Wednesday December 30th, 2020

The US$ hits 2 ½ year lows as markets ignore tier 2 US stimulus wrangling and China/EU set to sign a significant investment deal. The Senate Majority Leader McConnel blocks the Dems and US President’s attempts to rollout US$ 2k stimulus checks and the likelihood of a compromise ahead of the new year seems unlikely. The EU and China are set to seal an Investment deal which has been under discussion since 2013. The deal will rebuild the EU/Chinese relationship, offers greater transparency, will boost market access and is said to create a level playing.  The UK becomes the first country to approve AstraZeneca covid19 vaccine, the EU rolls out vaccinations as Germany records its highest day of covid related deaths. CNY rallies for a 3rd straight session up 0.1%, while Asian currencies are up 0.2% on average vs US$. Trading currencies rally significantly with MXN up 0.3%, JPY & NOK up 0.45%, NZD up 0.6%, AUD up 0.75% and ZAR rebounds up 0.9% vs US$. US Chicago Purchasing Managers Index and US Pending Home sales data releases, alongside US stimulus updates will help provide intraday direction.

Oil prices remains stable with Brent Crude holding above US$51pb on demand optimism and falling US oil inventories. Focus remains on OPEC’s Jan4th meeting and the prospect of increased output levels into 2021. C$ continues to strengthen on a weaker US$ and firm oil prices, but lags behind its peers in its ability to rally vs US$. The prospect of increased oil output from the OPEC meeting will likely keep C$ within its current range, with a bias to buy US$ on any dips towards 1.2700. Support at 1.2780 (Dec21st), if breached look for with 1.2684 (Dec17th) resistance at 1.2876.

Euro hits 1.2294 a 2020 high on the positive China/EU investment deal and a weakening US$. The US$ continues under pressure as markets ignore the current stimulus impasse over the proposed US$2k checks. Vaccine rollouts and the signing of the China/US investment deal has seen markets extend the risk-on rally and strengthening Euro. Intraday US stimulus and US data releases will be watched closely for direction. Support at 1.2125 with resistance rising to 1,2294 if breached look for 1.2350.

GBP extends its gains vs US$ on Brexit optimism and AstraZeneca approval. The UK is widely anticipated to approve the post-Brexit deal today in Parliament ahead of the Dec-31st deadline. The UK also becomes the first country to authorize the AstraZeneca vaccine today and is critically needed as the government expands its tier 4 lockdowns. The vaccine which stores at fridge temperature will assist the government in expanding its vaccination program. Expect markets to remain relatively thin, with a bias GBP could extend its gains. Support 1.3425, with resistance at 1.3620, if breached look for 1.3773 (May2018).