• USD/JPY bulls lack momentum amid the Japanese holiday.
  • DXY stalls Friday’s bounce amid vaccine progress.
  • US Markit PMIs in focus amid mixed covid narratives.

USD/JPY has bounced-off lows but remains well within Friday’s 20-pips trading range below the 105 level, starting out a fresh week in Asia this Monday.

The major remains divided between two contrasting covid narratives, with half the world going back under lockdowns and stricter restrictions to contain the coronavirus resurgence while on the other side, optimism prevails amid a likely rollout of vaccines in the coming months.

The US dollar index, therefore, remains near the lower end of the recent trading range, undermined by the optimism over the vaccine progress, especially after Moncef Slaoui, Head of the government’s Operation Warp Speed, said that the vaccinations in the US will “hopefully” start in less than three weeks.

Meanwhile, Japanese traders are away, celebrating Thanksgiving Day, which gives the yen market little impetus. However, the renewed uptick in the S&P 500 futures amid vaccine hopes seems to keep the upside limited in the safe-haven yen. The futures tied to the S&P 500 index are up 0.11% on the day, trading above 3,550.

Next of relevance for the spot remains the US Markit Preliminary PMI reports. Meanwhile, the incoming covid updates worldwide will continue to influence the broader market sentiment and eventually the USD/JPY pair.,

USD/JPY technical levels

“Technically, the USD/JPY remains immured in a descending channel that can be stretched back to December 2016, though the much narrower channel from the beginning of July is more relevant for current trading. Support is primarily at 103.30 which marks the bottom on November 6 and the start line for the rally on the 9th. Those were the lowest points since the crash and immediate recovery in March,” FXStreet’s Senior Analyst Joseph Trevisani noted.

USD/JPY additional levels

 

  • EUR/USD refreshes intraday high, stays inside short-term symmetrical triangle.
  • Sustained trading above 200-bar SMA, normal RSI conditions favor bulls.
  • November 04 high adds a filter to the downside, monthly high will offer additional resistance.

EUR/USD rises to 1.1860 during Monday’s Asian session. The major currency pair trades inside a symmetrical triangle since November 09 while keeping upside momentum beyond 200-bar SMA off-late.

With the RSI conditions not being oversold or overbought, the continuation of the latest recovery moves can be expected.

As a result, EUR/USD buyers currently eye the upper line of the stated triangle, at 1.1881 now, while targeting to refresh the monthly peak surrounding 1.1920.

It should, however, be noted that a clear break above 1.1920 will be enough for the bulls to challenge the yearly high marked in September around 1.2010.

Meanwhile, the pattern’s support line, at 1.1835 now, precedes a 200-bar SMA level of 1.1789 to probe the short-term downside. Also acting as a support is the November 04 high of 1.1770.

EUR/USD four-hour chart

Trend: Further recovery expected

 

  • Gold bounces off intraday low of $1,868.90, keeps pullback from the previous day’s top surrounding $1,880.
  • Covid data, uncertainty over Fed’s emergency program battle optimism concerning virus treatments, Brexit.
  • November month’s preliminary PMIs will decorate today’s calendar.

Gold prices remain depressed near $1,870, down 0.10% intraday, during the early Monday morning in Asia. In doing so, the yellow metal fails to extend Friday’s bounce off $1,852.80 to near $1,880. The reason could be traced to the traders’ confusion amid mixed clues concerning the coronavirus (COVID-19) and vaccines as well as a lack of confirmation on the Brexit deal and the tussle between the US Fed and Treasury.

Uncertainty prevails…

Although global vaccine producers are on their way to get regulatory approvals from the US and the UK, the surge in the covid numbers hasn’t faded yet, which in turn keeps the market players worries unless the cure to the pandemic rolls out. Also portraying the virus pessimism is the record high hospitalization rate in the US as well as the latest resurgence in Asian countries like Japan and India.

Additionally, challenges to the soft Brexit, due to the disagreement over the key issues including fisheries, governance and competition rules, joins the doubt over the future of the Federal Reserve’s emergency lending program to weigh on risks. Furthermore, US President Donald Trump’s tiring efforts to stop the President-elect Joe Biden from reaching the White House also add to the market’s lack of clarity and sour the trading sentiment.

Amid these catalysts, S&P 500 Futures wobble around the mid-3,500s with no clear direction. It should also be noted that markets in Japan are closed for the day and hence fewer moves are expected unless any surprises erupt from the risk front.

Though, the preliminary readings of November month’s activity numbers for the leading economies, like the US and the UK, will be important to watch for the day.

Technical analysis

Considering the bullish MACD signals, gold buyers are likely aiming at the one-week-old falling trend line and 10-day EMA joint, around $1,879-80, during the further recovery moves. However, the $1,900 round-figure can restrict the metal’s short-term upside. On the contrary, the $1852/48 support area, comprising the recent lows and May’s bottom, becomes the key support to watch if the bullion turns to the south.

 

Analysts at Bank of American Merrill Lynch (BAML) noted a few factors that call for an upbeat outlook for gold and silver in the coming quarters.

Key quotes

“Uncertainty over how the interplay between nominal rates, breakeven inflation and real rates will play out has been the root cause of gold’s volatility during 4Q20.”

“Confidence that global economies will reopen in 2021 as vaccines are deployed meant that financial markets have increasingly priced in a cyclical recovery, reflected for instance in a steeper US yield curve.”

“Importantly, rates re-priced not through an increase in breakeven inflation, but rather higher nominal and, importantly for gold, real rates, effectively putting a stop to the bull market. “

“We are following dynamics in the US closely, hoping for more fiscal support as the government 

1) rolls over Covid-19 relief measures 

and 2) gets to work on an infrastructure stimulus.” 

“At the same time, the Fed should strengthen guidance that nominal rates will remain capped as the economy reflates, thereby reducing the drag from real rates. “

 

 

  • GBP/USD picks up bids towards the monthly high, prints seven-day winning streak.
  • UK Times mark Whitehall source to cite Brexit deal, The Guardian quotes Chancellor Sunak to mark Britain’s tough stand.
  • Pfizer will soon get the UK’s approval, Regeneron’s antibody treatment gets FDA’s green light.
  • UK/US PMIs, Brexit headlines and virus/vaccine updates are the key.

GBP/USD refreshes intraday high to 1.3298 during the initial Asian session on Monday. The pair recently gained bids as the market turns optimistic concerning the Brexit deal and the coronavirus (COVID-19) vaccine. However, challenges to the Fed’s emergency programs and the rising virus figures in the northern hemisphere challenge the pair bulls.

Brexit deal not at any cost…

The UK Times cites an anonymous British government source to suggest that there are increasing expectations of a deal. The Sky follows the suit while citing the European Union’s (EU) side while indicating 95% chances of a Brexit deal. However, the piece also mentioned increased uncertainty over the key issues like fisheries, governance and competition rules that highlight the anxiety.

On the other hand, The Guardian quotes UK Finance Minister Rishi Sunak to probe the bulls while highlighting the British government’s readiness to step back from the deal if it’s not in their favor. The diplomat said, per the news, “We should not be going for a deal at any price, that would be the wrong thing to do and I think there are things that are important to us in these negotiations, and we’ve been entire, as I said, reasonable, consistent and transparent.”

Also on the negative side are the fears that the US Federal Reserve (Fed) will soon have to hand over $500 billion of emergency program funds to Treasury Secretary Steve Mnuchin.

Elsewhere, virus treatments are battling the risk-off mood. The Telegraph came out with the news suggesting that Pfizer will soon get approval from the UK government for its COVID-19 vaccine whereas Regeneron’s antibody treatment gets a go from the US Food and Drug Administration (FDA). It should also be noted that chatters surrounding a gradual easing of the covid-led activity restrictions also favor the GBP/USD bulls off-late.

Against this backdrop, S&P 500 Futures mark 0.10% intraday loss by press time.

Moving on, GBP/USD traders will pay close attention to the preliminary readings of November month PMI data for fresh impetus. Though, this doesn’t dim the importance of virus, vaccine and Brexit updates.

Technical analysis

A clear break above the monthly high near 1.3315 becomes necessary for the bulls before challenging the yearly top of 1.3482. Meanwhile, a 10-day SMA near 1.3240 offers immediate support to watch during the quote’s pullback moves.

 

With the continued escalation in the coronavirus cases on both sides of the Atlantic, the governments contemplating whether to ease or extend the lockdowns announced earlier this month.

The UK recorded 18,662 new coronavirus infections on Sunday and 398 deaths, according to official data published on Sunday.

Despite the surge in new cases, the government is mulling easing the COVID-19 restrictions in Scotland, Wales and Northern Ireland over Christmas to allow families to get together.

In this regard, The Telegraph reported that the Transport Minister is likely to announce on Monday that the quarantine restrictions will end in time for Christmas.

On the contrary, Germany’s Finance Minister Olaf Scholz told Bild newspaper that “everything points to the fact that the current restrictions must be extended for some time beyond Nov. 30,

Separately, Germany is said to extend its measures to contain the COVID-19 pandemic until December 20, Reuters reported, citing a senior politician and a draft proposal obtained.

Meanwhile, the French government spokesman Gabriel Attal said Sunday, “Emmanuel Macron will give prospects over several weeks, especially on how we adjust our strategy. What is at stake is adapting lockdown rules as the health situation improves while avoiding a new flare-up in the epidemic.”

“There will be three steps to (lockdown) easing in view of the health situation and of risks tied to some businesses: the first step around Dec. 1, then before the year-end holidays, and then from January 2021,” Attal added.

Related reads

  • UK to give green light to Pfizer’s covid vaccine by end of this week – The Telegraph
  • Forex Today: hints on economic progress coming up next
  • AUD/NZD fails to respect Friday’s bounce off seven month low.
  • New Zealand Retail Sales grew 28% in Q3 versus prior contraction of 14.6%.
  • 10-day SMA, July low restricts immediate upside, bears can eye 50% Fibonacci retracement level of March-August upside.

AUD/NZD stays heavy near the lowest since late-April while taking rounds to the intraday low around 1.0530 during the early Asian session on Monday. The pair recently slumped from 1.0555 to 1.0531 after New Zealand’s (NZ) third quarter (Q3) Retail Sales offered a big beat to the prior release.

Not only the NZ Retail Sales that rose beyond the previous -14.6% to 28% but the Retail Sales ex-Autos, mostly known as Core Retail Sales, also recovered from -13.7% prior to +24.1% QoQ in the Q3.

Read: New Zealand’s Retail Sales unexpectedly jumps 28% in Q3, NZD/USD bounces

Following the data, the pair extends its reversal from a confluence of 10-day SMA and July low, currently near 1.0563/58, which in turn drags the quote towards the recently flashed multi-day low of 1.0510.

During the pair’s additional weakness past-1.0510, the 50% of Fibonacci retracement level near 1.0480 and March 25 high around 1.0220 will lure the AUD/NZD bears.

On the contrary, an upside clearance of 1.0563 on a daily closing isn’t enough to recall the bulls as 200-day SMA and a falling trend line from October 08, respectively around 1.0655 and 1.0700, stand tall to challenge the recovery moves.

AUD/NZD daily chart

Trend: Bearish