Swiss Franc Down Broadly, Focus Turns to Fed Powell

Overall market sentiment is rather mixed for the moment. Despite the initial steep selloff overnight, major US indexes staged an impressive come back towards the end of the session. NASDAQ even eked out a slight gain. Gold is back above 1800 handle while Bitcoin appears to be supports by 40k for now. Investors are probably still holding their bets before Fed Chair Jerome Powell’s testimony today, and US CPI tomorrow. In the currency markets, Yen is staying in near term recovery for now. Selling focus has apparently turned to Swiss Franc. Commodity currencies are recovery while Sterling appears to be ready to extend recent rally.

Technically, GBP/CHF’s strong rally yesterday, and break of 1.2549 resistance argues that the corrective fall from 1.3070 might have completed at 1.2134 already. Immediate focus is now on trend line resistance at 1.2652. Sustained break there will add to this bullish case and send GBP/CHF through 1.2816 resistance back to 1.3070 high. We’ll monitor USD/CHF’s reaction to 0.9293 resistance and at the same time.

In Asia, at the time of writing, Nikkei is down -0.90%. Hong Kong HSI is up 0.20%. China Shanghai SSE is down -0.46%. Singapore Strait Times is up 0.44%. Japan 10-year JGB yield is up 0.0161 at 0.151. Overnight, DOW dropped -0.45%. S&P 500 dropped -0.14%. NASDAQ rose 0.05%. 10-year yield rose 0.009 to 1.780, after hitting 1.808.

NASDAQ staged strong rebound after initial dive

NASDAQ initially dived sharply to as low as 14530.22 overnight, but staged a strong rebound to close up 0.05% at 14942.82. Technically, we’re seeing NASDAQ as in correction to the move from 10822.57 to 16212.22. It’s envisaged as a range pattern that could last for a while.

Nevertheless, 14100/14200 zone should provide enough support to floor any decline attempt. We’re talking about a cluster of support levels there, including 14175.11 resistance turned support, 14181.69 support, and 38.2% retracement of 10822.57 to 16212.22 at 14153.37.

However, it should be noted that a firm break of 14181.69 structural level, which is unlikely, would indicate that NASDAQ could be in a larger scale correction.

Australia retail sales rose 7.3% mom in Nov as restrictions eased

Australia retail sales rose 7.3% mom in November, well above expectation of 4.0% mom. That’s also the fourth strongest monthly rise on record. Total turnover at current prices hit a record AUD 33.4B.

“Further easing of COVID-19 restrictions in the South-Eastern states and territories has seen the retail industry recover all lost momentum caused by the Delta outbreak,” Ben James, Director of Quarterly Economy Wide Statistics, said. “Victoria recorded the largest state rise, up 20.0 per cent, reaching its highest level of the series. This follows the state’s lockdown ending in late October.”

“Continued easing of COVID-19 restrictions, including less strict density and capacity limits, in New South Wales (5.1 per cent) and the Australian Capital Territory (19.2 per cent) led to rises in turnover to record levels.”

Australia exports rose 2% in Nov, imports rose 6%

Australia goods and services exports rose 2.% mom or AUD 691m to AUD 43.86B in November. Goods and services imports rose 6% mom or AUD 2049m to AUD 34.44B. Trade surplus came in at 9.42B, below expectation of AUD 10.75B.

Fed Powell committed to prevent higher inflation from becoming entrenched

In the prepared remarks for the nomination hearing before Senate Banking Committee, Fed Chair Jerome Powell said, “today the economy is expanding at its fastest pace in many years, and the labor market is strong.”

After the initial shutdown and the subsequent reopening, “the economy has rapidly gained strength despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation.”

“We are strongly committed to achieving our statutory goals of maximum employment and price stability,” Powell said. “We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”

Looking ahead

Fed Chair Jerome Powell’s testimony is the main focus for today. Italy will release retail sales while US will release NFIB business optimism index.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9214; (P) 0.9244; (R1) 0.9303; More….

Intraday bias in USD/CHF remains on the upside for 0.9293 resistance first. As noted before, with 0.9084 support intact, choppy rise from 0.8925 could still extend higher. Break of 0.9293 should target 0.9372 resistance and above. On the downside, break of 0.9199 minor support will turn intraday bias neutral first.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We’d pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Economic Indicators Update