ITALY DATA: Dec PMI: New Orders Add Positive Element To Lower-than-expected Read
Italian services momentum eased in December, with the PMI falling to 51.5, below the expected 54.1 and prior 55.0. Alongside the weaker-than-expected manufacturing reading last week, that dragged the composite reading down to 50.3, an 11-month low (vs 53.0 cons, 53.8 prior).
Despite the lower-than-expected print, a positive element of the report comes from the new orders index, which saw another “sharp inflow”. Overall, there is still uncertainty around the Italian growth outlook. Q4 GDP is expected at 0.2% Q/Q, a touch above the 0.1% seen in Q3. For 2026 overall, the 0.7% expected growth is a shade above 2025’s 0.6% consensus.
Key notes from the release:
- “The slowdown in the pace of activity growth occurred despite sustained and sharp inflows of new business. Volumes of new work have risen in each month for nearly a year, with the current trend of growth stretching back to February 2025.”… “In anecdotal evidence, a general pick-up in customer interest for Italian services was noted. Some panellists also saw their marketing efforts bear fruit.”
- “Data from the latest survey confirmed that the domestic market drove the improvement in demand conditions in December, as export orders ticked down slightly”
- “Workforce numbers across the Italian service sector rose only slightly again in December”
- “On the price front, Italian services companies faced another marked rise in their average cost pressures at the end of the year”…“Firms were sufficiently confident in demand conditions to be able to pass through some of the hike in cost burdens to clients by increasing their fees. However, prices charged by service providers exhibited a softer rate of increase in December and one that was mild in relation to that of costs amid pressure on margins.”
- “Looking ahead, more than one-third of Italian service providers were confident that activity would rise over 2026”
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USDCAD TECHS: Bull Channel Breakout
- RES 4: 1.4140 High Nov 5 and a key resistance
- RES 3: 1.4131 High Nov 21
- RES 2: 1.4051 High Nov 28
- RES 1: 1.3939/4016 Low Nov 28 / 20-day EMA
- PRICE: 1.3865 @ 16:35 GMT Dec 5
- SUP 1: 1.3853 Intraday low
- SUP 2: 1.3840 50.0% retracement of the Jun 16 - Nov 6 bull cycle
- SUP 3: 1.3812 Low Sep 23
- SUP 4: 1.3779 Low Sep 22
A bear theme in USDCAD remains intact and Friday’s strong sell-off reinforces a bear theme. The pair has breached an important support at 1.3942, the base of a bull channel drawn from the Jul 23 low. The break highlights a stronger bear cycle and signals scope for an extension towards 1.3840 next, a Fibonacci retracement point. Initial firm resistance to watch is 1.4016, 20-day EMA.
LOOK AHEAD: US Week Ahead: FOMC Decision Dominates, Post Shutdown Data Catch-Up
- Next week’s US calendar is dominated by the FOMC decision on Wednesday, with a third consecutive 25bp cut almost fully priced.
- Expect it to be a contentious meeting however, with many arguing for a pause not least whilst they’re still relatively in the dark on key official data releases following the government shutdown.
- Fed Chair Powell opted for a surprisingly hawkish tone at the late October press conference, highlighting a deeply divided committee on prospects for another cut in December.
- The “fog” had appeared to win out until NY Fed’s Williams, a senior permanent voter, gave unusually explicit guidance on still seeing room “for a further adjustment in the near term”. With no pushback from FOMC members or media briefings, it appears this message has approval from the core of the FOMC which should be enough to see a rate cut this month. The likely catalyst was the further increase in the unemployment rate to 4.44% back in September, although subsequent tracking suggests stabilization and jobless claims data don’t show any signs of deterioration.
- We’ll be looking for the number of hawkish dissents (we’d be surprised if anyone joins Miran dissenting for a 50bp cut) and expect a greater number to object to a cut in the 2025 dot plot, whilst the distribution of dots for 2026 should be in greater focus.
- As for the economic projections, we expect upward revisions to GDP growth but downward revisions to near-term core PCE inflation with tariff passthrough proving less severe than previously feared.
Aside from the Fed, we also receive two months worth of JOLTS data along with other delayed releases as the shutdown data backlog is slowly caught up.
AUDUSD TECHS: Bullish Impulsive Wave Extends
- RES 4: 0.6723 High Oct 21 ‘24
- RES 3: 0.6707 High Sep 17 and a key resistance
- RES 2: 0.6660 High Sep 18
- RES 1: 0.6649 Intraday high
- PRICE: 0.6630 @ 16:32 GMT Dec 5
- SUP 1: 0.6580/6533 High Nov 13 / 20-day EMA
- SUP 2: 0.6517 Low Nov 27
- SUP 3: 0.6466/21 Low Nov 26 / 21
- SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger
A strong impulsive bull wave in AUDUSD remains intact, having printed 10 consecutive sessions of higher highs. Recent gains have cleared a number of important short-term resistance points, strengthening a bull theme and highlighting scope for a continuation higher. Today’s rally has resulted in a breach of 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg. This opens 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6533, 20-day EMA.
