· US DOLLAR OUTLOOK: USD PRICE ACTION AIMING HIGHER WITH TREASURY YIELDS
The US Dollar advanced broadly on Thursday with USD price action strengthening against its Japanese Yen and Australian Dollar peers in particular. This looked largely owed to another extension higher in US Treasury yields and calm returning to Capitol Hill after yesterday’s clash. On balance, the DXY Index gained 0.3% for the session and now challenges its negatively-sloped 8-day simple moving average.
DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (15 OCT 2020 TO 07 JAN 2021)
The broader US Dollar also seems to be recoiling higher off its bottom Bollinger Band as bulls attempt to make a push and keep the relative strength index from sliding back into ‘oversold’ territory. This brings to focus US Dollar rebound potential – particularly if Treasury yields continue climbing. That said, the yearly opening level and 20-day simple moving average stand out as two obstacles that could undermine US Dollar buying pressure. Eclipsing this area of technical resistance could open up the door for US Dollar bulls to test the 91.00-price level.
USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)
US Dollar implied volatility readings continue to cool off from recent red-hot readings as political drama drifts into the rearview mirror. USD/CAD is expected to be the most active major currency pair during Friday’s trading session judging by its latest overnight implied volatility reading of 9.1%. This is likely in consideration of potentially high-impact monthly jobs data on deck for release from both the US and Canada.
· GBP/USD Forecast: Pound needs a fresh catalyst
* GBP/USD Current price: 1.3569
* UK Construction output remained in expansion territory in December, according to Markit.
* Coronavirus contagions in the UK receded for the first time this week.
* GBP/USD neutral-to-bearish in the near-term could accelerate its slide.
The GBP/USD pair ended the day in the red around 1.3570, undermined by renewed dollar’s demand and the absence of UK news that could provide the pound with directional impulse. The currency remained under pressure after the latest total lockdown imposed by the government spurred concerns about potential economic fallout. This Thursday, the UK reported 52,618 new coronavirus cases, the first time the figure dropped this week, although the death toll reached a record of 1,162.
Markit published the December UK Construction PMI, which missed the market’s expectation and contracted to 54.6. On Friday, the UK will release Halifax House Prices.
GBP/USD short-term technical outlook
The GBP/USD pair is at risk of extending its decline. The 4-hour chart shows that the pair met sellers around a bearish 20 SMA while holding above a bullish 100 SMA, this last around 1.3515. Technical indicators remain within negative levels but lack directional strength. Still, the near-term picture favors another leg south, although with limited scope amid intrinsic dollar’s weakness.
Support levels: 1.3515 1.3470 1.3420
Resistance levels: 1.3620 1.3660 1.3710
· EUR/USD Forecast: Dollar firmer ahead of US employment figures
The American dollar extended its Wednesday’s gains against most major rivals, with EUR/USD falling to 1.2244, but pared gains during the US session. Wall Street kept running and reaching record highs, while US Treasury yields reached fresh multi-month highs. The market moved past US political turmoil and remained focused on hopes that immunization will revive economies in the second half of the year, also encouraged by monetary stimulus.
This Friday, attention will be on the US Nonfarm Payroll report. The country is expected to have added just 71K new positions in the month, while the unemployment rate is foreseen at 6.8%. Average hourly earnings are expected to have grown by a modest 0.2% MoM, while the annual figure is foreseen unchanged at 4.4%.
EUR/USD short-term technical outlook
The EUR/USD pair stabilized around 1.2270, where it stands ahead of the Asian opening. The 4-hour chart shows that the pair settled below a flat 20 SMA, but it keeps developing above a bullish 100 SMA. Technical indicators have turned flat after pulling down from daily highs, the Momentum around its midline and the RSI at 46. The corrective decline will likely continue on a break below the mentioned 100 SMA, currently at 1.2230
Support levels: 1.2230 1.2190 1.2140
Resistance levels: 1.2285 1.2345 1.2390
Friday preview: US December non-farm payrolls in the spotlight
All eyes will be on the monthly US non-farm payrolls report at the end of the week, which most economists - but not all - expect to show a further slowing in hiring as Covid-19 restrictions continue to bite.
Consensus is a for slowdown in the pace of job creation from November's pace of 245,000 to just 71,000.
Ian Shepherdson at Pantheon Macroeconomics on the other hand is expecting a small upside surprise in the form of a print of 300,000.
"If we're right, expect much commentary to the effect that the labor market is proving surprisingly resilient in the face of the Covid third wave.
· Covid updates: UK strain confirmed in more states; U.S. hospitalizations top 132,000
New York Gov. Cuomo warns Covid variant discovered in UK could force shutdown
The more-contagious coronavirus variant first identified in the United Kingdom, known as B.1.1.7, could be a problem for New York and might eventually lead to an economic shutdown if it stresses the state’s hospitals, Gov. Andrew Cuomo said.
New York has reported only one Covid-19 case with the new variant so far, but there’s likely more cases that just haven’t been detected, Cuomo said. A more transmissible strain is worrisome because it will infect more people and drive more hospitalizations, Cuomo said during a call with reporters.
“In the U.K., it overtook everything in three weeks,” Cuomo said. “If the U.K. spread catches on in New York, hospitalization rate goes up, the hospital staff is sick, then we have a real problem and we’re at shutdown again.”
· Mandatory COVID-19 testing introduced to bolster border measures
Passengers arriving from all international destinations will be required to present a negative COVID-19 test result before departing for England to help protect against new strains of coronavirus circulating internationally.
Transport Secretary Grant Shapps has announced that from next week inbound passengers arriving by boat, plane or train will have to take a test up to than 72 hours before departing the country they are in, to help protect against the new strains of coronavirus such as those seen in Denmark and South Africa.
· Chinese city near Beijing stops people from leaving as coronavirus cases spike — like Wuhan did last year
· Singapore PM receives first dose of COVID-19 vaccine
Singapore Prime Minister Lee Hsien Loong received the first shot of a vaccine against COVID-19 on Friday, the 68-year-old said in a Facebook post sharing a video of him being injected in the arm at a local hospital.
Singapore has so far only approved Pfizer-BioNTech’s vaccine but has said it has also secured enough doses for its 5.7 million population including from other vaccine-makers like Moderna and Sinovac.
The city-state gave its first jabs at the end of December, but Lee said broader vaccinations of healthcare workers from public institutions would start on Friday, followed by the elderly next month.
· Trump finally concedes Biden will become president
President Donald Trump on Thursday admitted, for the first time in his own words, that President-elect Joe Biden’s administration would take charge on Jan. 20.
Without mentioning Biden by name, Trump in a nearly three-minute video said “a new administration will be inaugurated on January 20th.”
· Trump is a ‘danger’ to the country and he needs to go, say former U.S. diplomats
President Donald Trump — who has been blamed for inciting a mob that invaded Capitol Hill — is a “danger” to the U.S. as long as he remains in office, two former American diplomats told CNBC on Friday.
Trump’s term officially ends in less than two weeks on Jan. 20 when Joe Biden will be sworn in as the next U.S. president. But questions have emerged over whether Trump should be removed before that day.
“I think what we learned yesterday — which many of us have felt for a number of months, if not years — is that every day that Donald Trump is in office is a danger to our country,” Kirk Wagar, U.S. ambassador to Singapore from 2013 to 2017, told CNBC’s “Squawk Box Asia.”
Trump finally conceded late Thursday that Biden will become the next president. His refusal to accept defeat in the presidential election culminated in a deadly riot in the halls of Congress on Wednesday, where at least five people died in clashes and dozens were reportedly injured.
· Democrats inch toward second Trump impeachment after Capitol siege
Congressional Democrats on Friday weighed impeaching President Donald Trump for a second time, two days after his false claims of election fraud helped encourage a mob that stormed the U.S. Capitol.
Democratic leaders including House of Representatives Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer called for immediate impeachment proceedings if Vice President Mike Pence and Trump’s cabinet refused to take steps to remove Trump from power.
· Scottish fishermen halt EU exports over Brexit delays
Many Scottish fishermen have halted exports to European Union markets after post-Brexit bureaucracy added days to their delivery times and hundreds of pounds to their costs.
· Chinese bargain hunters pile into stocks blacklisted by Trump
As U.S. investors dump shares in Chinese companies blacklisted by outgoing President Donald Trump, bargain hunters in China are taking the opposite side of that trade, wagering that a Joe Biden presidency will reverse the investment ban.
Trump signed an executive order on Nov. 12 that bars U.S. securities investment in Chinese companies allegedly owned or controlled by the Chinese military.
The outgoing U.S. president is considering expanding that blacklist of 35 firms to include Alibaba and Tencent.
As U.S. investors rush to sell shares in the sanctioned companies and their subsidiaries before the executive order takes effect on Jan. 11, Chinese investors are swooping in.
· U.S. envoy to U.N. to visit Taiwan; China says playing with fire
The U.S. ambassador to the United Nations, Kelly Craft, will visit Taiwan on Jan. 13-15 for meetings with senior Taiwanese officials, the U.S. mission to the U.N. said on Thursday, prompting China to warn they were playing with fire.
Beijing, which claims the self-governed island as its own territory, has been angered by stepped-up support for Taiwan from the outgoing Trump administration, including trips to Taipei by top U.S. officials, further straining Sino-U.S. ties
· In Japan, wider COVID-19 curbs heighten double-dip recession risk
Japan is considering extending a state of emergency from the Tokyo metropolitan area to other regions as novel coronavirus cases increase but that could raise the risk of a double-dip recession for the world’s third-largest economy.
Prime Minister Yoshihide Suga conceded that the measures that took effect in the capital region on Friday might also be needed in other parts of the country as infections spread.
The government has resisted calls from some experts for wider curbs beyond those imposed in Tokyo because of the economic pain they would cause.
Analysts and officials have warned that the limited, one-month state of emergency targeting Tokyo and neighbouring prefectures could lead to a contraction in economic growth for the current quarter.
· Samsung Elec flags fourth-quarter profit rise on chip, display sales
Samsung Electronics Co Ltd said on Friday its fourth quarter operating profit likely rose 26% as coronavirus pandemic driven remote working and TV-watching fuelled sales of chips and display panels.
However, profit likely fell about 27% when compared with the previous quarter, analysts said, due to weaker smartphone sales, marketing costs and a strong won versus U.S. the dollar.
The 9 trillion won ($8.24 billion) estimate provided by the South Korean tech giant for profit in the December quarter was in line with a 9.1 trillion won analyst forecast by Refinitiv SmartEstimate. That analyst forecast was trimmed back from 9.5 trillion earlier in the week.
· Oil hits 11-month highs on Saudi output cut pledge, equities rally
Oil prices on Friday hit 11-month highs and were on track for a strong weekly gain as a rally in global equities fed risk appetite and stoked bullish sentiment following Saudi Arabia’s pledge to cut output.
Brent crude climbed 39 cents, or 0.7%, to $54.77 a barrel by 0757 GMT, after touching $54.92, the highest since Feb. 26.
U.S. West Texas Intermediate (WTI) gained 33 cents, or 0.7%, to $51.16. The contract also touched its highest since Feb. 25 at $51.34 earlier in the session.
Both benchmarks are on track for weekly gains of more than 5%.
Earlier this week, Saudi Arabia, the world’s biggest oil exporter, said it would cut output by an additional 1 million barrels per day (bpd) in February and March.
On Thursday, seven North Sea crude cargoes were bought and sold in the trading window operated by Platts, a record amount that trade sources said may reflect tighter supply after the surprise cut.
UBS raised its forecast for Brent to $60 per barrel by mid-year, following Saudi Arabia’s unilateral cut and expectations of a second quarter demand recovery as coronavirus vaccine rollouts should revive travel.
Reference: CNBC, DailyFX, Reuters, Sharecast, FXStreet
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