There is little news coming out to stop the rising equities markets which is great for those who like to trade in low volatility environments and have a trend following strategy. The risk would be that next week traders step in and sell these highs to get a better entry price for themselves but by then we could have seen new all-time highs across all markets.
The forex pairs are trading within relatively small daily ranges so support and resistance levels are likely to hold.
Market Brief
There are only three economic reports to look forward to in the US session today: the US HPI m/m, the S&P/CS HPI y/y, and Richmond Manufacturing Index.
COVID-19 figures for the European Union reached new highs over the past week due to the Omicron coronavirus variant, but new studies indicated that the strain wasn't as harmful despite being highly infectious. The US CDC has reduced the time needed to quarantine from 10 days down to 7, which is seen as a positive.
We did receive info from the Bank of Japan which showed Core CPI y/y had risen to 0.8% from the previous reading of 0.6% and in the overnight session, the Japanese Unemployment Rate had drifted higher to 2.8% and up from the previous reading of 2.7%. Industrial production in Japan jumped to a record high of 7.2% m/m in November 2021, from the previous reading of 1.8%.
The forex heatmap is showing that the latest data out of Japan hasn’t dented the yen’s strength as it has turned bullish across the board. The Weakest currencies are currently the Canadian dollar and New Zealand dollar, which suggests that the market could go risk-off later.
The Nikkei 225 also gained on the back of the economic data out of Japan over the last 24 hours and also found a bid following the bullish US equities markets. The Nikkei 225 is touching an old support level which printed in November, but this is the second test and should find it easier to get through the resistance.
The EURJPY has found some resistance at the mid-level of the 50=period Donchian channel. EURJPY had been making lower lows and lower highs, so we could see a more concerted effort to sell the euro against the yen from here.
The start of the European and London session has seen the German DAX continue its 5th consecutive day of making higher highs. Getting above the 15,800 level means this old resistance zone should become a decent support level on the next test, especially if it happens sooner rather than later. All-time highs at 16,300.72 are within touching distance.
The US markets seem very unconcerned about the fiscal changes that are happening early next year which include the faster taper of asset purchases. It will be interesting to see what happens when the volume returns next week and whether traders that have been away from the desk push for higher highs or see these elevated levels as being too frothy.
The Volatility Index (VIX) is now back into the range around 20 and is looking likely to keep going lower. This is showing that the markets are almost on autopilot and floating higher on low volume and little news.
The GBPJPY has been trading within a very tight range during the Asia-Pac session but is in an intraday uptrend. It will be interesting to see if anything can get the GBPJPY to rise higher for what would have been a London breakout, had the London traders been at their desks today.
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