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This will be the last Morning Call for 2020. We will resume on Jan 4th 2021. Thank you for your support and we wish our readers a great holiday season.
Intermarket:
- SP Futures 3706 (-0.18%)
- EUSTXX 3534 (-0.82%)
- Crude Oil 48.18 (-0.36%)
- US 10YR 0.93 (-0.03%)
- EurUsd 1.2248 (-0.15%)
- UsdJpy 103.38 (+0.31%)
- DAX 13630 (-0.43%)
Reality and expectation continued to diverge in terms of the global Covid-19 development. French President Macron became the latest high-profile victim to catch the virus. Meanwhile, a US health care worker, with no known history of allergies, reported a severe allergic reaction to the Pfizer vaccine minutes after the shot was administered. Nonetheless, risk appetite remained buoyant after EU officials announced the rolling out of vaccine from 27 December onwards.
But the tone is slightly different into Friday, with profit taking reported ahead of the weekend. Brexit negotiations will continue into the weekend and perhaps reducing risk is the better option after all: EU’s Barnier attempted to sound positive yesterday but Frost, Gove and Johnson were all pessimistic. It seems that neither side wants to take responsibility for a no-deal outcome – which seems like the most probable option at this point in time.
Looking ahead: today we get the German Ifo. After the stronger than expected ZEW expectations as well as the PMIs, we would expect a stronger print. Beyond that, traders will be on the lookout for any headlines regarding US fiscal talks and Brexit.
Matters that Matter:
• Fed’s Main Street lending sees record volume in closing days
• US Republicans seek firm end to Fed’s coronavirus loans, complicating aid talks
• BOJ unveils plan to probe better ways to hit price goal, extends fund scheme
• Britain, EU strike pessimistic tone in post-Brexit trade talks
• Australian states impose border curbs as Sydney COVID-19 cluster grows
• River Asset Management quietly accumulating positions in Bitcoin and Ether for more than $600 mln.
Majors 1-Day View:
USDJPY
- Buyers returned to the market in Asia trade after Thursday’s 8-month low at 102.87. This is possibly profit taking from oversold conditions, but signals have improved to the extent that our call for today is bullish.
- Short-covering reported.
- Risk mood neutral to off in Asia also supporting Usd demand.
EURUSD
• Prices posted the 6th higher daily low in a row on Thursday, with gains of ¾ Big Fig. However, sellers returned to the market this morning from overbought levels. As such, we favour selling into rallies today.
• Profit taking a factor today, although positive bias not breached.
• Christmas to impact liquidity and flows.
AUDUSD
• With prices stretched at 2 ½ year highs, sellers have returned to the market in Asia trade, retracing almost all of Thursday’s upwards move. As such, the outlook shifts to cautiously bearish for today and we prefer selling into rallies.
• Risk more off than on this morning weighing on prices.
• Profit taking ahead of X-Mas holidays expected.
GBPUSD
• Prices posted the 4th higher daily high & low in a row on Thursday, with gains of over 1 Big Fig. However, sellers have returned to the market from 2 ½ year highs, and as such we prefer to sell into rallies today.
• Traders cautious as Brexit negotiations enter final round.
• Profit taking reported.
FX Relative ATR Grid
Comment: Ranges are uneven into Friday, and with extended moves on USD pairs, being more selective would seem like the better play.
FX Relative Strength Grid
Comment: The strongest signals going into Friday are JPY weakness vs. EUR strength.