The EU releases its latest projections on the euro area economy
- 2021 growth seen at 5.0% (previously 4.8%)
- 2022 growth seen at 4.3% (previously 4.5%)
- 2023 growth seen at 2.4%
- 2021 inflation seen at 2.4% (previously 1.9%)
- 2022 inflation seen at 2.2% (previously 1.4%)
- 2023 inflation seen at 1.4%
On the economic outlook, the Commission noted that the new headwinds are mounting as supply-side challenges continue to persist and surging energy prices look set to weigh on consumption and investment.
As for inflation, they see it peaking at 3.7% in the final quarter of this year and to continue recording “high prints” in 1H 2022 before declining and then stabilising by 2023.
USD/CAD moves up to 1.2570, its highest since 7 October, and threatens a break of its 100-day moving average
Commodity currencies are bearing the brunt of the drop in the FX space today, being punished with the dollar pushing higher; even though the greenback’s advance against the euro and pound has been trimmed in the past hour or so.
USD/CAD in particular is now at fresh five-week highs and is targeting to establish the next upside leg, as price threatens a break of its 100-day moving average (red line) @ 1.2537.
Hold a break above that and buyers will see a more bullish bias moving forward.
China’s Development Research Center is a think tank under the State Council
- News that it held a meeting on Wednesday with real estate industry associations and some financial institutions in Guangzhou
- Discussion centred on the situation in property markets.
Via Chinese news outlet Cailianshe
Bloomberg (may be gated) with a brief piece outling some of Goldman Sachs’ top ideas for next year, including:
- short AUD/CAD (citing a bullish oil view favouring CAD while downside China risks impact AUD and also slower hikes from the Reserve Bank of Australia than the Bank of Canada)
- long on copper and Brent oil contracts for the end of 2023, as those markets are cyclically tight, with the forwards “nowhere near the necessary incentive level for higher activity.”
GS expect 2022 to continue with strong demand and constrained supply.
Standard And Poors warn “China’s Contagion Risks Rise”
- Huarong and Evergrande impact have been largely contained within China speculative-grade bonds, but headlines hit home buyer sentiment and is spreading contagion in the residential market.
S&P ratings agency reporting on property market turmoil in the country.
Price falls below the 1.3411
The price of the GBPUSD has fallen today below the November low of 1.34236 and the September low 1.3411. That takes pair to the lowest level since December 23, 2020. The low just reached 1.34056.
The move below the old lows opens the door for further downside momentum. A lower trendline on the daily chart cuts across at 1.3324. Other swing levels from November and December 2020 come in at 1.33117. The 38.2% retracement of the move up from the March 2020 low to the June 2021 high comes in at 1.31640. All are in play on a new leg lower in the move down.
What might ruin the bearish break?. Getting above the earlier November low at 1.34236 would disappoint sellers on the break. Also watch 1.34498. That was the low on Monday.
When a new multi-month low is made, traders expect more. Now there may be some wiggle room- especially since the pair has been on a straight line down from the US morning high at 1.35384 (135 pips). However, you want the more recent lows to hold resistance. So watch the 1.3450 level as a risk/bias defining level. Stay below keeps sellers in control. Move above and stay above, and disappointment on the failed break may start to creep into the market sentiment.