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Intermarket:
- SP Futures 3664 (-0.08%)
- EUSTXX 3516 (-0.03%)
- Crude Oil 45.03 (-0.56%)
- US 10YR 0.95 (-2.09%)
- EurUsd 1.2118 (+0.04%)
- UsdJpy 104.44 (+0.04%)
- DAX 13293 (-0.09%)
Risk assets remain buoyant as Democrats backed a bipartisan proposal framework of $908b. Modest gains were posted on Wall Street, while the US 10Y reached 0.96%. Meanwhile, the Fed’s Beige Book reiterated a moderate expansion, but with signs of slowdown in areas with surging Covid cases; ADP missed the mark at 307K vs 440K in November which, alongside the lower ISM manufacturing employment component, doesn’t bode well for tomorrow’s NFP numbers. Watch for today’s ISM Services Employment number as well.
With worse data from the US, USD continues to be offered vs. Euro and Comm-Dolls in particular. GBP remains rather weak on the crosses, as traders await the final say on Brexit negotiations. BBC sources suggest a deal is still possible, despite Barnier’s less than encouraging report yesterday morning.
Crude Oil rose on talks that OPEC+ is close to agreeing on a deal that would allow for a gradual tapering of the supply cuts in 2021. More details are expected before the weekend as the bloc wraps up its week-long discussion today.
Matters that Matter:
• Biden says will not kill Phase 1 trade deal with China immediately -NYT
• Is U.S. inflation coming back? Jump in long-dated bond yields sparks debate
• US Covid-19 spread continues, new cases reaching 200K/day
• Deal on fresh US coronavirus relief still elusive
• Brexit deal could come in the next few days - BBC
• CN Nov Caixin Services PMI, 57.8, 2nd-highest since April 2010, 56.8 prev
• Italy to ban movement between regions from Dec 21st to Jan 6th.
• Opec+ deal expected today
Majors 1-Day View:
USDJPY
- Signals are weak after a 2nd failed rally alongside the 2nd little changed close in a row. There is a very weak downwards bias however, so the call for today is cautiously bearish.
- USDJPY caught between USD weakness and risk-on flows.
- Opex still a factor.
- Bids reported around 104.00 while offers defend 105.00.
EURUSD
• Prices posted the 7th higher daily low in a row yesterday, reaching 2 ½ year highs. Prices are hence extended at the Weekly, Daily and intraday levels and pullbacks are to be expected. Buying dips towards 1.2050 is our preferred call for today.
• Prices supported on USD weakness.
• Bids reported around 1.2020 still.
AUDUSD
• Prices posted the 2nd higher daily low in a row on Wednesday, reaching fresh 2 year highs at .7420s. As such, the call remains bullish but with caution as prices are extended at the Daily level and pullbacks are to be expected.
• Prices supported by equity markets and USD weakness.
• AUD trade data ignored.
GBPUSD
• Volatile trading on Wednesday has weakened the bullish bias and has established a range-trading scenario. As such, the call for today is to sell on rallies towards 1.3410s, or buy on dips towards 1.3310s.
• GBP recovered ground after early disappointment as BBC reports deal is possible.
• Traders await Brexit breakthrough
FX Relative ATR Grid
Comment: Ranges remain healthy into Thursday, although the current trends are at extended levels and caution is advised.
FX Relative Strength Grid
Comment: The strongest signals going into Thursday are GBP, JPY, USD weakness vs. CHF, EUR strength.