Daily Market Outlook, December 17, 2020
Risk tone was positive in Asia as investors remained hopeful that a US fiscal stimulus package is drawing near. The Federal Reserve last night kept interest rates and its asset purchase targets unchanged, as expected. However, it tweaked its forward guidance on asset purchases which will continue until “substantial further progress” has been made towards its twin goals of maximum employment and price stability.
Brexit headlines and the Bank of England’s policy update at midday are today’s main focus. As the Monetary Policy Committee (MPC) made a decision to raise its asset purchases in November, it seems likely that they would prefer to make no further policy changes for now. Policymakers will take into account further rises in Covid-19 cases, resulting in stricter containment measures and weaker near-term economic activity. But they may also want to sound more upbeat about medium-term economic trends in the wake of the positive vaccine news.
Post-Brexit uncertainty is an additional complication. While latest reports suggest an EU/UK deal on new trading arrangements may be getting closer, an accord has yet to be reached. Against this background, it seems likely that the MPC will stand pat for now and merely note ongoing risks and their readiness to react to any adverse developments.
Other major central banks will also deliver policy updates, including the Swiss National Bank (SNB) and Norway’s central bank (Norges Bank) this morning and the Bank of Japan (BoJ) early tomorrow. No major policy changes are expected, as policymakers take stock of latest Covid developments and medium-term vaccine optimism. The SNB is likely to continue to warn against a “highly valued” Swiss franc (despite the US yesterday designating Switzerland as a ‘currency manipulator’). The Norges Bank could bring forward its expectations for the first hike to earlier in 2022, while the BoJ is expected to extend its emergency loan programmes beyond next March.
Data wise, US initial jobless claims will be closely watched after last week’s unexpected jump to 853k. Look for a fall back to 760k, although the consensus forecast is 813k with perhaps a greater degree of uncertainty on the outcome than usual. Also due are updates on US housing and regional business activity reports including the Philadelphia Fed survey.
Back to the UK, early tomorrow sees the release of December GfK consumer confidence, which is expected to show an improvement. Also due at 7am are official retail sales data for November during the national lockdown in England. Retail sales are expected to have fallen for the first time since April, but the decline is likely to have been less severe than during the first lockdown..
Today’s Options Expiries for 10AM New York Cut
- EUR/USD: 1.2200-05 (508M)
- GBP/USD: 1.3650 (400M)
- AUD/USD: 0.7550 (609M)
- USD/JPY: 102.95-103.00 (500M), 103.75-90 (1BLN)
Technical & Trade Views
EURUSD Bias: Bullish above 1.20 targeting 1.23
EURUSD From a technical and trading perspective, as 1.20 now acts as support bulls target primary ascending trendline resistance to 1.23
Flow reports suggest offers through the 1.2240-60 area with increasing offers through the 1.2280 level and into the 1.2300-20 area where weak stops appear with congestion increasing beyond that point for quite a distance, downside bids light through the 1.2080 area before weak stops appear for a chance at a quick move through to the 1.2060 level and stronger stops on any attempt through the 1.1980 areas and a failed topside opening up some further weakness through to the congestion around the 1.1900 areas.
GBPUSD Bias: Bullish above 1.3175 targeting 1.39
GBPUSD From a technical and trading perspective, as as 1.3250 supports then prices can extend higher to test wave 5 upside objectives to 1.3910/80 area,failure below 1.3175 opens the pivotal 1.30
Flow reports suggest offers are likely to be piled up through to the 1.3550 area before some weakness starts to appear through to the 1.3800 area given a few days. Downside bids light back through the 1.3500 level with weak stops through the level and then opening to a quick move through to 1.3450 with limited bids appearing with weakness continuing through to the 1.33 handle
USDJPY Bias: Bearish below 105 targeting 101.20
USDJPY From a technical and trading perspective, below 105 descending trendline resistance, look for the next leg lower to target year to date lows at 101.20
Flow reports suggest congested through to the 104.80 level where offers are likely to be a little stronger with weak stops on a move through the 105.20 level before further offers into the 105.50 area and weakness through to the 106.00. downside Bids into the 103.50 level increasing on move through the 103.00 area with the stops likely to increase through 102.80, topside offers likely to increase through to the 106.00 area with weak stops through the 106.20 area and increasing congestion on a push above the 106.50 level and into the 107.00.
AUDUSD Bias: Bullish above .7230 bullish targeting .7700
AUDUSD From a technical and trading perspective, as .7240/20 now acts as support look for a retest of offers and stops above .7400 from here anticipate a profit taking pullback towards .7200 again before price attempts to extend higher again to target wave 5 upside objective towards .7700
Flow reports suggest strong offers on the move into the 76 cents area with likely weak stops in the usual 0.7620-30 area however, congestive offers likely to continue through to the 0.7750 areas with sentimental areas likely to be very strong, downside bids light back through the 75 cents area with weak stops on a dip through the 0.7480 area and the market then opening through to the 74 cents with very light bids
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!