Daily F.X. Analysis, December 09 – Top Trade Setups In Forex – Brace for BOC Policy! 

On the news front, the economic calendar is filled with the Bank of Canada’s policy rate. The BOC is expected to keep the Overnight Rate rate unchanged at 0.25%, which is likely to drive no major change in the Loonie. The BOC Rate Statement will be worth watching to determine further moves in CAD.

Economic Events to Watch Today  

 

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EUR/USD – Daily Analysis

The EUR/USD closed at 1.21044 after placing a high of 1.21337 and a low of 1.20952. EUR/USD pair fell on Tuesday for the third consecutive session but remained under consolidation in a tight range. The EUR/USD pair avoided major losses as the Euro remained appealing due to broad weakness in the U.S. dollar. The U.S. Dollar Index fell to its two and a half years lowest level on Tuesday and capped further losses in the EUR/USD pair. The U.S. dollar was weak on Tuesday as the country crossed the threshold of 15 million coronavirus cases, which was the world’s highest total. American hospitals braced to ration care amid staff shortages and warned about the rampant spread of the disease.

Pennsylvania’s governor Tom Wolf said that the coronavirus was running extensively throughout the state and could soon reach the level where hospitals will begin turning away patients. He also said that additional pandemic restrictions might be on controlling the spread of the virus.

Meanwhile, the talks for the second round of coronavirus relief stimulus between Democrats and the Republicans and the agreement of both parties over the bipartisan proposal of a $908 billion stimulus package also weighed on the U.S. dollar. Due to stimulus hopes and the rising number of coronavirus cases, the weak U.S. dollar capped further downside in the EUR/USD pair on Tuesday.

On the data front, at 11:30 GMT, the French Final Private Payrolls for the quarter raised to 1.6% against the expected -1.0% and supported the single currency Euro. At 12:45 GMT, the French Trade Balance showed a deficit of -4.8B against the expected -5.5B and supported Euro. At 15:00 GMT, the quarter raised the Final Employment Change to 1.0% against the forecasted 0.9% and supported Euro. The Revised GDP for the quarter dropped to 12.5% against the expected 12.6% and weighed on Euro. The ZEW Economic Sentiment raised in December to 54.4 against the estimated 37.5 and supported Euro. The German ZEW Economic Sentiment also surged to 55.0 from the projected 45.9 and supported Euro.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October fell to 7.2B against the projected 17.6B and weighed on the U.S. dollar and capped further losses in EUR/USD pair. At 16:00 GMT, the NFIB Business Index fell to 101.4 against the estimated 102.6 in November and weighed on the U.S. dollar that capped further losses in the EUR/USD pair.

At 18:30 GMT, the Revised Nonfarm Productivity for the quarter declined to 4.6% against the expected 4.9% and supported the U.S. dollar and supported the downward momentum in EUR/USD pair. The Revised Unit Labor Costs for the quarter came in as -6.6% against the estimated -8.9% and supported the U.S. dollar. 

At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December compared to the previous 50.0.

Moreover, the Euro remained comparatively appealing due to a more optimistic outlook of the Eurozone’s economy than the U.S. that capped further losses in the EUR/USD pair. The ECB’s policy decision is scheduled for Thursday. If the ECB takes a more hawkish tone, then Euro will rise and vice versa.

Daily Technical Levels

Support   Resistance

1.2086        1.2125

1.2071       1.2149

1.2046       1.2165

Pivot point: 1.2110

EUR/USD– Trading Tip

The EUR/USD is trading at 1.2127 level, finding an immediate resistance at 1.2160 and 1.2196 level along with a support level of 1.2085. Closing of candles underneath the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040. However, the focus is likely to stay on the German Trade Balance, which is due during the European session. Choppy session expected until economic figures show major deviations. The MACD is mixed, suggesting bearish; therefore, the idea will be to open a sell trade below the 1.2175 level today to capture quick green pips. 

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GBP/USD – Daily Analysis

The GBP/USD pair closed at 1.33564 after placing a high of 1.33935 and a low of 1.32894. The GBP/USD pair fell on Tuesday for the third consecutive day amid the rising Brexit uncertainty that took its toll on British Pound. The mixed comments from various officials from both sides raised the uncertainty in the market related to the Brexit deal and weighed on British Pound. The British Cabinet Minister Michael Gove announced that they had reached an agreement in principle. The E.U.’s chief negotiator Michel Barnier told European ministers that a deal’s chances were very thin. At the same time, German Minister Michael Roth said there was no substantial progress in the trade talks between the E.U. and the U.K. He added that it was uncertain whether Britain and the E.U. could reach a trade deal.

All this uncertainty in the market weighed on the British Pound and dragged the pair GBP/USD on the downside. Another factor involved in the GBP/USD pair’s downward momentum was the latest move by the U.K. government to drop parts of its controversial internal market bill that paved the way for both sides to meet in Brussels on Wednesday to settle an agreement.

The U.K. government reached a post-Brexit arrangement in principle over the Irish border with the European Union after agreeing to ditch the most controversial parts of its internal markets bill. On Tuesday, the U.K. government said that it would abandon all the Brexit clauses relating to Northern Ireland in the internal market bill in exchange for promises by the E.U. to minimize checks and control due to being imposed on food and medicines going into Northern Ireland from Great Britain from January 01.

A deal on Ireland is reached between the E.U. and the U.K. it was not one of the key sticking points that have held the Brexit talks hostage. The Brexit talks will enter a last decisive phase from Wednesday as the PM Boris Johnson has prepared to travel to Brussels on that day to secure a deal over the European Union’s relations with the U.K. If he failed to reach an agreement with the E.U. It would mean that from the start of next year, the tariffs would be applied to some trade between the U.K. and the E.U. for the first time in almost half a century. U.K. sends almost 43% of its exports to the trade bloc E.U. and tariffs on its exports will be harmful to its economy. Failure to reach a deal will also end many cooperation types between the U.K. and the E.U. over crime, security, and travel.

The British Pound remains under pressure on Tuesday ahead of the final round of talks between PM Johnson and E.U. Commission President Ursula von der Leyen on Wednesday. On the data front, at 05:01 GMT, the BRC Retail Sales Monitor for the Year raised to 7.7%against the forecasted 5.0% and supported British Pound, and capped further losses in GBP/USD pair.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October declined to 7.2B against the estimated 17.6B and weighed on the U.S. dollar. At 16:00 GMT, the NFIB Business Index declined to 101.4 against the expected 102.6 in November and weighed on the U.S. dollar.

At 18:30 GMT, the Revised Nonfarm Productivity for the quarter fell to 4.6% against the expected 4.9% and supported the U.S. dollar. The Revised Unit Labor Costs for the quarter came in as -6.6% against the projected -8.9% and supported the U.S. dollar. At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December compared to the previous 50.0.

Daily Technical Levels

Support   Resistance

1.3297       1.3400

1.3242       1.3448

1.3193       1.3504

Pivot point: 1.3345

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3378, holding below an immediate resistance level of 1.3395. On the higher side, the GBP/USD pair can lead to a 1.3437 level, and support stays at 1.3340, which is extended by an upward trendline. Overall it’s an ascending triangle, and it typically breaks on the higher side; thus, we can expect the GBP/USD price to move until 1.3435.

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USD/JPY – Daily Analysis

The USD/JPY pair closed at 104.161 after placing a high of 104.204 and a low of 103.953. The pair posted gains on Tuesday as the market’s risk sentiment improved due to a combination of factors.

The news that Great Britain has started using the Pfizer vaccine on patients from Tuesday increased the risk-on sentiment as the hopes for economic recovery increased. Another factor involved in the rising risk-on sentiment was the rising hopes that the U.S. will soon deliver the second round of stimulus measures.

On late Monday, the Chinese Foreign Minister, Wang Yi, said that Beijing was open to restarting its relationship with the U.S. He also declared that both countries were at a critical historical stage after a year of intensifying tensions. Wang said that U.S. policy on China needed to return to objectivity and rationality. He also said that both sides should struggle to restart the dialogue and get back on the right track and rebuild mutual trust in the next Sino-US relations phase. Wang blamed the growing division between the world’s two biggest economies on some Americans with outdated Cold War mentality and ideological preconceptions. All these developments in vaccine usage, rising hopes for stimulus, and the U.S. and China relationship raised the risk sentiment that weighed heavily on the safe-haven Japanese Yen that ultimately supported the USD/JPY pair on Tuesday.

On the data front, at 04:30 GMT, the Average Cash Earnings for the Year came in as -0.8% against the expected -0.7% and weighed on the Japanese Yen. The Household Spending for the Year dropped to 1.9% against the forecasted 2.7% and weighed on the Japanese Yen and added gains in the USD/JPY pair. At 04:50 GMT, the Bank Lending for the Year came in line with the expectations of 6.3%. The Current Account Balance from Japan showed a surplus of 1.98T against the forecasted 1.83T for October and supported the Japanese Yen.

The quarter’s final GDP also raised to 5.3% against the expected 5.0% and supported the Japanese Yen. AT 04:52 GMT, the Final GDP Price Index for the Year raised to 1.2% against the forecasted 1.1% and supported the Japanese Yen. At 10:00 GMT, the Economic Watchers Sentiment dropped to 45.6 against the expected 52.7 and weighed on the Japanese Yen that supported the USD/JPY pair’s upward trend.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October fell to 7.2B against the estimated 17.6B and weighed on the U.S. dollar. At 16:00 GMT, the NFIB Business Index fell to 101.4 against the estimated 102.6 in November and weighed on the U.S. dollar. At 18:30 GMT, the Revised Nonfarm Productivity for the quarter declined to 4.6% against the forecasted 4.9%, supported the U.S. dollar, and added further gains in the USD/JPY pair. The Revised Unit Labor Costs for the quarter came in as -6.6% against the projected -8.9% and supported the U.S. dollar and supported the USD/JPY pair’s upside momentum. At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December than the previous 50.0.

Meanwhile, the USD/JPY pair’s gains remained limited as the U.S. dollar was under pressure as the country crossed 15 million coronavirus cases, which was the world’s highest total. American hospitals started to give warnings about the staff shortage and extensive spread of the disease. Pennsylvania’s governor Tom Wolf said that the coronavirus was spreading extensively throughout the state and could soon reach the level where hospitals will begin turning away patients. He also said that additional pandemic restrictions might be on controlling the spread of the virus.

Daily Technical Levels

Support   Resistance

104.00       104.27

103.84       104.38

103.73       104.54

Pivot point: 104.11

USD/JPY – Trading Tips

The USD/JPY is trading within a symmetric triangle pattern observed in the 4-hour timeframe. The pair recently disrupted the sideways trading series of 104.600 – 104.200, and now it’s trading at 104.300 level, especially after bouncing off over 103.700 level on the lower side, supporting the pair nearby 103.700 mark. On the downside, the USD/JPY may find support at the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.350 and 104.700 today. Good luck