Daily F.X. Analysis, December 31 – Top Trade Setups In Forex – U.S. Jobless Claims Ahead

On Thursday, the German banks will be closed in observance of New Year’s Eve since banks aid most foreign exchange volume. When they are closed, the market is less liquid, and speculators become a more dominant market influence. This can lead to both abnormally weak and abnormally huge volatility. Later throughout the U.S. session, the U.S. unemployment claims will remain in highlights.

Economic Events to Watch Today  

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.22998 after placing a high of 1.23099 and a low of 1.22454. EUR/USD pair rose for the 5th consecutive day on Wednesday and reached above 1.23000 level, its highest since April 2018 amid the broad-based U.S. dollar weakness. The reports that the U.S. Senate has delayed a decision on increasing the coronavirus relief checks added pressure on the U.S. dollar. The Republican Senator Mitch McConnell blocked a move by colleague Bernie Sanders to allow a vote on increasing stimulus checks from $600 to $2000. However, Treasury Secretary Steve Mnuchin announced that direct payments of $600 would be out as soon as this week.

Despite a delay in the vote on the increase in the stimulus checks, the greenback dropped as investors were hopeful that the Senate would approve the rise in stimulus checks. The declining U.S. dollar added strength to the rising EUR/USD pair. On the data front, at 13:00 GMT, Spanish Flash CPI for the year dropped to -0.5% against the expected -0.6% and supported Euro that added additional gains in EUR/USD pair. From the U.S. side, at 18:30 GMT, the Goods Trade Balance from November fell to -84.8B against the projected -81.5B and weighed on the U.S. dollar that added further gains in EUR/USD pair. The Prelim Wholesale Inventories from November also fell to -0.1% against the projected 0.7% and supported the U.S. dollar. At 19:45 GMT, Chicago PMI in December surged to 59.5 against the projected 56.6 and supported the U.S. dollar. At 20:00 GMT, the Pending Home Sales from November fell to -2.6% against the projected 0.1% and weighed on the U.S. dollar that ultimately added gains in EUR/USD pair.

Furthermore, the risk-sensitive EUR/USD pair was also supported by the rising risk sentiment in the market after Britain approved another vaccine made by AstraZeneca and Oxford University. On Wednesday, Britain became the first country to approve the emergency use authorization of a vaccine developed by AstraZeneca and the University of Oxford that offers a 90% efficacy rate with the second vaccine shot.

The news about another vaccine available for use to control the coronavirus’s spread and in cheap amounts gave hopes that the global economic recovery process will speed up. These hopes raised the risk sentiment in the market and supported the currency pair EUR/USD on Wednesday.

Meanwhile, the optimism surrounding the Brexit deal also kept the EUR/USD pair on the upside on Wednesday. However, the EUR/USD pair’s gains remain limited throughout the day as the new variant of coronavirus that was originally discovered in the U.K. reached almost eight European Union nations. This urged E.U. nations to start mass vaccination to control the spread of the virus whereas, Spain was set to register people who refuse to be vaccinated against coronavirus and share it with European Union nations.

Daily Technical Levels

Support Resistance

1.2210    1.2279

1.2175    1.2311

1.2142    1.2347

Pivot point: 1.2243

EUR/USD– Trading Tip

The EURUSD continues to trade with a bullish bias after violating the ascending triangle pattern, extending resistance at the 1.2265 level. Above this, the odds of bullish trend continuation remains pretty solid. On the higher side, the pair may find resistance at 1.2308, and a bullish breakout of 1.2308 can lead its price towards the 1.2340 level. Bullish bias dominates today.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.36245 after a high of 1.36255 and a low of 1.34888. The British Pound to U.S. Dollar exchange rate climbed to weekly highs as the U.K. Parliament voted for the Brexit trade deal. Barely 24 hours before the U.K.’s final split from the European Union, Prime Minister Boris Johnson’s post-Brexit trade deal won approval from the U.K. Parliament. The agreement earlier crossed the House of Commons with 521 votes in favor of 73 opposing it. The Scottish National Party (SNP) was against the bills while stating that it will harm Scotland’s fishing industry and told PM Johnson that it would bolster the case for independence.

The Sterling got support from the Brexit deal’s approval in the U.K. Parliament and supported the GBP/USD currency pair on Wednesday. At the same time, the U.K. has ordered 100 million doses of the new vaccine that will be enough to vaccinate most of the population. On Wednesday, the U.K. regulatory approved the emergency use authorization to the vaccine of AstraZeneca and Oxford University that is said to offer 90% efficacy against coronavirus with the second vaccine shot. 

On Tuesday, the U.K. reported a record increase in new infections of over 50,000, the largest daily increase since the pandemic began. THE British Prime Minister Boris Johnson has approved placing more parts of the country into tier-4 restrictions as the country was fighting against the new variant of coronavirus, which scientists have warned that could spread more rapidly.

In parts of Southwest England and Cumbria, the ministers were considering imposing the toughest measures to control the spread of a new variant of coronavirus. Johnson announced that a further 20 million people in England will join the toughest tier of coronavirus restrictions from Thursday. These negative developments could not reverse the GBP/USD pair’s movement on Wednesday, and the pair continued increasing for the second consecutive day.

On the data front, at 11:57 GMT, the Nationwide HPI in December came in as 0.8% against the expected 0.4% and supported British Pound, and pushed the pair GBP/USD higher. From the U.S. side, at 18:30 GMT, the Goods Trade Balance from November decreased to -84.8B against the anticipated -81.5B and weighed on the U.S. dollar that added gains in GBP/USD pair. The Prelim Wholesale Inventories from November also decreased to -0.1% against the anticipated 0.7% and supported the U.S. dollar. At 19:45 GMT, Chicago PMI in December surged to 59.5 against the anticipated 56.6 and supported the U.S. dollar. At 20:00 GMT, the Pending Home Sales from November decreased to -2.6% against the anticipated0.1% and weighed on the U.S. dollar that ultimately added further gains in GBP/USD pair.

The U.S. dollar weakness was driven by the hopes that the increase in stimulus checks will be passed in the Senate even though they have delayed the decision. This weakness of the U.S. dollar kept the GBP/USD pair higher on board on Wednesday.

Daily Technical Levels

Support Resistance

1.3456    1.3533

1.3413    1.3567

1.3379    1.3611

Pivot Point: 1.3490

GBP/USD– Trading Tip

The GBP/USD pair has also violated the resistance level of 1.3617 level, and on the higher side, the next target remains at the 1.3698 level. On the lower side, the GBP/USD pair may find support at the 1.3617 level for now. We can expect a continuation of an upward trend in the Sterling today.

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 103.207 after placing a high of 103.591 and a low of 102.959. USD/JPY pair extended its losses on Wednesday amid the declining U.S. dollar despite the market’s rising risk sentiment. The USD/JPY pair fell to its fresh weekly lowest level below 103.00 level on Wednesday as the greenback was very weak across the board against its rival currencies. The U.S. Dollar Index that measures the value of the U.S. dollar against the basket of six major currencies fell to its lowest level for almost three years below 89.52 on Wednesday.

The U.S. Senate delayed its decision on increasing the number of stimulus checks from$600 to $2000 as the Republican Senator Mitch McConnell blocked a move by colleague Bernie Sanders to allow a vote on increasing stimulus checks. Treasury Secretary Steve Mnuchin has announced that direct payments of $600 would be out as soon as this week. Investors were hopeful that the rise in stimulus checks will be accepted by Senate and continued selling the U.S. dollar on Wednesday that ultimately weighed on the currency pair USD/JPY and dragged the pair towards fresh weekly lowest level.

On the data front, at 18:30 GMT, the Goods Trade Balance from November declined to -84.8B against the estimated-81.5B and weighed on the U.S. dollar that dragged the currency pair USD/JPY on the downside. The Prelim Wholesale Inventories from November also dropped to -0.1% against the estimated 0.7% and supported the U.S. dollar. At 19:45 GMT, Chicago PMI in December raised to 59.5 against the estimated 56.6 and supported the U.S. dollar. At 20:00 GMT, the Pending Home Sales from November dropped to -2.6% against the estimated 0.1% and weighed on the U.S. dollar, increasing the USD/JPY pair’s losses.

Furthermore, the market’s risk sentiment was also improved after Great Britain became the first country to approve the vaccine by AstraZeneca and the University of Oxford for emergency use. This vaccine is said to provide 625 efficacy against coronavirus in the first shot that could be increased to 90% in the second shot. After this news, the hopes for economic recovery took their pace as a cheaper vaccine will be wildly available and help control the loss caused by the coronavirus pandemic. This news raised the market’s risk sentiment and added weight on the safe-haven Japanese Yen that ultimately capped further losses in the USD/JPY pair on Wednesday.

The main driver of the currency pair USD/JPY remained the sell-off in the U.S. dollar amid the rising hopes for an increase in stimulus checks the amount, and it will remain at the mercy of the U.S. dollar for a while as there will be no macroeconomic release from Japanese side until next week.

Daily Technical Levels

Support Resistance

103.39    103.78

103.23    104.01

103.01    104.17

Pivot point: 103.62

USD/JPY – Trading Tips

The USD/JPY violates the sideways range at the 103.500 level. It was a support level extended by an ascending triangle pattern that has already been violated. On the 2 hour timeframe, the USD/JPY pair is gaining support at 103.003 and 102.750 levels along with a resistance level of 103.575, which is extended by a triangle pattern that got violated. The pair is now closing a doji candle over 103.260 support level that suggests odds of bullish correction. On the higher side, the pair can lead towards the 103.575 level and then offer us a sell trade. Let’s brace for it. Good luck!