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Intermarket:
- SP Futures 3687 (-0.28%)
- EUSTXX 3524 (-0.26%)
- Crude Oil 46.05 (-0.43%)
- US 10YR 0.97 (-0.28%)
- EurUsd 1.2127 (+0.05%)
- UsdJpy 104.12 (-0.04%)
- DAX 13254 (-0.21%)
Risk appetite is less buoyant into Monday’s London session on reports that the US may sanction key Chinese officials over recent events in Hong Kong, but also on uncertainty regarding EU/UK trade talks. Still, US markets remain near record highs as a poor NFP print on Friday raised hopes that US politicians will push forward a $908bn stimulus deal, perhaps by the end of this week. Beyond the themes highlighted in our Weekly Call, focus will be on the US FDA meeting on Thursday regarding Emergency Use Authorization for the Pfizer/BioNTech vaccine (the same vaccine which will be rolled out in the UK from tomorrow).
Brexit will be the main focus into the week, but early reports suggest divergences remain on the “level playing field”. This should be a make-or-break week, with a possible ratification summit, later this week on the 10th December.
Looking ahead: UK PM Johnson and EC President von der Leyen speak; UK House of Commons debates Internal Market Bill.
Matters that Matter:
• Biden transition, U.S. coronavirus vaccine teams to meet amid surge, distribution questions
• US preparing new sanctions on Chinese officials over Hong Kong crackdown – sources
• FTSE Russell to drop eight Chinese firms after U.S. blacklisting
• ‘On a knife edge’: Britain and EU in last-ditch trade talks
• EU source – Pessimism from both sides of deal by Monday night, level playing field differences maybe insurmountable – Times radio
• USD CFTC net shorts highest in five weeks
Majors Weekly View:
USDJPY
- Prices posted a failed rally and the 2nd little changed close in a row last week. As such, the outlook remains cautiously bearish once more, and we prefer to sell rallies.
- Risk appetite mixed during Asia
- Bids reported around 103.75-50, offers form 104.40.
EURUSD
• Prices posted a fresh 2 ½ year high at 1.2175 on Thursday, via the 8th higher daily low in a row, but sellers have returned to the market from overbought levels and the pullback may extend. While signals remain bullish, caution is advised and buying dips remains the favoured call.
• Profit taking reported on fall from 2 ½ year highs on Friday.
• EU budget negotiations and Brexit a factor.
AUDUSD
• Prices posted the 3rd higher daily low in a row on Thursday, reaching a fresh 2 ½ year high at .7450. Pullbacks from such overbought extremes are likely, but in the absence of any counter-trend signals, the outlook remains bullish this week.
• Prices supported by equity markets, commodities and USD weakness.
• Bullish setup continues.
GBPUSD
• Despite prices posting the 4th higher weekly low in a row last week, sellers returned from the 2 ½ year top at 1.3540 and the pullback may extend. As such, the outlook is just cautiously bullish and we prefer to buy dips this week.
• Mixed signals from Brexit talks.
• GBP trading near 2 ½ year highs suggests consensus is for a deal.
FX Relative ATR Grid
Comment: Ranges expanded last week, which suggests better trading conditions this week, with continuation bets becoming viable again.