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Today is a short trading day ahead of the Christmas holidays. The FTSE will be closed from 12:30GMT, Euronext cash closes at 13:05GMT with the DAX closed all day. US markets will follow in a similar vein, closing halfway through the US session. Volumes are very thin and there is still potential for some risk moves as we await the conclusion to the Brexit UK/EU Trade Deal.
Reports had come out stating that traders should expect UK Prime Minister Johnson to address a press conference around 08:00GMT with final talks between himself and EU’s von der Leyen scheduled for 07:00GMT. Since these reports there has been talks of delays, but a few more hours after so many years won’t matter too much. The feeling is that a deal has been done and that Johnson made a concession on the fishing problem to get a better deal elsewhere. Brexiteers will call for a No Deal rather than a fisheries fudge but the markets are buoyant that one of the largest risk events is going to pass imminently without a disorderly conclusion.
GBPUSD is up 0.58% in early trading and has breached yesterday’s high signalling a real possibility of reaching the 1.36 to 1.37 in a measured move. The MACD on the Daily chart is positive signalling some bullish momentum coming into the pair this last week and making a test lower unlikely today.
EURGBP is trading down as expected and has printed below yesterday’s low, signalling the euro is set for a weaker end to the year. The pound against the yen, Canadian dollar and Australian dollar is looking very strong, so the risk is that the deal is not finalised today and profit taking into the holiday occurs.
China’s PBOC set their mid-point lower today for the USD/CNY and I am monitoring this to see if the dollar versus the yuan is likely to fall further, as this has been a strong signal for the US dollar index moves too. The DXY is currently trading towards the lower range set on Monday and the consolidation looks more likely to break lower as we have taken out yesterday’s low price. This signals the dollar bear trend continues into the end of the year.
Talk around the USDJPY and the 100-price level were mentioned again last night by the Bank of Japan, but as risk events like the UK/EU trade deal and US stimulus packages come to a positive conclusion the move away from safe havens like the Japanese yen should be more supportive of the USDJPY pair. If the USDJPY were to continue grinding lower in this tight range, there is a multi-year rising trend line that the price action would meet around the 102.00 level. However, there is a liquidity target below this year’s low, which traders may wish to test for buyer’s commitment.
