<p style=““ class=“text-align-justify“>The over 1% drop in the S&P 500 yesterday saw a daily close below its 50.0 Fib retracement level of the swing higher from October, seen at 3,796. That has been a level limiting further downside in the past week, before we headed into the Christmas break.</p><p style=““ class=“text-align-justify“>But as we move towards the turn of the year, sellers are taking charge and pushing the agenda, in search of the next downside leg for stocks.</p><p style=““ class=“text-align-justify“>The double-top pattern around 4,100 has a downside target of around 3,760 and that will be the next level to be mindful of before we look towards the November low at 3,698 for the S&P 500 index.</p><p style=““ class=“text-align-justify“>As much as stocks had been hopeful for a major rebound on the back of a Fed pivot of sorts, we’re still not quite at the point where the Fed and other major central banks are resigned to putting a complete stop to their respective tightening cycles.</p><p style=““ class=“text-align-justify“>Much like how the dollar has a few key considerations to take into account <a target=“_blank“ href=“https://www.forexlive.com/news/two-reasons-why-you-should-not-to-discount-the-dollar-20221223/“ target=“_blank“ rel=“follow“>here</a>, it is the same story for equities as well.</p><p style=““ class=“text-align-justify“>The inflation outlook remains pivotal but as mentioned <a target=“_blank“ href=“https://www.forexlive.com/news/the-technical-story-is-the-one-to-watch-for-stocks-ahead-of-the-turn-of-the-year-20221226/“ target=“_blank“ rel=“follow“>here</a> previously, do not brush aside the implications of the technical picture that is playing out at the moment – as also seen above.</p>

This article was written by Justin Low at www.forexlive.com.

<p>The Bank of Japan buys Japanese Government Bonds (JGBs) as part of its <a target=“_blank“ href=“https://www.forexlive.com/terms/y/yield/“ target=“_blank“ id=“bc27d1fa-0b41-4192-ac3a-48794fd4ff1e_1″ class=“terms__main-term“>yield</a> curve control (YCC) program to maintain loose monetary policy. </p><p>The BOJ buys JGBs in scheduled and unscheduled operations. Unscheduled buys are sometimes referred to as ‚emergency‘ bond buys. The Bank conducted an unscheduled operation on Wednesday and did so again Thursday. After buying on Thursday morning (Japan time) the BOJ bought more later in the session. </p><p>Thus, two ‚emergency‘ bond buys today:</p><ul><li>offered to buy unlimited amounts of two- and five-year notes at a fixed yield</li><li>and also 600 billion yen of one-to-10 year bonds</li><li>on top of a daily offer to buy 10-year debt at 0.5% (the new top of its current yield target)</li></ul><p>Despite announcing the widening of the 10 year JGB band to +/- 0.5% the bank finds itself forced to continue to buy to defend yields. The widening of the band has encouraged traders to speculate that the Bank will be forced to lift the cap further or scrap it completely.</p><p>USD/<a target=“_blank“ href=“https://www.forexlive.com/terms/j/jpy/“ target=“_blank“ id=“9ad55131-b07a-4ccb-b844-eed2194cf434_1″ class=“terms__secondary-term“>JPY</a> update:</p><p>—</p><p>As a catch-up with the People’s Bank of China today:</p><ul><li> sets USD/ CNY reference rate for today at 6.9793 </li><li>injected 205bn yuan of 7 day reverse repos, with 4 bn yuan maturing today, for a net injection of 201bn yuan in open market operations</li></ul><p>While in China, stocks dropped on the session:</p>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p>JP Morgan EUR/CHF outlook for the upcoming year:</p><ul><li>Stay short EUR/CHF in cash</li></ul><p>JPM are targeting:</p><ul><li>0.95 in Q1 2023</li><li>0.92 by the end of 2023</li></ul><p>JPM citing:</p><ul><li>CHF’s anti-cyclical properties and the SNB’s bullish policy regime shift for the currency point to further downside for EUR/CHF into 2023</li></ul><ul><li>The CHF remains one of the best proxies of global growth, serving as a reliable hedge against lingering downside risks to the cycle next year</li><li>Real rate differentials and Switzerland’s sustained current account surplus remain bullish CHF tailwinds, particularly vs. EUR. </li><li>Deleveraging flows should also be CHF-supportive. </li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.

<ul><li>Prior -57.5</li></ul><p style=““ class=“text-align-justify“>CFA notes that despite financial analysts being now somewhat less pessimistic about the Swiss economy, the only real improvement in the outlook that they are expecting to see – if at all – stems from China.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Just to provide a bit of context, Ito is also touted to be a potential successor to Kuroda for the top job at the BOJ, and he has previously worked closely with Kuroda together at Japan’s finance ministry and was also Kuroda’s inspiration for adopting the 2% inflation target in Japan. In an opinion column, he acknowledged the central bank’s efforts to fix market functionality after having tweaked its yield curve control policy last week:</p><p style=““ class=“text-align-justify“>“Kuroda is correct on this technical point. But the tweak to the YCC could still be the first step toward monetary-policy normalization. If so, it should be heralded as a sign that the BOJ has had some success with its decade-long ultra-easy monetary policy. Kuroda’s Bazooka, as it is colloquially known, may have hit its mark.“</p><p style=““ class=“text-align-justify“>Ito goes on to argue that „next year’s ’spring offensive‘ – annual pay negotiations – is expected to bring large wage hikes, partly to compensate for the higher inflation rate in 2022“. Adding that such a scenario would „be an ideal initial condition for the BOJ to start hitting its inflation target on a more sustainable basis“ and „bring a happy ending to Japan’s decade-old ultra-easy monetary policy“.</p><p style=““ class=“text-align-justify“>The full post can be found <a target=“_blank“ href=“https://www.project-syndicate.org/commentary/bank-of-japan-yield-cap-could-be-first-step-to-normalization-by-takatoshi-ito-2022-12″ target=“_blank“ rel=“nofollow“>here</a>.</p>

This article was written by Justin Low at www.forexlive.com.

<p>This is one of the most simple technical analysis, and guide (bullish or bearish) that you will probably see. It shows swing traders and buy and holders (or those seeking to sell some of their holdings) exact prices of when the market is in the favor of bulls or bears, and why. </p><p>The above is a simple map that can provide you with directional clearance, based on a simple and known pattern called a ‚bull flag‘ (channel) and previous pivot points, as well as the famous and followed 20EMA, which is a key indicator in technical analysis. Both are descibed below. </p><p>About bull flags in technical analysis: A bull flag channel chart pattern frequently continues a stock’s ascent. It’s characterized by consolidation followed by a rapid upswing. When a stock’s price rises strongly and sustainably, it forms a channel or flag-like pattern on the chart. Horizontal trendlines border this horizontal channel. Upper trendline represents resistance, lower is support. </p><p> During consolidation, the stock’s price may move inside the channel, but within a tight range. Traders and investors wait to see which way the stock’s price will go next during a period of consolidation. The stock’s price breaks out of the channel and rises, signifying an uptrend. Others may wait for a pullback or retest of the breakout point before placing a trade. </p><p>About 20-day exponential moving average (20EMA): EMAs are used to smooth price data and spot patterns. It’s like a simple moving average (SMA), but recent price data is given greater weight. The 20-day exponential moving average (EMA) is a technical indicator that takes the average stock price over the last 20 days, but gives greater weight to recent days. </p><p>To compute the 20-day EMA, first calculate the weighting multiplier, which is 22/(N+1) (in this case, 20). Once you have the weighting multiplier, you can compute the 20-day EMA. EMA = (Today’s price * Weighting multiplier) + (Yesterday’s EMA * (1-Weighting multiplier)). Repeat this method for each day in the period, beginning with the previous day’s EMA. The smoothed line on the chart helps filter out noise and volatility in pricing data. </p><p>Trade the Nasdaq at your own risk and visit ForexLive.com <a target=“_blank“ href=“https://www.forexlive.com/technical-analysis“>technical analysis</a> for additional perspectives.</p>

This article was written by Itai Levitan at www.forexlive.com.

<p style=““ class=“text-align-justify“>The energy crunch in Europe has been a key story since the Russia-Ukraine conflict and there were major worries in the past few months over how things are going to play out during the winter. The good news is that milder weather has helped with the situation, meaning fewer households have been cranking up the heat this December.</p><p style=““ class=“text-align-justify“>The data from Gas Infrastructure Europe showed Germany’s gas storage to be at 88.2% full as of Tuesday, up some 1% from the week before.</p><p style=““ class=“text-align-justify“>Of note, gas demand in Germany fell to a six-week low over the Christmas weekend – clocking in at just 2.2 TWh/day according to THE.</p><p style=““ class=“text-align-justify“>As for why this is relevant, it is because Germany is Europe’s biggest consumer of gas and as storage levels are able to keep sufficiently high, it means a reduced probability of shortages. In turn, that will also help reflect lower gas prices – which will be a welcome development for households in general.</p><p style=““ class=“text-align-justify“>For now, it is still early as gas consumption will continue to dwindle down the storage levels all the way through spring before being replenished in the autumn again.</p><p style=““ class=“text-align-justify“>/<a target=“_blank“ href=“https://www.forexlive.com/terms/e/eur/“ target=“_blank“ id=“b0427fd7-674c-4ad1-b689-22d1f8b087b0_1″ class=“terms__main-term“>EUR</a></p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>This ties in to the decision from mainland China yesterday, with the Hong Kong government also set to drop its Covid vaccine pass scheme starting from Thursday.</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/china-takes-the-final-step-to-embrace-living-with-covid-20221227/“ target=“_blank“ rel=“follow“>China takes the final step to embrace living with Covid</a></li></ul>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>If you think back to eight to ten years back, the European economy was in a massive blackhole – having to deal with the sovereign debt crisis, threats to the Eurozone breaking up, and weakening growth alongside rather depressed inflation pressures. The ECB had no room to wiggle with its easy monetary policy (negative rates) and we all were witnessing the Japanification of Europe.</p><p style=““ class=“text-align-justify“>German bond yields were in negative territory for the better part of the last decade and if not for the pandemic, any one person in the market would have laughed off the thought of yields rising back to 2008 levels. Yet, here we are today.</p><p style=““ class=“text-align-justify“>It’s one of those things that you should never say never in markets, or at least something along those lines.</p><p style=““ class=“text-align-justify“>Amid the holiday period, yields are continuing to climb as bonds are being sold again after the more hawkish ECB narrative earlier this month. A 50 bps rate hike for the central bank’s next meeting is also very much fully priced in – some 90% roughly.</p><p style=““ class=“text-align-justify“>It’s all about the inflation story now for European policymakers, they can somewhat be thankful that got a sort of reset button to distract from their shortcomings and failings since the global financial crisis.</p><p style=““ class=“text-align-justify“>But knowing how people never change, it is only a matter of time before the region succumbs to the same kind of blunders in the past and we’ll be talking about the same sort of incompetence once again.</p><p style=““ class=“text-align-justify“>For now, the inflation outlook will spare them the scrutiny but once the world starts to move to the next phase of the post-pandemic era, we’ll see who manages best. And if history is any indication as was the case after the global financial crisis, euro area lawmakers and policymakers don’t have the greatest of track records.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Domestic sight deposits CHF 506.4 bn vs CHF 510.2 bn prior</li></ul><p style=““ class=“text-align-justify“>There has been little change in overall sight deposits over the past two to three weeks, as the SNB takes it slow after its recent policy tweaking in the past few months as highlighted <a target=“_blank“ href=“https://www.forexlive.com/news/whats-behind-the-sudden-plunge-in-snb-sight-deposits-20221017/“ target=“_blank“ rel=“follow“>here</a> previously.</p>

This article was written by Justin Low at www.forexlive.com.