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Intermarket:
- SP Futures 3588 (-0.52%)
- EUSTXX 3458 (-0.26%)
- Crude Oil 41.30 (-0.30%)
- US 10YR 0.84 (-3.78%)
- EurUsd 1.1874 (+0.10%)
- UsdJpy 104.04 (-0.14%)
- DAX 13092 (-0.24%)
US stocks retreated slightly, perhaps on some profit taking sparked by rising Covid cases and worse US retail sales. This despite AstraZeneca suggesting phase 3 trials are “days to weeks away”. Overall though, it was a rather dull session overnight and ranges have been declining. Covid and US politics are still the main focus.
Covid cases are finally dropping in Europe, but the Euro’s resilience is surprising given the fundamental backdrop. Hungary and Poland have rejected the EUR750bn coronavirus rescue fund, France has cut 2021 growth forecast after the second lockdown and any progress will need to wait until the December EU Council Summit.
On the other hand, Australia is now heading toward its summer months, and with the state of Victoria reopening after more than four months of lockdown, economic fortunes are looking brighter and analysts seems to be turning bullish on AUD.
Looking ahead: we get UK’s CPI/PPI/RPI and EU CPI. BOE’s Haldane and Bailey, Fed’s Williams, Bullard and Kaplan are also speaking.
Matters that Matter:
• Biden’s coronavirus advisers warn on stalled transition, Trump pushes legal challenges
• Fed’s Powell signals emergency credit programs should be extended
• Tokyo to raise COVID alert level to highest of 4 levels - Nikkei
• BoE DepGov Ramsden – Markets eyeing @20% chance of no UK-EZ trade deal, not about to implement negative rates soon
• RBNZ accidentally discloses decision ahead of monetary policy announcement
• RBA Gov Lowe – Current policy correct, not worried about housing market
• RBNZ: Reviewing internal information processes after accidental leak in MPS; information went to small group of financial firms shortly before publication
• RBA Lowe: Australia needs to keep strong trade relationship with China; bond-buying is lowering costs of borrowing but also rates across the economy; completely right for government to borrow to support economy right now; Australian economy on the road back but recovery uneven; possible that lower rates could cause rapid house prices rises
• Australia Trade Min Birmingham: Does not expect any swift change in US/China trade relations under Biden
Majors 1-Day View:
USDJPY
- Prices posted the 4th lower daily high in a sequence on Tuesday, testing 104.00. As such, the outlook switches to cautiously bearish today.
- JPY sought on weak US data, Covid-19 spread and political uncertainty.
- Stops reported sub-104.00
EURUSD
• Prices posted the 4th higher daily low in a sequence on Tuesday, maintaining the bullish slant, but with another little changed close signals remain weak.
• Prices supported by weaker USD.
• Offers reported around 1.1900, support comes in around 1.1830.
• Covid-19 cases finally slowing in Europe.
AUDUSD
• After testing the November top at .7340s, prices declined on Tuesday and further selling was noted in today’s Asia trade. With the small sequence of higher daily lows interrupted, the call for today is cautiously bearish.
• AUD declining on weaker risk sentiment.
• Vaccine optimism waning.
GBPUSD
• After forming a base around 1.3100, prices have posted higher daily lows and despite strong upwards momentum, signals remain bullish into Wednesday.
• GBP boosted by rumour of trade deal coming early next week.
• GBP traders expect a breakout if/when Brexit is resolved.
FX Relative ATR Grid
Comment: Ranges continue to decline, with contractions becoming evident on EUR crosses. Volatility is dissipating and being selective remains key.
FX Relative Strength Grid
Comment: the main signals into Wednesday appear to be GBP and JPY strength vs. CAD weakness