Positive Sentiment Boosts NZD, USD Still Bounded in Consolidations

Positive market sentiment boosts Kiwi, Aussie higher but Canadian is lagging far behind as dragged down by falling oil prices. Sterling is also firm after mixed retail sales data. On the other hand, Swiss Franc and Dollar are following Loonie as the next worst performer for the data. But after all, the greenback are still just engaging in consolidations. Euro and Yen are mixed for now. There shouldn’t be any surprises in the final hours of the day, and the picture should pretty much be done.

Technically, NZD/USD is trying to extending the rise from 0.5511 and breached 0.6202 temporary top. Immediate focus is now on 38.2% retracement of 0.7463 (2021 high) to 0.5511 at 0.6257. Rejection by this fibonacci resistance will keep price actions from 0.5511 as a corrective move, and maintains medium term bearishness. However, sustained break of 0.6257 will add too the case of bullish trend reversal. We’d probably find out next week.

In Europe, at the time of writing, FTSE is up 0.87%. DAC is up 1.18%. CAC is up 1.27%. Germany 10-year yield is up 0.019 at 2.041. Earlier in Asia, Nikkei dropped -0.11%. Hong Kong HSI dropped -0.29%. China Shanghai SSE dropped -0.58%. Singapore Strait Times dropped -0.42%. Japan 10-year JGB yield rose 0.0050 to 0.254.

ECB Lagarde: We expect to raise rates further

ECB President Christine Lagarde said in a speech, “the ECB will ensure that a phase of high inflation does not feed into inflation expectations, allowing too-high inflation to become entrenched.”

“We have acted decisively, raising rates by 200 basis points, and we expect to raise rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely manner,” she said.

“But if we want to rebuild our supply capacity and strengthen domestic sources of growth, other policy areas need to refocus. Most importantly, they need to direct investment towards the transitions that will define our future – and the financial sector needs to be able to actively support these transitions,” she added.

Bundesbank Nagel: We must resolutely raise key rates further

Bundesbank President Joachim Nagel said, “We must resolutely raise our key rates further and adopt a restrictive stance… We cannot stop here. Further decisive steps are necessary.”

“We should start reducing the size of our bond holdings at the beginning of next year by no longer fully reinvesting all maturing bonds,” Nagel added.

UK retail sales volume up 0.6% mom in Oct, sales value up 1.8% mom

UK retail sales volumes rose 0.6% mom in October, above expectation of 0.3% mom. Ex-fuel sales volume was up 0.3% mom, below expectation of 0.6% mom.

In the three months period to October, comparing with the previous three months, sales volume was down -2.4% while ex-fuel sales volume was also down -2.4%, continuing the down trend started since summer 2021.

In value term, headline sales was up 1.8% mom while ex-fuel sales was up 1.0% mom. Comparing the three month periods, headline sales value was down -0.7% while ex-fuel sales value was down -0.1%.

Japan CPI core hits 40-yr high, BoJ Kuroda rules out rate hike

Japan headline CPI rose from 3.0% to 3.7% yoy in October, above expectation of 2.7% yoy. CPI core (all item ex-fresh food) rose from 3.0% to 3.6% yoy, above expectation of 3.5% yoy. That’s the highest level in 40 years since 1982. CPI core-core (all item ex-fresh food and energy) rose from 1.8% yoy to 2.5% yoy, above expectation of 1.9% yoy.

BoJ Governor Haruhiko Kuroda said that core inflation was rising “quite a bit” but he expects it to slow back to below 2% in the next fiscal year.

“Raising interest rates now could delay Japan’s economic recovery,” Kuroda told the parliament. “I’m not saying the BOJ cannot raise rates indefinitely. I’m saying that it’s inappropriate to raise rates now, in light of current economic and price developments.”

“It’s difficult to sustainably achieve our 2% inflation target unless nominal wages rise steadily,” Kuroda said. “We’ll continue with our monetary easing to support the economy and achieve our 2% inflation target in a sustained, stable fashion backed by wage growth.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 139.15; (P) 139.95; (R1) 141.01; More…

Intraday bias in USD/JPY remains neutral as consolidation from 137.66 temporary low is still in progress. In case of stronger recovery, upside should be limited below 145.16 support turned resistance. On the downside, break of 137.66 will resume the decline from 151.93, to 133.07 fibonacci level, as a correction to the larger up trend.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It’s too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.58).

Economic Indicators Update