Sample Category Title

EUR/USD

Current level - 1.1338

The bulls became more active during the last session and the pair recorded its third consecutive day of gains. The range between 1.1235 and 1.1366 has not been broken through yet, and the market mood remains neutral. The first breach of these zones could turn out to be fake, followed by an impulse in the opposite direction. The picture on the higher time frames remains negative, and in order to change this, the bulls would have to hold the zone at 1.1235 and successfully breach 1.1366. The first support for them is 1.1294, followed by the local area at around 1.1260. If an eventual breach of 1.1366 attracts strong bearish interest and prices fall towards 1.1290, then this pressure can be expected to continue towards 1.1190 and 1.1000 as well. Significant activity can be expected today around the announcement of the initial jobless claims for the United States at 13:30 GMT and the new home sales at 15:00 GMT. The low liquidity around the upcoming holidays may also contribute to the higher volatility.

USD/JPY

Current level - 114.11

The pair failed to stay above the resistance at 114.19, and in the early hours of today, activity is rather low. It is possible that the bears will renew their pressure around the current levels in order to test the support at around 113.72. An analysis of the higher time frames has revealed that the upward trend is in a long pause and that the market mood is shifting towards its neutral state. If the bulls decide to return to the market, then the first area of ​​interest to them may be the lower zone at around 112.58.

GBP/USD

Current level - 1.3345

The bulls once again attacked the resistance at 1.3360 and the expectations for further gains are growing stronger. It is possible for the market to correct yesterday's movement by testing the area at around 1.3270. The formation of a shallow pullback or a narrow range below 1.3360 will be an early indicator of an impending breach and an attack on 1.3425, as well as on the next more significant resistance at around 1.3500. If the breach does not materialise, however, the market is likely to continue to trade without a clear direction between the 1.3180 support and the 1.3360 resistance.

USDCAD is retreating after the pullback off the one-year high of 1.2960 after a strong rally from the 1.2600 support level. The flat mode in the RSI indicator confirms the recent weak momentum on price, while the stochastic oscillator is heading south, creating a bearish crossover within the %K and %D lines.

Should selling forces strengthen, the 20-day simple moving average (SMA) at 1.2790 will come under spotlight ahead of the 40-day SMA at 1.2660. Moving lower, the 1.2600 psychological mark could next add some footing ahead of the 200-day SMA at 1.2490, while a break below this significant line would out the recent upside trend under examination.

Alternatively, a close above the one-year high of 1.2960 will brighten the broader outlook, pushing the price towards the 1.3175 key level, which has been frequently tested during November 2020. Beyond that, the rally may gear up to 1.3415.

In brief, USDCAD is facing a weaking bullish bias, where a drop below the 200-day SMA at 1.2490 is expected to enhance selling interest.

GBPJPY has swiftly turned up following the consolidation around the 149.50 support area, with the price breaching the limits from the 200-day simple moving average (SMA) to peak at a one-month high, nearly around the 153.00 level early on Thursday.

Bullish pressures could persist in the short term according to the momentum indicators. The RSI has pierced above its 50 neutral mark and it is rapidly gaining ground within the bullish territory. Likewise, the MACD is quickly recovering within the negative area and above its red signal line, while the Stochastics are also changing course to the upside, all signaling further progress in the market.

Yet, the way up could be rocky, and the bulls will need to push harder to keep the upper hand as the long-term supportive trendline drawn from the 2020 bottom could switch to resistance with the help of the 50-day SMA around the 153.16 area. The 50% Fibonacci retracement of the latest downleg at 153.58 and the 154.00 hurdle are also within breathing distance, making any moves towards the 61.8% Fibonacci of 155.26 less likely.

In the bearish scenario, where the price returns below the 200-day SMA, the 23.6% Fibonacci of 151.14 and the 20-day SMA may deter any declines towards the 149.50 support region. If the bears manage to break the floor between 148.96 – 148.45 too, then the price may continue lower to test February’s low of 147.38. Such a move would downgrade the broad picture from neutral to bearish.

In summary, the ongoing bullish corrective move in GBPJPY could keep buying interest intact in the short term, though traders may wisely wait for a sustainable break above 154.00 to raise exposure in the market. Besides, a significant close above 154.00 is required to dissolve the downward pattern from 158.20.

Asian equities drift higher on sympathy trade

Overnight, the buy-the-dip FOMO gnomes had another day in the sun on Wall Street, thanks to decent US GDP data and indications that omicron is less symptomatically aggressive. Record highs were in sight once again as the S&P 500 jumped 1.02%, the Nasdaq powered 1.18% higher, and the Dow Jones gained a healthy 0.74%. In Asia, futures on all three have maintained their gains, drifting around 0.10% higher today.

The overnight rally on Wall Street has dragged seemingly still reluctant markets in Asia higher today as well, with regional bourses still refusing to fully buy into the hype from the US. The Nikkei 225 is 0.10% higher, despite an upward revision to Japan’s 2022 GDP forecast by the government. South Korea’s Kospi is 0.35% higher.

In China, a lockdown of the city of Xian to combat a virus outbreak has had no noticeable impact on local equity markets, which are recording modest gains. The Shanghai Composite and CSI 300 have gained 0.20%. Hong Kong, meanwhile, has posted a somewhat healthier gain of 0.45%.

Singapore has shrugged of VTL restrictions to gain 0.25%, with Kuala Lumpur rising by 0.40%, and Taipei gaining 0.60%. Jakarta is 0.35% higher with Bangkok rising by 0.65% and Manila jumping 1.10% higher. Australian markets have also risen in sympathy, the ASX 200 and All Ordinaries gaining 0.35%.

That all set the scene for a modest rally in European markets this afternoon, although the UK’s CBI Monthly Growth Indicator, and UK Car Production released this morning, both disappointed and may cap sentiment in London this afternoon. It would take some huge downside misses from the US data dump this evening to unsettle what appears to be an inevitable Santa rally on Wall Street into the end of the week.

US equity markets jump on positive Omicron reports

A cocktail containing better US Q3 GDP data, along with positive omicron headlines further inoculated financial markets against a year-end sell-off overnight. Mostly, it was Scottish and Imperial College London’s studies that back up preliminary South African data, suggesting that omicron is far more contagious than delta, but much less likely to put you in hospital. Of course, with case numbers exploding across the world, the sheer volume of omicron cases means that for health systems, omicron could mathematically and statistically be a zero-sum game versus omicron.

Markets don’t concern themselves with these sorts of “slapping you in the face” details if the headlines agree with the narrative that they want to hear. Unsurprisingly in New York, therefore, equities powered higher along with oil, and the US dollar staged a sharp retreat as defensive positioning was unwound, although the bond market was sharply unchanged. So, markets and investors will get their “Santa/Christmas rally” by the looks of it. On a personal level, it is the only question I have been asked all week. It has become so annoying that I have contemplated breaking wrapped Christmas presents and taking scissors to soft toys.

From here, we are probably going to need some more omicron headlines along the lines of hospitalisations and deaths soar with total cases to turn the markets from their perpetual, central bank QE-induced perpetual buy-the-dip in everything course. The data calendar in the US sees jobless claims, durable goods and personal spending and income released tonight, the last major dataset to be released globally for this year. It would take a serious negative divergence by the data to upset the applecart of bulls, and likely only temporarily.

Thereafter, we will be left to the tender mercies of omicron headlines until the new year, and even that potency now appears to be fading. Only Vladimir Putin deciding to holiday over the Ukrainian border changes that narrative. Think much lower equities, lower everything in Europe, USD 150 oil, a much higher dollar and Swiss franc with plunging treasury yields. But I don’t want to be the Grinch-ski who stole Christmas.

In Asia, the calendar today is dead with only Singapore Inflation for November to relieve the monotony. Higher than expected prints could put another tightening by the MAS back on the table and see local equity weakness. Otherwise, we are in a hurry-up-and-wait mode in Asia today.

US dollar falls hard on surging virus sentiment

The US dollar was in full retreat overnight, mostly due to reports that omicron presents fewer hospitalisation risks. That saw sentiment swing even more strongly back to the global recovery trade and saw the dollar index collapse by 0.37% to 96.12, easing still more in Asia to 96.03. I am adjusting my downside support level to 95.85 on the dollar index, where it has traced out a triple bottom. A daily close under 95.85 sets up a deeper US dollar correction, potentially into January, assuming omicron remains a storm in a teacup in the minds of the investors globally.

EUR/USD rallied 0.40% to 1.1340 overnight, but still faces resistance above 1.1360. Only a move above 1.1400 suggests a medium-term low could be in place. GBP/USD shrugged on weaker Q3 GDP to leap 0.66% to 1.3350 after the UK Prime Minster appeared to rule out more virus restrictions, despite cases hitting 100,000 per day yesterday. GBP/USD needs to recapture 1.3400 to signal a medium-term low. USD/JPY remains at 114.15 today, with no movement in US bond yields overnight meaning no movement in the currency pair.

The three risk-sentiment amigos, the CAD, AUD, and NZD all booked strong gains overnight between 0.65% for the CAD, and 0.85% for AUD. A rise above 0.7250 for AUD/USD and 0.6850 from NZD/USD will signal further rallies into the new year. USD/CAD is at 1.2850 this morning and needs to close below 1.2750 to signal the same.

Asian currencies despite a much weaker fixing once again from the PBOC for the yuan versus the US dollar. It highlights the challenges China has to weaken the yuan, without incurring the ire of Washington D.C., as their closed border means recycled Chinese offshore profits provide an underlying bid to the yuan. Asian currencies rose on improving sentiment and a strong yuan ignoring the PBOC signals, continues to provide support during Asian trading hours.

WTI crude found support from a larger-than-expected decline in US inventories. Price action saw active buying above 66.00, keeping the early December rally valid in the process.

The latest rebound is testing the supply zone around 73.30, which sits along the 30-day moving average. A close above this area of interest would force the bears to cover, paving the way for a rally towards 78.00.

On the downside, 71.00 is the immediate support. And 68.50 is a second line of defense in case of a deeper correction.

The sterling surged after Britain’s economy showed solid growth in Q3. A previous rebound to the supply zone near 1.3370 has put pressure on the short side.

Then the pound found bids at 1.3170. Four attempts at this key support suggest a strong interest in keeping the price steady. 1.3370 is a major hurdle as it coincides with the 30-day moving average.

A breakout could initiate a bullish reversal and propel the pound to 1.3500. An overbought RSI may cause a short pullback with 1.3240 as the closest support.

The US dollar stalled over improved risk appetite. The pair is consolidating near June 2020’s lows. A bearish breakout would further extend the downtrend.

The euro so far has found buyers at 1.1235. The bulls need to lift offers around 1.1360, the upper band of the recent consolidation range, before they could hope for a reversal. An extended rally may send the price to 1.1460.

In the meantime, the RSI’s overbought situation could briefly limit the bullish push as intraday traders take profit near the resistance.

Technical analysis

The RSI is above level 50 and headed downwards.

The Stochastics left the overbought zone and headed downwards to level 50.

Most likely scenario – SELL

Target prices: 1,802.98 1,798.53

Alternative scenario – BUY

Target prices: 1,809.04 1,811.71

Key levels

Support 1,802.98 1,798.53

Resistance 1,809.04 1,811.71