Asian Open: CHF/JPY looks ready to pop higher, China CPI in focus

Wall Street extended its rally for a third day, although momentum is showing signs of waning with daily ranges for the major indices all below their ATR’s (average true ranges). But perhaps this is to be expected from a tactically viewpoint as they edge towards their record highs. And as it’s generally not until the middle of the month until Santa’s rally really kicks in and US CPI is tomorrow, it leaves potential for another week of potential chop before the rally (hopefully) kicks in.

BOC not as hawkish as some had hoped

That’s not to say BOC were dovish either but could be seen as such relative to some expectations of a hike in Q1. A hike in Q1 was dispelled by still vowing to keep rates low until “economic slack is absorbed” so that 2% CPI is achieved by “sometime in the middle quarters of 2022”. This means April is the earliest meeting they could hike. And perhaps not yet significant but worth noting is the removal of how “vaccines are proving highly effective against the virus” from their statement in the face of the Omicron breakout. So, whilst they’re not yet ringing alarm bells it could be a cause for a later hike should Canada follow the UK’s steps with some sort of ‘Plan B’.

Guide to CAD

CAD pairs gave back some of Tuesday’s gains which allowed NZC/CAD to print a bullish engulfing candle around support and GBP/CAD recover back above the November low. AUD/CAD rallied higher and removed any hopes of a breakout from its (now defunct) bearish flag. CAD/JPY and USD/CAD were effectively flat by the close.

Plan ‘B’ weighs on the pound

The UK government has confirmed that ‘Plan B’ will be triggered due to the rise of Omicron cases in the UK. Face masks are now compulsory in most indoor venues (excluding hospitality) and those who can are encouraged to work from home. It has been warned that London is the epicentre of the Omicron outbreak and that cases could begin to double in 2-3 days. Some are also suggesting a lockdown by January if hospitalisations rapidly rise over Christmas. GBP was weak across the board and lost around -1% against AUD, EUR and 0.8% against CHF.

China Inflation data at 12:30 AEDT

Today’s inflation data is in some ways a warm-up for US CPI tomorrow. Although a key difference is that consumer prices in China are significantly lagging relative to producer prices (unlike the US). Perhaps this will change and the gap could narrow as, historically, the CPI-PPI spread does not remain high for long.

CHF/JPY considers breakout

CHF/JPY is one of those pairs that is easily ignored but can provide some solid moves, with the risk of ‘blink and you miss it’ thrown in. We’ve been keeping an eye on its pullback from the November high as it tried to carve out a base around the May and June highs, and we think it’s ready to pop higher.

A spike lower on 29^th November may have marked the corrective low and yesterday’s bullish range-expansion candle took prices to a 9-day high, so with momentum seemingly realigned with its bullish trend we think the market is now ready to head towards 125 and revisit the November high. A break above the 123.71 high / monthly pivot point assumes bullish continuation.

ASX 200 Market Internals:

ASX 200: 7429.3 (1.58%), 08 December 2021

Materials (2.14%) was the strongest sector and Utilities (0.15%) was the weakest
11 out of the 11 sectors closed higher
4 out of the 11 sectors outperformed the index
156 (78.00%) stocks advanced, 33 (16.50%) stocks declined
60.5% of stocks closed above their 200-day average
50.5% of stocks closed above their 50-day average
55% of stocks closed above their 20-day average

Outperformers:

+ 10.9%-Zip Co Ltd(Z1P.AX)
+ 10.0%-Mesoblast Ltd(MSB.AX)
+ 6.17%-Kogan.com Ltd(KGN.AX)

Underperformers:

-4.01% - Steadfast Group Ltd (SDF.AX)
-2.71% - Polynovo Ltd (PNV.AX)
-2.31% - Orora Ltd (ORA.AX)

Up Next (Times in AEDT)

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.