Post-Christmas holiday trading is very thin on news and trading volume, with the markets set to resume normal trading in the first week of January.
The last week of trading for 2020 starts with some good news stories lifting the global markets. US President Trump decided against vetoing the latest US stimulus aid bill and averts not only a Federal Government shutdown but restores unemployment benefits. He did not get his request for the direct payments to rise from $600 to $2000 but tweeted out that more money was on its way. There is also an extension to the moratorium on evictions, support for small businesses and aid for schools. President Trump is unhappy with what he considers a wasteful number of items that are included within the bill and has called on Congress to remove them.
The US dollar is weaker at the start of the London session against all of the major currency pairs, as it resumes the bearish trend it has been in since the height of the coronavirus pandemic. A break lower than 89.730 on the US dollar index would signal not only a new December low but a new low for the year and open up the possibility that the dollar gets sold off further towards the 2018 lows.
The UK signed a new free trade deal with Turkey worth in the region of £19 billion. Turkey’s top exports include machinery, iron, steel and oil as well as jewellery and clothing. The deal is the UK’s 5th largest trade deal after Japan, Canada, Switzerland and Norway and part of a larger 62 trade agreements made before the January 1st Brexit deadline.
The pound starts of the session mixed against the majors and down against the euro.
Cable looks to be ready to trade higher and will target the 1.4000 big figure next, should the US dollar continue to weaken.
EU officials are set to meet today to discuss the EU/UK trade agreement which was agreed upon by negotiators on Christmas eve. UK parliament should vote on or before Thursday this week.
EURUSD should be able to test the 1.2300 level this week as the US dollar declines. Last week’s price action traded within the previous week’s range, so after the compressed trading due to the holidays we may get an impulsive move higher.
EURJPY looks interesting as it crosses the 126.50 level today, having made a 2020 high at the end of August, a break above 127.00 is looking possible this week. The daily MACD is showing no bullish momentum currently but the moving averages are starting to converge.
Major support is found at 123.00 and the 200 daily sma. The Nikkei 225 had followed the other major stock markets in Asia higher today as the world went risk on after President Trump’s signing of the bill.