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Intermarket:
- SP Futures 3652 (+0.81%)
- EUSTXX 3513 (+0.23%)
- Crude Oil 44.98 (-0.83%)
- US 10YR 0.846 (+0.42%)
- EurUsd 1.1957 (+0.28%)
- UsdJpy 104.37 (+0.07%)
- DAX 13385 (+0.40%)
Welcome to December markets. November was a great month for equities thanks to progress on the vaccine front and with more clarity on the US political scene. The Dow Jones had it’s best month since 1987, hitting all-time highs, while the USD was down in November as the FED will likely extend stimulus measures in the absence of fiscal stimulus from Washington. To this end, Mnuchin extended 4 of the Fed’s emergency schemes yesterday. Gold also fell to the lowest levels since July and Bitcoin hit all-time highs.
Equities were boosted again during Asia trade as Tesla will be added to the S&P 500 in one shot before the US market opens on Dec 21st. However, Fedspeakers suggest that tangible benefits from vaccines won’t materialise until they become available to the common Joe.
In other news, OPEC+ was unable to achieve an agreement yesterday, so negotiations continue today. Basically, UAE and Kazakhstan are ready to increase supply, while other members would like to extend current production cuts.
Looking ahead: we get a host of final manufacturing PMI data from US, Europe, UK; CPI from Eurozone and US’, and US’ manufacturing ISM and construction spending. ECB’s Lagarde, Fed’s Brainard, Daly and Evans are also speaking today. FED’s Powell and TSC Mnuchin will testify on the Cares act today, but the speech was released yesterday and may not spark much volatility.
Matters that Matter:
• Arizona, Wisconsin certify vote results for Biden
• FOMC’s Powell – Challenging months ahead until vaccine clears production, distribution hurdles
• U.S. TsySec Mnuchin urges Congress to tap unused CARES Act funds for COVID relief
• BoE Tenreyro – Little immediate economic boost from COVID-19 vaccine
• Euro zone agrees to fine-tune bailout fund amid COVID worries
• China Caixin Mfg PMI 54.9, decade high, 53.5 f’cast, 53.6 prev
• RBA holds rates as housing market booms
• RBA: Cash rate unchanged at 0.1%; not expecting to raise cash rate for at least 3 years; board prepared to do more if necessary; will keep size of bond-buying program under review; has been positive news on vaccine front; views addressing the high unemployment as national priority; further rise in unemployment rate still expected
Majors 1-Day View:
USDJPY
- Prices posted a bullish outside day on Monday, which leaves a slight positive bias on balance for Tuesday.
- Risk back on? JPY offered in Asia.
- Opex may cap rallies however: 540 Mln at 104.85, 400 Mln at 105.00 expire today.
EURUSD
• A failed rally on Monday, with prices first reaching 1.2000, then declining to close negative on the day, leaves signals rather weak into Tuesday, despite the trend of higher daily lows remaining intact. As such, we prefer to sell into rallies today.
• Prices supported into London but offers gather ahead of 1.2000
• Positioning is long EURUSD, so USD short squeezes are a risk.
AUDUSD
• Prices posted a bearish outside day on Monday, rejecting .7400 and interrupting the sequence of higher daily lows. As such, signals for Tuesday switch to bearish.
• No reaction to RBA of CNY PMI
• Trend and bias remain positive on equity prices, commodities and vaccine hopes.
GBPUSD
• Prices posted a little changed close yesterday, showing investor indecision. However, yesterday’s failed rally suggests weakness in the short-term and as such, selling on any rally towards 1.3380 remains the preferred strategy.
• Prices still discounting Brexit deal despite lack of positive news.
• Traders await Brexit breakthrough
FX Relative ATR Grid
Comment: Ranges expanded on the last trading day of November, leaving traders with better conditions into this first trading day of December.
FX Relative Strength Grid
Comment: The strongest signals going into Tuesday are GBP and JPY weakness vs. USD strength.