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Intermarket:
• SP Futures 3748 (+0.60%)
• EUSTXX 3610 (+0.11%)
• Crude Oil 51.10 (+0.93%)
• US 10YR 1.049 (+0.67%)
• EurUsd 1.2311 (-0.11%)
• UsdJpy 103.22 (+0.17%)
• DAX 13892 (+1.76%)
Risk assets remained buoyant yesterday despite the rather historic
invasion of the US Capitol. These are scenes that we would never have
expected to see in a G10 nation in the 21st century. Also, it is
unconceivable that a US President would support this riot. Suspending
Trump’s social media access is a given and impeachment is likely next
on the agenda. Although the markets have remained calm,
maintaining their faith in US institutions, we do wonder whether
everything will return to “normal” under President Biden.
Stock markets cheered the unavoidable “Blue Wave” (expecting
further stimulus measures) with the US10 Year moving higher past 1%
and Gold declining. After the Democrats’ projected win of both seats
in the Senate run-off in Georgia, focus will turn to the prospects of
boosting the USD900bn fiscal support package, as several Democrats
are flagging the idea of raising the direct payments to Americans to
USD2,000.
Looking ahead: in the US, the ISM services index for December is due.
It is expected to ease somewhat to 54.5, but with the stronger ISM
manufacturing this week, we may be in for a positive surprise.
Matters that Matter:
• CNN: Trump told people he banned Pence’s chief of staff
from the West Wing
• NYT: Several of President Trump’s top aides, including
national security adviser Robert O’Brien, are considering
resigning in the wake of his response to a pro-Trump mob
breaching the US Capitol today
• Canada: Quebec imposes month-long curfew from 8 pm to
5.00 am starting Sat to curb spread of coronavirus
• U.S. considering adding Alibaba, Tencent to China stock ban
-sources
• NYSE to delist three Chinese telecoms in dizzying about-face
Majors 1-Day View:
USDJPY
• Prices interrupted the sequence of lower daily highs on
Wednesday, which improves the outlook for Thursday.
However, caution is advised as sellers returned ahead of
103.50. As such, the call is to play a break of 103.50 or 102.58.
• Prices firmer as US 10YR exceeds 1% on Georgia run-offs.
EURUSD
• Prices posted the 3rd higher daily low on Wednesday reaching
1.2350. However, sellers returned to the market at the highs and
the pullback may deepen given the overbought conditions.
However, the bias remains positive for now and we prefer to buy
into dips.
• Markets still positioned long EURUSD. Barrier option reported at
1.2350.
• US Insurrection ignored, markets may react if situation worsens.
AUDUSD
• Prices posted the 2nd higher daily high & low in a row on
Wednesday, reaching fresh 2 ½ year highs at .7820. Sellers returned
to the market at the highs and the pullback may deepen given the
overbought conditions. However, the bias remains positive for now
and we prefer to buy into dips.
• AUD and Risk appetite swayed by Georgia results.
• Commodities continue to support AUD.
GBPUSD
• Prices posted the 2nd little changed close in a row on Wednesday,
indicating weak directional signals. Yesterday’s session was a volatile
one however, and as such we prefer to play a break of 1.3670 or
1.3540.
• UK AstraZeneca vaccine rollout extended to doctors’ practices.
• USD moves remain key.
FX Relative ATR Grid
Comment: Ranges remain healthy into Thursday with the exception of
GBP which continues to lag, and is perhaps setting up a volatility
breakout.
FX Relative Strength Grid
Comment: the main signals going into Thursday are JPY and GBP
weakness vs. NZD and CHF strength.