Yen Extends Rebound to End as December’s Winner

Yen’s rebound continues in Asian session today, and looks set to end as the best performer for the month. Swiss Franc follows as the next strongest with much help from buying against Euro and Sterling, and overall bearish market sentiment. Canadian and Australian Dollars are the worst in December for the same reason while Dollar is mixed. Volatility today, if there’s any, should be looked through. The real moves will only come next week with lots of evens including FOMC minutes and NFP.

In Asia, Nikkei closed flat. Hong Kong HSI is up 0.39%. China Shanghai SSE is up 0.65%. Singapore Strait Times is up 0.22%. Japan 10-year JGB yield is down -0.0272 at 0.421. Overnight, DOW rose 1.05%. S&P 500 rose 1.75%. NASDAQ rose 2.59%. 10-year yield dropped -0.052 to 3.835.

Happy new year to our readers. We’ll be back on January 3.

GBP/CHF continues consolidation pattern, targeting 1.104

GBP/CHF is so far one of the top movers for the week, even though over movements in the markets are rather indecisive. The decline from 1.1543 is seen as the third leg of the consolidation pattern from 1.1574. Deeper fall is expected as long as 1.1265 resistance holds.

Strong support could be seen around 1.1045 cluster (38.2% retracement of 1.1043) to complete the three-wave pattern. Break of 1.1265 resistance will bring stronger rise back to retest 1.1574. Nevertheless, sustained break of 1.1043/5 will be a sign of trend reversal, and target 61.8% retracement at 1.0714.

PBoC makes largest weekly cash injection since 2019

PBoC injected CNY 183B (USD 25.28B) of liquidity through seven-day reverse repurchases agreements in open market operations today. The China’s central bank said it’s for “maintaining steady year-end liquidity level”. Through the week, PBoC injected a net CNY 975B, the largest amount since January 2019.

USD/CNH has been steadily in range since hitting 6.9296 earlier this month. Upside is so far capped by head and shoulder top neck line, and below 55 day EMA. Further decline remains in favor for now. As a correction to the up trend from 6.3057 to 7.3745, deeper fall would be seen to 6.8372 resistance turned support before bottoming.

Looking ahead

Swiss KOF economic barometer and US Chicago PMI are the only features today.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 160.22; (P) 160.58; (R1) 160.97; More…

GBP/JPY declined again after rejection by 4 hour 55 EMA, but stays above 158.57 support. Intraday bias remains neutral first and further decline is expected. On the downside, firm break of 158.57 will target 161.8% projection of 172.11 to 163.02 from 169.26 at 154.55 next. However, break of 162.32 resistance will turn bias to the upside for stronger rebound.

In the bigger picture, sustained break of 55 week EMA (now at 161.26) will confirm medium term topping at 172.11, on bearish divergence condition in weekly MACD. Fall from 172.11 should be correcting whole up trend from 123.94 (2020 low). Deeper decline should be seen to 38.2% retracement of 123.94 to 172.11 at 153.70 and possibly below. This will now remain the favored case as long as 55 day EMA (now at 166.11) holds.