Daily Market Outlook, December 11, 2020

Risk tone was mixed in Asia, heading into the weekend. Attention remained on Brexit headlines and prospects of a further US fiscal stimulus package. Boris Johnson warned yesterday that there is a “strong possibility” of an Australian trading relationship with the EU, i.e. no deal. Talks between the EU and the UK resumed yesterday, and a decision is expected to be made on Sunday whether negotiations should continue. Brexit was reportedly pushed off the agenda at the EU summit last night, although EU leaders approved the bloc’s long-term budget and the recovery fund.

Meanwhile in the US, an agreement on additional fiscal stimulus remained elusive. Separately, FDA approval of the Pfizer/BioNTech vaccine moved a step closer after it was backed by government advisers.

It is a relatively light calendar today, with no noteworthy UK economic data releases. This morning sees the release of Italian October industrial production, which is forecast to rise 1.0%m/m. It would support expectations of a decent start to the quarter in Monday’s figures for industrial output in the Eurozone as a whole. Nevertheless, next week’s timelier December flash PMI surveys are expected to reaffirm a two-speed economy, with a setback more evident in services as coronavirus restrictions are tightened across the continent.

The most notable economic data today, however, is the US University of Michigan consumer sentiment report for December. Yesterday’s weekly initial jobless claims figures jumped up unexpectedly to 853k, the highest since September, suggesting that the labour market may be faltering on the back of stricter coronavirus containment measures. Headline consumer sentiment dropped to 76.9 in November, watch for a modest rise to 78.0 on vaccine hopes, although that would remain well below pre-Covid levels. The consensus forecast, however, is for another fall to 76.0. US producer price inflation figures are also due today and are expected to show modest gains.

Today’s Options Expiries for 10AM New York Cut

  • EURUSD: 1.1900-05(1BLN), 1.2000(572M), 1.2045-60(1.1BLN)
  • USDJPY: 103.50-60 (1.3BLN), 104.00(836M), 104.25-35(898M) 104.90-105.00(1.2BLN), 105.35-40(661M)
  • AUDUSD: 0.7400-05 (1.1BLN), 0.7430(533M), 0.7495-00(771M)

Technical & Trade Views

EURUSD Bias: Bullish above 1.20 targeting 1.23

EURUSD From a technical and trading perspective, as 1.1820 acts a support look for a retest of cycle highs at 1.20 anticipate a profit taking pullback on the initial test, while 1.1820 is defended then look for price to test the wave 5 upside objective at 1.2120 UPDATE target achieved as 1.20 now acts as support bulls target primary ascending trendline resistance to 1.23

Flow reports suggest topside offers light through to the 1.2180 area where offers are likely to be thick to the 1.2220 area and stops appear for possibly a strong breakout if that is possible, downside bids light through the 1.2100 level and some bids into the 1.2080 area before weak stops appear for a chance at a quick move through to the 1.2000 level and stronger stops on any attempt through the 1.1980 areas and a failed topside opening up some further weakness through to the congestion around the 1.1900 areas.

GBPUSD Bias: Bullish above 1.3175 targeting 1.39

GBPUSD From a technical and trading perspective, as as 1.3250 supports then prices can extend higher to test wave 5 upside objectives to 1.3910/80 area,failure below 1.3175 opens the pivotal 1.30

Flow reports suggest offers into the 1.3400 level with weak stops likely through the 1.3420 area before running into stronger offers from the 1.3440-50 area, a break here is likely to see stronger stops appearing and the market testing to the 1.3500 with stronger offers again reappearing however, a strong push through the level will allow the market over time to test to the 1.40-43 area, downside bids light through the 1.3300 area and weak stops likely to appear with limited congestion through to the 1.3200 level with again limited bids and stronger congestion on the move starting to appear to match off with any weak stops on a run to the 1.3150 and stronger bids.

USDJPY Bias: Bearish below 105 targeting 101.20

USDJPY From a technical and trading perspective, near term short covering to challenge offers to 105 descending trendline resistance, as this area contains upside attempts look for the next leg lower to target year to date lows at 101.20

Flow reports suggest congested through to the 104.80 level where offers are likely to be a little stronger with weak stops on a move through the 105.20 level before further offers into the 105.50 area and weakness through to the 106.00. downside Bids into the 103.50 level increasing on move through the 103.00 area with the stops likely to increase through 102.80, topside offers likely to increase through to the 106.00 area with weak stops through the 106.20 area and increasing congestion on a push above the 106.50 level and into the 107.00.

AUDUSD Bias: Bullish above .7230 bullish targeting .7700

AUDUSD From a technical and trading perspective, as .7240/20 now acts as support look for a retest of offers and stops above .7400 from here anticipate a profit taking pullback towards .7200 again before price attempts to extend higher again to target wave 5 upside objective towards .7700

Flow reports suggest strong offers on the move into the 76 cents area with likely weak stops in the usual 0.7620-30 area however, congestive offers likely to continue through to the 0.7750 areas with sentimental areas likely to be very strong, downside bids light back through the 75 cents area with weak stops on a dip through the 0.7480 area and the market then opening through to the 74 cents with very light bids

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