Articles
USD/JPY Forecast: Pressure on the dollar remains
100366 December 31, 2020 18:12 FXStreet Market News
USD/JPY Current price: 103.17
- Coronavirus-related concerns continue to undermine the market’s mood.
- US Initial Jobless Claims are foreseen at 833K in the week ended December 25.
- USD/JPY is consolidating losses, has room to extend its slump once below 102.86.
The USD/JPY pair trades around 103.15, down for the day as pressure on the greenback continues. The world celebrates the year-end, with some markets off and some due to early closes. European stocks are sharply down, led by the FTSE, which plunged on the pound’s strength after the UK Parliament passed the post-Brexit deal.
The focus remains on coronavirus, amid news indicating resurgent contagions and deaths, but also the beginning of immunization. Japan reported 3,476 new cases and 43 deaths in the last 24 hours, whit over 1,000 reported in Tokyo. The numbers are records for the country, and the government is studying restrictive measures.
Trading will likely come to a halt after the release of US Initial Jobless Claims for the week ended December 25, foreseen at 833K.
USD/JPY short-term technical outlook
The USD/JPY pair consolidates losses, maintaining the bearish stance in the near-term. The 4-hour chart shows that the price remains well below bearish moving averages, with the 20 SMA currently around 103.50. Technical indicators remain near daily lows, with limited directional strength. It seems unlikely, but the pair could extend its slump once below December’s low at 102.86.
Support levels: 102.80 102.40 102.10
Resistance levels: 103.50 103.90 104.30
View Live Chart for the USD/JPY
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Greece Retail Sales (YoY): 4.7% (October) vs -3.5%
100365 December 31, 2020 18:12 FXStreet Market News
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.
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EUR/USD: Dips toward 1.2235 seen as a buying opportunity
100364 December 31, 2020 18:02 FXStreet Market News
EUR/USD bulls took a breather near 32-month tops amid holiday-thinned liquidity conditions but the prevalent bearish sentiment surrounding the USD should help limit any meaningful slide. The pair’s bullish potential is still intact, according to FXStreet’s Analyst Haresh Menghani.
Key quotes
“The US economic docket highlights the only release of the usual Initial Weekly Jobless Claims. The data is unlikely to provide any meaningful impetus. However, the broader market risk sentiment might continue to influence the USD price dynamics and assist investors to grab some opportunities on the last trading day of the year.”
“RSI on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution for aggressive bullish traders. This makes it prudent to wait for a modest pullback or some near-term consolidation before the next leg up. The next relevant target on the upside is pegged near the 1.2340 level, above which the pair could aim to reclaim the 1.2400 mark in the near-term.”
“Any meaningful pullback might now be seen as a buying opportunity and remain limited near the triangle resistance breakpoint, currently near the 1.2230 region. The mentioned support coincides with another ascending trend-line support, which if broken decisively might prompt some technical selling.”
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EUR/USD Forecast: Consolidates in quiet markets, bullish potential intact
100362 December 31, 2020 17:29 FXStreet Market News
- EUR/USD bulls took a breather near 32-month tops amid holiday-thinned liquidity conditions.
- The prevalent bearish sentiment surrounding the USD should help limit any meaningful slide.
- Any dip towards the 1.2235 resistance breakpoint could now be seen as a buying opportunity.
The EUR/USD pair was seen oscillating in a narrow trading band through the first half of the European session and consolidated its recent strong gains to the highest level since April 2018. In the absence of any fresh fundamental catalyst, bulls took a brief pause and refrained from placing fresh bets amid year-end thin trading volumes. That said, sustained selling bias around the US dollar should help limit the downside, rather supports prospects for a further near-term appreciating move.
Investors continued to dump the USD on hopes for a stronger global economic recovery in 2021 and expectations that the Fed will keep interest rates lower for a longer period. Apart from this, the likelihood of additional US financial aid package and regulatory approval of AstraZeneca/Oxford COVID-19 vaccine remained supportive of the underlying bullish tone in the equity markets. This was seen as another factor that further undermined the greenback’s relative safe-haven status.
There isn’t any major market-moving economic data due for release from the Eurozone. This, in turn, leaves the pair at the mercy of the USD price dynamics. The US economic docket highlights the only release of the usual Initial Weekly Jobless Claims. The data is unlikely to provide any meaningful impetus. However, the broader market risk sentiment might continue to influence the USD price dynamics and assist investors to grab some opportunities on the last trading day of the year.
Short-term technical outlook
From a technical perspective, the pair this week confirmed a fresh bullish breakout through a symmetrical triangle and seems poised to prolong its recent upward trajectory. However, RSI on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution for aggressive bullish traders. This makes it prudent to wait for a modest pullback or some near-term consolidation before the next leg up. The next relevant target on the upside is pegged near the 1.2340 level, above which the pair could aim to reclaim the 1.2400 mark in the near-term.
On the flip side, any meaningful pullback might now be seen as a buying opportunity and remain limited near the triangle resistance breakpoint, currently near the 1.2230 region. The mentioned support coincides with another ascending trend-line support, which if broken decisively might prompt some technical selling. The pair might then turn vulnerable to break below the 1.2200 mark and accelerate the corrective slide further towards the 1.2130-25 congestion zone, tested earlier this week.
GBP/USD climbs further beyond mid-1.3600s, fresh 31-month tops
100361 December 31, 2020 17:02 FXStreet Market News
- GBP/USD continued scaling higher for the third consecutive session on Thursday.
- The passage of Brexit deal into law extended some support to the British pound.
- The risk-on mood undermined the safe-haven USD and remained supportive.
The buying interest around the British pound picked up pace during the early European session and pushed the GBP/USD pair further beyond mid-1.3600s, or fresh 31-month tops.
The pair built on the previous day’s strong positive move back above the 1.3600 mark and gained some follow-through traction for the third consecutive session on Thursday. The sterling was supported by the passage of post-Brexit trade deal in the UK Parliament. This, coupled with sustained US dollar selling bias, provided an additional boost to the GBP/USD pair.
The USD Index languished near multi-year lows amid the increasing likelihood of additional US financial aid package and expectations that the Fed will keep rates lower for a longer time. Apart from this, hopes for a strong global economy in 2021 remained supportive of the prevalent risk-on environment, which further dented the greenback’s relative safe-haven status.
Meanwhile, Thursday’s move up could further be attributed to some technical buying on a sustained move beyond the previous double-top resistance near the 1.3620-25 region. This, in turn, might have already set the stage for a further near-term appreciating move for the GBP/USD pair. Hence, a subsequent strength, towards reclaiming the 1.3700 mark, looks a distinct possibility.
That said, investors remain concerned about the exclusion of the crucial services sector, which make up 80% of the British economy, from the Brexit agreement. Adding to this, an unprecedented level of COVID-19 infection across the UK might hold bulls from placing fresh bets and keep a lid on any further gains for the GBP/USD pair amid year-end thin trading volumes.
Market participants now look forward to Thursday’s US economic docket – highlighting the only release of usual Initial Weekly Jobless Claims. This, along with the broader market risk sentiment and developments surrounding the coronavirus saga, might influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.
Technical levels to watch
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The good, the bad, the ugly
100359 December 31, 2020 16:26 Forexlive Latest News Market News
The winners and losers among the major currencies space in 2020
It has been a long and weary year with plenty of twists and turns along the way but here we are, wrapping up the final day of a historic 2020.
A new month, year, quarter, and decade dawns upon us so let’s take a look back at the year in FX and some of the hits and misses in trading this year.
The good
Among the top performers, the Australian dollar is a standout with nearly 10% gains against the dollar this year. The currency pair fell by more than 17% from 9 March to 19 March to the lows for the year, before posting a stunning recovery ever since.
The surge in iron ore prices has also underpinned the currency, which has largely ignored escalating tensions between Australia and China – as the risk rally stays the number one driver in the market to have bolstered commodity currencies this year.
As we look towards the year-end, AUD/USD is now rising past 0.7700 and trading to its highest levels since April 2018. The 0.8000 remains the next key upside target.
Besides the aussie, the euro also deserves a mention in this category as it put on a solid showing with near 10% gains against the dollar itself throughout the year.
The pair had a stunning rise in late February to early March as Treasury yields capitulated and resulted in dollar weakness for the most part, rising from 1.08 to 1.14.
But that all came crashing down as the peak of the virus crisis hit and the pair crumbled to the lows for the year just under 1.07.
Since then, the pair has generally been the go-to trade to short the dollar with the breakout in July towards 1.19 and then the early December break above 1.20 exemplifying the poor dollar performance in the second half of the year especially.
While euro fundamentals aren’t exactly perfect, it is hard to argue against the technical aspect of things with EUR/USD now having much room to roam around 1.20 to 1.25.
Adding to that is other major central banks also cowering and looking towards negative rates, in which the ECB has pretty much reached its limits on that front.
The bad
An easy mention in this category is the British pound. Amid the virus crisis exacerbating economic worries, the Brexit saga didn’t lend much help to the quid throughout the course of the year outside of GBP/USD – which owes to dollar weakness as well.
A double whammy of the virus crisis and Brexit took cable for a nosedive from 1.32 to near 1.14 – a drop of 14% – in the span of roughly two weeks.
But since then, the pair has put up a solid recovery, with the Brexit turmoil during September to October quickly brushed aside as the market bet that a deal will be struck.
Amid thin liquidity this week, cable is attempting a break above its recent highs of 1.3624 as price now trades to its highest levels since May 2018.
It remains to be seen if real money flows will stick with that next week but despite the relief from a Brexit trade deal, UK economic prospects continue to look dim and this will be more clearly reflected against other major currencies outside of the dollar.
The volatility in the currency amid the whole Brexit debacle is also worth mentioning, with price action pretty much dictated by media journalists and Twitter posts during key moments and that made it tough to read into the market at times.
A secondary mention in this category is the Canadian dollar. It wasn’t so much so the loonie’s fault but more so the capitulation in oil prices that proved to be a major drag for the currency – especially in Q1 trading.
Since then, the loonie has put a modest showing but gains aren’t anything that really stands out as the market kept the focus on more key currencies throughout the year.
That said, the descend in USD/CAD from 1.46 to 1.27 is keeping in tune with the dollar slide as of late and the break below 1.30 and the December 2019 low is putting sellers in a good spot as we look towards the new year.
The ugly
Among the major currencies, there’s only one real mention in this category and that is the US dollar. It has been a year where the greenback has turned from being the most sought after during the ‘sell everything, buy dollar’ response back in March, to ‘buy everything, sell dollar’ mode that we are getting into looking towards 2021.
A lot of this owes to the Fed’s response to the virus crisis and the introduction of swap lines helped to ease liquidity pressures on the dollar while the printing press working overtime pretty much gave the green light for risk assets to rally hard.
They pretty much turned the market narrative, leaving investors and traders to put aside the question of “what about the economy?” to stick with “who cares about the economy?”. And that is arguably the key takeaway in the market in trading this year.
Among other mentions in this category is the Turkish lira, Brazilian real, and Argentinian peso. The former had to deal with central bank and political instability, not helped by dwindling FX reserves as well as a rush to the exits in Turkish bonds and stocks.
Meanwhile, the latter two declined by more than 20% against the greenback this year with Brazil arguably having a poor response to the virus crisis while the ARS, well, continues to just be the ARS as tough capital controls continue to spark plenty of demand for the dollar in the black market amid widespread angst about devaluation.
Special mentions
The king of the G10 space this year deserves a mention in this spot. With gains of over 14% against the dollar, the Swedish krona takes the crown, benefitting from a different approach from the Riksbank and the government in dealing with the virus crisis.
There was no draconian lockdown by Sweden when dealing with the health crisis and while that is still up for debate, the Riksbank stayed away from tweaking its benchmark interest rate (0%) while only making minor changes to its lending rate to stimulate the economy.
While not really FX per se, there are two other assets in the market deserve a mention for 2020 as well in my view. The first being silver, which has been among the standout performers this year in the commodities space.
Although iron ore pipped silver in terms of year-to-date gains, the gains in silver this year has been nothing short of stunning with over 48% gains – nearly doubling that of gold throughout the course of the year.
Gold on its own is also set for its biggest jump in almost a decade, so its supposedly “poor cousin” has certainly had a magnificent 2020 all things considered.
The last asset that deserves a special mention here is Bitcoin. Cryptocurrencies have always been in the shadows of major financial market assets but the late year-end surge in Bitcoin is certainly worth taking note of.
Bitcoin appeared to not be going places for the most part this year, even falling below $4,000 in March with the drop threatening to send it into obscurity.
But amid free flowing liquidity and there being so much money in the market, investors are finding literally everything and anything to put their money into these days.
To wrap up the year, Bitcoin is looking at fresh record highs near $30,000 and has posted a whopping 300% gain. There may be a potential for a major correction/pullback in the near future but as long as investor/risk appetite remains unnerving, Bitcoin may yet realise more speculative gains going into 2021.
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Financial markets expect low inflation but not deflation – Natixis
100358 December 31, 2020 16:26 FXStreet Market News
Two hypotheses have emerged: the world is heading for deflation, or it is heading for hyperinflation. So far, it has been low inflation, but not deflation, as real interest rates have remained very low. Financial markets expect a continuation of this equilibrium with low inflation but not deflation, as deflation is being averted by the money creation and the structural inflationary factors despite the massive savings glut, per Natixis.
US Dollar Index (DXY) fades recent bounces off 32-month low while receding to 89.60 during the early Thursday.
Key quotes
“The deflation hypothesis results from the observation of an (ex-ante) global savings glut (ex-post, savings are equal to investment at the global level) and therefore abnormally weak demand. The savings glut is evidenced by the rise in the global savings rate and in the private sector savings rate, the decline in nominal and real long-term interest rates and the decline in global inflation.”
“It is true that if the savings glut gets worse after the COVID-19 crisis, depressed demand could give rise to true deflation. True deflation is a situation where inflation becomes so low that the real interest rate becomes excessive. This is not yet the case.”
“Traditional monetary theory explains that a large increase in the money supply leads to a large increase in prices in the medium term. But for this link between the money supply and inflation to appear today, the excess savings accumulated during the covid crisis must be at least partially consumed. If they are not consumed and are invested in financial or real estate markets, then asset prices but not goods and services prices will rise.”
“There are several possible structural causes of hyperinflation. Population ageing, as pensioners consume but do not produce; the energy transition, as renewable energy is much more expensive than fossil fuels due to the intermittency in the production of renewable energies and electricity storage costs; the need to lift low wages and achieve a fairer distribution of income in OECD countries and the return to regional value chains, which will reduce the use in OECD countries of lowcost products made in emerging countries.”
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Ethereum whales go into buying spree in anticipation of new all-time highs
100356 December 31, 2020 16:26 FXStreet Market News
- ETH moves above $750 for the first in over two years.
- Whales are accumulating ETH tokens ahead of the further price increase.
Ethereum (ETH) hit a new high of 2020 at $759 during early Asian hours. At the time of writing, the second-largest digital asset is changing hands at $751, having gained over 30% in the past seven days. ETH has been gaining ground since the beginning of December amid positive fundamentals and the growing interest from institutional investors.
ETH whales push the market to new highs
According to the data provided by the behavioral analytical company Santiment, the number of Ethereum addresses holding over 10,000 ETH increased by 39 in just two months, while the number of smaller addresses having from 1-10,000 ETH decreased over the same timeframe.
The increased number of large accounts usually is a precursor of massive price growth as the sudden spike in buying pressure can translate into millions of dollars.
Meanwhile, the Santiment analysts noted that the decrease of smaller accounts numbers might be related to the DeFi industry developments.
This massive drop from two weeks ago from this group surprised us, too. It could very well have been a #defi-related anomaly, considering just how big the dropoff was.
— Santiment (@santimentfeed) December 31, 2020
ETH bulls target at $800
From the technical point of view, a sustainable move above $750 bodes well for ETH bulls. This resistance area is reinforced by a 0.5 Fibo retracement level for the downside move from January 201 high to December 2018 low. It served as a strong barrier for the price since December 28.
On the intraday charts, the local support is created by 1-hour EMA50 at $733. This level shall provide a short-term backstop for the price; however, if it is broken, the sell-off may be extended towards $700. A sustainable move below this level will bring more sellers to the market and bring $665 into focus (1-hour EMA200).
ETH, 1-hour chart
On the upside, if the move above $750 is sustained, the upside momentum will start gaining traction, taking the price to $800.
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US Initial Jobless Claims Preview: Temporary surge without affecting unemployment trends
100355 December 31, 2020 16:17 FXStreet Market News
Initial Jobless Claims are expected to continue their recent cycling between surprise gains and losses. First-time filings are expected to increase to 833,000 after 803,000 while continuing claims are predicted to rise to 5.433 million from 5.337 million. Currency markets can be volatile in the final weeks of the year, FXStreet’s Analyst Joseph Trevisani reports.
On the last day of the year, commodity-linked currencies are the best performers against the greenback, followed by EUR and GBP.
Key quotes
“Requests for unemployment benefits are forecast to rise to 833,000 in the December 25 tracking period, two weeks after the highest total since early September and one week after the lowest filings this month.”
“Continuing claims are projected to reach 5.433 million in the December 18 week, after falling to 5.337 million, the lowest of the pandemic era, the previous week.”
“Initial Jobless Claims in the US have been the pandemic’s telltale. They signaled the abrupt shift to catastrophe in March and have been monitored ever since for the recovery. The recent volatility in filing is directly tied to the newly imposed restrictions in a few states. It does not represent a national trend. As such the potential variation in the weekly numbers, will, barring a huge disparity, have little impact on the currency markets, even in their end of year liquidity desert.”
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EUR/USD to enjoy a considerable gain on a break above 1.2310
100354 December 31, 2020 16:17 FXStreet Market News
The EUR/USD pair reached a fresh 2020 high of 1.2309 as speculative interest kept selling the greenback heading into the year-end. Euro/dollar hovers around 1.2300 while higher highs are still in sight, Valeria Bednarik, Chief Analyst at FXStreet, reports.
Key quotes
“News that the US Senate has delayed a decision on increasing coronavirus-relief checks added pressure on the dollar. Republican Senator Mitch McConnell blocked a move by colleague Bernie Sanders to allow a vote on increasing stimulus checks from $600 to $2,000, although Treasury Secretary Steve Mnuchin announced that direct payments of $600 would be out as soon as this week.”
“Further gains are now expected on an extension above 1.2310, with the EUR/USD pair targeting 1.2413, April 2018 monthly high.”
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NZD/USD consolidates gains to 32-month tops, comfortable above 0.7200 mark
100353 December 31, 2020 16:17 FXStreet Market News
- NZD/USD continued scaling higher for the third consecutive session on Thursday.
- The prevalent risk-on mood undermined the safe-haven USD and benefitted kiwi.
- Hopes for a global economic recovery, more US fiscal aid boosted risk sentiment.
The NZD/USD pair now seems to have entered a consolidation phase and was seen oscillating in a range around the 0.7220-25 region, just below fresh 32-month tops set earlier today.
The pair added to this week’s positive move and continued gaining traction for the third consecutive session on Thursday. Growing hopes for a global economic recovery in 2021 remained supportive of the underlying bullish tone in the equity markets, which, in turn, benefitted the perceived riskier kiwi.
Apart from this, the likelihood of additional US financial aid and expectations that the Fed will keep interest rates lower for a longer period further undermined demand for the safe-haven US dollar. This contributed to the momentum and pushed the NZD/USD pair to the highest level since April 2018.
That said, overbought conditions on short-term charts held investors from placing fresh bullish bets amid relatively thin liquidity conditions on the back of year-end holiday season. Nevertheless, the bias still seems tilted in favour of bullish traders and supports prospects for additional gains.
Market participants now look forward to Thursday’s US economic docket – highlighting the only release of usual Initial Weekly Jobless Claims. This, along with the broader market risk sentiment, might influence the USD price dynamics and produce some trading opportunities around the NZD/USD pair.
Technical levels to watch
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Using oil rent to finance energy transition is effective – Natixis
100352 December 31, 2020 16:02 FXStreet Market News
Currently, lenders (investors, banks) are increasingly discouraged from financing investments in fossil fuels. But they will be able to continue to finance oil companies whose strategy will be to invest a substantial part of their oil revenues in the energy transition (in renewable energies). Strategists at Natixis believe this transition model where the oil rent finances the energy transition is effective and straightforward.
WTI is consolidating just above the $48.00 mark as the market mood remains positive.
Key quotes
“Oil sellers (whether governments or national or private oil companies) receive a rent which is equal to the difference between the oil price and the cost of producing oil. This rent comes structurally from the existence of oil fields with different production costs, some of which are much lower than the oil price, which adjusts to the production cost level of the marginal field to be used. If oil-importing countries tax oil (or CO2), they recover part of the oil rent.”
“CO2 taxation makes it possible to share the oil rent between oil producers (countries or oil companies) and oil-using countries. An effective use of the oil rent would be to use it to invest in the energy transition (particularly in renewable energy). Some private oil companies (Total, Shell, BP) have announced that they will apply this strategy. We believe this strategy is effective. It simply transfers part of the investment in fossil fuels to investment in renewable energies, it legitimises the existence of the oil rent and it prevents the disappearance of oil companies, it gradually modifies their model by using a simple financial circuit.”
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