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Intermarket:
- SP Futures 3684 (-0.17%)
- EUSTXX 3526 (-0.06%)
- Crude Oil 45.53 (-0.49%)
- US 10YR 0.93 (+0.69%)
- EurUsd 1.2120 (+0.12%)
- UsdJpy 104.05 (+0.01%)
- DAX 13268 (+0.02%)
Brexit talks dominated headlines yesterday as UK PM Johnson and EC President Ursula von der Leyen have agreed to meet physically (Wed/Thur) to salvage any hopes left of averting a hard-Brexit. The UK for its part has offered to back down its threat to break international law in the Internal Market Bill in what is seen as a compromise, but only if a deal is agreed.
Focus will remain on Brexit as UK chief negotiator Frost will meet EU chief negotiator Barnier today to draw up a list of outstanding differences between the two sides ahead of Thursdays EU leaders meeting.
In other news, China added a Queensland meatwork to its growing list of banned Australian beef exporters. Dalian iron-ore futures contract started positive but fell sharply after Australia’s Port Hedland reported iron ore exports to China fell 13.3% from a month ago. As a response, Australia passed a law that can scrap China Belt and Road accords.
Looking ahead: Ger ZEW is the only piece of data due today, so headlines on Brexit, Vaccines, US fiscal talks will take precedence.
Matters that Matter:
• UK PM Johnson headed to Brussels to discuss Brexit in coming days
• Pelosi says talks on US fiscal support are making progress
• China’s Wang vows to uphold trade deal during Biden administration -U.S. business group
• AU Nov NAB Business Conditions, 9, 2 prev, Business Confidence, 12, 3 prev
• RBNZ to seek views on plans to resume LVR restrictions
• Trump will sign an executive order today to ensure that priority access for Covid-19 vaccines procured by the US government is given to the American people before assisting other nations
• Australia passes law that can scrap China Belt and Road accords
• PM Trudeau: Canada not adding structural deficits to economy; low rates make this different than 1990s debt crisis; approval of Pfizer could come this week
• US could acquire more Moderna vaccine by Q2 at least
Majors 1-Day View:
USDJPY
- Prices posted the 2nd inside day in a row on Monday, so trend signals are weak. On balance however, a slight bearish bias remains for Tuesday and the call is to sell into rallies.
- Prices rangebound, awaiting fresh flows.
EURUSD
• After posting a fresh 2 ½ year high, within the context of overbought signals at the weekly, daily and intraday level, profit taking commenced and prices interrupted the sequence of higher daily lows. As such, signals for Tuesday switch to cautiously bearish.
• Profit taking seen ahead of key risk event.
• Optimism on EU budget and better German data ignored.
AUDUSD
• Despite posting a volatile session, prices posted the 2nd little changed close on Monday. This action suggests indecision and as such the outlook for Tuesday is to remain square within Monday’s range.
• Business sentiment strong as anti-covid restrictions eased.
• Economic recovery in 2021 should be positive for AUD.
GBPUSD
• Prices posted a volatile session on Monday as losses of over 1 ½ Big Figs were eventually recovered into the close. However, with the trend of higher daily lows interrupted, on balance there remains a negative bias for Tuesday.
• Brexit negotiations going nowhere, GBP vulnerable.
• Retail sales softer recently as lockdowns impact.
FX Relative ATR Grid
Comment: Ranges have continued to expand on Monday, which suggests favourable trading conditions for Tuesday as well. Caution on the Loonie which has posted over 150% ATR and as such is due for more of a rangebound day.
FX Relative Strength Grid
Comment: The strongest signals going into Tuesday are NZD and EUR weakness vs. CAD and CHF strength.