US dollar index (DXY) fades recent bounces off 32-month low while receding to 89.60 during the early Thursday. In doing so, the greenback gauge reverses the recovery gains from the multi-month low, marked during the Asian session, amid failures to cross the immediate resistance line.Full Article
GBP/USD is finishing the year on the front foot, with the pair crossing above the 1.3650 mark for the first time since May 2018 and printing highs during the European morning session in the 1.3680s. No particular news or theme is behind the upside, as sterling traders continue to juggle the themes of Covid-19 spread and lockdowns (will the UK go into national lockdown in January), vaccine distribution (how quickly can the UK achieve herd immunity) and Brexit (though a bare-bones deal has been agree and no deal avoided, what next for the UK’s service sector, for which nothing has yet been agreed).
Month, quarter and year-end portfolio flows appear to again be distorting the price action on the final trading day of the year; amid a lack of any catalysts, EUR is the G10’s underperforming currency, which is holding the Dollar Index flat (EUR/USD makes up 50% of the basket of USD major exchange rates that make up the index), though the USD is underperforming versus the majority of its major counterparts. GBP is one beneficiary of the weaker US dollar. Over the coming hours, trading conditions are likely to significantly die down given market participants leaving early for New Year’s Eve celebrations.
It was a tumultuous year for pound sterling. After a strong finish to the year in 2019 on the back of a decisive Conservative general election victory that handed the party a 364 seat majority in Parliament (and avoided the market’s worst-case scenario of a Jeremy Corbyn led Labour Party victory), things quickly went south as the Covid-19 epidemic went global. By mid-March, GBP/USD has slumped more than 12% to more than multi-decade lows beneath 1.1500 and EUR/GBP had appreciated more than 10% to above 0.9400.
By the start of Q2 2020, GBP was well off these extreme levels, as the swift response from global fiscal and monetary authorities to the pandemic breathed life back into the more risk-sensitive such as GBP, AUD, NZD, CAD, the Scandis and Emerging Market FX. The subsequent wave of USD weakness that has carried through into the end of the year (driven the USD bearish combination of extraordinarily dovish Fed action, Joe Biden’s election victory and vaccine optimism) has lifted GBP/USD to the 1.3600 and into positive territory on the year. The pair looks to close out the year with gains of slightly more than 4.0%.
But Sterling has struggled to regain its poise versus the euro; EUR/GBP looks set to close out the year with gains of around 5.5% and EUR/GBP trading close to the 0.9000 level. Though the EU and UK managed to agree a bare-bones trade deal at the last minute and in doing so avoided the disastrous no-deal outcome, price action (i.e. the fact that EUR/GB remains elevated) suggests that markets are not overly impressed with the deal, that does not even yet cover access of the UK’s service sector (which accounts for 80% of GDP) to the EU market. Perhaps markets are of the view that the deal undermines the UK’s relatively economic standing versus the Eurozone.
The UK’s much faster rollout of Covid-19 vaccines will test this narrative; if the UK achieves herd immunity well ahead of the EU (perhaps as early as Q2 2020), the UK could be in for a period of relative outperformance versus the EU that might be bearish for EUR/GBP. It must not be forgotten, however, that another reason for EUR/GBP appreciation in 2020 was to do with the removal of EU breakup risk premia that was priced out when the bloc agreed on its next-generation Recovery Fund that would be funded by jointly issued EU debt. As these funds get dished out in 2021, though this might not immediately spur economic activity, it might spur continued improvements in confidence in the EU project’s long-term viability.Full Article
After closing the previous four trading days in the positive territory, the EUR/USD pair edged slightly lower on the last day of 2020 and was last seen losing 0.26% on the day at 1.2265. In November, the pair gained more than 2% and is advancing 2.8% in December. For the year, EUR/USD is up 9.3%.
Earlier in the day, the data from the US showed that Initial Jobless Claims fell by 19,000 to 787,000 in the week ending December 26 and came in much better than the market expectation of 833,000. Nevertheless, the market reaction to this report was largely muted.
The US Dollar Index, which tracks the greenback’s performance against a basket of six major currencies, is virtually unchanged on the day at 89.67.
EUR/USD Price Forecast 2021: Euro-dollar long-term bullish breakout points to 1.2750.
“Bulls will get discouraged if the pair loses the 1.2000 threshold, but won’t give up unless the pair falls below 1.1600 in the first quarter of the year, as it will return to levels below the long-term trend line,” says FXStreet Chief Analyst Valeria Bednarik. “In such a case, lower lows will come into play, with the pair poised to extend its decline towards 1.0351, the multi-decade low posted in December 2016.”
Spot silver (XAG/USD) prices broke to the upside of a short-term bull flag and longer-term pennant structure flagged in an article on Wednesday, with prices rallying as high as $26.70 in early Thursday Asia session trade before sliding back to current levels around $26.50. With the metal off its Asia Pacific highs, it currently trades with losses on the day of more than 1% or around 30 cents. However, note that prices found support at $26.30 upon the retest of the previously broken above the short-term bull flag and longer-term pennant, implying that further upside from current levels is likely.
However further upside might have to wait until January; markets have been incredibly quiet on the final trading day of the year, with much of Europe shut for Christmas Eve holidays and many market participants on both sides of the Atlantic away on vacation anyway. Year-end portfolio rebalancing flows have been distorting trade this week and have generally worked against the favour of the US dollar (and in favour of precious metals such as gold and silver) and there could be some fireworks at the final 4pm London Fix of the year (when global financial institutions will take the average over exchange rates over a two-minute window in order to value their international portfolios, hence why the time period can see some manipulation).
Spot silver was the best performing of the four major precious metals and looks set to finish the year with gains of around 56.5%, significantly outstripping spot palladium’s gains of just over 30%, spot gold’s gains of just under 30% and spot platinum’s gains of around 19.5%. An unprecedented expansion of the money supply by major central banks across the globe (most notably, the Fed) amid the Covid-19 crisis was the main factor behind the impressive gains seen across precious metals markets. In terms of the reason behind silver’s outperformance, it seems as though some catch up following years of underperformance was at play.
At the start of the year, spot silver prices were over 60% down from their all-time highs set back in 2011. Meanwhile, spot gold was around 28% below its all-time highs set back in 2011. Of course, spot gold went on the smash through its 2011 highs and cross above the $2000 mark for the first time by Q3 2020. Whether spot silver can match this feet in 2021 seems unlikely, given it would need to appreciate more than 80% from current levels in the $26.00s to break above all-time highs close to $48.00. So while 2021 might not see new all-time highs for silver, if precious metals continue to do well, there is every chance that XAG/USD continues to be the best performer out of the bunch as it continues to unwind that prolonged period of underperformance seen throughout the 2010s.
XAG/USD four hour chartFull Article
Kusama is currently ranked 45th by market capitalization at $600 million and it’s up by 5,500% in the past year hitting an all-time high in the past 24 hours at $68.89. The digital asset is one of the best performing altcoins in 2020.
One of the most critical on-chain metrics for Kusama is the fact that around 90% of the total supply is already in circulation which means inflation will be minimal. Additionally, more than 50% of the tokens are staked which diminishes selling pressure.
In the long-term, it seems fairly possible for KSM to reach $100 as there is basically no resistance ahead of the current price, considering it just established a new all-time high. However, there are some concerning signs in the short-term.
KSM/USD 6-hour and 12-hour charts
On the 12-hour chart, the TD Sequential indicator has presented a sell signal and it’s about to do the same on the 6-hour chart within the next three hours. If both calls get enough continuation, we could see Kusama price dip towards $60.
KSM Trading Volume chart
On top of that, the trading volume of Kusama has spiked significantly over the past 24 hours, which has been an accurate indicator of tops in the past. It happened on October 26 and September 2. This metric seems to give credence to the bearish outlook above.Full Article
Major equity indexes in the US started the day near Wednesday’s closing level as trading volume remains thin on New Year’s Eve. As of writing, the Dow Jones Industrial Average was down 0.14% at 30,367, the S&P 500 was losing 0.1% at 3,730 and the Nasdaq Composite was unchanged at 12,863.
Among the 11 major S&P 500 sectors, the Energy Index is down 1% after the opening bell, possibly pressure by profit-taking following this week’s strong performance. On the other hand, the Communication Services Index is the top performer in the early trade, gaining 0.4%.
The data published by the US Department of Labor showed on Thursday that the Initial Jobless Claims declined by 19,000 to 787,000 last week but this reading was largely ignored by market participants.
S&P 500 Price Forecast 2021: Optimism is not inappropriate as bulls could enjoy another 15% winning year.
“The next year appears very positive for equities and the S&P 500,” says FXStreet Senior Analyst Joseph Trevisani. “Once the pandemic retreats, deferred global consumer demand should drive a robust expansion in growth.”Full Article
European bourses closed out the year with a whimper, falling across the board:
On the year, there was some wide divergence in performance,, with UK stocks posting the worst year since 2008.
I envision a reversal in relative fortunes in the year ahead as the rebirth of the service sector boosts Spain and the stronger euro saps German exports. For Spain, the IBEX 35 remains 23% from pre-pandemic levels and 37% from the 2017 high. It would need to double to get back to 2008 levels.
Some of that is a reflection of a narrow index but it doesn’t change much of you use broader measures of Spanish stocks.
Drilling down, December was a good month for European stocks but the 3% rise in the euro masks even better underlying demand for European assets.
The German DAX hit all-time highs this month and is looking to break out from four years of consolidation:
The main risk to a break higher is the euro but if you’re a foreign investor, do you can whether you get a 10% gain from the equity market or the currency?
2021 earnings are tough to forecast but the first quarter of the year is going to be depressed and they’re still low. Some of them are trading sub-12 what will likely be 2022 earnings, which is awfully attractive compared to bonds. Here are the 2021 forecast price/earnings ratios:
Compare those to the S&P 500 at 22 and Nikkei 225 at 21.
Looking through the charts, the FTSE 100 is consolidating after breaking the June high (top of page). I think it will be back at 7500 in short order, which is a tidy 15% rally and I expect sterling to compound that for foreign investors.
I think even better value is if you go down the food chain, the FTSE smallcap index has already retraced all the 2020 losses and finished the year up 4.4%. It could run.
It looks like one of the craziest years in market history won’t have a grand finale. The market is largely flat in today’s truncated session. The S&P 500 is down 2 points to 3729.
EUR/USD gives up some ground after reaching a fresh 2020 high on Wednesday at 1.2309. The pair is quiet in ultra-thin market conditions as the world celebrates Year-End but the rally is set to continue, according to FXStreet’s Chief Analyst Valeria Bednarik.
“The US has just released Initial Jobless Claims for the week ended December 25, which came in at 787K against the 833K expected. Wall Street is poised to open with losses, following the lead of its European counterparts. US markets are due to close earlier today, which means activity will likely stall shortly.”
“The EUR/USD pair retains its bullish stance. The 4-hour chart shows that it bounced from a bullish 20 SMA, currently providing dynamic support around 1.2260. The longer moving averages maintain their bullish slopes well below the current level, while technical indicators consolidate within positive levels.”Full Article
The USD/CHF pair refreshed multi-year lows during the early North American session, with bears now looking to extend the downward trajectory further below the 0.8800 mark.
The pair failed to capitalize on its intraday uptick, instead met with some fresh supply near the 0.8825 region and drifted into the negative territory for the fourth consecutive session on Thursday. The prevalent bearish sentiment surrounding the US dollar was seen as one of the key factors that capped the early attempted recovery move.
Investors remain convinced about the likelihood of more US financial aid package. This, along with expectations that the Fed will keep interest rates lower for a longer period, continued weighing on the buck. In fact, the USD Index fell to its lowest level since April 2018 and failed to gain any respite from upbeat Initial Jobless Claims data.
According to the US Department of Labor (DOL), the number of Americans filing for unemployment-related benefits fell to 787K during the week ending December 26. This was well below the 833K expected and the last week’s upwardly revised reading of 806K (803K reported previously), albeit did little to impress the USD bulls.
Meanwhile, indications of a subdued opening in the US equity markets did little to influence the Swiss franc’s safe-haven demand or provide any meaningful impetus. Nevertheless, the USD/CHF pair remains on track to post its lowest monthly close since April 2014 and end the year on a downbeat note, recording around 9% fall in 2020.
The EUR/USD pair gives up some ground after reaching a fresh 2020 high on Wednesday at 1.2309. The pair is quiet in ultra-thin market conditions as the world celebrates Year-End. The greenback retains the doubtful honor of being the weakest currency across the FX board, undermined by mounting virus concerns, but also but resurgent demand for the pound after the UK Parliament backed the post-Brexit deal.
The EU hasn’t published macroeconomic data while the US has just released Initial Jobless Claims for the week ended December 25, which came in at 787K against the 833K expected. Wall Street is poised to open with losses, following the lead of its European counterparts. US markets are due to close earlier today, which means activity will likely stall shortly.
From a technical point of view, the EUR/USD pair retains its bullish stance. The 4-hour chart shows that it bounced from a bullish 20 SMA, currently providing dynamic support around 1.2260. The longer moving averages maintain their bullish slopes well below the current level, while technical indicators consolidate within positive levels.
Support levels: 1.2260 1.2220 1.2175
Resistance levels: 1.2320 1.2350 1.2385Full Article