OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss unrest in China amid tighter Covid restrictions, oil and the week ahead. Subscribe on Android This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 404) - MarketPulseMarketPulse

S&P 500 keeps nibbing at 4,040 and while rejected Friday and before, this level would be eventually overcome. Low 4,010s are the support, and the remaining key data of 2022 shouldn‘t force a lasting break. Of course, unless China uncertainty strikes the way it did over the weekend – Asian session understandably took the bulk of the hit but the rush to bonds appears receding for now. Even if S&P 500 buyers would be overpowered right next, the Q4 rally isn‘t over – the headline dust only needs to settle.Market breadth is improving, VIX is revealing retreating fears, and in general we‘re back to summer bets on less restrictive Fed. Just like back then the negative quarterly GDP print drew focus to the recession now predictions (didn‘t happen), the latest retreat in inflation (with more, lot more to come) is giving rise to similar bets.Even if the Fed goes only 50bp in Dec (as anticipated long ago) and 25bp in Jan, that‘s still a headwind – it‘ll tip the real economy into recession, no matter how slow they are planning to go now. 5% year end or 5.50% after Mar FOMC – either will do the trick. Yield curve has twice inverted, housing feels that, manufacturing is sputtering, and labor market posture (tightness or hotness, call it whatever you please) will change. Tech layoffs are only a harbinger.What does it mean for stocks now? We‘re still moving higher before recession goes after earnings. 4,065 – 4,070 followed by even 4,130, are my key levels to watch in the weeks ahead.Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookThe real resistance is a bit above the 200-day moving average. The spring is coiled, and ready – it‘ll more probably happen on Wednesday‘s GDP than on Tuesday‘s consumer confidence. Sectors featured Friday will do great.Credit MarketsThe retreat in yields and general risk-on posture in bonds will continue – Friday was a welcome reprieve. Loaded and ready to go higher in support of the stock market rally.

Oil is losing over 3% on Monday due to concerns around demand in China caused by strengthening lockdowns. Also, demand for risky assets, including oil, declined due to massive protests in China against the zero-covid policy. In addition, the news that the US has granted Chevron a license to produce oil in Venezuela should not be missed either. The price of WTI dipped below $74 on Monday, while Brent was temporarily trading below $81, hitting its lowest level in 11 months. Oil is very sensitive to fluctuations in global supply and demand, so even news of a potential supply and demand shift was enough to intensify the sell-off.Today's move down confirmed the severity of the downward momentum of the last three weeks, as prices broke the support that stood two months ago. On the technical analysis side, the two upside impulses above $93 for WTI were nothing more than a corrective pullback as part of the downside trend from June this year.Looking solely at the chart, the price could pull back quite quickly by another $10 to 64, where it last received support from buyers in August and December 2021. The realisation of the Fibonacci pattern suggests a drop to $49 (161.8% of the initial decline).However, in oil, such long-term patterns are permanently disrupted by geopolitics. And now traders should also keep in mind that oil bounces in recent months have been directed by OPEC+, which first hinted at and then announced production quota cuts.It is also worth realising that the energy situation in Europe looks better than expected only because of warmer weather. This factor remains outside the influence of the authorities, and in case of colder weather, energy prices could go up sharply, despite economic weakness.Geopolitics and weather are the most significant risks to an overall bearish scenario in oil, which sees the price falling another $10 before year-end to $64 and $25 to $49 before the end of the second quarter next year. Translated into Brent, the scenario assumes a drop to $71 and $57, respectively.

Risk assets rose worldwide last week as the backdrop turned more supportive. Recession fears seem to be easing worldwide, particularly in the Eurozone, but interest rates are not rising in tandem, the best combination possible for stock markets, credit and commodity currencies. The dollar underperformed against every currency in G10, and the biggest winners were Latin American currencies. The major exception was the Brazilian real, which continues to be hobbled by fears that the Lula administration will undo the economic stabilisation achieved over the last year in Brazil.   As this is written, news of the anti-lockdown protests in China are dominating headlines and risk assets are opening softer in Asian early morning trading. In addition to the headlines from China, this should be a very busy week for markets. The flash inflation report out of the Eurozone (Wednesday) is expected to remain at record highs, specially in the core indicator, a stark contrast to the wishful thinking we see in the ECB and elsewhere that inflation will somehow go away on its own. The latter part of the week will be dominated by US macro news, including the PCE inflation report (Thursday) and the critical November payrolls report (Friday). Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 28/11/2022 GBP The pound continues to benefit from the sense of stability brought to UK finances by Prime Minister Sunak. It’s also helpful that market expectations for the terminal rate in the UK continue to creep up towards 5%. A handful of MPC members spoke last week, and there appears a general consensus among policymakers that additional interest rate hikes are required. Last week’s High Court ruling, which deemed that another Scottish Independence referendum cannot take place without Westminster consent, had little impact on sterling. This week is extremely light in terms of UK data, so risk appetite among investors and a couple of speeches by MPC members (Tuesday and Wednesday respectively) will be the main drivers of trading in the pound. EUR While sentiment in the Eurozone economy remains negative, key surveys last week all came out stronger than expected. This includes the PMI survey of business activity, but also consumer and investor confidence. For now, the weakness in the surveys has not fully shown up in the actual economic numbers, which continue to hold up rather well under the circumstances. Figure 2: Euro Area PMIs (2020 – 2022) Source: Refinitiv Datastream Date: 28/11/2022 This week, the focus will be on the flash inflation numbers for November, out on Wednesday. The excitement around the possibility that headline inflation may retreat slightly, while remaining in double digits, should be tempered by the absence of any sign of a pullback in the more persistent core number. The latter will likely remain above 5%, a dizzying and unsustainable 4% above overnight rates in the Eurozone. USD The holiday-shortened week in the US had little economic or policy news to drive markets, aside from the publication of the somewhat stale minutes of the last Fed meeting. The minutes reinforced the notion that the Fed is likely to revert back to a 50 bp hike in December, but told us little about the more important question of what to expect next year. While the payrolls report on Friday should dominate headlines, we think markets are not paying enough attention to the PCE inflation report for October, the Fed’s preferred inflation measure, released the day before. It will be interesting to see whether it confirms the softness of the CPI report that gave so much encouragement to markets, thanks partly to some technical quirks in the report. Should it come out higher than expected we could see some sharp retracement in expectations for the Fed’s terminal rate. JPY The yen traded a touch higher on the US dollar last week, though the general improvement in risk appetite meant that the currency underperformed most of its G10 counterparts. Slowly but surely, the Japanese yen is regaining its status as one of the chief safe-haven currencies in the world, a mantle lost due to the Bank of Japan’s ultra-dovish monetary policy stance. Yet, with central banks globally approaching the end of their tightening cycles, the yen is somewhat back in favour again among investors, with the currency rallying this morning on news of the worsening in the COVID-19 situation in China over the weekend. Japanese inflation data, out last week, came in higher than expected, perhaps a prelude to a slightly less dovish BoJ policy stance. Labour market data (Monday), industrial production (Tuesday), and a speech from Bank of Japan governor Kuroda (Thursday) will be closely watched by investors this week. CHF The Swiss franc ended last week little changed against the euro, and around the middle of the G10 currency performance dashboard. News from Switzerland was scarce, and the US Thanksgiving holidays ensured that trading activity was light in the second half of the week. This week’s economic calendar in Switzerland is unusually busy. Third-quarter GDP growth, sentiment indices, retail sales and PMI data will all be out. The primary focus should, however, be on the latest inflation figures (out on Thursday), as the November print may have the biggest impact on the size of the SNB’s rate hike next month. In the two months prior, the data has surprised to the downside, but at 3% it remains significantly above the SNB’s 0-2% target range. AUD News of anti-lockdown protests in China over the weekend led to a bit of weakness in the Aussie dollar this morning, as investors fret over the possibility of additional mobility restrictions in Asia’s largest economy. AUD does, however, continue to remain well bid against most currencies, as dimming fears over a global recession support high-risk assets. Domestic economic news out last week was a touch on the soft side, which perhaps contributed to the underperformance in AUD relative to its New Zealand counterpart. Both the services and manufacturing PMIs missed expectations, with the latter now at its lowest level since January (47.2). An unexpected drop in this morning’s retail sales print for October (-0.2%) has further clouded the outlook. Figure 3: Australia Retail Sales (2021 – 2022) Source: Refinitiv Datastream Date: 28/11/2022 We suspect that headlines out of China, Australia’s largest trading partner, will be the main driver of the dollar during the remainder of the week. Domestic macroeconomic data releases are few and far between, though a speech from Reserve Bank of Australia governor Lowe on Friday could draw some attention. NZD In line with expectations, the Reserve Bank of New Zealand raised its base rate by another 75 basis points last week. Some analysts had pencilled in a smaller hike in light of the growing downside risks to growth. While the RBNZ noted that a shallow recession was likely on the way in 2023, it also said that this would be a necessary condition in order for the bank to reach its inflation target. The statement remained rather hawkish. The reference to ‘tighten at pace’ was removed, though the bank noted that rates would need to go higher than previously expected. The committee even discussed the possibility of a 100bp hike at last week’s meeting. The New Zealand dollar was well supported in the aftermath of Wednesday’s RBNZ announcement – we suspect that growing expectations for hikes could keep the currency well bid this week. The bank’s commitment to bringing down core inflation is notable, and is likely to ensure that it could raise rates deeper into 2023 than most of its G10 counterparts. CAD The Canadian dollar once again underperformed most of its major peers last week, ending near the bottom of the G10 performance tracker, alongside the US dollar. Some dovish comments out of the Bank of Canada were partly behind this underperformance, with deputy BoC governor Rogers saying last week that higher rates were causing hardship for households. The BoC delivered a dovish tilt at its last meeting, and it will likely take something extraordinary for anything larger than a ‘standard’ 25bp hike at the last policy meeting of the year in December. This week is a very busy one in terms of economic data releases in Canada. Tuesday’s Q3 GDP number to expected to show that the Canadian economy expanded at a modest pace in the three months to September. Meanwhile, economists are bracing for a sharp slowdown in job creation in Friday’s labour report for November (+6k expected in the net employment change number). SEK The Swedish krona appreciated against the euro last week, in line with the general improvement in investor appetite for risk. The outcome of last week’s Riksbank meeting was more or less as expected, perhaps with a slight dovish tilt, which limited further gains for the krona. The Riksbank raised interest rates by 75 basis points to 2.5%, the highest level since 2008. The board stated that the risk of high inflation becoming entrenched is still substantial, and that it is very important that monetary policy acts to ensure a stabilisation around the 2% target within a reasonable time. Figure 4: Riksbank Base Rate (%) (2012 – 2022) Source: Refinitiv Datastream Date: 28/11/2022 In addition, the Riksbank also published its new macroeconomic projections. The target CPIF measure was projected to ease from 7.6% this year to 5.7% in 2023, an upward revision from the previous forecast of 5.1%, and then down to 1.5% in 2024, slightly lower than 1.6% expected last time. The bank expects a GDP contraction of 1% in 2023, before growth of 1.0% returns in 2024. As for the terminal rate, the bank puts it at 2.84% in the third quarter of next year. The revised rate path remains somewhat off-market expectations and, in our view, is somewhat conservative. NOK In the absence of relevant data last week in Norway, the Norwegian krone traded in line with risk assets, ending the week higher against the euro on improved risk sentiment. Expectations of a more dovish Federal Reserve, and the reduced fear of recessions, have contributed to the improvement in risk sentiment. Indeed, NOK was by far and away the best performer in the G10 last week, largely a consequence of its high-risk status. No major data will be published this week either. Therefore, we believe that the currency will continue to trade in line with other risk assets. Protests in China over increased restrictions to curb covid may continue to worsen sentiment, which may weigh on risk assets in the coming days, including the Norwegian krone. CNY The Chinese yuan was among the underperformers last week. Sentiment toward China has taken another turn for the worse, as domestic covid cases continued to hit fresh record highs. This has prompted officials to introduce local restrictions and mass testing, as a number of cities struggle to contain the spread. This will add to the strain on the Chinese economy and policymakers have rushed to provide monetary support. Last week, commercial banks in China announced fresh credit lines to help struggling property developers. For the first time since April, the PBoC also cut its reserve requirement ratio (RRR) for banks, slashing it by 25 basis points to ensure ample liquidity. In the coming days, we’ll receive fresh PMI prints for November, which should help us understand the degree of the economic slowdown. The immediate attention in China is, however, on protests against the country’s zero-Covid policy. These protests have erupted in the past few days in response to a number of tragedies, including a fire that killed 10 in Urumqi, the capital of the northwestern Xinjiang region. Protests have taken place in at least nine cities, including Beijing and Shanghai, which has further soured sentiment towards the yuan at the start of this week. Economic Calendar (28/11/2022 – 02/12/2022) To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Source: Dollar falls as recession fears recede, yields fall | Ebury UK

After strong gains last week, the Japanese yen has extended its gains on Monday. USD/JPY is trading at 138.23 in the European session, down 0.67%. Yen jumps on China unrest China has applied its Covid-zero policy with a heavy hand, but Covid cases continue to rise nonetheless. The mass lockdowns have triggered widespread protests, which some injuries reported. The unrest is likely to exacerbate supply-chain disruptions and dampen domestic demand, which has hurt risk appetite. This has resulted in flows to haven assets, such as the Japanese yen. USD/JPY dropped as much as 1% earlier today, but the dollar has managed to recover some of these losses. The yen also received a boost after Bank of Japan Governor Kuroda said that the tightening labour market will push wages higher. Kuroda has long insisted that rising inflation has driven by import costs and the weak yen and is transient. Higher wages would indicate that inflation is sustained, which could result in the BoJ making some changes in its ultra-loose policy. After a short trading week in the US due to the Thanksgiving holiday, the markets will have plenty of US events to digest this week. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed’s decision to raise rates by 50 or 75 basis points at the December 14th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase. Investors are viewing a 50-point move as a dovish pivot, which has been putting pressure on the US dollar. Still, even a 50-bp hike would set a record for yearly rate hikes of 4.25%.   USD/JPY Technical There is resistance at 139.82 and 141.58 There is support at 137.39 and 135.63 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

We see a completed actionary wave y, which has the form of a primary double zigzag Ⓦ-Ⓧ-Ⓨ, and a second small intervening wave x, which is also a double zigzag.Now the formation of the final actionary wave z is taking place, which, most likely, will take the form of a primary standard zigzag Ⓐ-Ⓑ-Ⓒ.The primary wave Ⓐ has the form of an impulse (1)-(2)-(3)-(4)-(5), for the completion of which a minor sub-wave 5 is needed. Its end is expected near 49.00. At that level, unfinished wave z will be at 38.2% of wave y.An approximate scheme of possible future movement is shown on the chart.The second chart hints that the formation of the cycle intervening wave x is not completed. Here it will take the form of a double zigzag Ⓦ-Ⓧ-Ⓨ of the primary degree. The first two zigzag sub-waves Ⓦ-Ⓧ look finished.Now the price is in the wave Ⓨ. It is assumed that this wave will take a standard zigzag structure of the intermediate degree (A)-(B)-(C), as shown in the chart.The growth of shares should be expected to 140.81, that is, above the previous high of 126.39, which was marked by wave Ⓦ. At the level of 140.81, cycle intervening wave x will be at 38.2% of actionary wave y.

Summary:  Today we look at how the market is absorbing the news of widespread protests in China against Covid policies there, from lower yields to lower crude oil prices. That combination offers strong support for the Japanese yen, while Apple risks a further haircut on the risk of widening production disruptions. It is worth noting that corn prices in China are diverging from prices elsewhere, also on Covid policy disruptions. Elsewhere, we consider the status of "de-globalization" (or is it re-globalization?), and look at incoming earnings and macro calendar events for the week ahead. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-nov-28-2022-28112022

The Australian dollar has started the trading week with sharp losses. AUD/USD is down 0.70% in Europe, trading at 0.6704. China jitters send Australian dollar tumbling Covid cases continue to rise in China despite the government’s zero-Covid policy, and the mass lockdowns have triggered protests across China. The demonstrators have clashed with police and some have even called for Chinese President Xi to step down. The scale of the unrest has sent jitters through the global markets, which are expected to cause new supply-chain issues and chill domestic demand. The unrest in China has put a damper on risk appetite and sent the US dollar higher. The Australian dollar is particularly sensitive to developments in China, as the Asian giant is Australia’s number one trading partner. The Australian dollar fell more than 1% earlier today but has pared some of those losses. Still, if there is further negative news out of China, the Aussie will likely lose more ground. Adding to the Australian dollar’s woes was a soft retail sales report for October. Retail sales fell 0.2% MoM, down from 0.6% in September and below the consensus of 0.4%. It was the first decline since December 2021 and will renew concerns that the domestic economy is slowing down due to the Reserve Bank of Australia’s steep rate-hike cycle. The RBA has eased the pace of hikes but remains wary of a wage-price spiral, and  Governor Lowe has warned that the central bank will not hesitate to return to oversize rate hikes if needed. After an abbreviated week due to the Thanksgiving holiday, it’s a busy week for US releases. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed’s decision to raise rates by 50 or 75 basis points at the December 14th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase.   AUD/USD Technical AUD/USD is testing support at 0.6706. Below, there is support at 0.6633 There is resistance at 0.6820 and 0.6903 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.