Major European indices close in the red. Give up gains of over 1%

German Dax -0.9%. France’s CAC -0.5%

The major European indices are closing in the red. The all gave up gains of nearly 1% or more at their intraday highs.  The provisional closes are showing:

  • German DAX, -0.7%. At the intraday high, the index was up 1.14%
  • France’s CAC, -0.5%. The high price for the day was up 1.13%
  • UK’s FTSE 100 -0.15%. The high price for the day reached 0.96%
  • Spain’s Ibex -0.7%. The high price for the day reached 0.9%
  • Italy’s FTSE MIB -0.3%. The high price for the day reached 1.07%
For the week:
  • German DAX, -0.6%
  • France’s CAC -0.5%
  • UK’s FTSE 100 +1%
  • Spain’s Ibex, -1.9%
  • Italy’s FTSE MIB +0.2%

AUDUSD moves toward swing lows from September/October 2020

Swing lows come in at 0.6991 to 0.7005

The AUD is the weakest currencies on the day, and the pair is pushing to a new 2021 low and moves toward the swing lows from October in September 2020.  Those levels come in between 0.6991 and 0.7005. The low price just reached 0.7013. A move below that floor area would increase the bearish bias for the pair.
Swing lows come in at 0.6991 to 0.7005_
Sticking to the daily chart, the 38.2% retracement of the move up from the March 2020 low (not shown) comes in at 0.70525. That is the new risk level on that chart. Stay below and the sellers remain in firm control. The low price from earlier in the week at 0.7062 is also a close risk defining level now

More from Fed’s Bullard: Wants to get soon to “live meetings” on rate hike possibility

Feds Bullard adds to his hawkish sentiment

Feds Bullard adds to his hawkish sentiment_
  • unemployment rate will be be below 4% by Q1 2022
  • expects upward revisions to November nonfarm payrolls. This is a very tight labor market
  • sticking with forecast for two rate hikes in 2022
  • faster taper would create option out he to do more rate hikes if inflation doesn’t dissipate
  • labor market participation not the thing to look at one deciding if have reached maximum employment
  • want to get soon to live meetings on rate hike possibility
  • with rapid changes in data, Fed may need to respond meeting by meeting
  • growth will slow it next year, but will still be super rapid amid productivity gains, better pandemic control
  • economy’s adaption so far to Covid 19 suggests we will be able to handle omicron variant
  • inflation is partly from supply shot, partly increase in demand

French health minister says latest COVID-19 wave peak could be “very elevated”

Remarks by French health minister, Olivier Véran

  • The peak could be reached in January
  • By the end of January, the peak could be “very elevated”
It seems like Veran is succumbing to the fact that the omicron variant is going to be more widespread across Europe and may eventually take over from delta as being the dominant variant across the region. Here’s a look at French cases for now:
For added context, France has fully vaccinated around 70% of its entire population as of the end of November with roughly 11% of those persons receiving booster shots.

Gold, NFP, the Fed, & the ECB

What to look for today from the NFP

Trading gold has been relatively straight forward as of late. See here. When real yields and the USD fall together gold rises. When real yields and the USD rises then gold falls.

This is why gold has been falling recently Powell has made a hawkish tilt by saying it is right too consider a faster taper at the December meeting. This lifted yields and the USD. As of tomorrow the Fed will be in the black out period, so here is what to watch for over the NFP.

Outcome 1

If the jobs report come in below minimum expectations expect a knee jerk reaction higher in gold. If jobs tank lower there will be sudden jitters that the Fed will not be in a position to discuss tapering more quickly. This will cause US10 year yields to fall, the USD to fall (EURUSD upside) and XAUUSD to rise.

Outcome 2

If the jobs report come in as expected then that just keeps the status quo. There is no obvious strong reaction expected from this data as that is what market participants are expecting.

Outcome 3

If the jobs report come in above maximum expectation then that could put some fire into the belly of those expecting early Fed tapering. In that situation we could expect to see US10 year yields rise, USD rise (EURUSD downs) and XAUUSD to fall.


Some notes on the outcomes

Outcome 1 is the highest conviction opportunity as it is the most unexpected. With Fed’s Powell, Clarida, Daly and now Mester all open to a faster taper and hikes next year then outcome 2 and 3 are what the market is positioning for.

Another key point to note is that the ECB are meeting in December amongst a COVID surge. This could make them more dovish at their meeting. So, one key scenario to look for is a divergence between the ECB and the FED. If the Fed taper faster, but the ECB hold back their PEPP taper and/or are more dovish on their projections expect some more USD strength. This does paint the picture of the possibility for further falls in gold if this happens. Look at the key tech on the monthly chart with the false break of the Harami Inside Bar. A central bank divergence between the ECB and the Fed would be the catalyst for this to play out.

What to look for today from the NFP

Dollar holds slightly firmer to start the session

Dollar leads the charge in the major currencies space

With the Fed continuing to brush aside omicron risks, and even using it as a segue to build a case for quicker tapering and rate hikes, it just means that the virus situation has to take a major turn for the worse to really derail the Fed’s plans at this point.
As such, the dollar is likely to stay buoyed by that for now as omicron headlines are only just slowly building up and concerns surrounding vaccine efficacy are still not fully justified yet – will take a few weeks before getting more clarity on that.
USD/JPY is up 20 pips to 113.30 levels again as buyers appear to have established a base at the 9 November low @ 112.72, at least on the daily chart:
USD/JPY D1 03-12
That is a decent base to build on with price even clawing its way just back above the 100-hour moving average @ 113.24 for the first time in trading this week.
That will see the near-term bias keep more neutral with plenty of room to roam between that and 114.00, risk-permitting that is. Don’t forget that we also still have the US non-farm payrolls report to deal with later in the day.
Meanwhile, EUR/USD is also tracking lower to 1.1282 as the pair now trades lower on the week with the earlier gains at the start of the week being erased already.
EUR/USD H1 03-12
Notably, price action has also fallen back to sit in between the key hourly moving averages and that is keeping the near-term bias more neutral for now. In essence, the pair is still relatively caught in a narrow range this week without any real impulse to break free.

French health ministry confirms that there are currently 9 confirmed omicron cases in the mainland

The first two cases were found less than 24 hours ago

The ring here has a familiar tune to it as it sounds a lot like how the delta variant got going. French top scientific advisor, Jean-Francois Delfraissy, says that there should be a progressive rise in cases involving omicron and that it will take over from delta as the dominant variant possibly by the end of January.

Federal Reserve speakers coming up for Friday 03 December 2021

A light slate for Federal Reserve speakers scheduled today.

  • James Bullard, President of the St. Louis Fed branch, is set to speak at the Missouri Bankers Association. I haven’t managed to find a time for this.

Apart from JB we”ll have to make do with NFP Friday!
What I do have also though is this from the ECB:

  • 0830 GMT – European Central Bank President Lagarde speaking
  • 1300 GMT  – ECB member Philip Lane speaking
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