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Morning Brief 30th December 2020
Asian round-up
The main story of the morning is one of US dollar weakness, as traders react to the news that US citizens will be getting $600.00 stimulus checks as soon as next Tuesday. Equity market markets are taking the news that Mitch McConnell has blocked attempts to quickly pass $2,000.00 stimulus checks through the senate well at this stage.
Asian markets have seen a quiet trading session, with the Nikkei 225 staging a minor pullback after a 5.0 earthquake was recorded in Japan. The Nikkei 225, which is currently trading at its highest level since 1991, has since regained its composure, alongside the Japanese yen currency.
China also downgraded its 2020 GDP expectations this morning, although only marginally. The National Bureau of Statistics pulled back upcoming GDP expectations to 6.0%, instead of the 6.1% expected.
China is set to release its annual Gross Domestic Product figure on January 18th next year and is expected to be the only major economy in the world to post growth in 2020.
FX
Back to the greenback, the US dollar index has fallen to its lowest level since April 2018, albeit in fairly illiquid holiday markets trading conditions. The EURUSD pair is also trading at a twenty-three-month high this morning and is currently testing towards the 1.2300 handle.
The EURUSD pair makes up a significant amount of the US dollar index, so if the pair continues to its March higher then the US dollar index is likely to remain heavily pressured to the downside. Technical analysis highlights the 1.2330 and 1.2400 areas as the next key upside levels.
In percentage terms, the Australian dollar is the biggest winner of the day so far and is trading higher by around (+0.75%) on the day. The price of Iron Ore is muted intraday, and the ASX is largely unchanged, so risk-on sentiment and US dollar weakness appear to be driving the Australian dollar higher.
Sterling is starting to firm above the 1.3550 level and has recouped its current weekly losses. Traders are clearly expecting the upcoming Brexit vote, which is being held later in UK Parliament, to easily get approved by lawmakers.
Indices
The German DAX pulled back sharply from a new all-time high yesterday, GER 30 traders will have to react to the news that Germany has suffered its worst death count since the COVID-19 crisis, after the government reported that 1,129 German citizens died of COVID-19 on Tuesday.
The FTSE 100 is increasingly interesting and is one index that still has some catching up to do, considering that German DAX is trading at all-time highs. If the UK economy starts to normalize in 2021 then the FTSE 100 could easily trade back towards the 7,000 level, and possibly much higher.
The CAC 40 is another major European Index that could be set to surge in 2021. The CAC 40 posted its best month of the year in November and is steadily grinding higher this month. The weekly time frame shows that index could go on a major tear higher if the 6,000 level is surpassed.
Commodities
Gold is once again struggling to build upside traction. It appears that risk-on trading sentiment has not been good for the yellow-metal. Key intraday support is found at $1,870 and $1,860, while the $1,900 and 1,910 levels are the big upside levels to watch prior to the $1,925 level.
Brent crude oil looks increasingly comfortable above the $50.00 level and looks set to post another month of solid gains. Technically, Brent crude oil looks set to test towards major trendline resistance around the $55.00 level at some point next month.
Upcoming News
The economic docket today is United States centric today, with traders looking forward to Pending home, Chicago PMI, Goods Trade Balance, and Wholesale Inventory data. Oil traders will also be watching EIA Crude stock change numbers later today.
This evening pound traders will react to the scheduled Brexit vote in UK Parliament. In reality, no major shocks are expected as the latest Brexit deal that PM Johnson agreed last week is expected to easily gain the support needed, so this may already be priced into sterling and UK equities.
