Daily Market Outlook, December 11, 2020

Most Asian equity markets are trading higher in the Far East, albeit only modestly, ahead of the unveiling of a $908bn pandemic relief bill in the US later today. Meanwhile, distribution of the Covid-19 vaccine has begun in the US, with the first round of vaccinations expected to commence later today. News that Germany will enter a strict lockdown from Wednesday until 10th January, in order to curb the rate of Covid-19 infections, will likely weigh on sentiment across Europe. However, some offset will come from the news that the UK and the EU have agreed to continue negotiations past yesterday’s deadline. In a joint statement, Boris Johnson and Ursula von der Leyen announced that talks should continue and go “the extra mile” in a bid to reach an agreement.

With Sunday’s deadline for a Brexit deal to be approved also proving a ‘soft’ one, talks are expected to continue today. However, the key question remains over how long negotiations can continue, particularly with the end of the year fast approaching. Despite no new deadline being set, reports suggest that EU officials think negotiations can continue until the end of this week and still leave enough time for any agreement to be ratified. Nevertheless, the end must now be very close and politicians on both sides are advising households and businesses to plan for the possibility of no deal.

With a deal still hanging in the balance, financial markets’ attention will be highly attuned to developments between London and Brussels. As a result, today’s light data calendar is unlikely to attract much attention, particularly with only the Eurozone industrial production report for October due. Here, already released data for individual countries have been upbeat with sizeable rises in Germany (3.4%) and Italy (1.3%), accompanied by more modest increases in Spain (0.6%) and France (0.5%). These readings point to an overall rise of 1.8% in Eurozone industrial production.

Overnight, meanwhile, a raft of indicators from China are expected to show the economic recovery remained strong in November. Annual industrial production, retail sales and fixed asset investment growth are all expected to have accelerated last month.

Domestically, early tomorrow morning, the release of the latest UK labour market report for October is forecast to show a further fall in employment and rise in the unemployment rate, albeit to a still relatively low 5.0%.

Today’s Options Expiries for 10AM New York Cut

  • EUR/USD: 1.2000 (1.1BLN), 1.2175 (860M), 1.2240-50 (614M)
  • GBP/USD: 1.3100 (210M), 1.3300 (400M), 1.3500 (545M)
  • AUD/USD: 0.7450 (607M)
  • USD/JPY: 103.00-10 (800M), 103.50-55 (878M) 104.00 (557M), 104.50 (435M)

Technical & Trade Views

EURUSD Bias: Bullish above 1.20 targeting 1.23

EURUSD From a technical and trading perspective, 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 1.2080 area before weak stops appear for a chance at a quick move through to the 1.2060 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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