Currencies were mixed on Friday although the US$ managed to squeeze up from its early session lows by the end of the day, allowing the DXY to post gains of around 0.15%. Much of the interest on Friday lay in Sterling, which initially headed sharply lower as a “no-deal” Brexit appeared to be the most likely outcome once the negotiations finish on Sunday. Monday is going to be a very big day for Sterling so stay nimble! Elsewhere the US$ has regained some of the week’s losses seen against the other major currencies, where the Aud$ in particular made some big advances on the back of the soaring Iron Ore price. After having reached a new high at 0.7571, last seen in June 2018, the Aud$ has ended the week by consolidating near 0.7535, but appears to have further gains ahead. The Euro looks rather similar, and while it did not make new trend highs last week, the technical breakout on the weekly charts does suggest further gains are possible. The DXY charts however are looking rather more neutral so it could turn out to be a week of consolidation while waiting on developments in stimulus/vaccine headlines.

The US stock markets, after having initially headed lower, managed to find a base and a minor bounce, which allowed the major indices to close mixed around par (DJI +0.15%, S+P/Nasdaq -0.20%).  Increasingly slim hopes for a stimulus deal before the end of the year were kept alive after the Senate passed a one-week spending bill, buying some time to break the stalemate on Capitol Hill. The deal keeps the government funded until Dec 18th, allowing a little more time to negotiate a full-year spending package and a further stimulus relief program. Elsewhere, traders continue to weigh the outcome of increasing lockdowns in various US jurisdictions with the possibility of a vaccine coming on line and creating ongoing uncertainty as to risk sentiment as we enter the holiday period.

Oil prices edged back from their 9 month highs seen on Thursday as doubts over any US fiscal stimulus package clouded an otherwise upbeat outlook for global demand. No great damage was done though and the price fell by around 0.8% in a day of consolidation, with WTI sitting at 46.50pb. The precious metals were mixed/flat although Iron Ore, as I said earlier, remains very strong, reaching $158 per tonne on Friday, up from a low of $77per tonne at the beginning of the pandemic in February.

It is going to be a big week ahead, beginning with the final countdown to the Brexit negotiations and the possibility of some fairly major gapping in Sterling at the Asian open. With regards to data it is going to be busy throughout, with Interest Rate Decisions to come from the Fed (Wed), SNB & BOE (Thur) and the BOJ (Fri), and with plenty else besides, on top of which we will have further stimulus talk from various global agencies as well as Vaccine/Covid headlines to deal with.

Monday sees the Japan Tankan and various bits of secondary Japanese data but the day is most likely to be all about Sterling, and the fallout from Brexit. Tuesday will see the RBA Minutes and a host of China figures, including the November Retail Sales, during the Asian session, to be followed by the UK Unemployment data and then some secondary US figures (Industrial Production, Capacity Utilisation).  Wednesday will include the December Services/Composite PMIs for Australia, the EU, UK and US, while the Mfg PMIs for Japan and the UK will also be released, as will the UK inflation figures (CPI, PPI, RPI) for November. Later in the day, the FOMC Meeting – Interest Rate Decision/Press Conference/Statement/Projections will take place but, ahead of that, the US November Retail Sales and Business Inventories are also due. Thursday will begin with the Q3 NZ GDP and the Australian Unemployment data for November, and then later, the SNB and BOE Meetings will take place, while the US will be busy with the release of the Housing Starts/Building Permits for November, the Philadelphia Fed Mfg Survey (Dec) and the weekly jobless claims. Finally, Friday will kick off with the NZ Trade Balance (Nov), the Japan National CPI (Nov) and the BOJ Meeting/Statement/Press Conference. Later in the day we have the UK Retail Sales (Nov), Q3 Current Account and the Q4 Quarterly Bulletin, along with the German IFO (Business Climate/Current Assessment/Expectations) along with the PPI and the Wage Price Index, and finally from the US, the Q3 Current Account. Have a good week.

Economic data highlights will include:

Mon: NZ Business PSI, NZ Visitor Arrivals, Japan Tankan, Industrial Production, Capacity Utilisation, Tertiary Industry Index, China House Price Index, EU Industrial Production

Tue: NZ Q4 WBC Consumer Survey, RBA Minutes, China Retail Sales, Industrial Production, Fixed Asset Investment, Press Conference, UK Unemployment, US Industrial Production, Import/Export Index, Capacity Utilisation, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory

Wed: NZ Current Account, Global Services/Composite PMIs (Australia, EU, UK, US), Australian WBC Leading Index, New Home Sales, UK CPI, PPI, RPI, US Retail Sales, Business Inventories, NAHB Housing Market Index FOMC Meeting – Interest Rate Decision/Press Conference/Statement/Projections

Thur: NZ Q4 GDP, Australian Unemployment, SNB Meeting/Interest Rate Decision, EU CPI, BOE Meeting/Statement/Minutes/Vote Count/APP Facility, US Housing Starts, Building Permits, Philadelphia Fed Mfg Survey, Weekly Jobless Claims

Fri: NZ Trade Balance, Japan National CPI, BOJ Meeting/Interest Rate Decision, UK Consumer Confidence, Retail Sales, German PPI, German IFO; Business Climate/Current Assessment/Expectations, EU Current Account, US Current Account

Market moves, in brief:

FX: DXY 90.95 (+0.15%)

Bonds: US10Y; 0.892% (-1.10%), German 10Y; -0.636% (-5.47%), UK 10Y; 0.169% (-16.01%), Australian 10Y; 0.996% (-0.37%), NZ 10Y; 0.891% (-1.48 %), China 10Y; 3.297% (+0.89%)

Stock Indices: DJI; +0.16%, S+P; -0.20%, NASDAQ; -0.23%, EUStoxx50; -1.04%, FTSE100; -0.80%, Shanghai Composite; -0.77%, ASX200SPI: -0.37%

Metals: Gold $1838 oz (+0.12%), Silver $23.95 oz (-0.16%), Copper $3.5335 lb (-1.15%), Iron Ore $155.18 per tonne (NYMEX) (+1.25%),

Oil: WTI $46.58 pb (-0.79%)

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Trend Table: December 12, 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.

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EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourNeutral – Turning Lower?Neutral – Turning Higher?Turning HigherPossible Topping FormationDownDown
4 HourTurning NeutralTurning NeutralDownNeutral – Turning Higher?Possible Topping FormationTurning Neutral
1 DayUp – Bearish DivergenceTurning NeutralNeutral – Turning Lower?Turning LowerTurning Higher?Possible Topping Formation
1 WeekNeutral – Turning Higher?Turning NeutralTurning Higher?Neutral – Turning Lower?Turning Higher?Turning Higher
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourTurning NeutralTurning HigherTurning HigherTurning NeutralNeutralTurning Lower
4 HourTurning NeutralTurning NeutralNeutral – Turning Lower?NeutralNeutralNeutral – Turning Lower?
1 DayPossible Basing FormationNeutral – Turning Lower?Neutral – Turning Lower?Turning NeutralTurning NeutralTurning Neutral
1 WeekPossible Basing FormationUp – OverboughtUpDownDownNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourPossible Basing FormationDownTurning Higher?Turning NeutralNeutral – Turning Higher?Neutral – Turning Lower?
4 HourTurning NeutralUp – OverboughtDownPossible Topping FormationTurning Lower?Possible Topping Formation
1 DayNeutral – Turning Higher?Neutral – Turning Higher?Turning Lower?Neutral – Turning Higher?Turning NeutralTurning Higher
1 WeekTurning NeutralTurning NeutralTurning NeutralTurning NeutralTurning NeutralNeutral – Turning Lower?

Outlook:

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