. About one hour later Europeans will be provided with the CPI indicator wondering whether it will go back from the level of 5.1% According to Investing.com, we can expect that British Annual Budget Release will be known tomorrow and what we’re sure of, there are many events to watch in the United States. Even if we don’t care about ADP Nonfarm Employment Change which will be released at 1:15 p.m., many will follow the testimony of Fed’s Jerome Powell at 3 p.m. followed by Crude Oil Inventories (prev. 4.515M) to be released half an hour later. In Canada, at 3 p.m. Bank of Canada will release its Interest Rate Decision. The previous Interest Rate was 0.25% Wednesday (2nd March) is a day free for Brazilians, so don’t expect any news coming from this country in LATAM. Time: GMT Data: Investing.com

XAUUSD grinds rising trendline Gold recovered after the first round of peace talks between Ukraine and Russia ended without a resolution. The precious metal found support over 1885. The rising trendline from early February indicates that the general direction is still up despite a choppy path. The previous peak at 1974 is now a fresh resistance and its breach could send the price to the psychological level of 2000. The downside risk is a fall below the said support. Then 1852, near the 30-day moving average, would be the bulls’ second line of defense. AUDUSD attempts reversal The Australian dollar steadied after the RBA warned that energy prices could flare up inflation. A break above the previous high (0.7285) shows buyers’ strong commitment despite sharp liquidation. Sentiment swiftly recovered and may attract more buying interest. An overbought RSI may temporarily limit the upside. And the bulls could be waiting for a pullback to accumulate. 0.7220 is the closest support. A bullish close above the January peak at 0.7310 could initiate a reversal in the medium-term and extend gains towards 0.7400. CADJPY bounces back The Canadian dollar clawed back losses after the Q4 GDP beat expectations. A jump above 90.70 has prompted sellers to cover their bets, opening the door for a potential reversal. 91.10 is the next resistance and its breach could propel the loonie to this year’s high at 92.00. On the downside, the psychological level of 90.00 is a key support to keep the rebound relevant. Otherwise, a drop to 89.30 would suggest that sentiment remains fragile. In turn, this would place the pair under pressure once again.

Positions of large speculators according to the COT report as at 22/2/2022 Total net speculator positions in the USD index rose by 698 contracts last week. This change is the result of an increase in long positions by 1,377 contracts and an increase in short positions by 679 contracts. The increase in total net speculator positions occurred last week in the euro, the Australian dollar and the Japanese yen. The decline in total net positions occurred in the British pound, the New Zealand dollar, the Canadian dollar and the Swiss franc.  Following Russia's invasion of Ukraine, markets shifted into risk-off sentiment. From a currency perspective, this means that the euro, pound, Australian dollar and New Zealand dollar could weaken. However, the situation is changing very quickly depending on various political statements. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators Date USD Index EUR GBP AUD NZD JPY CAD CHF Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Jan 18, 2022 36434 24584 -247 -88454 -8331 -80879 7492 -10810 Note: The explanation of COT methodolody is at the end of this report. Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish Jan 18, 2022 691882 211901 187317 24584 9589 7540 -11039 18579 Bullish         Total change 14389 9834 -43467 53301     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 59 306 contracts last week, up by 11 725 contracts compared to the previous week. This change is due to a decrease in long positions by 3,704 contracts and a decrease in short positions by 15,429 contracts. Total net positions have increased by 53,301 contracts over the past 6 weeks. This change is due to the fact that large speculators ended 43,467 short positions and addded 9,834 long positions.  This data suggests continued bullish sentiment for the euro. Open interest, which fell by 5,465 contracts in the past week, shows that the downward movement that occurred in the euro last week was not supported by the volume and therefore it was a weak decline as there were fewer bearish traders in the market.  The euro weakened strongly last week under the influence of the war in Ukraine and reached strong support at 1.1120. Long-term resistance: 1.1280 – 1.1300. Next resistance is near 1.1370 – 1.1400. Support: 1.1100-1.1140   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish Jan 18, 2022 183234 39760 40007 -247 -17259 9254 -19665 28919 Weak bearish         Total Change -12050 11743 -11614 23357     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators last week amounted to - 5,809 contracts, down by 8,046 contracts compared to the previous week. This change is due to a decrease in long positions by 7,902 contracts and an increase in short positions by 144 contracts. Total net positions have increased by 23,357 contracts over the past 6 weeks. This change is due to speculators exiting 11,614 short positions and adding 11,743 long positions. The decline in total net positions of large speculators into negative territory indicates bearish sentiment for the pound. Open interest, which fell by 6,859 contracts last week, indicates that the decline in the pound that occurred last week was not supported by volume and was therefore weak. The pound, just as the euro, might be negatively impacted by risk-off sentiment which could then send the pound towards support which is at 1.3300 or possibly 1.3200. Long-term resistance: 1.3620-1.3640.  Next resistance is near 1.3680 – 1.3750. The resistance is also in the zone 1.3490 – 1.3520. Support is near 1.3270 – 1.3300 and then mainly in the zone 1.3200.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Bullish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish Jan 18, 2022 181136 9051 97505 -88454 -4317 -3332 -6364 3032 Weak bearish         Total Change 7126 -830 -8236 7406     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 Total net speculator positions last week reached -84,080 contracts, up 2,614 contracts from the previous week. This change is due to a decrease in long positions by 139 contracts and a decrease in short positions by 2,753 contracts. This data suggests a weakening of the bearish sentiment for the Australian dollar, which is confirmed by the downtrend. Total net positions have increased by 7,406 contracts over the past 6 weeks. This change is due to speculators exiting 8,236 short contracts while exiting 830 long contracts. However, there was an increase in open interest of 1 contract last week. This means that the upward movement that occurred last week was weak in terms of volume because new money did not flow into the market. The Australian dollar is very sensitive to the international geopolitical situation. In the event of geopolitical instability, it can usually be expected to weaken especially in the AUDUSD pair and also the AUDJPY. However, last week the Australian dollar surprisingly strengthened and approached the resistance band. Long-term resistance: 0.7270-0.7310                                                                                                            Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish Jan 18, 2022 44727 11612 19943 -8331 2661 652 379 273 Weak bearish         Total Change 14570 6383 9330 -2947     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 11,551 contracts, having fallen by 2,218 contracts compared to the previous week. This change is due to a decrease in long positions by 7,580 contracts and a decrease in short positions by 7,580 contracts. This data suggests that the bearish sentiment on the NZ dollar continues. Total net positions have declined by 2,947 contracts over the past 6 weeks. This change is due to speculators adding 9,330 short positions and adding 6,383 long positions. Last week, open interest fell significantly by 7,469 contracts. Therefore, the upward movement in NZDUSD that occurred last week is not supported by volume and therefore the move was weak. The strengthening of the NZDUSD that occurred last week is somewhat surprising given the geopolitical tensions in Ukraine. This upward movement is forming a channel pattern, which may be a correction in the current downtrend trend that we can see on the daily or weekly chart. Long-term resistance: 0.6850 – 0.6890 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.

Economic Calendar by FXMAG.COM – 04/03/2022 This week wasn’t easy for anybody and we might say markets and governors “have taken that into consideration” and let us slow down in the end of this week. We don’t have many events to follow on Friday. Australia The biggest challenge would be staying awake at 0:30 a.m. to check out the Australian Retail Sales (MoM) (prev. -4.4%). United Kingdom Nine hours later, at 9:30 a.m. UK Construction PMI is presented. The previous value of this indicator was 56.3 North America According to Investing.com, In the USA, at 1:30 p.m., the Bureau of Labor Statistics presents Nonfarm Payrolls (467K) and Unemployment Rate (4.0%). An hour and a half later Canada releases Ivey PMI (50.7)

The Swing Overview - Week 9 The war in Ukraine continues, and although we all want this tragic event to be ended immediately, but unfortunately, according to last statements of Russian officials, it looks like the war will drag on for a longer period of time. Investors have reacted to this development by selling risk assets, including the Czech koruna. Stock indices are losing ground and the DAX in particular has been under heavy pressure. On the other hand, commodities such as oil, gold, and coal are strengthening strongly. Somewhat surprising is the development in the Australian dollar, which usually weakens in the events of geopolitical uncertainties. However, there is a reason for its current rise. More on this in our article. Conflict in Ukraine   Vladimir Putin probably did not expect to encounter such a brave resistance from Ukraine and that  almost the whole world would send Russia into isolation through significant sanctions. The list of companies and actions that have cut ties with Russia is growing day by the day and Western companies are leaving Russia. Thus, for Russians, foreign goods (food, clothing, furniture, electronics, cars) will gradually become very rare. Probably the strongest sanction that Russia has felt so far, was the freeze of the Russian Central Bank's foreign exchange reserves. In response, the Russian ruble began to depreciate significantly on February 28, 2022, and has already lost more than 30% of its pre-invasion value. In response, the Russian Central Bank intervened by raising the interest rate to 20%, which temporarily halted the ruble's fall.    Figure 1: The Russian ruble paired with the USD and the euro Meanwhile, Western countries have not exhausted all options to stop Russia in this war through economic sanctions in case of further escalation of the conflict yet. The fact that European countries might stop taking Russian gas is also at stake. This would, of course, have a very significant impact on the entire European economy. However, these are still just some economic losses, which can not be   compared at all with the losses of lives experienced by the unprecedentedly attacked Ukraine. In any case, this crisis seems to have the potential to surpass in its consequences the crisis that occurred in Russia in 1998, which led to inflation exceeding 80% and central bank interest rates reaching 150%.   Data from the US economy The ISM manufacturing sentiment indicator for February came in at 58.6 which is better than expected and points to an optimistic development of the US economy. In the labour market sector, the ADP (non-farm job change) indicator was reported, which showed that 475 thousand jobs were created in America in February (compared to 509 thousand in January). The number of unemployment claims reached 215 thousand last week, which was less than expected 226 thousand. Thus, the data show that the US economy is doing well so far and the US Fed is going to raise interest rates at its next meeting on March 16, 2022. Jerome Powell said that he would support a 0.25% rate hike. Powell also said that the war in Ukraine means significant uncertainty for monetary policy.   The US dollar and bond yields The US dollar continues to strengthen, as the USD index shows. In addition to the expected US interest rate hike, the US dollar bullishness is explained by demand for US government bonds in times of uncertainty. Demand for these bonds then pushes down their yields, which continue to fall. Figure 2: 10-year government bond yield on the 4H chart and USD index on the daily chart Index SP500 The US SP 500 index moved in a consolidation range last week. This shows that investors have so far viewed the conflict in Ukraine as an event that is more or less a regional event and therefore saw cheap stocks as a buying opportunity.  However, the sanctions adopted by Western countries will of course also have an impact on the global economy, especially if the conflict deepens further. This concern was then reflected at the end of the week when the index started to weaken. Figure 3: The SP 500 on H4 and D1 chart   Resistance according to the H4 chart is in the region of around 4,410 - 4,420. The nearest support according to the H4 chart is at 4255 - 4284. Significant support is at 4,100 - 4,113. German DAX index In contrast to the SP 500 index, there was a big sell-off in the DAX, showing that investors are worried, among other things, that a further escalation of the conflict could lead to a disruption in the supply of Russian gas, on which Germany is heavily dependent.  According to the daily chart, it looks like the DAX index is now in free fall and is breaking through support barriers as if they did not exist. It looks like the market is starting to show signs of panic selling by inexperienced investors.  If you are speculating in the short term, then bear in mind that short term speculation against such a strong downtrend is very disadvantageous and risky.   Figure 4: DAX on H4 and daily chart     Current resistance is in the area of 13,655 - 13,756. The price is now at support at 13,400, which is already slightly broken, but the closing of the whole session will be crucial. The next support is then at 13 000 - 13 100.   The Czech koruna is losing significantly The Czech koruna has long benefited from the interest rate differential, which has been very favourable for the koruna against the euro and has been the reason why the koruna has appreciated strongly since November 2021. But the Czech koruna, along with other Central European currencies, is a currency that is losing ground heavily in the current conflict.   Figure 5: The EURCZK on the daily chart   Firstly, there is the concern that the Czech Republic is geographically quite close to Ukraine, even though the Czech Republic does not have very significant exports directly with Ukraine nor Russia (in total, around 3% of total Czech exports). At the same time, there is concern about the Czech Republic's dependence on Russian gas. If the taps are closed, then the koruna could shoot above  CZK 27 per euro. Currently, the EURCZK pair is trading at the resistance level of 25. 80 - 25.90.   The Australian dollar The Australian dollar is a currency that tends to weaken during major global crises. In particular, the AUDJPY pair is correlated with the SP 500 index in the short term. Currently, however, the Australian dollar is strengthening.  This is because the Australian economy is export-oriented and exports commodities such as gold, iron ore, coal and gas.  All these commodities are now in high demand. Europe, for example, is realising that dependence on Russian gas is not paying off and is looking for alternatives. A temporary solution will be to rebuild coal-fired power stations. Germany and Italy have already started to buy coal stocks, which are therefore appreciating strongly. As a result, the price of coal has sky-rocketed, with one tonne reaching a record price of the USD 400. Figure 6: The coal price   The gold, traditionally seen as a safe haven in times of uncertainty, is also strengthening. The gold has also been helped by a fall in US bond yields.   Figure 7: The gold on H4 and D1 charts   In terms of technical analysis, the gold stopped at the resistance of $1,973 per ounce. The nearest support according to the daily chart is  $1,870 - 1,878 per ounce. The rise in commodity prices then resulted in the strengthening of the Australian dollar.     Figure 8: The AUDJPY currency pair on D1 chart   The AUDJPY broke the resistance in the range of 0.8400 - 0.8420, which became the new support. The next resistance is then at the level of 85.90 - 86.20.  

Markets have started the week with further heavy selling as the conflict in Ukraine continued to intensify. From Friday’s crazy reports of Europe’s largest nuclear power plant being shelled to broken ceasefires and trapped residents unable to evacuate. Today’s reports suggested Russia had agreed to stop fighting on their side to finally allow trapped residents to evacuate to safe zones.  Oil and Gold have been headline movers, but it hasn’t been all about them. We have continued to watch stock drops on stock indexes. European indexes and Asian indexes have been particularly hard hit, with several losing over 15% in the last two monthly bars, including this month. Oil has not only been a flyer as the world watches Russia and Ukraine, but the energy shock has sent oil prices flying. WTI has seen over 40% added in the last two months, and the rally has been running for the last four months straight. Oil jumped to 13-year highs today as reports mentioned the U.S and Europe could look at banning Russian crude imports.  Getting back to stock indexes, the oil rally has also contributed to the decline. Oil at these highs ramps up inflation fears, that are already running hot and start to put growth pressure back on economies that are just beginning to come out of the pandemic. Business requires energy. High energy costs make business more expensive and can be passed onto the consumer, increasing the cost of goods.  Surging inflation has mainly been a US and European issue, but if it ramped up all over the world, many economies might not be ready to start raising rates to combat it. For instance, Australia’s building industry has been kept alive by a super-hot housing market. Rising rates could cool off the housing market and put pressure on the building and trade industries. One major building group just failed. Higher rates and reduced business could show cracks in more companies.  We’ve picked a few markets out to take a closer look.  Euro Stoxx 50 The Euro Stoxx 50 lost 20% to its low. Europen shares, especially German shares, have been hit hard by the conflict in Ukraine. Sellers have cut close half of the rally seen from 2020. Today sellers retraced all gains made in 2021 after hitting 3381.  Hang Seng Index This one went a little under the radar, but I saw the damage that has been done to this index and was quite surprised. 14% has been wiped off the index in the last two months and the price today slipped below the 2020 low. When you compare it to the JPN225 that’s where the shock comes from, as it has dropped 8%. Gold Gold has been a significant talking point during the crisis. Good old Gold went straight back to safe mode as traders looked for a safe bet in a time of crisis. The rally in the last two months has been rather explosive. Buyers have added over 11% to the value, and we saw $2000USD touched today. Price now sits 3.72% away from retesting highs set back in 2020 in the heart of the pandemic. Another factor that might be adding to the appreciation. Reposts suggest that Gold could be being used to pay for oil. This is interesting as oil has always been paid for in USD. But with Russia partially locked out of SWIFT and the Fed blocking their USD transactions, Gold could be a new payment option moving forward.  Uncertainty presents Volatility Currently, our margin levels remain unchanged across all instruments and we offer one of the best swap conditions on key instruments such as Gold. Make the most out of market movements right now with Eightcap. For more information on market updates and our swap rates, please contact our award-winning customer service team. The post CFD Update: Three Markets to Watch as Markets Open Today appeared first on Eightcap.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the jump in bullish bets in the Brazilian Real currency futures contracts. Real speculators increased their bullish bets for a fourth straight week this week and by a total of +63,801 contracts over this four-week time-frame. This bullishness has taken the Real speculator level from -13,353 net positions on February 1st to +50,448 net positions this week. The current overall speculator standing has now climbed to the most bullish level on record, according to the CFTC data that goes back to the mid-1990’s and eclipsing the previous high set in 2017. The BRLUSD currency pair price has been in an uptrend since the beginning of the year and has reached the highest levels since June just below the 0.2000 exchange rate. The currencies with higher speculator bets this week were the Brazil real (26,003 contracts), Mexican peso (25,553 contracts), Euro (5,633 contracts), British pound sterling (5,472 contracts), Canadian dollar (4,887 contracts), Australian dollar (5,744 contracts) and Bitcoin (363 contracts). The currencies with lower speculator bets were the US Dollar Index (-1,310 contracts), Japanese yen (-5,545 contracts), Swiss franc (-4,261 contracts), New Zealand dollar (-2,621 contracts) and the Russian ruble (-9,843 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,651 82 34,774 86 -39,391 9 4,617 67 EUR 719,975 91 64,939 55 -95,105 49 30,166 24 GBP 211,869 46 -337 74 14,129 38 -13,792 27 JPY 208,629 61 -68,732 25 79,535 76 -10,803 27 CHF 47,273 24 -15,248 43 20,862 54 -5,614 47 CAD 143,507 26 14,140 61 -21,586 42 7,446 45 AUD 189,667 75 -78,336 12 87,737 84 -9,401 30 NZD 50,389 44 -14,172 47 16,090 55 -1,918 30 MXN 154,664 28 42,378 45 -45,811 54 3,433 58 RUB 24,753 11 9,674 36 -9,068 65 -606 18 BRL 94,577 100 24,445 74 -27,081 25 2,636 97 Bitcoin 9,980 51 80 99 -517 0 437 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week equaled a net position of 34,774 contracts in the data reported through Tuesday. This was a weekly fall of -1,310 contracts from the previous week which had a total of 36,084 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 9.1 percent and the small traders (not shown in chart) are Bullish with a score of 67.0 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.2 8.5 10.5 – Percent of Open Interest Shorts: 15.9 78.1 2.3 – Net Position: 34,774 -39,391 4,617 – Gross Longs: 43,761 4,831 5,942 – Gross Shorts: 8,987 44,222 1,325 – Long to Short Ratio: 4.9 to 1 0.1 to 1 4.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.8 9.1 67.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.9 5.0 -14.7   Euro Currency Futures: The Euro Currency large speculator standing this week equaled a net position of 64,939 contracts in the data reported through Tuesday. This was a weekly boost of 5,633 contracts from the previous week which had a total of 59,306 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.9 percent. The commercials are Bearish with a score of 48.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.7 54.2 11.7 – Percent of Open Interest Shorts: 22.7 67.4 7.5 – Net Position: 64,939 -95,105 30,166 – Gross Longs: 228,385 390,260 84,321 – Gross Shorts: 163,446 485,365 54,155 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 54.9 48.8 24.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.4 -12.6 7.1   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week equaled a net position of -337 contracts in the data reported through Tuesday. This was a weekly lift of 5,472 contracts from the previous week which had a total of -5,809 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 73.8 percent. The commercials are Bearish with a score of 38.0 percent and the small traders (not shown in chart) are Bearish with a score of 27.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.5 62.1 10.6 – Percent of Open Interest Shorts: 22.7 55.4 17.2 – Net Position: -337 14,129 -13,792 – Gross Longs: 47,679 131,583 22,551 – Gross Shorts: 48,016 117,454 36,343 – Long to Short Ratio: 1.0 to 1 1.1 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 73.8 38.0 27.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.1 6.7 -23.2   Japanese Yen Futures: The Japanese Yen large speculator standing this week equaled a net position of -68,732 contracts in the data reported through Tuesday. This was a weekly decrease of -5,545 contracts from the previous week which had a total of -63,187 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 24.6 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bearish with a score of 26.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.0 80.3 10.7 – Percent of Open Interest Shorts: 40.0 42.2 15.9 – Net Position: -68,732 79,535 -10,803 – Gross Longs: 14,665 167,605 22,407 – Gross Shorts: 83,397 88,070 33,210 – Long to Short Ratio: 0.2 to 1 1.9 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 24.6 75.7 26.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.7 -10.0 17.5   Swiss Franc Futures: The Swiss Franc large speculator standing this week equaled a net position of -15,248 contracts in the data reported through Tuesday. This was a weekly reduction of -4,261 contracts from the previous week which had a total of -10,987 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.3 percent. The commercials are Bullish with a score of 54.3 percent and the small traders (not shown in chart) are Bearish with a score of 46.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 3.5 74.1 21.4 – Percent of Open Interest Shorts: 35.7 30.0 33.3 – Net Position: -15,248 20,862 -5,614 – Gross Longs: 1,651 35,045 10,127 – Gross Shorts: 16,899 14,183 15,741 – Long to Short Ratio: 0.1 to 1 2.5 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.3 54.3 46.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.8 8.0 -7.7   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week equaled a net position of 14,140 contracts in the data reported through Tuesday. This was a weekly increase of 4,887 contracts from the previous week which had a total of 9,253 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 61.4 percent. The commercials are Bearish with a score of 42.2 percent and the small traders (not shown in chart) are Bearish with a score of 44.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 35.5 40.1 21.5 – Percent of Open Interest Shorts: 25.6 55.2 16.3 – Net Position: 14,140 -21,586 7,446 – Gross Longs: 50,881 57,576 30,817 – Gross Shorts: 36,741 79,162 23,371 – Long to Short Ratio: 1.4 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 61.4 42.2 44.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.4 -5.4 2.4   Australian Dollar Futures: The Australian Dollar large speculator standing this week equaled a net position of -78,336 contracts in the data reported through Tuesday. This was a weekly advance of 5,744 contracts from the previous week which had a total of -84,080 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.2 percent. The commercials are Bullish-Extreme with a score of 84.4 percent and the small traders (not shown in chart) are Bearish with a score of 29.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.7 80.1 10.5 – Percent of Open Interest Shorts: 48.0 33.8 15.4 – Net Position: -78,336 87,737 -9,401 – Gross Longs: 12,720 151,922 19,865 – Gross Shorts: 91,056 64,185 29,266 – Long to Short Ratio: 0.1 to 1 2.4 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 12.2 84.4 29.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.4 -8.0 1.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week equaled a net position of -14,172 contracts in the data reported through Tuesday. This was a weekly reduction of -2,621 contracts from the previous week which had a total of -11,551 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.5 percent. The commercials are Bullish with a score of 55.2 percent and the small traders (not shown in chart) are Bearish with a score of 29.9 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.8 72.1 5.3 – Percent of Open Interest Shorts: 48.9 40.2 9.1 – Net Position: -14,172 16,090 -1,918 – Gross Longs: 10,485 36,326 2,665 – Gross Shorts: 24,657 20,236 4,583 – Long to Short Ratio: 0.4 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.5 55.2 29.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.8 8.4 4.3   Mexican Peso Futures: The Mexican Peso large speculator standing this week equaled a net position of 42,378 contracts in the data reported through Tuesday. This was a weekly advance of 25,553 contracts from the previous week which had a total of 16,825 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.4 percent. The commercials are Bullish with a score of 53.7 percent and the small traders (not shown in chart) are Bullish with a score of 57.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 48.5 46.9 4.1 – Percent of Open Interest Shorts: 21.1 76.5 1.9 – Net Position: 42,378 -45,811 3,433 – Gross Longs: 74,971 72,497 6,306 – Gross Shorts: 32,593 118,308 2,873 – Long to Short Ratio: 2.3 to 1 0.6 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.4 53.7 57.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.0 -16.0 3.7   Brazilian Real Futures: The Brazilian Real large speculator standing this week equaled a net position of 24,445 contracts in the data reported through Tuesday. This was a weekly boost of 685 contracts from the previous week which had a total of 23,760 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.4 percent. The commercials are Bearish with a score of 24.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 55.0 40.2 4.8 – Percent of Open Interest Shorts: 29.1 68.9 2.0 – Net Position: 24,445 -27,081 2,636 – Gross Longs: 51,990 38,039 4,541 – Gross Shorts: 27,545 65,120 1,905 – Long to Short Ratio: 1.9 to 1 0.6 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 74.4 24.7 97.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 34.7 -37.1 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week equaled a net position of 9,674 contracts in the data reported through Tuesday. This was a weekly reduction of -9,843 contracts from the previous week which had a total of 19,517 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.3 percent. The commercials are Bullish with a score of 64.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.6 51.9 3.5 – Percent of Open Interest Shorts: 5.6 88.5 5.9 – Net Position: 9,674 -9,068 -606 – Gross Longs: 11,050 12,848 855 – Gross Shorts: 1,376 21,916 1,461 – Long to Short Ratio: 8.0 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 36.3 64.8 18.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.7 -4.2 -39.0   Bitcoin Futures: The Bitcoin large speculator standing this week equaled a net position of 80 contracts in the data reported through Tuesday. This was a weekly rise of 363 contracts from the previous week which had a total of -283 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 98.7 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 22.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.0 3.2 12.0 – Percent of Open Interest Shorts: 79.2 8.4 7.6 – Net Position: 80 -517 437 – Gross Longs: 7,981 321 1,198 – Gross Shorts: 7,901 838 761 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 98.7 0.0 22.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.8 -39.7 -3.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Now is the time for traders to adapt to higher volatility and rapidly changing market conditions. One of the best ways to do this is to monitor different asset classes and track which investments are gaining and losing money flow. Knowing what the Best Asset Now is (BAN) is critical for consistent growth no matter the market condition.With that said, buyers (countries, investors, and traders) are panicking as the commodity Wheat, for example, gained more than 40% last week.‘Panic Commodity Buying’ in Wheat – Weekly ChartAccording to the US Dept. of Agriculture, China will hold 69% of the world’s corn reserves, 60% of rice and 51% of wheat by mid-2022.Commodity markets surged to their largest gains in years as Ukrainian ports were closed and sanctions against Russia sent buyers scrambling for replacement supplies. Global commodities, commodity funds, and commodity ETFs are attracting huge capital inflows as investors seek to cash in on the rally in oil, metals, and grains.How does the Russia – Ukraine war affect global food supplies?The conflict between major commodity producers Russia and Ukraine is causing countries that rely heavily on commodity imports to feed their citizens to enter into panic buying. The breadbaskets of Ukraine and Russia account for more than 25% of the global wheat trade and nearly 20% of the global corn trade.Last week, it was reported that many countries have dangerously low grain supplies. Nader Saad, an Egypt Cabinet spokesman, has raised the alarm that currently, Egypt has only nine months’ worth of wheat in silos. The supply includes five months of strategic reserves and four months of domestic production to cover the bread needs of 102 million Egyptians. Additionally, Avigdor Lieberman, Israel’s economic minister, said on Thursday (3/3/22) that his country should keep “a low profile” regarding the conflict in eastern Europe, given that Israel imports 50 percent of its wheat from Russia and 30 percent from Ukraine.Sign up for my free trading newsletter so you don’t miss the next opportunity!The longer-term potential for much higher grain prices exists, but it’s worth noting that Friday’s close of nearly $12.00 a bushel for wheat is not that far away from the all-time record high of $13.30, recorded 14-years ago. According to Trading Economics, wheat has gone up 75.08% year-to-date while other commodity markets like Oats are up a whopping 85.13%, Coffee 74.68%, and Corn 34.07%.How are other markets reacting to these global events?Year-to-date comparison returns as of 3/4/2022:-9.18% S&P 500 (index), -7.49% DJI (index), -15.21% Nasdaq (index), +37.44% Exxon Mobile (oil), +20.08% Freeport McMoran (copper & gold), -20.68% Tesla (alternative energy), -24.49% Microstrategy (bitcoin play), -40.51% Meta-Facebook (social media)As stock holdings and 401k’s are shrinking it may be time to re-evaluate your portfolio. There are ETFs available that can give you exposure to commodities, energy, and metals.Here is an example of a few of these ETFs:+53.81% WEAT Teucrium Wheat Fund+41.79% GSG iShares S&P TSCI Commodity -Indexed Trust+104.40 UCO ProShares Ultra Bloomberg Crude Oil+59.32% PALL Aberdeen Standard Physical Palladium SharesHow is the global investor reacting to rocketing commodity prices and increasing market volatility?We can track global money flow by monitoring the following 1-month currency graph (www.finviz.com). The Australian Dollar is up +4.25%, the New Zealand Dollar +3.72%, and the Canadian Dollar +0.30% vs. the US Dollar due to the rising commodity prices like metals and energy. These country currencies are known as commodity currencies.The Switzerland Franc +0.96%, the Japanese Yen +0.35%, and the US Dollar +0.00% are all benefiting from global capital seeking a safe haven. As volatility continues to spike, these country currencies will experience more inflows as capital comes out of depreciating assets and seeks stability.We also notice that capital outflow is occurring from the European Union-Eurodollar -4.55% and the British Pound -2.22% due to their close proximity (risk) to the Russia - Ukraine war.www.finviz.comGlobal central banks will need to begin raising their interest rates to combat high inflation!Due to the rapid acceleration of inflation, the US Federal Reserve may have been looking to raise interest rates by 50 basis points at its policy meeting two weeks from now. However, given Russia’s invasion of Ukraine, the FED may become more cautious and consider raising interest rates by only 25 basis points on March 15-16.What strategies can help you navigate current market trends?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals are starting to act as a proper hedge as caution and concern start to drive traders/investors into Metals and other safe-havens.Now is the time to keep your eye on the ball!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Positions of large speculators according to the COT report as at 1/3/2022 Total net speculator positions in the USD index fell 1,310 contracts last week. This change is the result of 35 contracts increase in long positions and a 1,345 contracts increase in short positions. Growth in total net speculator positions occurred last week in the euro, the British pound, the Australian dollar, and the Canadian dollar. Decreases in total net positions occurred in the New Zealand dollar, the Japanese yen, and the Swiss franc.   Following Russia's invasion to Ukraine, markets shifted into risk-off sentiment. This means that especially the euro and the pound are weakening. The Australian dollar and New Zealand dollar are strengthening due to rising prices of commodities that these countries export. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish         Total change 28093 16484 -23871 40355     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 64,939 contracts last week, which is an increase by 5,633 contracts compared to the previous week. This change is due to an increase in long positions by 14,190 contracts and an increase in short positions by 8,557 contracts. These data suggest continued bullish sentiment in the euro. Open interest, which has increased by 23,293 contracts in the last week, shows that the downward movement that occurred in the euro last week was supported by volume and is therefore strong. The euro is weakening sharply under the influence of the war in Ukraine and we can see that support levels have not been respected in such a strong trend. In a strong downtrend it is very risky to try to catch the bottom and open bullish long positions.  Long-term resistance: 1.0980 – 1.1010. Next resistance is near 1.1120 – 1.1150. Support: 1.0640-1.0700 The British pound date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish         Total change 28635 7919 8009 -90     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week reached to -337 contracts, having increased by 5,472 contracts compared to the previous week. This change is due to an increase in long positions by 5,430 contracts and a decrease in short positions by 42 contracts. This suggests bearish sentiment, but it is weak as the total net positions of large speculators increased. Open interest, which rose by 23,426 contracts last week, means that the fall in the pound that occurred last week was supported by volume and is therefore strong. Risk off sentiment due to the war in Ukraine continues to weigh on the pound as well as the euro and therefore the pound is weakening strongly. Long-term resistance: 1.3270-1.3300.  Next resistance is near 1.3420 – 1.3440. The resistance is also in the zone 1.3490 – 1.3520. Support is near 1.3150 – 1.3200.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish         Total change 8531 3669 -6449 10118     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1   The total net positions of speculators last week reached to - 78,336 contracts, up by 5,744 contracts compared to the previous week. This change is due to an increase in long positions by 1,167 contracts and a decrease in short positions by 4,577 contracts. This data suggests a weakening of bearish sentiment in the Australian dollar. However, last week we saw a decline in open interest by 2,912 contracts. This means that the upward movement that occurred last week in the AUDUSD was weak because new money did not flow into the market. The Australian dollar has been strengthening strongly recently, which is explained by the rise in the prices of commodities that Australia exports. These commodities include coal, gas and gold.  Long-term resistance: 0.7520-0.7560                                                                                                              Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish         Total change 5662 -1127 4714 -5841     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1     The total net positions of speculators last week reached a value of - 14,172 contracts, having fallen by 2,621 contracts compared to the previous week. This change is due to a decrease in long positions by 6,858 contracts and a decrease in short positions by 4,237 contracts. This data suggests that the bearish sentiment for the NZD continues. Last week, open interest fell significantly by 6,247 contracts. Therefore, the upward movement in the NZDUSD that occurred last week is not supported by volume and therefore the price action was weak. The strengthening of the NZDUSD that occurred last week is somewhat surprising given the geopolitical tensions in Ukraine and risk off sentiment. What helped the NZD rise are rising prices of commodities  such as milk, which New Zealand produces. Long-term resistance: 0.6850 – 0.6890 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.

USDJPY breaks higherThe Japanese yen softened after weaker-than-expected GDP in Q4. Despite choppiness in recent price action, confidence in the greenback remains high.A failed attempt at the supply zone (115.80) suggests a lack of momentum, but a swift bounce off 114.65 reveals strong enough buying interest.A bullish breakout would lead to the double top at 116.35. Its breach could end the two-month-long consolidation and trigger an extended rally towards January 2017’s highs around 118.00. 115.40 is fresh support.AUDUSD seeks supportThe Australian dollar stalls as commodity prices consolidate. The rally above 0.7310, a major supply area, has weakened selling pressure and put the pair on a bullish reversal course.The Aussie’s parabolic ascent and an overbought RSI prompted short-term buyers to take profit. As the RSI swings back into the oversold zone, the bulls may see the current fallback as an opportunity to stake in.0.7380 is a fresh resistance and 0.7250 is the immediate support. Further below 0.7170 is a critical level to keep the rebound valid.UK 100 sees limited bounceThe FTSE 100 struggles as the UK plans to ban Russian energy imports.On the daily chart, a break below the demand zone (6850) wiped out 11-months worth of gains and signaled a strong bearish bias. The RSI’s oversold situation may cause a temporary rebound, but a bearish MA cross could attract more selling interest.The liquidation is yet to end as medium-term buyers scramble for the exit. 7200 is a fresh resistance and 7450 is a major supply zone. A drop below 6800 may lead to 6500.

To minimize trading risk and grow capital during a global crisis is somewhat hinged on the answers to speculative questions. How long will the Russia – Ukraine war last? How high is the price of oil and gas going to go? How quickly will central banks raise interest rates to counter high inflation? What assets should I put my money into? Knowing what the Best Asset Now (BAN) is, is critical for risk management and consistent growth no matter the market condition!‘BUY THE DIP’ or ‘SELL THE RALLY’? - DJI Weekly ChartAs of 3/8/22, YTD returns are: DJIA -10.20%, S&P 500 -12.49%, Nasdaq 100 -18.70%The Dow Jones Industrial Average traded as high as 36952.65 on January 5, 2022The DJIA put in a Covid 2020 Low of 18213.65 on March 23, 2020. When you double the price of this significant low, you get a price of 36427.30, which the DJIA reached on November 4, 2021. This was precisely 591 calendar days from the 2020 low. The 200% level seems to have capped the bull rally. If, in fact, this is the top and the start of a bear market, we should experience high volatility both up and down. However, the highs and lows should be lower as the market begins to trend lower. The volatility will also continue to increase as the market deflates and continues to lose capital.Sign up for my free trading newsletter so you don’t miss the next opportunity! It appears this scenario may very well coincide with the fundamental current events of high inflation, central banks unable to add stimulus, having to raise their interest rates, and current/future geopolitical events.What-To-Do Before the Storm Hits“Have A Plan and Stick-To-Your-Plan”There are some basic strategies or practices that professional traders utilize to minimize trading risk and grow capital. Here are a few ideas:Bull/Bear Markets – In an upmarket, you should buy the dips. In a down market, you should do the opposite and sell the rallies. Rallies in a down 'bear' market tend to be very fast and short-lived.Diversification – Don't have your eggs in too many baskets. It is better to navigate thru a storm by focusing your resources specifically rather than generally.Leverage – Reduce leverage, position size, or know how you will respond to different percentage losses or gains. Understand what your investment objective is as well as your tolerance for risk. If you're having trouble sleeping at night, you should reduce your holdings to the place where you are comfortable.Leverage is a mathematical equation, and it does not have to be 1x, 2x, etc. It can also be 0.75x, 0.50x, etc. You get to decide what's best for you and your family. Leverage is also a double-edged sword! Be careful, especially when the markets are on edge and volatile.Where is the Institutional Money Going?The global currency market, otherwise known as Forex or FX, is the largest market in the world. According to the BIS Triennial Central Bank Survey, published on December 8, 2019, by the Bank for International Settlements, it has an average daily transactional volume of $6.6 trillion.By tracking global money flow, we can get a pretty good idea of where the smart money is going. For now, let’s see what has happened during the last 6-months.According to www.finviz.com, we notice that the US Dollar, despite its Covid stimulus spending spree, was the preferred currency. However, the Eurodollar has seen substantial outflows decreasing by -7.60%, which is entirely understandable with the Russia – Ukraine War at their doorstep.Global central banks ponder how quickly to raise interest rates in order to curb high inflation!According to TradingEconomics, the current global interest rates by major country are: United States 0.25%, Japan -0.10%, Switzerland -0.75%, Euro Region 0.00%, United Kingdom 0.50%, Canada 0.50%, and Australia 0.10%.The US Federal Reserve may have been looking to raise interest rates by as much as 50 basis points at its next policy meeting. However, given Russia’s invasion of Ukraine, the FED may become more cautious and consider raising interest rates by only 25 basis points on March 15-16. We need to pay close attention to this high-impact market event.What strategies can help you minimize trading risk and grow capital?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Minimizing risk in order to grow your capital must remain a primary focus for all investors and traders. Now is the time to keep your eye on the ball!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

AUD/USD witnessed fresh selling on Friday and snapped two successive days of the winning streak.Dovish remarks by RBA Governor Lowe, modest USD strength exerted some downward pressure.A goodish recovery in the risk sentiment helped limit further losses for the perceived riskier aussie.The AUD/USD pair recovered a few pips from the daily low, around the 0.7300 mark touched in the last hour and was last seen trading around the 0.7325 region.The pair struggled to capitalize on its gains recorded over the past two trading sessions and witnessed some selling on Friday in reaction to dovish-sounding remarks by the RBA Governor Philip Lowe. During his opening address to the Australian Banking Association, Lowe said that the RBA will not be pressured by financial markets to raise interest rates until prices are rising at a sustainable pace.Apart from this, some intraday US dollar buying exerted additional downward pressure on the AUD/USD pair. That said, hopes of a diplomatic solution to the Ukraine crisis lifted the global risk sentiment and acted as a headwind for the safe-haven greenback. The optimism was fueled by comments from Russian President Vladimir Putin, saying that there are certain positive shifts in talks with Ukraine.The latest developments triggered a goodish move up in the equity markets, which, in turn, extended some support to the perceived riskier aussie. The risk-on mood, along with firming expectations for an imminent start of the policy tightening by the Fed pushed the US Treasury bond yields higher. This should act as a tailwind for the USD and keep a lid on any meaningful upside for the AUD/USD pair.Hence, it will be prudent to wait for some follow-through buying before confirming a near-term bullish bias amid the risk of a further escalation in tensions between Russia and the West. In fact, US President Joe Biden is set to call for an end of normal trade relations with Russia later this Friday, alongside the Group of Seven nations and European Union leaders.

In the following week: Great Britain, Germany, USA, Canada, Australia, Japan, Russia… - these countries have their economic indicators presented. What’s mostly interesting? Tuesday Australia and China At 0.30 a.m. RBA Release Meeting Minutes, At 2 a.m. Chinese Industrial Production (YoY) goes public. Great Britain In the morning, five hours later, British Average Earnings Index +Bonus is presented. Previously it amounted to 4.3%. At the same time (7 a.m.) Claimant Count Change is released. Would it increase? Germany Germans will sleep a bit longer – ZEW Economic Sentiment is released at 10 a.m. and previously amounted to 54.3 USA The awaited release of the day is US PPI (MoM), which previously hit 1.0% Wednesday USA Wednesday is a kind of continuation of the Tuesday’s afternoon as the whole day is full of US releases. We begin with Core Retail Sales (MoM) (3.3%) followed by Retail Sales (MoM) (3.8%) and Crude Oil Inventories. In the evening Fed will finally publish Interest Rate Decision, which previously hit 0.25%. Canada and New Zealand Canadian Core CPI is released at 12:30 p.m. New Zealand’s GDP goes public late in the afternoon. Thursday Australia and Great Britain At 0:30 a.m. Australians get to know Employment Change (12.9K). In the midday BoE releases its Interest Rate Decision – previous one amounted to 0.50% The EU and the USA On Thursday European Markets investors should follow ECB President Lagarde testimony and release of EU CPI (YoY) (prev. 5.8%) What to follow in the USA? Building Permits, Initial Jobless Claims And Philadelphia Fed Manufacturing Index Friday Japan As monetary policy are released around the world in the following week, BoJ presents its Statement as well. Russia It’s interesting what will be the Interest Rate of Russian Central Bank as it remains conflicted with Ukraine and sanctions affect the country’s economy Canada Core Retail Sales (MoM) and US Existing Home Sales are latter indicators to be showed the following week. Source: Investing.com Time: GMT

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 8th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the rising bullish sentiment in the Mexican Peso currency futures contracts. Peso speculators have boosted their bullish bets for six consecutive weeks and in nine out of the past ten weeks. Over the past six-week time-frame, Peso bets have gained by a total of +53.807 contracts, going from -790 net positions on January 25th to +53,017 net positions this week. This recent improvement in Peso positioning pushed the current net speculator standing (+53,017 contracts) to the most bullish level in the past one hundred and four weeks, dating back to March 10th of 2020. Joining the Mexican peso (10,639 contracts) with positive changes this week were the Japanese yen (12,876 contracts), Brazil real (48 contracts), Swiss franc (5,538 contracts), New Zealand dollar (1,793 contracts), Australian dollar (141 contracts) and Bitcoin (185 contracts). The currencies with declining bets were the US Dollar Index (-730 contracts), Euro (-6,095 contracts), British pound sterling (-12,189 contracts), Canadian dollar (-6,494 contracts) and the Russian ruble (-1,868 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-08-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 62,447 95 34,044 85 -37,890 12 3,846 59 EUR 738,990 98 58,844 53 -83,873 52 25,029 16 GBP 246,312 68 -12,526 65 25,457 45 -12,931 29 JPY 208,683 61 -55,856 33 76,657 74 -20,801 5 CHF 51,820 30 -9,710 53 21,942 56 -12,232 27 CAD 149,425 30 7,646 55 -15,494 46 7,848 45 AUD 197,094 80 -78,195 12 78,183 77 12 52 NZD 53,250 50 -12,379 50 13,592 51 -1,213 38 MXN 166,433 34 53,017 50 -55,194 50 2,177 52 RUB 22,420 7 7,806 32 -7,325 69 -481 22 BRL 68,623 65 50,496 100 -52,564 0 2,068 90 Bitcoin 9,591 48 265 100 -422 0 157 17   US Dollar Index Futures: The US Dollar Index large speculator standing this week totaled a net position of 34,044 contracts in the data reported through Tuesday. This was a weekly decrease of -730 contracts from the previous week which had a total of 34,774 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 84.5 percent. The commercials are Bearish-Extreme with a score of 11.6 percent and the small traders (not shown in chart) are Bullish with a score of 58.6 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.7 12.8 9.0 – Percent of Open Interest Shorts: 19.2 73.4 2.9 – Net Position: 34,044 -37,890 3,846 – Gross Longs: 46,031 7,962 5,642 – Gross Shorts: 11,987 45,852 1,796 – Long to Short Ratio: 3.8 to 1 0.2 to 1 3.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 84.5 11.6 58.6 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.9 7.7 -19.7   Euro Currency Futures: The Euro Currency large speculator standing this week totaled a net position of 58,844 contracts in the data reported through Tuesday. This was a weekly decline of -6,095 contracts from the previous week which had a total of 64,939 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.1 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 52.3 11.6 – Percent of Open Interest Shorts: 24.9 63.7 8.2 – Net Position: 58,844 -83,873 25,029 – Gross Longs: 242,683 386,654 85,727 – Gross Shorts: 183,839 470,527 60,698 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.1 52.0 15.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.4 -7.8 0.5   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week totaled a net position of -12,526 contracts in the data reported through Tuesday. This was a weekly decrease of -12,189 contracts from the previous week which had a total of -337 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.0 percent. The commercials are Bearish with a score of 44.7 percent and the small traders (not shown in chart) are Bearish with a score of 28.9 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.7 66.8 9.4 – Percent of Open Interest Shorts: 25.8 56.4 14.6 – Net Position: -12,526 25,457 -12,931 – Gross Longs: 50,982 164,423 23,076 – Gross Shorts: 63,508 138,966 36,007 – Long to Short Ratio: 0.8 to 1 1.2 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.0 44.7 28.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.4 5.1 -8.0   Japanese Yen Futures: The Japanese Yen large speculator standing this week totaled a net position of -55,856 contracts in the data reported through Tuesday. This was a weekly boost of 12,876 contracts from the previous week which had a total of -68,732 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 32.7 percent. The commercials are Bullish with a score of 74.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 4.8 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 81.6 8.1 – Percent of Open Interest Shorts: 34.2 44.9 18.1 – Net Position: -55,856 76,657 -20,801 – Gross Longs: 15,548 170,330 16,884 – Gross Shorts: 71,404 93,673 37,685 – Long to Short Ratio: 0.2 to 1 1.8 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 32.7 74.3 4.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.9 -3.1 -13.5   Swiss Franc Futures: The Swiss Franc large speculator standing this week totaled a net position of -9,710 contracts in the data reported through Tuesday. This was a weekly boost of 5,538 contracts from the previous week which had a total of -15,248 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.0 percent. The commercials are Bullish with a score of 55.5 percent and the small traders (not shown in chart) are Bearish with a score of 27.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.4 70.7 17.3 – Percent of Open Interest Shorts: 28.1 28.4 40.9 – Net Position: -9,710 21,942 -12,232 – Gross Longs: 4,856 36,635 8,947 – Gross Shorts: 14,566 14,693 21,179 – Long to Short Ratio: 0.3 to 1 2.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.0 55.5 27.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.6 9.6 -22.1   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week totaled a net position of 7,646 contracts in the data reported through Tuesday. This was a weekly fall of -6,494 contracts from the previous week which had a total of 14,140 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.1 percent. The commercials are Bearish with a score of 46.4 percent and the small traders (not shown in chart) are Bearish with a score of 45.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.5 41.7 22.7 – Percent of Open Interest Shorts: 27.3 52.1 17.5 – Net Position: 7,646 -15,494 7,848 – Gross Longs: 48,492 62,360 33,951 – Gross Shorts: 40,846 77,854 26,103 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.1 46.4 45.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.5 2.8 1.2   Australian Dollar Futures: The Australian Dollar large speculator standing this week totaled a net position of -78,195 contracts in the data reported through Tuesday. This was a weekly advance of 141 contracts from the previous week which had a total of -78,336 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.3 percent. The commercials are Bullish with a score of 77.2 percent and the small traders (not shown in chart) are Bullish with a score of 52.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.9 74.1 13.0 – Percent of Open Interest Shorts: 49.6 34.5 13.0 – Net Position: -78,195 78,183 12 – Gross Longs: 19,521 146,144 25,564 – Gross Shorts: 97,716 67,961 25,552 – Long to Short Ratio: 0.2 to 1 2.2 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 12.3 77.2 52.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.7 -14.6 35.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week totaled a net position of -12,379 contracts in the data reported through Tuesday. This was a weekly rise of 1,793 contracts from the previous week which had a total of -14,172 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.5 percent. The commercials are Bullish with a score of 51.3 percent and the small traders (not shown in chart) are Bearish with a score of 37.9 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.6 62.0 5.2 – Percent of Open Interest Shorts: 52.9 36.5 7.5 – Net Position: -12,379 13,592 -1,213 – Gross Longs: 15,775 33,005 2,792 – Gross Shorts: 28,154 19,413 4,005 – Long to Short Ratio: 0.6 to 1 1.7 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.5 51.3 37.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.7 0.5 14.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week totaled a net position of 53,017 contracts in the data reported through Tuesday. This was a weekly lift of 10,639 contracts from the previous week which had a total of 42,378 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 50.0 percent. The commercials are Bearish with a score of 49.8 percent and the small traders (not shown in chart) are Bullish with a score of 52.3 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.7 36.4 3.4 – Percent of Open Interest Shorts: 13.8 69.5 2.1 – Net Position: 53,017 -55,194 2,177 – Gross Longs: 76,020 60,537 5,674 – Gross Shorts: 23,003 115,731 3,497 – Long to Short Ratio: 3.3 to 1 0.5 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.0 49.8 52.3 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.9 -22.4 -0.4   Brazilian Real Futures: The Brazilian Real large speculator standing this week totaled a net position of 50,496 contracts in the data reported through Tuesday. This was a weekly lift of 48 contracts from the previous week which had a total of 50,448 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 90.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 15.3 5.1 – Percent of Open Interest Shorts: 5.9 91.9 2.1 – Net Position: 50,496 -52,564 2,068 – Gross Longs: 54,543 10,468 3,488 – Gross Shorts: 4,047 63,032 1,420 – Long to Short Ratio: 13.5 to 1 0.2 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 90.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 62.0 -62.3 8.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week totaled a net position of 7,806 contracts in the data reported through Tuesday. This was a weekly fall of -1,868 contracts from the previous week which had a total of 9,674 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.9 percent. The commercials are Bullish with a score of 68.7 percent and the small traders (not shown in chart) are Bearish with a score of 21.5 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.5 60.6 2.9 – Percent of Open Interest Shorts: 1.6 93.3 5.1 – Net Position: 7,806 -7,325 -481 – Gross Longs: 8,173 13,590 657 – Gross Shorts: 367 20,915 1,138 – Long to Short Ratio: 22.3 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.9 68.7 21.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.1 -7.0 -22.4   Bitcoin Futures: The Bitcoin large speculator standing this week totaled a net position of 265 contracts in the data reported through Tuesday. This was a weekly gain of 185 contracts from the previous week which had a total of 80 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 7.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.9 2.8 9.9 – Percent of Open Interest Shorts: 78.1 7.2 8.3 – Net Position: 265 -422 157 – Gross Longs: 7,760 272 950 – Gross Shorts: 7,495 694 793 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 7.6 16.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.4 4.5 -8.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Positions of large speculators according to the COT report as at 8/3/2022 Total net speculator positions in the USD index fell by 730 contracts last week. This change is the result of an increase in long positions by 2,270 contracts and an increase in short positions by 3,000 contracts. The decrease in total net speculator positions occurred last week in the euro, the British pound, and the Canadian dollar. The increase in total net positions occurred in the New Zealand dollar, the Australian dollar, the Japanese yen and the Swiss franc.     The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish         Total Change 56038 29275 1991 27284     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1 The total net positions of speculators reached 58,844 contracts last week, down by 6,095 contracts from the previous week. This change is due to an increase in long positions by 14,198 contracts and an increase in short positions by 20,393 contracts. These data suggest a weakening of the bullish sentiment for the euro. Open interest, which rose by 19,015 contracts in the past week, shows that the downward price action movement that occurred in the euro last week was supported by volume and it was  therefore a strong trend. The euro continues to weaken under the influence of the war in Ukraine and we can see that support levels have not been respected in such a strong trend. The ECB's announcement last week to end the bond purchases in 3Q 2022 also contributed to the euro’s weakness. This hawkish statement at a time when economic growth is slowing sparked fears of stagflation in the market and therefore the euro weakened following the ECB announcement.   Long-term resistance: 1.1120 – 1.1150. Support: 1.080-1.0850. The next support is at 1.0640-1.0700.   The British pound date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish         Total Change 64272 14316 19079 -4763     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators last week reached - 12,526 contracts, having fallen by 12,189 contracts compared to the previous week. This change is due to the growth in long positions by 3,303 contracts and the growth in short positions by 15,492 contracts. This suggests bearish sentiment as the total net speculators positions  are negative while there has been a further decline as well. Open interest, which rose by 34,443 contracts last week, means that the fall in the pound that occurred last week was supported by the volume and it was therefore a strong price action. Risk off sentiment due to the war in Ukraine continues to weigh on the pound as well as the euro and therefore the pound is weakening strongly. Long-term resistance: 1.3180-1.3210.  Next resistance is near 1.3270 – 1.3330. Support is near 1.3000.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish         Total Change 7074 4400 -678 5078     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 The total net positions of speculators last week reached 78,195 contracts, up by 141 contracts compared to the previous week. This change is due to the growth in long positions by 6,801 contracts and the growth in short positions by 6,660 contracts. This data suggests a weakening of the bearish sentiment for the Australian dollar. Last week we saw an increase in open interest of 7,427 contracts. This means that the downward movement that occurred last week was supported by volume as new money flowed into the market. The Australian dollar weakened quite significantly last week. This may be explained by the fact that there has been a fall in prices in commodities that Australia exports (e.g. gold, coal). The decline in commodity prices also reflects efforts to find a diplomatic solution to the war in Ukraine.  Long-term resistance: 0.7370-0.7440                                                                                                              Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish         Total Change -66 -173 1433 -1606     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 12,379 contracts, having increased by 1,793 contracts compared to the previous week. This change is due to an increase in long positions by 5,290 contracts and an increase in short positions by 3,497 contracts. This data suggests that the bearish sentiment on the NZ dollar has weakened over the past week. Open interest rose significantly by 2,861 contracts last week. The downward movement in the NZDUSD that occurred last week was therefore supported by volume and therefore the move was strong. The weakening in the NZDUSD that occurred last week can be explained by the decline in the prices of commodities that New Zealand produces. Long-term resistance: 0.6850 – 0.6920 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.

EURUSD struggles to rebound The US dollar bounces across the board as the Fed may possibly raise interest rates on Wednesday. The pair found support near May 2020’s lows around 1.0800. The RSI’s oversold condition on the daily chart prompted the bears to take some chips off the table, alleviating the pressure. 1.1110 is a fresh resistance and its breach could lift offers to 1.1270. In fact, this could turn sentiment around in the short term. Failing that, a break below 1.0830 could trigger a new round of sell-off towards March 2020’s lows near 1.0650. AUDUSD lacks support The Australian dollar slipped after dovish RBA minutes. The pair continues to pull back from its recent top at 0.7430. A drop below the demand zone at 0.7250 further puts the bulls on the defensive. The former support has turned into a resistance level. 0.7170 at the origin of a previous breakout is key support. An oversold RSI may raise buyers’ interest in this congestion area. A deeper correction could invalidate the recent rebound and send the Aussie to the daily support at 0.7090. GER 40 attempts to rebound The Dax 40 edges higher as Russia and Ukraine hold a fourth round of talks. The index bounced off the demand zone (12500) from the daily chart, a sign that price action could be stabilizing. The supply zone around the psychological level of 14000 sits next to the 20-day moving average, making it an important hurdle. A tentative breakout may have prompted sellers to cover. 14900 would be the target if the rebound gains momentum. On the downside, 13300 is fresh support, and 12720 is the second line of defense.

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 15th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the strong speculator sentiment for the commodity currencies in the currency futures contracts. The Canadian dollar, Australian dollar and the New Zealand dollar all saw boosts in their bets that either pushed their bullish standings higher or sharply reduced their bearish levels this week. The Australian dollar saw the largest improvement with a huge net gain of over +33,000 contracts this week which marked the largest one-week increase in the past three hundred and sixty-five weeks, dating all the way back to March of 2015. This week’s gain dropped the AUD’s current bearish standing down to -44,856 contracts from approximately -78,000 contracts in the previous week. The New Zealand dollar contracts saw a one-week gain of +16,032 contracts which marked its largest one-week rise in the past one hundred and seventeen weeks (back to December of 2017). This rise brought the NZD speculator positions out of bearish territory for the first time in fourteen weeks to a very small bullish level of +3,653 contracts. Finally, the Canadian dollar contracts increased by a net position of +10,094 contracts this week after falling in four out of the previous five weeks. This climb in speculative bets brings the current CAD bullish standing to the best level of the past six weeks. Overall, the currency markets with higher speculator bets this week were the New Zealand dollar (16,032 contracts), Canadian dollar (10,094 contracts), Swiss franc (4,481 contracts) and the Australian dollar (33,339 contracts). The currencies with declining bets were the US Dollar Index (-5,664 contracts), Mexican peso (-63,593 contracts), Euro (-40,050 contracts), Japanese yen (-6,484 contracts), Brazil real (-6,333 contracts), British pound sterling (-16,535 contracts), Russian ruble (-263 contracts) and Bitcoin (-75 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-15-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 47,574 62 28,380 75 -31,969 21 3,589 56 EUR 666,010 70 18,794 41 -42,629 64 23,835 14 GBP 188,323 31 -29,061 53 37,279 52 -8,218 39 JPY 215,484 65 -62,340 29 87,597 80 -25,257 0 CHF 43,356 19 -5,229 61 17,460 50 -12,231 27 CAD 143,863 26 17,740 65 -13,145 50 -4,595 21 AUD 124,521 25 -44,856 43 48,640 55 -3,784 43 NZD 39,200 23 3,653 77 -1,815 28 -1,838 31 MXN 102,749 4 -10,576 23 7,848 76 2,728 55 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 68,874 65 44,163 94 -46,800 6 2,637 97 Bitcoin 10,198 53 190 98 -453 0 263 19   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 28,380 contracts in the data reported through Tuesday. This was a weekly lowering of -5,664 contracts from the previous week which had a total of 34,044 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.7 percent. The commercials are Bearish with a score of 21.5 percent and the small traders (not shown in chart) are Bullish with a score of 55.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.6 3.1 11.0 – Percent of Open Interest Shorts: 23.9 70.3 3.5 – Net Position: 28,380 -31,969 3,589 – Gross Longs: 39,767 1,452 5,242 – Gross Shorts: 11,387 33,421 1,653 – Long to Short Ratio: 3.5 to 1 0.0 to 1 3.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 74.7 21.5 55.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -10.7 16.5 -40.7   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 18,794 contracts in the data reported through Tuesday. This was a weekly decline of -40,050 contracts from the previous week which had a total of 58,844 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.8 percent. The commercials are Bullish with a score of 63.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.3 55.4 11.3 – Percent of Open Interest Shorts: 27.5 61.8 7.7 – Net Position: 18,794 -42,629 23,835 – Gross Longs: 202,040 369,253 75,191 – Gross Shorts: 183,246 411,882 51,356 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 40.8 63.7 13.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.4 4.2 -6.5   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -29,061 contracts in the data reported through Tuesday. This was a weekly decrease of -16,535 contracts from the previous week which had a total of -12,526 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.1 percent. The commercials are Bullish with a score of 51.7 percent and the small traders (not shown in chart) are Bearish with a score of 38.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.2 66.9 12.6 – Percent of Open Interest Shorts: 32.7 47.1 16.9 – Net Position: -29,061 37,279 -8,218 – Gross Longs: 32,442 125,994 23,650 – Gross Shorts: 61,503 88,715 31,868 – Long to Short Ratio: 0.5 to 1 1.4 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.1 51.7 38.6 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.9 5.0 -6.1   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -62,340 contracts in the data reported through Tuesday. This was a weekly decrease of -6,484 contracts from the previous week which had a total of -55,856 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.6 percent. The commercials are Bullish with a score of 79.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.8 75.7 7.2 – Percent of Open Interest Shorts: 44.7 35.0 18.9 – Net Position: -62,340 87,597 -25,257 – Gross Longs: 34,016 163,089 15,533 – Gross Shorts: 96,356 75,492 40,790 – Long to Short Ratio: 0.4 to 1 2.2 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.6 79.7 0.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.1 4.1 -13.6   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -5,229 contracts in the data reported through Tuesday. This was a weekly lift of 4,481 contracts from the previous week which had a total of -9,710 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.8 percent. The commercials are Bullish with a score of 50.5 percent and the small traders (not shown in chart) are Bearish with a score of 27.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.4 66.3 20.2 – Percent of Open Interest Shorts: 25.5 26.1 48.4 – Net Position: -5,229 17,460 -12,231 – Gross Longs: 5,808 28,761 8,768 – Gross Shorts: 11,037 11,301 20,999 – Long to Short Ratio: 0.5 to 1 2.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 60.8 50.5 27.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.3 1.0 -11.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of 17,740 contracts in the data reported through Tuesday. This was a weekly boost of 10,094 contracts from the previous week which had a total of 7,646 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 64.9 percent. The commercials are Bullish with a score of 50.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.0 41.3 20.3 – Percent of Open Interest Shorts: 20.6 50.4 23.5 – Net Position: 17,740 -13,145 -4,595 – Gross Longs: 47,406 59,344 29,213 – Gross Shorts: 29,666 72,489 33,808 – Long to Short Ratio: 1.6 to 1 0.8 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 64.9 50.0 20.6 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.5 9.0 -23.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -44,856 contracts in the data reported through Tuesday. This was a weekly boost of 33,339 contracts from the previous week which had a total of -78,195 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.2 percent. The commercials are Bullish with a score of 55.2 percent and the small traders (not shown in chart) are Bearish with a score of 43.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.5 62.3 15.6 – Percent of Open Interest Shorts: 55.5 23.3 18.6 – Net Position: -44,856 48,640 -3,784 – Gross Longs: 24,281 77,621 19,378 – Gross Shorts: 69,137 28,981 23,162 – Long to Short Ratio: 0.4 to 1 2.7 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.2 55.2 43.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 32.4 -35.4 30.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of 3,653 contracts in the data reported through Tuesday. This was a weekly rise of 16,032 contracts from the previous week which had a total of -12,379 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 77.4 percent. The commercials are Bearish with a score of 27.6 percent and the small traders (not shown in chart) are Bearish with a score of 30.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.8 37.4 6.2 – Percent of Open Interest Shorts: 45.5 42.1 10.9 – Net Position: 3,653 -1,815 -1,838 – Gross Longs: 21,493 14,671 2,417 – Gross Shorts: 17,840 16,486 4,255 – Long to Short Ratio: 1.2 to 1 0.9 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 77.4 27.6 30.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 25.8 -24.4 5.5   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of -10,576 contracts in the data reported through Tuesday. This was a weekly reduction of -63,593 contracts from the previous week which had a total of 53,017 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.8 percent. The commercials are Bullish with a score of 76.1 percent and the small traders (not shown in chart) are Bullish with a score of 54.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.1 55.1 6.1 – Percent of Open Interest Shorts: 48.4 47.5 3.5 – Net Position: -10,576 7,848 2,728 – Gross Longs: 39,164 56,610 6,302 – Gross Shorts: 49,740 48,762 3,574 – Long to Short Ratio: 0.8 to 1 1.2 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 22.8 76.1 54.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.8 4.9 -1.7   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 44,163 contracts in the data reported through Tuesday. This was a weekly fall of -6,333 contracts from the previous week which had a total of 50,496 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 93.8 percent. The commercials are Bearish-Extreme with a score of 5.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.1 13.7 6.2 – Percent of Open Interest Shorts: 16.0 81.7 2.3 – Net Position: 44,163 -46,800 2,637 – Gross Longs: 55,181 9,444 4,239 – Gross Shorts: 11,018 56,244 1,602 – Long to Short Ratio: 5.0 to 1 0.2 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 93.8 5.6 97.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 56.5 -55.9 -3.0   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly decline of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 190 contracts in the data reported through Tuesday. This was a weekly decline of -75 contracts from the previous week which had a total of 265 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 98.4 percent. The commercials are Bearish-Extreme with a score of 5.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.3 2.7 10.1 – Percent of Open Interest Shorts: 76.5 7.2 7.5 – Net Position: 190 -453 263 – Gross Longs: 7,989 279 1,029 – Gross Shorts: 7,799 732 766 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 98.4 5.1 18.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.0 3.0 -2.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.