Dollar Edges Lower; Lira Rebounds on New Measures

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Daily Market Outlook, December 21, 2021

Daily Market Outlook, December 21, 2021 Overnight Headlines WHO Sounds Warning Over Fast-Spreading Omicron Variant Omicron Becomes Dominant US Strain With 73% Of Covid Cases Biden-Manchin Call Seen Possibly Reviving Talks On Economic Plan Manchin To Dems: Redo The Whole Thing, Maybe I'll Vote For It Democrats Wrestle With Where To Cut Wish List To Satisfy Manchin Progressives Prod Biden To Act On Own After Manchin's Roadblock ECB's De Guindos: Inflation Hike Not As Temporary As Expected German Tax Take Continues To Surge But Supply Bottlenecks Drag UK PM Will Not Impose More Covid Restrictions Before Christmas China Expected To Extend Regulatory Crackdowns Into 2022 Japan Weighs Raising FY22 Growth Forecast To 3.0% Or More Australia's Central Bank Upbeat On Outlook Ahead Of QE Decision New Zealand Delays Phased Border Reopening Due To Omicron The Day Ahead Asia-Pac stocks traded with mild gains following the downbeat lead from Wall Street US equity futures edged higher overnight, with the NQ the outperformer and the RTY posting the shallowest gains In FX, DXY drifted under 96.500, NZD narrowly outperformed and USD/TRY slumped under 14.0000 The first US death attributed to the Omicron variant reported in Harris County, Texas Turkish President Erdogan said Turkey is implementing new measures to ease volatility in Forex rate RBA Minutes stated the Board is prepared to be patient and remained committed to maintaining highly supportive monetary conditions Looking ahead, highlights include German GfK Consumer Sentiment, EZ Consumer Confidence (Flash) and supply from the USG10 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: 1.1250 (790M), 1.1295-1.1300 (1.3B), 1.1310-15 (685M), 1.1350(800M)USD/JPY: 112.70 (560M)GBP/USD: 1.3340 (300M), 1.3435-50 (535M). EUR/GBP: 0.8540 (380M)USD/CAD: 1.2850 (360M), 1.2940-50 (880M). AUD/USD: 0.7275 (380M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above Edges higher as risk assets buoyant in Asia EUR/USD opened +0.34% at 1.1274 after EUR broadly gained on the crosses Pair consolidated in Asia and traded in a 1.1274/87 range Heading in to the afternoon session it is around the session high Resistance is at the 21-day MA at 1.1285 and 10-day MA at 1.1291 A close above those readings would suggest a short-term bottom is forming Sellers are tipped above 1.1300 to likely slow any upward progress Bids are lined up ahead of 1.1220 with support at trend low at 1.1186GBPUSD Bias: Bearish below 1.36 Bullish above. GBP/USD helped to intra – day high by rise in risk appetite Cable rises to 1.3222 as risk-sensitive pound benefits from equity gains Nikkei closed up 2%.... European and U.S. equity futures higher 1.3222 = intra-day high. 1.3196 was Asian session low 1.3243 (Monday's high) is a resistance level. Large 1.3245 expiry Wednesday UK may or may not introduce new restrictions vs Omicron from Dec 28USDJPY Bias: Bullish above 112.50 Bearish below USD/JPY tad better bid into London, as spec cover shorts Intra-day spec position adjustments seen behind USD/JPY blip up into London USD/JPY to 113.77 EBS in Asia PM trade, low of session 113.56 post-Tokyo fix Moves above mostly flat 100-HMA sold since Friday, today too? Flows few and far between today, mostly quiet between 113.60-70 Japanese importers still eyed towards 113.00, exporters from @114.00 Eyes remain on US rates, yields hold up today with Asia risk-on Yield on US Treasury 10s @1.432%, well above 1.353% low yesterdayAUDUSD Bias: Bearish below 0.7250 Bullish above AUD/USD ventures higher, coaxed by equities rally AUD/USD rises to 0.7123 from 0.7098 in holiday-thinned trading Rally across Asia stock markets spurs FX reaction; ASX +0.9% S&P futures climb 0.9%, nearly erasing Monday's selloff Potential for AUD/USD to take on mild bullish bias Tues close above 0.7130 will overcome 21 DMA resistance Will clear a path toward Bollinger uptrend channel 0.7175

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Market Update – December 21 – Turnaround Tuesday & Winter Solstice?

• USD (USDIndex 96.50) held onto gains as US stocks fell over 1% again, Yields also dipped. Oil posted 2-week lows before recovering and GOLD could not hold $1800.
• Risk-off, shaken off so far today as Asian markets rally. Biden’s $1.75tn build back better bill still being resisted by Manchin but signs are more positive. Nikkei +1.79% and European & Futures rise over 1%. OMICRON – still weighs, NZ delays opening borders, UK no new measures now but cannot rule out lockdowns (probably after Christmas) – 73% of all cases in US were Omicron last week, and first death confirmed.
• Turkish Lira recovered +23% yesterday and another +11% today – Erdogan promised to back/guarantee local savings in LIRA (up to $1.5 billion local USD savings converted to LIRA on Monday night). Some speculators in USDTRY over 15.00 no-doubt burnt but this does not change the fundamentals of the Turkish economy and 20%+ inflation-rate. Move in USDTRY off lows today at 13.60.

• US Yields 10yr traded down to 1.419% now 1.43% lifted as market sentiment improved and save haven flows were reversed.
• Equities – USA500 -52 (-1.14%) at 4568 Dow & Nasdaq -1.23% – USA500.F trades up at  4593. Nike & Micron beat earnings significantly, Movers; PFE +2.6%, MRNA -6.25%
• USOil – slumped to $65.88  yesterday bounced to $69.00 now as sentiment lifts 
• Gold – Could not hold the key $1800 handle yesterday & tested 1788 again, Now up at 1790.
• FX markets – EURUSD 1.1275 from a test of 1.1300, USDJPY 113.72, Cable tested down to 1.3173, recovered to 1.3215 after no new restrictions announced.

Overnight – RBA Minutes – confirmed worries over Covid, Inflation and “Committed To Maintaining Highly Supportive Monetary Conditions.”

European Open – The March 10-year Bund future is down -33 ticks, underperforming versus Treasuries, which are also in the red. DAX and FTSE 100 are up 1.2%, and a 1.2% rise in the NASDAQ future is leading US markets higher, after a broad rebound across Asian markets. Omicron and the associated comeback of restrictions remain in focus, but the general feeling is that developments will dent, but not derail the recovery.

Today – German GfK Consumer Sentiment, EZ Consumer Confidence (Flash).

Biggest FX Mover @ (07:30 GMT) NZDJPY (+0.31%) Bounced from 76.00 lows yesterday to 76.40 now. MAs now aligned higher, MACD signal line & histogram moving higher but still under 0 line since early Friday, RSI 52 & rising, Stochs OB zone. H1 ATR 0.125 Daily ATR 0.714.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our written permission.

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Personal Assets Trust update: optimistic on future returns despite inflation risk

Personal Assets Trust one of the components of the MoneyWeek investment trust portfolio, said it is prepared for higher inflation and believes the fund will be protected. Saloni Sardana looks at how the trust is doing.

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German Economy May Shrink This Quarter on Covid, Bundesbank Says

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Market Spotlight: USDNOK Pattern Play

USDNOK Back in Bull Channel Following the false downside break of the bull channel off YTD lows, USDNOK has since traded back up into the middle of the channel and is currently holding within a contracting triangle pattern. The pattern has formed around the latest test of the 9.1112 level and, while MACD and RSI are turned lower for now, the focus is on an eventual break higher towards the .94193 level, in line with the broader bull trend. Currently, the retail market is around 60% long which we will need to see shift before an upside break can develop.Keep An Eye OnWith a light data sheet ahead of Christmas, the key focus this week will be on risk sentiment and developments within the COVID backdrop. If risk sentiment continues to deteriorate, potentially around news of fresh restrictions being added in places, this is likely to weigh on oil prices, which will pull NOK lower, creating room for a continuation higher in the pair. US Core PCE on Thursday will be key to watch also. A solid print will further sharpen the focus on Fed tightening expectations, keeping USD in demand as we head into the end of the year.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-usdnok-pattern-play"
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Precious Metals Monday 20-12-2021

GoldGold prices have started the week in demand with gold back in the green again last week’s rally. While prices are a little off last week’s highs for now, the near-term outlook remains geared towards further gains as equities markets come under pressure. Risk sentiment has taken a hit over the weekend as global omicron concerns ratcheted higher. In Europe, a number of countries have had to introduce fresh restrictions, including curfews and lockdowns in places, in a bid to tackle soaring omicron numbers. The UK is said to be mulling further measures also, with speculation that a Christmas lockdown might be needed. Meanwhile, in the US sentiment has been hit by news that Biden’s “Build Back Better” has been shelved for now following rejection by one of Biden’s top party officials.Looking ahead this week, trading is likely to remain light in the lead up to the Christmas holidays. However, given the fluid situation around omicron, the risks of further restrictions being announced (including lockdowns) holds the potential to stoke market volatility at a moments notice. For now, with risk assets under pressure, gold prices are likely to retain a safe haven bid across the week.SilverSilver prices remain subdued near the foot of the declines seen across November and early December. With the US Dollar having moved higher, in line with soaring Fed tightening expectations, silver prices have been heavily pressured. The downturn in equities prices is now weighing on silver also as the prospect of a fresh wave of global restrictions in response to omicron threatens to weigh on demand for the metal.Technical ViewsGoldGold prices are now sitting just above the block of consolidation which formed atop the 1763.88 level. While price holds above there, and with the rising trend line and MACD and RSI supporting, the focus is on a further push higher in the near term. For bulls, 1826.71 is the next marker to note. To the downside, 1763.88 is the key support to note.SilverFollowing the breakdown through the rising channel from YTD lows, silver prices remain around the 21.4523-22.3205 level support for now. MACD has crossed bullish here, along with RSI rising, suggesting a potential correction higher in the offing. However, 24.0073 is likely to act as resistance to any such move, keeping the focus on further downside longer-term.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/precious-metals-monday-20-12-2021"
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Margin lending: investors are loading up on cheap debt to buy stocks

Central banks will be slow to raise rates, but even small changes matter with US margin debt at record highs

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/604253/borrowing-more-to-buy-stocks
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Investment Bank Outlook 20-12-2021

Credit AgricoleAsia overnightThe spread of the omicron variant as well as the shelving of President Joe Biden’s Build Back Better bill weighed on sentiment in the Asian session. The UK has not ruled out stricter lockdown measures ahead of Christmas, and the Netherlands has gone back into lockdown; both countries are struggling to control the spread of the omicron variant. US Senator Joe Manchin has said that he will not vote for Biden’s Build Back Better bill, which robs the Democrats of a critical vote needed to get the bill through the Senate. Asian bourses as well as S&P 500 futures were trading lower at the time of writing. In G10 FX, the JPY and EUR were the outperformers in the Asian session while the NOK and NZD were the underperformers, the former being weighed down by falling oil prices.CIBCFX FlowsNew Zealand November trade improved for the month but the annual deficit widened to NZ$6bn from -NZ$4.9bn, widest since February 2019. No immediate reaction to NZD$, took a while to move lower as US e-minis go negative. The selloff prior to Tokyo open got the Kiwi down to 0.6726.Demand for Tokyo fix saw the $YEN bounced off the low 113.50 to 113.63. A spike to 113.70 following the PBoC cutting 1-year LPR, negative risk sentiment has pushed the pair back. There are quite a few 115.00 strikes due this week, interesting to know if they are magnetic.The move in AUD$ below 0.7125 was pretty quick, I believed a macro account behind the price action. AUD$ has bounced off 0.7109 but remains heavy at 0.7125. There are decent option strikes maturing today, A$685mio at 0.7100, A$550mio at 0.7200 and A$1.24bn of 0.7205 calls.$CAD higher but obstacles seen above 1.2900, probably profit taking. There are option strikes at figure but no biggie. I also believe commodity futures lending support to the Loonie. Our strategists and economists are bullish $CAD, this was one of Bipan’s call for 2022 trade ideas. There should be digital options at 1.3000.It was a terrible week for PM Boris Johnson, Tory MPs rebelled, losing North Shropshire byelection and Brexit Minister Frost, his closest ally quit. Johnson is now caught between huge new variant cases and Covid restrictions over Christmas. GBP$ moved down to 1.3223, I heard option-type of offers are picked up near 1.3250.CitiEuropean OpenA risk off mood was prevalent through the markets today. This was a combination of dented risk appetite after U.S. Senator Joe Manchin told Fox News Sunday program he cannot vote for President Joe Biden’s roughly USD2tn spending package, as well as Omicron fears in Europe. The two themes were prevalent across all asset classes, with Oil down sharply, S&P eminis and Nasdaq 100 eminis seeing 1% declines, and high beta currencies NOK, NZD and AUD leading the drops in G10. The day also saw a cut in the loan prime rate of China down to 3.80% (prior 3.85%).We have a light day of events today, as Christmas approaches.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-20-12-2021"
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Four top investment trusts overlooked by the market

Professional investors Charlotte Cuthbertson and Nick Greenwood of the MIGO Opportunities Trust pick four investment trusts that are trading at discounts to the value of their underlying investments.

from Moneyweek RSS Feed https://moneyweek.com/investments/funds/investment-trusts/604243/four-top-investment-trusts-overlooked-by-the-market
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Two small-cap funds with big potential

Two investment trusts concentrating on US small-cap shares offer excellent long-term value.

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Dollar Edges Higher; Hawkish Fed Helps, While Omicron Hurts Europe

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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

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-december-20-2021"
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Market Update – December 20 – Risk-Off greets the start of Week 51

• USD (USDIndex 96.60) rallied on Friday from 95.80 lows and holds gains to start the week. Stocks sank again on Friday and are lower today, Yields also fell and remain down. Oil tanked -2.79% Friday to 2-week lows, GOLD rallied and cooled but holds $1800. Risk off starts the new week with JPY in demand. Catalyst – OMICRON – lockdowns and further restrictions in Europe, health systems stretched. Other market news – China cuts borrowing costs, Biden’s $1.75tn build back better bill will be blocked by Manchin. Chile (worlds biggest  Copper producer) elects young left-wing President (Boric).
• US Yields 10yr traded down significantly to 1.402% on Friday, now down again 1.36% 
• Equities – USA500 -48 (-1.03%) at 4668 (was down over 68pt) Dow lost over 500pts– USA500.F trades down again at 4568. 
• USOil – slumped over -2.79% to close at $70.14  and is down another $2.50 again today to $67.50
• Gold – Another volatile day on Friday, touched 1815 but closed at 1798.  Holds over $1800 currently.
• FX markets – EURUSD 1.1250 from 1.1235, USDJPY 113.40 from 113.70 close on Friday, Cable closed at 1.3234 down again today to test 1.3200, after more political turmoil, as Brexit Minister Lord Frost resigns and more photos of Tory staff (including Jonson) breaking lockdown rules. 

Overnight – ECB’s de Cos: Rate hikes are unlikely in 2022, NZD Trade balance improves significantly and consumer sentiment surprisingly holds up.

European Open – The March 10-year Bund future is up 36 ticks, the 30-year has rallied 90 ticks, alongside broad gains in US futures, amid concern that Biden’s spending package won’t get sufficient support to go ahead after all. US growth forecasts are already being revised down in some quarters and without the prospect of considerable fiscal support, it will remain up to the central bank to keep the economy afloat, which will likely mean a less aggressive tapering schedule from the Fed. Stock markets tanked across Asia on the news and DAX and FTSE 100 are down -2.2% and -1.7% respectively. Virus developments are adding to the risk off backdrop, with parts of Europe already back in lockdown and others once again contemplating wide spread closures over the holiday period as booster programs are not fast enough to deal with the Omicron variant.

Today – U.S. leading indicators

Biggest FX Mover @ (07:30 GMT) AUDJPY (-0.74%) Down from 82.40 on Thursday to 80.25 now. MAs aligned lower, MACD signal line & histogram moving lower & under 0 line since early Friday, RSI 26, OS but still falling. H1 ATR 0.17 Daily ATR 0.97

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our written permission.

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