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DAILY ANALYSIS

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Forecasting Strategy for Short Term Trade

EUR/USD

It’s been a choppier session than some might have expected on the eve of Christmas eve. Having dipped to sub-1.1300 levels at one point earlier on during US trading hours, EUR/USD has now recovered back to the 1.1330s and is eyeing a test of weekly highs just to the north of 1.1340. The drop under 1.1300 was likely spurred by the release of a batch of broadly strong US data at 1330GMT.

To recap quickly; the November Core PCE report was hotter than expected at 4.7%, Durable Goods Orders saw solid MoM growth November and Personal Income and Spending both saw healthy MoM gains (though were slightly negative when adjusted for inflation).

USD/JPY

The US dollar extends its rally against the Japanese yen, advancing for the third consecutive day, trading at 114.36 during the New York session at press time. Positive news on the Covid-19 Omicron-variant front is cheered by investors as the Santa Rally finally kicked in. European equity indices rise between 0.93% and 1.42%, while US stock indices advance between 0.62% and 0.70%.

GBP/USD

GBP/USD has preserved its bullish momentum and reached its highest level since late November at 1.3388 early Thursday. Easing concerns over tighter Omicron-related restrictions in the UK and some positive Brexit headlines help the British pound attract investors but the technical picture suggests that there could be a correction before the pair can extend its rally.

USD/CHF

The USD/CHF fall continues for the second consecutive day, trading at 0.9177 during the New York session at the time of writing. The Santa Rally arrived, as shown by US equities gaining between 0.69% and 0.85%, as market mood improved. Since Wednesday, investors’ confidence rose when South Africa reported that people infected with the Omicron variant are 80% less likely to be hospitalized. Additionally, the US Food and Drug Administration (FDA) approved Covid-19 emergency treatments to Pfizer and Merck in the last two days, spurring another leg up in stocks.

The USD/CHF stills range-bound, even though it broke below the confluence of the 50 and the 100-day moving averages (DMAs) but so far has been unable to break below the 200-DMA at 0.9175.

AUD/USD

Since rebounding from the 0.7200 level during Asia Pacific trade, AUD/USD has advanced, though in recent hours, has been going sideways in the 0.7230s area, after running into resistance ahead of the 0.7250 mark. At current levels, the pair trades higher by about 0.3% on the session, taking its on-the-week gains to about 1.6%. That’s an impressive move higher given that the final week before Christmas is typically characterised by low volumes and volatility.

A pick-up in optimism that the Omicron variant won’t derail the global economic recovery amid indications it is significantly milder than Delta and the approval of two new pills in the US for at-home Covid-19 infection treatment have been the main factors driving risk appetite and helping to drive the Aussie higher this week.

XAU/USD

Risk sentiment is firm and the US dollar is on the backfoot, giving the yellow metal room to breath above water following the prior day's rally.  Investors are betting that the latest COVID variants will not disrupt global development and this has given the bulls on Wall Street the shot in the arm they needed at this time of year. 

In turn, this has promoted a bid in gold despite regulators' concerns about the spread of the new variant, Omicron. At the time of writing, gold is trading at $1.809 and is higher by some 0.35% on the day so far after travelling from a low of $1.798.91 to a high of $1.810.74. 

#JP225

The Nikkei 225 in Japan nudged 0.83% higher to close at 28.98.37 while the Topix index gained 0.91% to 1.989.43.

Major indexes are still on track for a Christmas week gain, with trading thinning as the holidays approach. The latest surge in coronavirus cases because of the omicron variant has been hanging over markets, along with concerns about rising inflation and its impact on economic growth.

#HK50

Shares in Asia-Pacific rose on Thursday as fears over the omicron Covid variant eased. Hong Kong-listed shares of Chinese e-commerce titan JD.com plunged 7.02% while Tencent surged 4.24%.

Those moves came after Tencent announced it will distribute the majority of its shares in JD.com to its shareholders — valued at 127.7 billion Hong Kong dollars (about $16.37 billion), based on JD’s Wednesday close in Hong Kong. Hong Kong’s Hang Seng index closed 0.4% higher at 23.193.64.

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