At the London market close, newswires were posting speculation that the UK and EU could be prepared to agree on a quick bilateral agreement, which would stop the UK from going over the cliff edge on January 1st by keeping the status quo. At the time of writing Sterling had not broken through the recent daily swing low and therefore remains in a bullish trend against the US dollar. PM Johnson addressed the nation via television and assured everyone that the goods in the lorries that were seen parked up at the ports would travel between the UK and EU and that the risk of transmission was low for lone drivers. The European travel ban imposed on the UK had sparked fears of food and medicine shortages as ports were closed.
This afternoon we had relatively quiet economic calendar, with the Eurozone Consumer Confidence Flash (Dec) coming in better than expected and markedly better than the previous readings. This was a Flash reading and so the first gauge of consumer sentiment in the European union. The EURUSD bounced off the 200 sma on the hourly and 1.2125 level.
The CBOE Volatility Index opened the US session at levels close to 30 which has translated to the intraday ranges being a lot wider on the risk assets during this Risk-Off start to the week. The USDJPY has been dropping these last few hours as traders move into the safe havens of Japanese yen, Swiss franc but to a lesser degree Gold and bonds.
The US dollar index gapped higher at the start of the trading day in a move 1.4% from Fridays low, which meant that it probed the highs from early last week but in recent lower time frame price action, it doesn’t look likely that the US dollar momentum can retain its bullishness. Tonight’s US close will be key and a close above 90.704 on the DXY will have traders eyeing the 91.50-92.00 zone.
US Treasury Mnuchin was very pleased that the stimulus bill had been done and that he believes the direct payments would be sent out to Americans from next week, stating that the bill is about “Kids, and jobs, and vaccines”.
OPEC+ are pivoting to being more reactionary in the wake of a continuing coronavirus pandemic, moving their meetings from being several months apart to monthly. Oil took a -4% hit today as travel restrictions and covid-19 new variant news hit WTI and Brent demand. A stronger US dollar would continue to weigh on the commodity, so traders who missed out on $50 may want to look for new buyers to join in around the $45.00-$46.00 price zone. News regarding OPEC+ decisions on output hikes in February had sources stating that Russia was in favour of a 500k Barrel Per Day (BPD) hike and that global oil recovery is slower than was expected.
USDCAD tagged the 1.2957 level before doing a 180º turn from the January to November 2020 market structure swing lows. A classic retracement with such a strong move would lead most traders to think this could be the start of the next leg down, so the recent swing lows around 1.2700 will be a key indicator of how low it will go. A break of last week’s low opens up 1.2550, 1.2250 and maybe 1.2000 as traders test the lower liquidity levels.