Daily Market Outlook, December 9, 2020

Asian equity markets are mostly up this morning, although Chinese indices are down. Optimism that the US will soon enact more fiscal stimulus after White House policymakers proposed a $916bn package may have provided support. President-elect Biden set a goal of 100 million Covid-19 vaccinations in his first 100 days. China annual CPI inflation fell by 0.5% in November, its first decline in a decade as pork prices slipped.

UK PM Johnson will head to Brussels today for talks with EU Commission President Von der Leyen. The discussions are set to focus on the key sticking points preventing agreement on a UK-EU trade deal, including fishing rights and regulatory alignment. Ahead of the talks, the PM offered a concession by dropping clauses from the Internal Market bill regarding Northern Ireland that were seen as contrary to previous agreements with the EU. However, the UK also said yesterday that it would break with the EU in not imposing tariffs on the US in response to aircraft subsidies.

Today’s data calendar is very light with nothing in the UK and little of note elsewhere. The US JOLTS (job opening and labour turnover survey) for October will as usual provide interesting detail. However, it lags the main labour market report by a month and so with the situation changing so quickly it is likely to be regarded as having limited relevance.

The Bank of Canada is expected to leave monetary policy unchanged at today’s update. That will leave the policy interest rate at 0.25% with asset purchases to continue at the current pace of at least C$4bn a week. The forward guidance is also likely to remain unchanged with the emphasis still on policy remaining loose until the recovery is assured. In Canada, as elsewhere, there are concerns about the potential negative impact on the economy of rising Covid-19 cases but given hopes of a vaccine, it is likely that the BoC will be content to wait-and-see.

The UK October GDP release due early tomorrow will show how much momentum the economy had going into the latest lockdown in England. Other data for October has been mixed. The PMI measures were all above 50 which is usually consistent with a rise in GDP. However, a range of high frequency indicators including the ONS Business Impact of Covid-19 Survey (BICS) and Apple/Google mobility data point to a decline.

That would seem consistent with the introduction in England of the tiered regional restrictions from about the middle of the month and with the more restrictive measures that were also in place in other parts of the UK. Consequently, look for a monthly fall of 1.0% which would leave GDP about 9% below the February level. The decline seems likely to be primarily concentrated in services that are more directly impacted by social distancing measures.

Today’s Options Expiries for 10AM New York Cut

  • EURUSD: 1.2130-40 (568M), 1.2190-1.2200 (544M), 1.2250(753M)
  • USDJPY: 103.00 (726M), 104.40-50 (704M), 104.65(750M), 104.80-85(539M)

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 downside bids light through to the 1.3320-00 area with bids light through the level and weak stops likely on a dip through the level, light congestion through to the 1.3250 area with stronger bids likely on a move to the 1.3200-1.3150 areas. Topside offers light through to the 1.3450 area with some offers starting to form with stronger offers likely through to the 1.3500-20 area and weak stops on a move through.

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 downside bids light through the 74 cents area with weak stops likely on a dip through the 0.7380 areas before congestive bids into the 0.7360-40 level, stronger bids into the 0.7320-00 with weak stops mixed with weak bids through to the 0.7250 area. Topside offers through to the 0.7460 area with increasing offers to the 0.7500 area and congestion beyond the level probably dated (old) however, likely to be in the area and negating much of the weak stops and only sentimental option levels to be concerned with, stronger offers then from the 0.7550 through to 0.7600 area and offers then likely to continue to increase.

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