Daily Market Outlook, December 20, 2021

Daily Market Outlook, December 20, 2021 Overnight Headlines Fauci Doesn't Expect Covid Lockdowns; Hospitals Likely Stressed Senator Manchin Will Not Vote For Build Back Better: 'This Is A No' Speaker Pelosi Hopeful Of Build Back Better Act Deal In 2022 ECB's Holzmann: Ready To Adjust Policy If Inflation Doesn't Fall German Health Minister Sees No Lockdown Before Christmas Brussels Urges Reset In EU-UK Relations To Tackle Key Issues UK Minister Doesn't Rule Out New Restrictions Before Christmas Turkey's Erdogan: Islam Demands Lower Rates And So Does He China Cuts Benchmark Rate For First Time In Almost Two Years BOJ Kuroda: Too Early Now To Consider Normalising Policy Oil Drops As Rapid Omicron Spread Dims Fuel Demand Outlook US Stock Futures Fall As Manchin, Omicron Damp Sentiment The Week Ahead Watch for U.S. inflation and consumer sentiment Focus will be trained on U.S. inflation and consumer sentiment data in what will otherwise be a quiet week for global data, as holidays and the year-end approaches. The calendar for U.S. data is moderately busy with final Q3 GDP, durable goods and current account lined up. The release that will attract the most attention will be the PCE price index and the University of Michigan consumer sentiment. It will be extremely quiet in Europe with Eurozone consumer confidence the only data of note. UK data includes Q3 GDP and Q3 current account. In Japan nationwide CPI and construction orders are due, while no data is expected out of China in the week ahead. There won’t be any data out of Australia either, but New Zealand will release trade data and dairy prices.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )EUR/USD: 1.1400 EUR1.42b, 1.1600 EUR1.02b, 1.1300 EUR1.01bUSD/JPY: 115.00 $1.19b, 114.10 $411m, 114.50 $382mAUD/USD: 0.7205 AUD1.24b, 0.7250 AUD997.2m, 0.7100 AUD685.5mTechnical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above Edges higher as US yields ease on risk aversion EUR/USD fell 0.83% Friday and closed at 1.1236 on broad USD & JPY strength After trading 1.1255 early Asia - it slipped to 1.1235 when E-mini opened lower US yields moved lower on Omicron concerns and dimming hopes of Biden spending bill EUR/USD moved higher and is around 1.1250 into the afternoon Resistance is at the 21-day MA at 1.1281 and 10-day MA at 1.1287 A break above 1.1290 would ease the downward pressure Support is at last week's 1.1221 low and trend low at 1.1186 EUR net spec short grows to 11,879 from 8,299 in week to TuesdayGBPUSD Bias: Bearish below 1.36 Bullish above. GBP heavy in Asia, market thin, flows few and far between GBP heavy in Asia, market thin, flows few and far between Cable 1.3223-43, GBP/JPY 150.03-56, EUR/GBP 0.8498-0.8504 Omicron spread, election defeat, Cabinet to-do weigh BoE seen tad more hawkish but on back-burner USD likely to remain bid vs GBP, maybe JPY too with risk off EUR/GBP sees some nearby option expiries today 0.8425-35 total E487 mln, 0.8510 E392 mln, 0.8560 E462 mln GBP net spec short increases to 50,748, biggest since Oct. 2019 from 32,277USDJPY Bias: Bullish above 112.50 Bearish below USD/JPY soggy with risk off, US yields heavy, crosses too JPY better bid in Asia with US yields soggy, risk mostly off in Asia USD/JPY 113.47-71 EBS in Asia, holding mostly above daily Ichi cloud Ichi cloud 111.90-113.47, recent forays into cloud brief 55-DMA 113.68, pivot of sorts, market thin, choppy on whatever flows Japanese importers poised to buy towards 113.00, exporters sell from 114.00 Some option expiries in area - 113.30-40 $645 mln, 113.65-75 $876 mln US yields soggy, help cap USD/JPY upside, Treasury 10s @1.369% Tokyo, most of Asia risk-off, Nikkei -2.1% @27,933, E-Minis @4566, -0.95% Crosses heavy, EUR/JPY 127.54-79, GBP/JPY 150.03-56, AUD/JPY 80.68-81.14 EUR/JPY and GBP/JPY especially heavy, could test towards recent lows JPY net spec short falls to 53,523 from 63,081AUDUSD Bias: Bearish below 0.7250 Bullish above Retains offered tone as risk – off mood prevails in Asia AUD/USD opened 0.78% lower at 0.7126 after USD rallied against risk currencies After trading at 0.7131 it slipped to 0.7109 when E-minis opened lower Move lower in US yields weighed on USD and helped to underpin AUD/USD AUD/USD remains offered, as risk assets under pressure with E-minis -0.85% Spread of Omicron variant unnerving investors into year-end Heading into the Afternoon the AUD/USD is trading around 0.7115 Support is at last week's low at 0.7090 where bids are tipped A break below 0.7085 targets the trend low at 0.6994 Resistance is at the 21-day MA at 0.7139 and 10-day MA at 0.7145 AUD net spec short decreases slightly to 78,903 from 81,792

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