S&P 500 recovered from China uncertainty, keeping right below 4,000 until Williams and Bullard reiterated sticky inflation and high rates views. Reiterated – not brought fresh and unexpected information. Still, stocks and much of the rest declined sharply, and even the 3,960s support was tested. It held, and overnight crawl higher began. VIX is slowly picking up, market breadth deteriorated, but Russell 2000 isn‘t in capitulation mode. Neither are my favorite Friday mentioned sectors. While I‘m not a raging short-term bull, I acknowledge the very solid medium-term prospects for the stock market rally to continue, especially over the final 2-3 weeks of the year. Markets are welcoming the decelerating inflation, and willing to bet against the hawkish Fed rhetoric in the short-term. Running on borrowed time, but running still. Note crude oil and precious metals with copper – turning up on yet another China easing rumor. Should it turn out true, it would be powerful, but for now let‘s count with muted, positive effect on the ebbing and flowing real assets. More up than down as the sensitivity to tight Fed rhetoric and moves decreases. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday. Let‘s move right into the charts. S&P 500 and Nasdaq outlook 4,010 will again be a daily stumbling block, but it would be encouraging to reach it on or before GDP tomorrow – then, there is Powell to recover from, his effect is likely to be bearish. Bulls don‘t want to see 3,960s give way. I‘m not yet looking to 4,040 – this will be a tough sideways week regardless of positive seasonality. Credit markets The degree to which HYG gets its act together today, will be most telling – as in determining the short-term direction this week Worst case, low 3,940s are second line of support, but I doubt we get there at all.

EUR/USD remains on the defensive for the second straight day amid a modest USD strength. China's COVID-19 woes weigh on investors' sentiment and benefit the safe-haven greenback. Bets for less aggressive Fed rate hikes could cap the buck and limit the downside for the pair. The EUR/USD pair edges lower during the Asian session on Monday and moves away from its highest level since August 12 touched last week. The cautious market mood - amid worries about the worsening COVID-19 situation in China - offers some support to the safe-haven US Dollar and drags the major lower for the second straight day. China recorded a record-high number of daily infections on Saturday, forcing the government to impose strict anti-COVID measures in several cities. Furthermore, public discontent over the zero-COVID policy flared protests across China and raised concerns about a further slowdown in economic activity. This, in turn, keeps investors on edge, evident from a generally weaker tone around the equity markets and driving haven flows towards the greenback. The flight to safety and growing acceptance of a less aggressive policy tightening by the Fed continue to exert downward pressure on the US Treasury bond yields. It is worth recalling that the minutes of the November FOMC meeting released last Wednesday showed that most policymakers agreed it would soon be appropriate to slow the pace of interest rate hikes. This, in turn, could hold back the USD bulls from placing aggressive bets. In contrast, the European Central Bank (ECB) is expected to deliver another supersized 75 bps rate increase in December. This might continue to underpin the shared currency and further contribute to limiting the downside for the EUR/USD pair, at least for the time being. Moving ahead, there isn't any major market-moving economic data due for release on Monday, either from the Eurozone or the US. Hence, traders will take cues from scheduled speeches by ECB President Christine Lagarde and influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the EUR/USD pair. The focus, however, will remain on the flash Eurozone CPI print on Wednesday and the closely-watched US monthly jobs data - popularly known as NFP on Friday. The key macroeconomic releases will help investors determine the major's near-term trajectory. Technical Outlook From a technical perspective, bullish oscillators on the daily chart and the lack of meaningful selling warrant caution before confirming that the EUR/USD pair has topped out. Hence, any subsequent downfall will attract fresh buyers near the 1.0325 region and remain limited near the 1.0300 round figure. The next relevant support is near last week's swing low, around the 1.0240-1.0220 region. A convincing break below the latter might prompt technical selling and drag spot prices below the 1.0200 mark towards testing the 100-day SMA, currently around the 1.0130 area. On the flip side, bulls might now wait for a sustained strength beyond a technically significant 200-day SMA, currently around the 1.0380 region, before placing fresh bets. This is followed by resistance near the 1.0400 round figure, last week's swing high around the 1.0445-1.0450 area and the monthly peak around the 1.0480 zone. Some follow-through buying beyond the 1.0500 psychological mark will be seen as a fresh trigger for bulls and set the stage for an extension of the recent recovery from over a two-decade low touched in September.

A flash estimate of Eurozone inflation for November will be released next week (November 30). In October, inflation rose further to 10.6% y/y, from 9.9% y/y previously. The main driver was food prices, which increased to 13.1% y/y. In contrast, energy price pressures remained stable at a high level and core inflation also recorded only a slight increase to 5.0% y/y. Although energy price pressures stabilized, an analysis of the data shows that, on one hand, price dynamics for fuels (petrol and diesel) are falling rapidly. On the other hand, the dynamics for electricity and gas continue to increase. This reflects the rapid increase in electricity and gas prices this summer. Although the situation on the wholesale markets has already eased considerably, we expect inflation levels for electricity and gas to remain high in the coming months, due to the delayed pass-through of prices to households. In contrast, the price dynamics for petrol and diesel will probably continue to decline. As a result, energy price inflation should remain stable in November, according to our assessment. For the further development of food inflation, the UN's index for global food prices should provide some guidance. This has been showing a strong downward trend since the summer. If this trend continues, food prices at the global level would fall y/y in November. The last time this was the case was in July 2020. We therefore also expect food prices in the Eurozone to lose momentum in the coming months. However, an analysis of the data shows that, on the global level, foodprices have risen in real terms (adjusted for inflation) to their highest level since 1975. This represents a significant loss of wealth, as consumers around the world are spending a much higher share of their income on food than they did 10 or 20 years ago. With regard to core inflation, we expect only a very small increase in momentum. With producer prices, which have been a good indicator of core inflation in recent years, already showing signs of a sustained easing, core inflation should also begin to fall gradually from the first half of 2023. Fortunately, producer prices in Germany already fell unexpectedly sharply in October compared to September. Taking all of these aspects into account, Eurozone inflation could lose some momentum in November for the first time in a long time. However, stabilization or a further slight increase cannot be ruled out entirely. Nevertheless, inflation should also peak in the Eurozone in the near future. We expect inflation to fall steadily in the first half of 2023 at the latest. For 2023 as a whole, we therefore forecast a decline in inflation to 5.6%, from an expected level of 8.4% in 2022. In the short term, Eurozone inflation depends very much on the development of European gas prices. Download The Full Week Ahead

XAU/USD Gold price edges lower in European trading on Friday, after the action repeatedly failed at 10DMA ($1756), with daily techs remaining bullishly aligned after a pullback from Nov 15 peak ($1786) found firm ground just above pivotal Fibo support (38.2% of $1616/$1786), reinforced by rising 20DMA. The metal is on track for a marginal weekly gains that would partially offset negative signal from previous week's bearish candle with long upper shadow, with more positive signals from monthly performance, as the yellow metal advanced strongly in December and on track for the first bullish monthly close after seven straight months in red ( November's rally marks so far the biggest rally since May 2021). Initial support at $1746 (cracked Fibo 23.6%/5DMA) should ideally hold, however, deeper dips should not exceed key supports at $1721, to keep near-term bulls in play. Res: 1762; 1771; 1786; 1800. Sup: 1746; 1732; 1721; 1712. Interested in XAU/USD technicals? Check out the key levels

EUR/USD may move back to parity EUR/USD managed to move rise by almost 1,000 pips after it has been falling for more than a year. In fact, this pullback was needed as the currency pair dropped by more than 20% in just twelve months. The eurodollar moved from $0.9534 to $1.047 in two months in the midst of a US dollar retreat. Related article: Stock indices may crash again soon Now the currency pair stopped at a trend line and resistance. It could be heading back to parity if it fails to break the trend line. Several failed divergences also point to a possible overheated upward move, drawing EUR/USD back down.  EUR/USD is forming a double top pattern, while bouncing from a 200-day moving average (EMA200). The eurodollar might be moving back to parity until the end of 2022, but traders need to stay cautious as there still wasn’t a full bounce from the trend line. The technical analysis suggests EUR/USD will go down temporarily, but traders need to wait for a confirmation signal. It will probably form in the next few days after the weekend. However, if the currency pair manages to get above the trend line, uptrend is confirmed and it could rise to 1.1000.  CAD/CHF at important support level CAD/CHF fell close to an important support a few weeks back and then filled the gap marked in a circle. A bullish divergence helped the currency pair to move higher, and a similar signal is forming right now. There is a new bullish divergence, which could send CAD/CHF up again. After it failed to fall below 0.7000, it will likely fill the gap in the circle like last time. This offers an opportunity for 150-200 pip move to the upside.  This was very probably a falsebreak, indicating this is a buying opportunity. However, a confirmation should be formed before entering the trade as the downtrend is still raging. In the next few days, an engulfing pattern or a pin bar on lower timeframes could confirm the move to the trend line. If no confirmation arrives, it could continue downward, making this breakout. GBP/JPY at trend line The pound has been one of the most volatile currencies in the last couple of weeks. GBP/JPY fell more than 1,000 pips and then jumped by 2,000 pips. After the currency pair found its peak at 172.00, it has been creating lower highs and lower lows since.  It seems that another price distribution is happening at 169.03, possibly sending GBP/JPY down again. There is a clear opportunity to short it, but we need to wait for a confirmation signal as with CAD/CHF.  There is an obvious trend line in the chart, which reminds what happened the last time. When the first trend line in the chart was broken, GBP/JPY dropped by approximately 700 pips. If the second trend line is broken too, we could see the currency pair moving to EMA200. That is a potential move of more than 500 pips, while 100-pip stoploss should be sufficient.   Bottom line The end of the year typically brings trend reversals, so traders should keep that in mind. Moreover, technical analysis suggests great trading signals, but make sure you wait for confirmations to avoid unnecessary losses. Protect capital at all costs. 

S&P 500 closed on a fine note, and keeps nibbing at 4,040 – the great resistance that will ultimately fall (likely early next week). Running the stops before that, but key sectoral performance indicates that it would be only weak hand that would be shaken out. If the sellers had any chance to push through, it was this week – and the final opportunity to do so this year, is to evaporate once the second week of Dec gets out of the way. The outside markets aren‘t hinting at much success for the bears – bonds remain risk-on, USD not throwing a spanner in the works… 10y over 2y yield relenting together with 3m yield going down, that would be most constructive for the bulls – still absent for now, and that‘s why this Q4 rally will fail in Q1 2023. Opening today‘s article for everyone after Thanksgiving – thank you all for the honor of serving you! Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday. Let‘s move right into the charts. S&P 500 and Nasdaq outlook The chart is still strong, and 3,958 shouldn‘t really come into danger – the time is to gather strength for the final 2-3 weeks of this year, and to run (higher). 4,040 getting out of the way, determines the speed and path of the upswing. 4,010s is the first line of support. Credit markets The retreat in yields and general risk-on posture in bonds will continue even as today‘s premarket progress has been reversed, and then some. Bonds haven‘t peaked, and neither have cyclicals or tech within this bear market rally in stocks. Gold, Silver and miners Precious metals surely give an appearance of the lows being in, and now are in the process of making higher highs and higher lows. Note the often written about decreasing sensitivity to rate hikes and at times hawkish rhetoric – economic slowdown with dollar getting challenged, that‘s an elixir that copper also likes Crude Oil Oil bulls better clear back above $80 again, but the short-term chart technicals look slated against. I‘m willing to sit out the setback - while combined with precious metals, copper and stocks, this portfolio should win the day together.

Dow Jones The Dow Jones is trading just under new multi-month high and moving within a narrow range for the second straight day, in a holiday-thinned market. Traders were mainly on hold for Thanksgiving, but closely watch major retailers on Black Friday, amid the fact that inflation remains high and threats of possible recession next year. The Dow keeps overall strong bullish stance and extends October’s massive gains, sparked by better than expected earnings season and additionally boosted by signals that the Fed would ease its aggressive stance in tightening its monetary policy. Monthly bullish engulfing in October strongly underpinned the action this month, keeping the index on track for the second straight monthly rally, as acceleration from 28638 (Oct 3 correction low) so far retraced over 61.8% of 36830/28638 pullback. Firm bullish structure is also seen on weekly chart, as Dow resumed steep advance after pausing last week, with weekly close above former top at 34244 (Aug 16) would add to bullish signals. Daily studies are overbought and bullish momentum is fading that may set scope for some corrective action, which should be limited and expected to provide better buying opportunities. Rising 10DMA (33876) marks initial support which should ideally contain, with deeper pullback to stall on approach to 33340 33188 (rising 20DMA/Nov 17 trough) and keep bulls intact. Res: 34757; 34897; 35277; 35409. Sup: 34127; 33876; 33753; 33341.

Happy Thanksgiving to any of our US followers! I have some holiday-related stats to quiz you on to get the episode started this week. Then from a market perspective, I cover what information we learned from the latest FOMC minutes, why the UK is set to be one of the worst performers in the G20 over the next two years, and what caused volatility in the oil market this week.

Flash PMI’s for November turned out to be a mixed bag. US data disappointed as the manufacturing PMI dropped to 47.6 from 50.4 and service PMI pushed lower as well to 46.1 from 47.8. It is broadly in line with our view that the US economy is heading into a mild recession in early 2023. Investments still look resilient as durable goods orders were decent in October. However, leading indicators suggest investments will slow down soon. For once the picture was a little more positive in the euro area as both PMI manufacturing and service were better than expected. The German ifo business confidence also surprised to the upside rising to 86.3 from 84.5. Despite the improvement the indicators are still at low levels and point to a euro area recession. But on the margin it is positive and fits with our view that the recession will not be deep, although it could be protracted as we have yet to feel the full effects of the sharp rise in bond yields and ECB policy rates. The PMI’s also showed easing price pressures and a further normalisation of delivery times, which is a further sign that goods price inflation is in the process of normalising on the back of a sharp drop in freight rates, easing supply chain problems and lower commodity prices. Oil prices turned lower again this week to USD85 per barrel, a decline of USD35 per barrel from the peak in June. Despite easing pressures, inflation will likely stay elevated for some time as some industries have yet to pass through previous price hikes and wage inflation are pushed up by tight labour markets. With more signs of easing price pressures in the medium term, central banks increasingly consider to lower the pace of hikes. Minutes from the recent Fed meeting and Fed speeches suggest a majority within the Fed lean towards lowering the size of Fed hikes to 50bp from 75bp. However, we still have another jobs report and inflation print ahead of the meeting on 14 December, which will be key for the size of the rate hike. The ECB may also move to a 50bp pace but it depends a lot on how next week’s inflation for November turns out. Another high print would likely trigger a 75bp hike on the 15 December meeting, but our baseline scenario is a 50bp rate increase. In China tweaks to the zero-covid policy led to more widespread outbreaks triggering restrictions in more than a third of China’s provinces. China could be facing a chaotic winter as it is hard to contain covid without reacting fast and forceful. Unless, they are willing to live with more spread of the virus, the result could eventually be harsh lockdowns during the winter to knock down the covid waves. Our baseline is that China will not open up fully until summer next year. But uncertainty prevails around which strategy China is going to follow after they took the first steps towards leaving the zero-covid policy. Stock markets got a lift this week from the softer tone from central banks and easing price pressures, which also pushed bond yields lower. EUR/USD has also seen a lift on the back of better risk sentiment and markets pricing a central bank pivot. Next week focus turns to US payrolls and Euro inflation. We expect US job growth to decline from 261k to a still decent 220k (consensus 200k). We look for euro inflation to rise to 10.8% y/y from 10.6% y/y but that core inflation holds steady at 5.0% y/y. Download The Full Weekly Focus

It's official: The most eagerly awaited economic report of this month, if not this year was released on Wednesday and showed the U.S central bank favors slowing down the pace of interest rate hikes to mitigate risks of overtightening. Minutes from the FOMC Monetary Policy Meeting earlier this month revealed several officials backed the need to slow the pace of rate hikes – signalling a pivot to smaller interest rate increases from as early as December. This adds weight to expectations the central bank will raise rates by 50 basis points next month, finally ending a run of super-sized 75 basis point hikes. In another revelation, some committee members expressed concern about risks to the global economy should the Fed continue to press forward at the same aggressive pace. Several Fed officials signalled that their assessment of the risks of a recession had grown to almost 50-50. That was the first such warning since the central bank began raising rates aggressively in March, bringing their target benchmark rate to a range of 3.75% to 4%. Whichever way you look at it, one thing is clear. This is the start of a more different and dovish narrative from the Fed, which ultimately presents an extremely bullish backdrop for commodity prices ahead. Since the beginning of this year, a long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have repeatedly described commodities as their "preferred asset class over the next decade". And now we could be about to see why! Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

After the Thanksgiving downtime that generated some further weakness for the greenback, investors will be looking for fresh direction from the barrage of US economic data that will be dominating the agenda in the coming week. The latest payrolls report will be the main attraction along with PCE inflation readings. CPI data out of Australia, the Eurozone and Switzerland as well as Canadian GDP numbers will be important too, while OPEC’s monthly decision will be another one to watch amid speculation of an output increase.

US non-farm payrolls – 02/12 – despite concerns about the strength of the US economy the labour market, has thus far continued to hold up well, with weekly jobless claims currently averaging around 225k per week. In October non-farm payrolls came in at 261k, while the September jobs number was up to 315k. Slightly more disappointingly was the fact that the unemployment rate edged up to 3.7%, while wage growth slowed to 4.7% from 5%. The report also served to indicate that there was little sign of a wage price spiral despite still high levels of vacancies. If anything, we are now starting to see in the current earnings season reports that the big tech companies are letting people go in their thousands. Amazon for example has announced the loss of over 10k jobs worldwide with more to come, while Meta recently announced 11k. Twitter has also seen people leave the business, some of them voluntarily because they don’t want to work for new owner Elon Musk. While not all these job losses are likely to be in the US there does appear to be a trend starting to build, although it is likely to take some time to filter through given that vacancy rates are still high. It’s also important to remember hiring trends tend to pick up in the lead up to Thanksgiving and the Christmas period on the back of temporary hires. Expectations for November payrolls is for 200k, down from 261k, which would be the lowest number this year. The unemployment rate is expected to tick higher to 3.8%, by virtue of a higher participation rate, while wage growth is forecast to remain subdued at 4.7% EU CPI (Nov) – 30/11 – there is increasing evidence that we might be getting close to peak inflation if the direction of travel of energy prices is any guide. Thus far in Europe we’ve seen little evidence of that with headline CPI jumping to 10.6% in October, up from 10% in September. In October we saw a sudden drop in German PPI numbers on a monthly basis by -4.2%, pulling the annualised number down from a record high of 45.8% to 34.5%. If this is indeed a leading indicator for headline CPI, and the weather doesn’t get too cold in the coming weeks then there is a chance that while the headline numbers could well remain high for some time, they could start to slowly fall back. Core prices are over half the level of the headline numbers at 5%, and with the ECB increasingly concerned about tightening too aggressively, some signs of softer CPI could well offer a compelling narrative for the ECB to hike by 50bps or even less when they meet next week.     US PCE Core Deflator (Oct) – 01/12 – there’s been little evidence thus far that US consumer spending is showing signs of slowing, while the Fed’s preferred measure of inflation, the PCE Core Deflator has thus far continued to edge higher. With core prices still showing underlying resilience there is little incentive the Federal Reserve to hold back from its currently hawkish monetary policy posture. This is despite headline CPI peaking at 9.1% In June. In September PCE Core Deflator edged up to 5.1% from 4.9% in August, although it is still below its February peaks of 5.4%. Nonetheless if we start to see signs that we are starting to turn lower then we could well see the US dollar come under further pressure building on the recent declines that we’ve seen since the peaks of late September. easyJet FY22 – 29/11 – 2022 was supposed to be the year that the UK travel sector saw a semblance of a return to normal service after the disruption caused by Covid. If only life was so simple with rising energy prices caused by the Russian invasion of Ukraine, as well as large scale travel disruption through the summer months, which prompted widespread cancellations and delays and timetable recalibrations. It is true that the aviation sector has had to deal with a myriad of challenges however some of these have been self-inflicted. Letting too many people go when lockdowns cut off their revenue flow, as well as industrial action has meant a summer of long delays, cancellations and excessive waits for luggage for some travellers. In October the easyJet share price hit ten-year lows and while we’ve seen a modest recovery since then the airline is still expected to post a full year loss of between £170m and £190m, which includes incremental disruption costs of £75m, mainly from the operational issues experienced in Q3, and FX costs of £64m. In Q4 easyJet operated at 88% of its 2019 capacity which was below expectations of 90%, while revenue is expected to increase to £2.5bn,...