The US$ is lower, while stocks are mixed towards the end of the US session, driven by a surge in the weekly Jobless Claims which jumped to a near three-month high on Turning Higher. Mounting new Covid infections have led to increased business restrictions, adding evidence that the pandemic and the lack of any additional fiscal stimulus are slowing the economic recovery and piling pressure on the currency. The figures showed that the initial jobless claims rose 137k to 853k in the week ending December 5, well above expectation of 723k, while the continuing claims rose 230k to 5.757mio in the week ending November 28.
Earlier in the day, the ECB announced a package of measures, including expanding and extending the pandemic emergency purchase programme (PEPP) in order to “to preserve favourable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability.” The ECB added that it stands ready to”adjust all of its instruments, as appropriate”.
The result is a stronger Euro although this is probably more due to general US$ weakness than any major desire to buy the Euro. However, traders liked the idea of further liquidity to support the EU economy and the Euro has regained 1.2100, having previously looked a little heavy yesterday, and after reaching a session high of 1.2158 after the release of the US data, it is settling at around 1.2130. The best performing currency on Thursday was the Aud$, which has reached 0.7533, a new 2 ½ year high. The Aud remains well underpinned by another rise in the Iron Ore price, which reached US$150 and Aud$200 per tonne for the first time in around 8 years. Cable on the other hand remains under heavy pressure on the lack of any breakthrough in the Brexit talks, and which seem to be going nowhere fast as the Sunday deadline looms. EurGbp is around 1.5% higher at the end of the session after rising from 0.9005 to a high of 0.9140 and looking as though there could be more in it yet on the topside if 0.9140/60 is taken out. The other big move in the crosses was in GbpAud which fell sharply, from 1.8040 to a low of 1.7620.Also worth noting was US$Chf, which fell to a new 5 year low as it heads towards the 0.8800 target that we mentioned last week.
Stocks are mixed, with the S&P and the DJI both choppy but going nowhere fast for much of Thursday, before selling off by around 0.3% late in the day as traders continue to monitor for signs of any progress in the ongoing fiscal stimulus talks and weighing hopes for a positive outcome against the surge in the weekly jobless claims. Tech stocks performed well with the Nasdaq up by 0.25%, not hurt by the float of AirBnB, which traded 115% above its IPO price!
Energy stocks soared on a sharp jump in oil prices which has seen WTI climb by 4.5+% during the session, reaching $47.70 per barrel, before settling back at $46.75. Hopes of a broad 2021 global economic recovery, as well as buoyant demand from China is also boosting oil prices, and as we said before, we are targeting $50/55pb over the next few weeks.
In other major date released on Thursday, the US CPI came in at 0.2% mm, 1.2% yy in November, while the Core CPI figure was at 0.2% mm, 1.6% yy, in mile with expectations.
Friday is going to be rather thin for data with the German CPI (CPI, exp -0.3%mm, -0.8%yy; HICP, exp -0.7%yy), US PPI (exp +0.2%mm, +0.8%yy) and the Michigan Consumer Sentiment Index (exp 76.5; prior 76.9) being the points of focus. Other events to watch will be the NZ Business PMI (Nov) and the REINZ House Price Index which may provide some swings in the Kiwi, the UK Financial Stability Report and the European Council Meeting. Note that Brexit negotiations have now been extended to Sunday, where a hard deadline has been set and may well produce some serious gapping potential for Sterling at the Monday opening. Be square! Have a good weekend.
Economic data highlights will include:
Fri: NZ Business PMI(Nov),REINZ House Price Index, UK Financial Stability Report, Consumer Inflation Expectation, EU Council Meeting, German CPI, US PPI, Capacity Utilisation, Michigan Consumer Sentiment Index
Market moves, in brief:
FX: DXY 90.88 (-0.22%)
Bonds: US10Y; 0.920% (-1.43%), German 10Y; -0.603% (+0.50%), UK 10Y; 0.201% (-20.38%), Australian 10Y; 1.000% (-3.24%), NZ 10Y; 0.905% (-3.53 %), China 10Y; 3.268% (-1.68%)
Stock Indices: DJI; -0.35%, S+P; -0.25%, NASDAQ; +0.20%, EUStoxx50; -0.19%, FTSE100; +0.54%, Shanghai Composite; +0.04%, ASX200SPI: -0.80%
Metals: Gold $1833 oz (-0.37%), Silver $23.93 oz (-0.10%), Copper $3.5755 lb (+1.78%), Iron Ore $156 per tonne (NYMEX) (+6.8%),
Oil: WTI $46.90 pb (+2.7%)
Trend Table: December 10, 2020
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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible short/medium/long term uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility). The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are pretty much ignored as choppy conditions seem likely to prevail.
For instance, if we see consecutive green boxes in the 1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required. The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.
In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.
Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.
|1 Hour||Neutral – Turning Higher?||Turning Lower?||Possible Basing Formation||Turning Neutral||Up – Overbought||Up|
|4 Hour||Turning Neutral||Turning Neutral||Turning Lower?||Neutral – Turning Higher?||Turning Higher||Neutral|
|1 Day||Bearish Divergence||Turning Neutral||Neutral – Turning Lower?||Turning Lower||Neutral – Turning Higher?||Possible Topping Formation|
|1 Week||Neutral – Turning Higher?||Turning Neutral||Turning Higher?||Neutral – Turning Lower?||Turning Higher?||Turning Higher|
|1 Hour||Turning Lower?||Turning Neutral||Turning Lower?||Turning Neutral||Neutral||Possible Topping Formation|
|4 Hour||Turning Neutral||Neutral – Turning Lower?||Neutral – Turning Lower?||Neutral – Turning Lower?||Neutral||Neutral – Turning Higher?|
|1 Day||Possible Basing Formation||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Basing Formation||Up – Overbought||Up||Down||Down||Neutral|
|1 Hour||Turning Lower||Up – Overbought||Down – Oversold||Up – Overbought||Turning Lower||Turning Lower|
|4 Hour||Turning Neutral||Turning Higher?||Down||Turning Higher||Down||Possible Topping Formation|
|1 Day||Neutral – Turning Higher?||Turning Neutral||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Neutral||Turning Higher?|
|1 Week||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Neutral – Turning Lower?|