Daily Market Lookup

• The dollar was up on Friday morning in Asia, with investors continuing to bet on further declines as optimism that the COVID-19 pandemic is slowly starting to come to an end. The euro, on the other hand, benefitted from the dollar’s weakness and looked set to close its best week in a month. The index has slid around 12% from a three-year high of 102.990 in March to a two-and-a-half year low of 90.504 seen on Thursday. Investors have a heavily short dollar stance recently, over bets that rates in the U.S. will stay low for a long time and being forcing yield-seekers to search for better returns elsewhere. Even the ever-rising number of COVID-19 cases and lockdowns in the U.S. failed to turn investors to the safe-haven asset. Investors continue to place their bets on more government support, either through further monetary easing or fiscal spending. A $908 billion COVID-19 aid package was gaining traction in Congress on Thursday, and the Fed is widely expected to expand its bond buying program. Both would see the dollar continue its downward trend, with bond buying keeping yields anchored and spending increasing appetite for riskier currencies. Both the Fed and ECB will convene for their respective policy meetings during the following week. The euro was also headed for its best week in six months against the yen, but the yen rose a little against the weakened dollar during the previous session. The GBP/USD pair inched down 0.01% to 1.3450. Although the pound saw a one-year high, investors continue to await the outcome of Brexit trade deal talks between the U.K. and the European Union (EU). Investors now look to U.S. jobs data, including November’s manufacturing payrolls and non-farm payrolls and due later in the day, for further clues to the U.S. economic recovery from COVID-19. The pound surged Thursday on a report the U.K. and EU have made progress on fishing quotas, stoking hopes that a post-Brexit deal is within sight. The U.K. and EU have reportedly found a compromise on fishing quotas. Under the reported proposal, the U.K. would hold onto increased stocks of fish that are sold in the U.K., while the EU will keep similar quotes of stock that are popular in the EU but not in the U.K. The report of a compromise comes less than a week after EU Brexit negotiator Michel Barnier's proposal - to return about 15% to 18% of the fish caught by European fleets in British waters to the U.K. under a free trade agreement - was rejected by the U.K. As the clock counts down toward the end of the transition period on Dec. 31, market participants have had to contend with mixed messages of the progress on Brexit talks that have dominated direction in the pound. The progress on fisheries marked progress after a months-long stalemate, but there remain other issues that continued to stifle the prospect of a deal including a level playing field and governance.
• The dollar continues to lack friends in early European trade Thursday, with optimism over the rollout of vaccines and talk of new U.S. fiscal stimulus prompting risk-on trades. Optimism over U.S. stimulus talks and bets on a successful roll-out of vaccines are leading traders to take bets on global growth and thus riskier currencies at the expense of the safe haven dollar, the world’s reserve currency, particularly with the Federal Reserve committed to keeping rates low for years. This move lower in the dollar has occurred despite the latest employment data showing a slowdown in the jobs recovery, with Wednesday’s monthly ADP report showing private payrolls grew at their slowest pace since July in November. Weekly initial jobless claims data will be studied later Thursday to see if they provide a similar picture ahead of Friday’s official employment report. Elsewhere, GBP/USD gained 0.2% to $1.3385, remaining close to a three-month high. Sterling received a boost Wednesday as the U.K. approved a Covid-19 vaccine developed by Pfizer (NYSE:PFE) and BioNTech and said it would start vaccinating those most at risk early next week. However, the focus remains on the Brexit trade deal talks. France warned Wednesday it could veto a trade deal between the U.K. and the European Union if it doesn’t like the terms of the deal, an intervention that puts pressure on EU negotiator Michel Barnier not to give too much ground. Over the past month, the number of short bets against sterling has increased, according to data by the U.S. Commodity Futures Trading Commission, suggesting the downside potential is quite large, should the two sides fail to agree a deal.
• Oil was up on Friday morning in Asia, looking set for a fifth week of gains, after major oil producers reached a compromise on whether to continue COVID-19-induced production cuts into 2021. The Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed at Thursday’s ministerial meeting to ease production cuts by 500,000 barrels per day (bpd) from January 2021. The increase sees OPEC+ production reduced to 7.2 million bpd, or 7% of global demand, from January onwards, compared to the current 7.7 million bpd cuts. However, the cartel failed to set a policy for the remaining 11 months of the year, disappointing expectations that OPEC would continue the existing cuts until at least March. However, the current compromise is an improvement from earlier calls within the organization to raise output by 2 million bpd. OPEC+ will now meet once a month to review the compromise, but monthly increases will not exceed 500,000 bpd. Signs of progress over the latest stimulus measures in the U.S. also gave the black liquid a boost. Congressional Republicans were pushing for a slimmed-down $500 billion package, which was rejected by Democrats as they argued the case for a bigger price tag. However, a proposed $908 billion bipartisan package was slowly gaining traction in Congress on Thursday. Oil prices rose on Friday, heading for a fifth week of gains, after major producers agreed to continue to restrain production to cope with coronavirus-hit demand but the compromise fell short of expectations. OPEC and Russia on Thursday agreed to ease deep oil output cuts from January by 500,000 barrels per day, failing to come to a compromise on a broader policy for the rest of next year. OPEC+ will meet once a month to review conditions and monthly increases will not be greater than 500,000 barrels per day (bpd). The increase means the Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+, are set to reduce production by 7.2 million bpd, or 7% of global demand from January, compared with current cuts of 7.7 million bpd. OPEC+ was expected to continue existing cuts until at least March, after backing down from plans to raise output by 2 million bpd. Also supporting prices, Republicans in the U.S. Congress struck a more upbeat tone on Thursday during coronavirus aid talks as they pushed for a slim $500 billion measure. The funding measure was earlier rejected by Democrats who say more money is needed to address the raging pandemic.

Gold – XAU

Gold on Thursday made its intraday high of US$1834.88/oz and low of US$1823./oz. Gold up 0.55% at US$1840.24/oz.

Technicals in Focus:

In daily charts, prices are below 50DMA (1899) and breakage above will call for 1916. MACD is above zero line and histograms are also increasing trend and it will bring upward stance in the upcoming sessions. RSI is in neutral region and more upside is expected before it gets stretched. Stochastic Oscillator is in oversold territory and giving negative crossover to bearish stance for intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above; buy above 1836-1763 with risk below 1760, targeting 1849-1860 and 1868-1880. Sell below 1849-1880 keeping stop loss closing above 1880, targeting 1840-1821-1805 and 1790-1781.

Silver - XAG

Silver on Thursday made its intraday high of US$24.27/oz and low of US$24.27/oz settled down by 0.20% at US$24.02/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 50DMA (24.30), breakage above will lead to 25.00. MACD is below zero line and histograms are decreasing trend and it will bring bearish stance in the upcoming sessions. RSI is approaching neutral region, indicating buy signal for now. The Stochastic Oscillator is in oversold region and giving negative crossover to show downside move for the intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above, Sell below 24.95-26.80 with stop loss above 26.80; targeting 23.90-23.20-22.00 and 21.60-21.20-20.50. Buy silver in between 23.90-21.60, targeting 24.95-25.65 and 26.05-26.40-26.80 with stop loss should be place on the breakage below 21.50.

Oil - WTI

Crude Oil on Thursday made an intra‐day high of US45.89/bbl, intraday low of US$44.71/bbl and settled up by 1.270% to close at US$45.65/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 100DMA i.e. 40.58 which is a support level and breakage below will call for 40.10. MACD is above zero line and histograms are in increasing mode will bring bullish stance in the upcoming sessions. The Stochastic Oscillator is in overbought region and giving positive crossover for confirmation of bullish stance; while the RSI is in neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy above 45.10-42.00 with risk daily closing below 42.00 and targeting 45.90-46.50-47.50 and 48.60-49.30. Sell in between 46.00-49.30 with stop loss at 49.30; targeting 44.60-44.00-43.60 and 43.00-42.50-41.50.

EUR/USD

EUR/USD on Thursday an intraday low of US$1.2100/EUR, high of US$1.2173/EUR and settled the day up by 0.246% to close at US$1.2142/EUR.

Technicals in Focus:

On daily charts, prices are sustaining below 100DMA (1.1031), which become immediate resistance level, break above will target 1.1090. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in oversold territory and giving negative crossovers to signal for bearish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Buy

Buy above 12100-1.1840 with risk below 1.1800, targeting 1.2150-1.2190 and 1.2240-1.2275. Sell below 1.2150-1.2275 targeting 1.2050-1.1990-1.1960 and 1.1905-1.1860 1.1790 with stop-loss at daily closing above 1.2275.

GBP/USD

GBP/USD on Thursday made an intra‐day low of US$1.3264/GBP, high of US$1.3440/GBP and settled the day up by 0.611% to close at US$1.3442/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 20DMA (1.3134) is become immediate support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in oversold territory and giving negative crossover to confirm bearish stance. MACD is above zero line but histograms are increasing lead to upward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.3450-1.3600 with targets at 1.3400-1.3340-1.3290 and 1.3200-1.3150-1.3100 stop-loss should be 1.3550. Buy above 1.3400-1.2880 with targets 1.3480-1.3520 and 1.3550-1.3600 with stop loss closing below 1.2800.

USD/JPY

USD/JPY on Thursday made intra‐day low of JPY103.67/USD and made an intraday high of JPY104.52/USD and settled the day down by 0.45% at JPY103.82/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 104.50-108.00 with risk above 108.00 targeting 103.90-103.10 and 102.50-102.00. Long positions above 104.00-101.00 with targets of 105.00-106.90 and 107.50-107.90-108.40 with stop below 105.00.