Daily Market Outlook, November 29, 2021

Overnight Headlines

  • Markets Unwind Part Of Friday's Selloff As Variant Fears Ease
  • WHO Urges Caution As South Africa Calls Omicron Variant 'Mild'
  • Biden Told It Will Take Two Weeks For Definitive Omicron Data
  • US Black Friday Store Shopping Drops 28% From Pre-Covid Levels
  • ECB's Lagarde: Euro Zone In Better Shape Facing New Covid Wave
  • ECB's Panetta: ECB Doesn't Need To Intervene On Inflation For Now
  • France Wants To Work With UK On Migration But Won't Be 'Hostage
  • England To Introduce New Omicron Restrictions From Tuesday
  • Japan Retail Sales Boosted By Fuel-Price Spike, Broad Trend Still Soft
  • Australia Q3 Inventories To Drag On GDP, Company Profits Rise
  • RBNZ Chief Economist Doesn't See Omicron Derailing Rate Increases
  • OPEC+ Moves Technical Meetings For Time To Review Market Rout

The Week Ahead

  • Uncertainty over Omicron variant to dominate markets Investors were caught off-guard on Friday by news that a potentially more contagious variant of the COVID-19 virus, with the propensity to re-infect, had been spreading quickly in southern African countries. Factors that were previously driving market price action, such as economic data, normalization of monetary policy by major central banks and inflation concerns will now take a back seat to developments in the newly named Omicron variant. It has since been detected in different parts of the world and countries have already begun to tighten border restrictions, although the World Health Organisation says it could take weeks to understand the level of severity of the variant. Federal Reserve Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen are due to speak this week and the market will pay close attention to their take on the latest phase of the coronavirus pandemic.
  • U.S. jobs lead busy calendar but COVID in focus There is a packed global economic data calendar this week, led by U.S. non-farm payrolls. Normally the U.S. jobs report and other top-tier data would help shape market direction, but concerns over the Omicron variant and government reactions will probably push the numbers into the background. November non-farm payrolls on Friday are expected to show a healthy 550,000 increase in jobs, according to the latest Reuters poll, while unemployment is seen easing to 4.5% from 4.6% in October. The closely watched average hourly earnings component is expected to rise 0.4% month-on-month, the same as October. Other key U.S. data includes ISM manufacturing and non-manufacturing, consumer confidence, factory orders, ADP employment, Chicago PMI and CaseShiller home prices. Europe's calendar includes euro zone sentiment indices, final November PMIs and consumer confidence, flash HICP inflation data, October retail sales and unemployment. German inflation and unemployment are also due. The UK has final PMIs and Nationwide house prices. China's November PMIs are due this week, with the official manufacturing PMI expected to improve to 49.6 from 49.2 in October, while the Caixin version is expected to ease to 50.5 from 50.6. Japan released October retail sales on Monday; industrial production, employment, business capex and November PMIs are due during the week. Australian data will be led by Q3 GDP, with building approvals and current account also on tap. New Zealand has business sentiment and terms of trade, while Q3 GDP, November PMI and jobs data are due in Canada.

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

- USDJPY - 115.70 543m. 113.40/50 711m. 113.20/30 785m. 111.40/50 460m.

- EURUSD - 1.1570 410m. 1.1490/1.1500 780m. 1.1460/70 1.06bn (839m C). 1.1440/50 667m. 1.1350 537m. 1.1300 1.70bn (954m P). 1.1250/70 1.51bn (1.02bn P). 1.1190 469m. 1.1150/60 529m.

- GBPUSD - 1.3750 662m.

- AUDUSD - 0.7100 799m.

- USDCAD - 1.2600 1.23bn (840m P).

- EURGBP - 0.8600 431m.

- USDCHF - 0.9270 1.07bn (1.01bn C).

- USDTRY - 11.50 540m.

- USDCNH - 6.39 645m. 6.36 460m.

Technical & Trade Views

EURUSD Bias: Bearish below 1.15 Bullish above

  • Weakens in Asia as Friday's risk selloff reverses
  • EUR/USD opened 1.1310 after rising 1% Friday when Omicron news shook markets
  • After rising to 1.1335 the EUR/USD tracked lower as risk assets moved higher
  • E-minis rose around 1.0% while the AXJ equity index only eased 0.15%
  • Report from S. Africa Omicron symptoms may be less severe underpinned risk
  • US Treasury yields moved higher with 10-year yield rising 6 BPs to 1.54%
  • EUR/USD moved below 10-day MA at 1.1280 and is at session low at 1.1277
  • Bids are tipped at 1.1225/30 with support at Friday's 1.1205 low
  • Resistance is at the 38.2 of the 1.1692/1.1186 move at 1.1379
  • Trading likely to remain choppy as Omicron uncertainty overhangs market

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • GBP remains in stasis in Asia, awaiting London open
  • GBP pairs did little in Asia, cable in tight 1.3325-42 range, quiet
  • GBP/JPY choppy at time with other JPY pairs but also in range
  • GBP/JPY 151.08-91, market thin, actual flows few and far between
  • Month and fiscal year end for hedge funds putting crimp on trading
  • GBP/USD between 55/100-HMAs at 1.3326/46, in 1.3319-43 hourly Ichi cloud
  • GBP/JPY holding mostly under 151.60 hourly Ichi kijun, 150.67 low Friday

USDJPY Bias: Bullish above 112.50 Bearish below

  • USD/JPY slumps into Europe open with market again risk off
  • Market risk-off in Asia PM trade, Nikkei off early, rebounds, off again
  • At @28,283, Nikkei closes off 1.6% on day, E-Minis still +0.8% @4631
  • Month-end and hedge fund fiscal year-end flows may be affecting trade
  • Markets on thin-side anyway following long US Thanksgiving weekend for many
  • USD/JPY from 113.88 EBS Tokyo fix high to 113.09 so far, 113.05 low Friday
  • US yields haven't moved much - gap up then mostly steady, Tsy 10s @1.522%
  • Option expiries still supportive, total $1.7 bln 113.00-50

AUDUSD Bias: Bearish below 0.75 Bullish above

  • Moves higher as Asian markets calm after Friday's rout
  • AUD/USD opened 0.7118 after falling 1.0% Friday on fresh COVID fears
  • Early AUD/JPY buying sent AUD/USD up to 0.7149 before 0.7150 sellers capped
  • It fell back to 0.7115 before rising again on rally in some risk assets
  • Reports Omicron strain symptoms less severe resulted in relief rally
  • E-minis rose 1.0% while oil bounced nearly 5% and Lon copper rose 1.45%
  • AUD/USD settled around 0.7140/45 heading into the afternoon