Yesterday, the Nasdaq Composite opened lower but
recovered most of the losses ending the day basically flat. At the moment,
there’s some consolidation going on probably due to uncertainty around the
upcoming economic data. The market rallied strongly in November as the rate
cuts pricing became more and more aggressive, but this wave of euphoria might
reverse quickly if the data starts to point to a hard landing. This week might
be key for the Nasdaq Composite as we are not only at an important technical
level, but we are also going to see lots of US labour market data.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
pulled back to the red 21 moving average where we
got a bounce yesterday. Looking at how things have been going recently, this
might even be ironically the “biggest” pullback we will see before another
rally. There will be important levels to watch out for on lower timeframes
which might or might not increase the chances for the rally.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD into the
cycle high. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. We indeed got a pullback with the buyers already piling
in near the most recent swing low. This move lower though gave us an early
lower low with the moving averages crossing over.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
got the drop into the support zone
around the 14050 level yesterday. The buyers immediately stepped in, and we
could see a rally back into the minor downward trendline where
we will likely find the sellers waiting to enter the market and target a break
below the 14050 level. A break below the support should trigger a selloff into
the next key support around the 13700 level where we will also find the 38.2% Fibonacci
retracement level of this entire November rally.

Upcoming
Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Today, we have the ISM
Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP
data. On Thursday, it will be the time for the US Jobless Claims figures, while
on Friday we conclude the week with the NFP report.

This article was written by FL Contributors at www.forexlive.com.

• Prior +0.5%
• PPI -9.4% vs -9.5% y/y expected
• Prior -12.4%

Looking at the breakdown, the increase largely comes from a push higher in energy prices (+1.0%) on the month. There was also an increase in prices for durable consumer goods (+0.1%) while prices remained stable for capital goods. Meanwhile, there were declines in the prices of non-durable consumer goods (-0.1%) and intermediate goods (-0.3%). If you strip out energy prices, producer prices actually declined by 0.2% in October.

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

• Only 23% of companies were optimistic about prospects for the year ahead
• 35% of businesses expect to employ fewer people next year
• Only 20% of firms expect employment to increase in the year ahead

The survey also highlights the continued struggle in Germany’s industrial and construction sectors. For the former, only 25% of companies are expecting an increase in production while 38% were expecting a drop next year. For the latter, only 13% expect an increase in output while 54% expect a decline in output for the year ahead.

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

Last Friday, the Dow Jones rallied despite the ISM Manufacturing PMI missing
expectations and falling further into contraction. The market is still trading
based on rate cuts expectations as the trigger for the rally was a neutral Fed Chair Powell speech
where he didn’t push back against the market’s pricing. The market seems to be
all-in on the soft-landing trade and ignoring the weakening economic data,
especially on the labour market side. The sentiment is also getting a bit bubbly
right when things might really go south, so the buyers might want to be extra
cautious going forward.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones broke
decisively through the cycle high and extended the rally into the 36265 level.
This looks more and more like a FOMO play with the index distant just 2% from
the all-time high. The market is not even offering decent pullbacks with the
price just going up parabolically. These are not healthy trends, especially in
this part of the cycle.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that
the price is overstretched to the upside as depicted by the price distance from
the blue 8 moving average. In
such instances, we can generally see a pullback into the moving average or some
consolidation before the next move. This would fit with a pullback into the
recently broken cycle high at 35684 where the buyers might pile in with a
defined risk below the level to position for another rally and target the
all-time high.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
breakout to the upside of the channel and the cycle high triggered a strong
increase in the bullish momentum with the buyers piling in aggressively to
target the all-time high. From a risk management perspective, buying around
these levels doesn’t make much sense from both a fundamental and technical
point of view, so waiting for a decent pullback should be better than chasing
this insane rally.

Upcoming Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Tomorrow, we have the
ISM Services PMI and the US Job Openings reports. On Wednesday, we will get the
US ADP data. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report.

This article was written by FL Contributors at www.forexlive.com.

The dollar is keeping steadier so far in European trading, as risk sentiment is looking a bit nervy to start the new week. The greenback is mostly higher across the board, only down marginally against the Japanese yen. In the bond market, Treasury yields are a touch higher so that is perhaps helping to give the greenback a bit more of a steadying hand on the session.

10-year Treasury yields are up 2.5 bps to 4.249% currently. Meanwhile, S&P 500 futures are down 0.3% so that isn’t doing much to help commodity currencies at the moment.

AUD/USD is down 0.4% to 0.6645 while USD/CAD is up 0.4% to 1.3545 as oil prices are also sitting lower on the day.

The euro continues to struggle after last week’s fall, following softer inflation data which sped up ECB rate cut odds to April next year. EUR/USD is down 0.2% to 1.0863 as the retreat from the highs around 1.1000 continue to play out for now.

There’s not much else to work with to start the new week, as market players are eyeing major central bank decisions this week and the next. Adding to that will be the US non-farm payrolls and US CPI data. As such, those will be more important risk events to drive trading sentiment, as opposed to the slower pace we’re seeing so far.

In other markets, gold is down 0.2% to $2,067 currently after a surge higher earlier today, which begs the question: Has gold peaked too early in the cycle?

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

Last week was marked by the RBNZ’s decision to maintain its official cash rate, which was interpreted as a hawkish stance by the market. Furthermore, they revised their rate projections, indicating that „if inflationary pressure were to be stronger than anticipated, the OCR would likely need to increase further.“

In the U.S., Fed’s Waller made some dovish comments hinting at potential rate cuts. It will be interesting to watch in the coming weeks if other Fed members share the same perspective, and particularly if Chair Powell does as well. I believe Powell will be reserved with expressing such views for now.

Looking ahead to this week, several important economic events are on the horizon.Monday kicks off at a slow pace, with ECB President Lagarde scheduled to discuss monetary policy at the Academy of Moral and Political Sciences in Paris.

Tuesday brings notable releases, including the Tokyo Core CPI y/y for Japan; the RBA policy announcement and cash rate for Australia; the Final Services PMIs for the eurozone and the U.K.; and the ISM Services PMI for the U.S. Additionally, the FOMC Financial Stability Report is scheduled, and New Zealand will report Employment Change q/q and the unemployment rate.

Wednesday features Australia’s GDP q/q, the ADP Non-Farm Employment Change for the U.S. and the BoC rate statement and Overnight rate for Canada. BoE Gov Bailey will also hold a press conference on the Financial Stability Report in London.

Thursday’s highlight is the Unemployment Claims report for the U.S., while Friday will see other important U.S. data releases, including the average hourly earnings m/m, the Non-Farm Employment Change, the Unemployment Rate, the Preliminary UoM Consumer Sentiment and the Preliminary UoM Inflation Expectations.

The consensus for the Tokyo Core CPI y/y is a drop from 2.7% to 2.4%. This is still a bit above the BoJ’s target, but not unusually high compared with other economically developed countries. However, analysts argue the spike in last month’s inflation data was likely caused by volatility in fresh food prices and fewer subsidies for utilities in October. For this print, the downtrend should resume as fresh food prices moderated last month and signs point to processed foods and manufactured goods prices also having peaked.

At this week’s meeting, the RBA is expected to maintain rates unchanged. Australia experienced lower-than-expected inflation figures for October, suggesting no immediate need for the RBA to act. There are currently no signs that inflation might surge again making another rate increase now, after the 25bps hike in November, very unlikely. However, analysts believe that another hike might be possible in February if the base effects prevent inflation from continuing to decline. The RBA will have sufficient data until then to assess whether the current rates are adequate.

The consensus for the U.S. ISM Services PMI is to rise from 51.8 to 52.5. The Fed’s tightening did not slow down demand in the services sector which still remains in expansionary territory. Last month, the index dipped to 51.8, indicating a somewhat slower increase, but consumers continue to spend on services with personal services expenditures having climbed higher for 20 of the past 21 months, according to Wells Fargo.

The U.S. ADP Non-Farm Employment is expected to rise from 113K to 120K. However, this report is not supposed to create any volatility in the market, unless it deviates a lot from expectations. Everyone will be waiting for Friday’s jobs data for more clarity on the labor market.

The BoC monetary policy announcement will be one of the most awaited events of this week. While the consensus is for the Bank to maintain its overnight rate unchanged, market participants will be looking for any hints regarding future decisions. The BoC might look to guide the market away from pricing in rate cuts for the beginning of next year. Although inflation data has moderated recently, it might be too early for rate decreases and the bank will likely want to wait for more data.

The most notable event on Thursday will be the unemployment claims in the U.S. which are expected to rise from 218K to 221K. Last month’s jobs data — 150K new jobs compared to 297K in September — pointed to a labor market slowdown which had been widely anticipated since the Fed started its tightening cycle. The consensus for non-farm employment change in November is a rise from 150K to 185K but analysts from Well Fargo expect even higher growth (230K). However, this spike is likely fueled by the end of the UAW and Hollywood’s actors strike as well as a late survey timing which will capture more seasonal holiday hires. Overall, they expect for softening labor demand to remain a theme moving forward.The average hourly earnings are expected to increase by 0.3% from prior 0.2% and the unemployment rate to remain unchanged at 3.9%.

For the Prelim UoM Consumer sentiment expectations are for a rise from 61.3 to 62.0. This will be a slight improvement, but consumers remain concerned about current and future conditions and this was reflected in last month’s print when the index dropped to 61.3.

What worries consumers most is the possibility of rising gas prices and inflation running hot again. Consumer year-ahead inflation expectations rose to 4.5% in November despite inflation currently receding suggesting that price increases coupled with higher interest rates will remain top of mind for some time.

USD/CAD expectations

On the H1 chart the pair closed the week near the 1.3480 level of support. From there a correction is expected until 1.3580 or even 1.3655 and if those resistance levels don’t hold, the next target could be 1.3420.

On the upside, the next resistance levels are at 1.3730 and 1.3815.

From a fundamental standpoint, the latest U.S. labor market has been softening. This isn’t favorable news for the USD, but it is likely to bolster the CAD in the short term. Compared to the U.S., recent jobs market data for Canada surpassed expectations, contributing to the CAD’s strength, especially over the past week. It’s important to note that this week will bring a substantial amount of new data for both the USD and the CAD.

Analysts at Citi point out that even if employment data for Canada printed above expectations, full-time job additions were not unusually high for the month and not enough to counter the substantial growth in population, which is why the unemployment rate continued to rise.

This article was written by Gina Constantin.

This article was written by FL Contributors at www.forexlive.com.

The rally in Gold looks unstoppable as many
positive drivers keep pushing the price to new highs. Gold is correlated with
real yields and those kept on falling lately due to weakening US data that led
to a fall in inflation expectations and Treasury yields. The market might have
gone too far too fast though as the rates pricing has reached five cuts in
2024, although they can easily increase if the data worsens even more. The bias
remains bullish, and the dips will likely be bought strongly, but watch out for
a quick deterioration in the data not followed by a strong Fed reaction as that
could make real yields to spike higher and weigh on Gold like it happened in
the recent two recessions.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold today
spiked higher in the APAC session amid low liquidity. The move got completely
reversed soon after with a very ugly reversal candlestick that might be a bad
omen for the buyers. Such extreme moves usually happen around short term tops and bottoms,
so the buyers might want to wait for at least a pullback into the trendline
before piling in again

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that we have
another minor trendline around the 2040 level. The buyers could split their
position in half to enter both at the minor and major trendline as we cannot
know which level will hold. The sellers, on the other hand, should pile in at
every break lower with a break below the major trendline likely triggering a
selloff into the 1930 level.

Gold Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the big spike followed by the huge
reversal. At the moment, there’s not much to do as the price is basically in no
man’s land and both buyers and sellers should wait for the market to come into
the key levels before taking new positions. A lot will depend on the economic
data this week as we get many top tier US labour market indicators, so keep a
close eye on the data.

Upcoming Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Tomorrow, we have the
ISM Services PMI and the US Job Openings reports. On Wednesday, we will get the
US ADP data. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report. The playbook
should continue to be the same with weak data boosting Gold and strong figures
leading to pullbacks.

This article was written by FL Contributors at www.forexlive.com.

UPCOMING EVENTS:

• Monday:
  Switzerland CPI.
• Tuesday: Tokyo
  CPI, China Caixin Services PMI, RBA Policy Decision, Eurozone PPI, Canada
  Services PMI, US ISM Services PMI, US Job Openings.
• Wednesday:
  Australia GDP, Eurozone Retail Sales, US ADP, BoC Policy Decision.
• Thursday: China
  Trade data, Switzerland Unemployment Rate, US Challenger Job Cuts, US
  Jobless Claims.
• Friday: Japan
  Wage data, US NFP, University of Michigan Consumer Sentiment.

Monday

The Swiss CPI Y/Y is expected to remain
unchanged at 1.7% vs. 1.7% prior,
while the M/M measure is seen at -0.1% vs. 0.1% prior. The inflation rate in
Switzerland has been in the SNB’s 0-2% target for a long time for both the
headline and core measures. The central bank is unlikely to hike even if we
get a small beat as the data might be distorted due to temporary rent and
energy price increases.

Tuesday

The RBA is expected to keep the cash rate
unchanged at 4.35% after they hiked
by 25 bps in November. RBA’s Governor
Bullock has kept a hawkish tone recently as the central bank is now more
worried about inflation expectations getting out of hand. The data, on the
other hand, has been mixed but skewed towards weakness as the PMIs
fell further into contraction and the Monthly
CPI missed expectations across the board,
although the Trimmed Mean measure fell by just 0.1%.

The US ISM Services PMI is expected to
increase to 52.0 vs. 51.8 prior.
The recent S&P
Global Services PMI beat expectations, but
the most notable take from the report was the line saying that “as a result
of subdued demand and decreasing backlogs, companies reduced their workforce
for the first time since June 2020, affecting both service providers and
goods producers. Cost pressures eased, with input prices rising at the
slowest rate in over three years”.

The US Job Openings is expected to fall to
9.350M vs. 9.553M prior.
The labour market has been showing clear signs of weakening lately and
despite the volatility in Job Openings, the trend is self-explanatory. This
will be the first major US labour market report for the week and it’s highly
likely that it will be market moving.

Wednesday

The US ADP is expected to show 128K jobs
added in November compared to 113K in
October. The market at the moment is more
focused on the labour market weakness, so a strong report might trigger
some reaction but it’s likely to be reversed soon after as the market will look
forward to the NFP release.

The BoC is expected to keep interest rates
steady at 5.00% vs. 5.00% prior.
This move is supported by the recent Governor
Macklem’s comments where he said
that “interest rates may now be restrictive enough” and the CPI
report where all the figures
fell further, especially for the underlying
inflation measures, which is what the BoC is most focused on. Moreover, last
week’s labour
market report, despite being good,
showed another increase in the unemployment rate.

Thursday

The US Jobless Claims continue to be one
of the most important releases every week as it’s a more timely indicator on
the state of the labour market. Initial Claims keep on hovering around cycle
lows, which shows us that layoffs have not yet picked up notably, but
Continuing Claims are now rising at a fast pace and that’s indicative of people
finding it harder to get another job after being laid off. This week the
consensus sees Initial Claims at 223K vs. 218K prior,
while there’s no estimate at the time of writing for Continuing Claims,
although the last week’s number was 1927K vs. 1841K prior.

Friday

The US NFP is expected to show 175K jobs
added compared to 150K in
October and the Unemployment Rate to remain
unchanged at 3.9%. The culprit for the pickup in growth is expected to be
attributed to the end of the United Auto Workers strikes in October which
weighed on the Manufacturing payrolls in the prior report.

The Average Hourly Earnings Y/Y is
expected to cool further to 4.0% vs. 4.1% prior, while the M/M measure is seen
ticking up to 0.3% vs. 0.2% prior. As a reminder, the last report missed
expectations across the board with all measures pointing to weakness like the
increase in the unemployment rate and the decrease in average weekly hours
worked.

There’s been lots of chatter on the Sahm
Rule Indicator lately, so let’s see
what’s that about. The Sahm Rule Indicator signals the start of a recession
when the three-month moving average of the national unemployment rate (U3)
rises by 0.50 percentage points or more relative to the minimum of the
three-month averages from the previous 12 months. The minimum three-month
average from the previous 12 months is at 3.5%, so we will need a spike to 4.3%
in the next report to bring the three-month average to 4.0% and reach the 0.50
threshold. With such a spike though, we won’t need to look at the indicator to
conclude that a recession might have already started.

The University of Michigan Consumer
Sentiment is expected at 61.8 vs. 61.3 prior.
This indicator measures how the consumers see their personal finances
compared to the Consumer Confidence which is more weighted towards the labour
market outlook. It’s been falling steadily since June while inflation
expectations spiked higher in the recent couple of months despite the huge drop
in gasoline prices. Nevertheless, the NFP will overshadow this report, so it could
be market moving only if it’s in line with the NFP release.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Here’s a great chart from BMO showing the consistent jobs growth in the establishment survey compared to the household survey showing net job losses since June.

On both charts, BMO highlights the slowing trend.

On a 6-month moving
average basis, this dragged the household survey’s payrolls growth to just 32k,
and even the establishment survey’s 6-month moving average has slipped to
effectively its lowest level since the pandemic. It’s no secret that labor is the
benchmark lagging indicator, and as such, the trend in hiring holds marginally
more weight than the outright level for monetary policymakers.

The latest jobs report is due Friday, December 8.

This article was written by Adam Button at www.forexlive.com.

• Powell: FOMC is ‚moving forward carefully‘ as risks around rates becoming more balanced
• Powell Q&A: Inflation is still well-above target but moving in the right direction
• US November ISM manufacturing PMI 46.7 vs 47.6 expected
• Canada November employment +24.9K vs +15.0K expected
• Gold touches an all-time high at $2075
• Atlanta Fed Q4 GDPNow 1.2% vs 1.8% prior
• Baker Hughes US oil rig count 505 vs 500 prior
• Fed’s Goolsbee: Inflation is coming down exactly as we want
• US October construction spending +0.6% vs +0.4% expected
• US S&P Global manufacturing PMI final for November 49.4 vs 49.4 prelim
• Canada November S&P Global manufacturing PMI 47.7 vs 48.6 prior

Markets:

• S&P 500 up 27 points, or 0.6%, to 4603
• Gold up $35 to $2071
• WTI crude oil down $1.70 to $74.26
• US 10-year yields down 13.3 bps to 4.56%
• AUD leads, EUR lags

Welcome to the new month, same as the old month.

The mood was to buy everything and sell oil, same as it was for all of November. It started out as a quiet one and a good Canadian jobs report moved the loonie into the poll position with it only up 30 pips on the day. From there though, a softer US ISM manufacturing report helped to kick off a wave of USD selling, particularly in USD/JPY.

In addition, stocks began to rip. Powell spoke similarly to Daly and Williams yesterday, which was mildly hawkish but in time the market ignored it and priced in even more rate cuts next year. Fed funds futures are now at 133 bps next year and 70% for the first one in March. That’s aggressive to say the least.

But the bigger picture theme is that we’re going back to the world of low rates and low inflation, not some kind of sticky, 1970s redux. That’s a major change and it’s what is driving everything.

Adding to that was another slump in oil, most of which came after Baker Hughes data showed the US adding more rigs. There’s a creeping feeling that we’re headed for another battle for market share because OPEC isn’t going to cut production again. That could be a big deflationary impulse, at least initially.

The euro didn’t benefit from the USD selling because inflation numbers in Europe are cratering, along with yields. The euro was particularly soft into the London fix, which points to flows and it staged a 50 pips recovery later to finish almost flat but still at the bottom of the pile beside the US dollar.

AUD is going to be one to watch in the year ahead. It was tops today and the housing market there just hasn’t cracked. That could keep the rate hiking cycle going longer but note that Chinese ETF FXI also hit at 52-week low today so maybe that’s an upside risk? Sentiment about China surely couldn’t get much worse.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.