Daily Market Outlook, December 18, 2020

Asian equity markets were lower on news that the US will blacklist several Chinese firms, while fiscal stimulus talks in Washington dragged on. As expected, the Bank of Japan left main policy settings, including its key interest rate and the 10‑year yield target, unchanged, but it extended its Covid emergency loan programme by six months.

The domestic focus remains on post-Brexit trade talks where the latest rhetoric was a little more downbeat. The UK’s Frost said “progress seems blocked” and Boris Johnson called for a significant shift in the EU’s position on fisheries. Still, EU officials reportedly indicated that a deal could still be reached by this weekend. Data released overnight showed UK consumer confidence rising by 7 points in December to -26, with the economic situation in the next twelve months seeing a particularly big improvement, boosted by the positive vaccine news and deployment.

UK data released at 7am this morning showed official retail sales (including auto fuel) dropping 3.8%m/m in November which was during the national lockdown in England, with containment measures also in place in other parts of the UK. That was the first decline since April, although it was less severe than during the first lockdown in the spring. Non-food store sales, notably fuel and clothing & footwear, saw particularly large declines, while internet sales jumped up.

Ahead today, the CBI will release the December update for its industrial trends survey. The net balance for total orders troughed in May at ‑62 and has trended higher since then, although it remains below pre-Covid levels. The Lloyds Business Barometer report, covering all sectors of the economy, will be released early Monday.

In the Eurozone, expect the German IFO business survey for December to show an improvement in the headline index for the first time in three months, aided by vaccine optimism. However, the country’s stricter measures to tackle rising Covid infections represent a downside risk. Overall, look for a cautious rise in the headline index to 91.3 from 90.7.

Today’s Options Expiries for 10AM New York Cut

  • EUR/USD: 1.2150 (1.6BLN), 1.2200 (875M), 1.2250 (2.2BLN), 1.2300 (500M)
  • GBP/USD: 1.3450 (450M), 1.3500 (302M), 1.3550 (295M)
  • USD/JPY: 102.00 (1BLN), 102.25 (380M), 103.50 (373M), 103.80-90 (700M), 104.00 (614M)

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 offers through the 1.2240-60 area with increasing offers through the 1.2280 level and into the 1.2300-20 area where weak stops appear with congestion increasing beyond that point for quite a distance, 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 are likely to be piled up through to the 1.3550 area before some weakness starts to appear through to the 1.3800 area given a few days. Downside bids light back through the 1.3500 level with weak stops through the level and then opening to a quick move through to 1.3450 with limited bids appearing with weakness continuing through to the 1.33 handle

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 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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