It was a relatively quiet day yesterday with movement between the daily ranges and few new levels tested. After the market close a flurry of news did start coming through with regards to the year’s main topics, namely, Brexit Trade Deal, Coronavirus and US stimulus packages.
News from the US was around President Trumps refusal to sign the COVID-19 relief bill.
US President Trump asked Congress to amend the bill and stated it currently has unnecessary components. Trump said the stimulus cheques that go directly to the people should be raised from the proposed $600 per person to $2,000 and warned he would not sign it until Congress amends the package. US House Speaker Pelosi took to twitter to say that the Democrats are ready to raise the direct payments to President Trumps $2,000 by unanimous consent, which begs the question, why not write that in before? There is a risk that President Trump veto’s the bill or a scenario where he refuses to sign and then if he fails to send back any amended bill to Capitol Hill the current bill comes into law automatically, so we should expect more news on this right up until the Christmas holiday.
The US dollar index is showing signs that it is prepared to range between $90 and $91 and the current lack of movement lower has put a ceiling on the EURUSD just below 1.2400 with last week’s high as current key resistance.
A UK source said an agreement on a UK/EU trade deal is again possible in the coming 48 hours ahead of the Christmas holidays as there was movement on access to the 6-12-mile fishing zone, ocean fishing and the sanctions regime. ITV’s Robert Peston tweet last night regarding a trade deal indicated that we could expect one today, or next Wednesday.
China’s PBOC again raise the mid-point of the USD/CNY but unlike earlier moves this week from PBOC this has not yet translated to a higher USD versus the Yuan. At the European open the US yields rose and that could add pressure to the US dollar in the London session, especially if traders feel bullish on the pound based on last night’s moves towards a UK/EU trade deal.
GBPUSD in a rising channel and the bullish mean regression target is 1.3500. A close above the Monday high would signal more bullishness into the new year. We’re currently trading in the price range carved out by Mondays price action, with a rising 200 Daily SMA, the major technical support of the 200 Day SMA means if there was a shock to the downside due to a ‘No-Deal’, 1.2800 could be the first major price target.
Oil production by OPEC+ nations is to increase from January 1st and in the current climate of lack of global demand, Crude and Brent were down -1.7% and -1.8% respectively. The stronger US dollar didn’t have much effect on the price of Natural Gas yesterday though as there was some big news out of Russia’s Gazprom stating, “that they expect to double their supplies to China in 2021”.
USDJPY is in a down trending channel and could be squeezed lower after the announcement this week that USDJPY @ 100.00 would be defended. This would be similar to a currency peg in my view, where traders could envisage any long positions initiated at 100.00 being defended by the BoJ, reducing the risk substantially. There is no way Japan would welcome this as a stronger Yen is not helping their exports. The BoJ members are all in agreement that they would not hesitate to do more monetary easing if needed.
Looking ahead with the days economic calendar, trading may be subdued in the London session as we await news and then any repricing be done into London close after we have had the US economic releases. There is key PCE data that the Fed uses to gauge inflationary pressures, followed by Jobless claims. The University of Michigan Sentiment is a final reading, so I am not expecting a big change in that data from current expectations. At 3.30pm there is the EIA Weekly Oil report which details last week’s inventories.