Daily Market Lookup

• The dollar was down on Wednesday morning in Asia, with investors taking stock of the risks ahead ranging from Brexit trade talks between the U.K. and the European Union (EU) to the U.S. Congress’ debate over the latest COVID-19 stimulus measures. The dollar is around half a percent above the two-and-a-half-year low seen on Friday as short sellers jumped in China's November consumer price index (CPI) came in below expectation, with data showing that CPI contracted 0.6% month-on-month and contracted 0.5% year-on-year, while the producer price index (PPI) contracted 1.5% year-on-year. The GBP/USD pair inched up 0.10% to 1.3367. The pound whipsawed before steadying above recent lows earlier, with Brexit talks currently deadlocked. It remains to be seen whether a dinner between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels will achieve what negotiators could not. Should the dinner fail, the U.K. faces a chaotic split from the EU should a deal not be reached before the end-of-year deadline. In anticipation of the wild ride ahead, volatility gauges for the pound have surged. One-week sterling implied volatility saw a fresh eight-month high on Wednesday alongside an elevated premium of puts to calls. Across the Atlantic, all eyes are on Treasury Secretary Steven Mnuchin after his statement on Twitter on Tuesday that he had spoken to House of Representatives Speaker Nancy Pelosi about a $916 billion offer for a COVID-19 relief bill. The amount is slightly higher than the $908 billion package proposed by a bipartisan group of lawmakers during the previous week. The focus is also on the European Central Bank (ECB) and the Fed, both due to hand down their last policy decisions for 2020 on Thursday. For the ECB in particular, investors are looking to see what the central bank will do or say about the euro, which has already gained 8% in 2020. Other investors remained cautious about the dollar’s short-term prospects. Uncertainty around Brexit, around the progress of a fiscal spending package through U.S. Congress and around the outcome of Thursday’s ECB meeting have traders temporarily cautious. “We think risk sentiment is going to stay strong … but there’s a few potential spanners in the works, so people are thinking ‘Let’s just hold off pushing the market even higher,’ and that’s why everything’s just stopped where it is,” Speizer added.
• The pound pared losses on Tuesday as the U.K. dropped parts of its controversial internal market bill, paving the way for both sides to meet in Brussels on Wednesday to clinch an agreement. The U.K. government reached a post-Brexit arrangement in principle over the Irish border with the European Union after agreeing to ditch the most controversial parts of its internal markets bill. "An agreement in principle has been found in the following areas, amongst others: border control posts/entry points specifically for checks on animals, plants and derived products, export declarations, the supply of medicines, the supply of chilled meats, and other food products to supermarkets, and a clarification on the application of State aid under the terms of the Protocol," according to a joint EU statement. But the bill -- a source of contention among EU leaders as it clashes with key terms of the withdrawal agreement requiring that Northern Ireland, in the post-Brexit period, follow EU rules in order to avoid a hard border with the Republic of Ireland -- is not one of the key sticking points that have held negotiations hostage. Market participants appear hopeful, however, that Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will reach a consensus on sticking points that have held negotiations hostage so far. Both sides on Monday admitted that significant differences remain on three critical issues: level playing field, governance, and fisheries. Britain reiterated hat talks would not be dragged on into the new year The U.K. and EU have until the end of the year to reach a deal, or run the risk of having to impose taxes on each other's goods.
• Oil was down on Wednesday morning in Asia, with concerns mounting after a larger-than-expected build in U.S. crude oil supplies during the previous week. However, positive vaccines news fueled hopes of a recovery in fuel demand and capped the black liquid’s losses. Data from the American Petroleum Institute released on Tuesday showed a 1.141-million-barrel build in U.S. crude oil supplies for the week ending Dec. 4. The build was much bigger than the 1.514-million-barrel draw in forecasts prepared by Investing.com, but was down from the previous week’s 4.146-million-barrel build. Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day. On the vaccines front, the U.K. has already seen the first patients inoculated with BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE:PFE) and BioNTech SE (F:22UAy). The U.K.’s Medicines & Healthcare Products Regulatory Agency granted a temporary authorization for emergency use of the vaccine during the previous week. The U.S. Food and Drug Administration (FDA) will convene to discuss BNT162b2 on Thursday. Should the FDA grant emergency use authorization during its meeting, distribution could begin within 24 hours, according to Health & Human Services Secretary Alex Azar. The FDA has already released documents that raised no new red flags over the safety or efficacy of the vaccine ahead of the meeting. The news helped allay investor fears as a sharp uptick in COVID-19 cases saw California, Germany, South Korea and Hong Kong all announce tightened restrictive measures in recent days. The number of global COVID-19 cases has now passed the 68.1 million mark, with the number of U.S. cases passing the 15.1 million mark, as of Dec. 9, according to Johns Hopkins University data. Meanwhile, in a further sign of increasing confidence in fuel recovery driven by COVID-19 vaccines, hedge fund managers were substantial buyers of petroleum futures and options last week for the fourth consecutive week. Data from the American Petroleum Institute United States API Weekly Crude Oil Stock released on Tuesday showed a 1.141-million-barrel build in U.S. crude oil supplies for the week ending Dec. 4. The build was much bigger than the 1.514-million-barrel draw in forecasts prepared by Investing.com, but was down from the previous week’s 4.146-million-barrel build. Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day.

Gold – XAU

The dollar was down on Wednesday morning in Asia, with investors taking stock of the risks ahead ranging from Brexit trade talks between the U.K. and the European Union (EU) to the U.S. Congress’ debate over the latest COVID-19 stimulus measures. The dollar is around half a percent above the two-and-a-half-year low seen on Friday as short sellers jumped in China's November consumer price index (CPI) came in below expectation, with data showing that CPI contracted 0.6% month-on-month and contracted 0.5% year-on-year, while the producer price index (PPI) contracted 1.5% year-on-year. The GBP/USD pair inched up 0.10% to 1.3367. The pound whipsawed before steadying above recent lows earlier, with Brexit talks currently deadlocked. It remains to be seen whether a dinner between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels will achieve what negotiators could not. Should the dinner fail, the U.K. faces a chaotic split from the EU should a deal not be reached before the end-of-year deadline. In anticipation of the wild ride ahead, volatility gauges for the pound have surged. One-week sterling implied volatility saw a fresh eight-month high on Wednesday alongside an elevated premium of puts to calls. Across the Atlantic, all eyes are on Treasury Secretary Steven Mnuchin after his statement on Twitter on Tuesday that he had spoken to House of Representatives Speaker Nancy Pelosi about a $916 billion offer for a COVID-19 relief bill. The amount is slightly higher than the $908 billion package proposed by a bipartisan group of lawmakers during the previous week. The focus is also on the European Central Bank (ECB) and the Fed, both due to hand down their last policy decisions for 2020 on Thursday. For the ECB in particular, investors are looking to see what the central bank will do or say about the euro, which has already gained 8% in 2020. Other investors remained cautious about the dollar’s short-term prospects. Uncertainty around Brexit, around the progress of a fiscal spending package through U.S. Congress and around the outcome of Thursday’s ECB meeting have traders temporarily cautious. “We think risk sentiment is going to stay strong … but there’s a few potential spanners in the works, so people are thinking ‘Let’s just hold off pushing the market even higher,’ and that’s why everything’s just stopped where it is,” Speizer added. The pound pared losses on Tuesday as the U.K. dropped parts of its controversial internal market bill, paving the way for both sides to meet in Brussels on Wednesday to clinch an agreement. The U.K. government reached a post-Brexit arrangement in principle over the Irish border with the European Union after agreeing to ditch the most controversial parts of its internal markets bill. "An agreement in principle has been found in the following areas, amongst others: border control posts/entry points specifically for checks on animals, plants and derived products, export declarations, the supply of medicines, the supply of chilled meats, and other food products to supermarkets, and a clarification on the application of State aid under the terms of the Protocol," according to a joint EU statement. But the bill -- a source of contention among EU leaders as it clashes with key terms of the withdrawal agreement requiring that Northern Ireland, in the post-Brexit period, follow EU rules in order to avoid a hard border with the Republic of Ireland -- is not one of the key sticking points that have held negotiations hostage. Market participants appear hopeful, however, that Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will reach a consensus on sticking points that have held negotiations hostage so far. Both sides on Monday admitted that significant differences remain on three critical issues: level playing field, governance, and fisheries. Britain reiterated hat talks would not be dragged on into the new year The U.K. and EU have until the end of the year to reach a deal, or run the risk of having to impose taxes on each other's goods. Oil was down on Wednesday morning in Asia, with concerns mounting after a larger-than-expected build in U.S. crude oil supplies during the previous week. However, positive vaccines news fueled hopes of a recovery in fuel demand and capped the black liquid’s losses. Data from the American Petroleum Institute released on Tuesday showed a 1.141-million-barrel build in U.S. crude oil supplies for the week ending Dec. 4. The build was much bigger than the 1.514-million-barrel draw in forecasts prepared by Investing.com, but was down from the previous week’s 4.146-million-barrel build. Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day. On the vaccines front, the U.K. has already seen the first patients inoculated with BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE:PFE) and BioNTech SE (F:22UAy). The U.K.’s Medicines & Healthcare Products Regulatory Agency granted a temporary authorization for emergency use of the vaccine during the previous week. The U.S. Food and Drug Administration (FDA) will convene to discuss BNT162b2 on Thursday. Should the FDA grant emergency use authorization during its meeting, distribution could begin within 24 hours, according to Health & Human Services Secretary Alex Azar. The FDA has already released documents that raised no new red flags over the safety or efficacy of the vaccine ahead of the meeting. The news helped allay investor fears as a sharp uptick in COVID-19 cases saw California, Germany, South Korea and Hong Kong all announce tightened restrictive measures in recent days. The number of global COVID-19 cases has now passed the 68.1 million mark, with the number of U.S. cases passing the 15.1 million mark, as of Dec. 9, according to Johns Hopkins University data. Meanwhile, in a further sign of increasing confidence in fuel recovery driven by COVID-19 vaccines, hedge fund managers were substantial buyers of petroleum futures and options last week for the fourth consecutive week. Data from the American Petroleum Institute United States API Weekly Crude Oil Stock released on Tuesday showed a 1.141-million-barrel build in U.S. crude oil supplies for the week ending Dec. 4. The build was much bigger than the 1.514-million-barrel draw in forecasts prepared by Investing.com, but was down from the previous week’s 4.146-million-barrel build. Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day.

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 1860-1805 with risk below 1805, targeting 1868-1880-1890 and 1900-1911. Sell below 1868-1911 keeping stop loss closing above 1911, targeting 1860-1849-1840 and 1821-1805-1790.

Silver - XAG

Silver on Monday made its intraday high of US$24.85/oz and low of US$24.41/oz settled up by 0.188% at US$24.50/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 Tuesday made an intra‐day high of US46.02/bbl, intraday low of US$45.23/bbl and settled down by 0.270% to close at US$45.67/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 Tuesday an intraday low of US$1.2094/EUR, high of US$1.2133/EUR and settled the day down by 0.0619% to close at US$1.2100/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 Monday made an intra‐day low of US$1.3228/GBP, high of US$1.3393/GBP and settled the day down by 0.1816% to close at US$1.3350/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 1.3400-1.3600 with targets at 1.3340-1.3290 and 1.3200-1.3150-1.3100 stop-loss should be 1.3550. Buy above 1.3340-1.2880 with targets 1.3400-1.3480-1.3520 and 1.3550-1.3600 with stop loss closing below 1.2800.

USD/JPY

USD/JPY on Tuesday made intra‐day low of JPY103.94/USD and made an intraday high of JPY104.20/USD and settled the day up by 0.103% at JPY104.15/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.