Last Week’s Market Overview
ECB held their last meeting in 2020 on last Thursday. As the market expected, additional 500 billion euros ($607 billion) were added to the bond-buying program and the deadline was extended to March 2022. The market did not react much to the event since it was eyeing on the progress of Brexit talks.
The EURUSD dropped at the beginning of last week as the market was worried that it would be difficult to reach an agreement before the deadline (Wednesday) of the talks. However, both sides finally extended the trade talks until Sunday. As a result, the market became more optimistic about a Brexit deal, the EURUSD rebounded quickly.
Therefore, the EURUSD was hovering in the consolidation zone ranged from 1.2055 to 1.2180 for the whole week.
The last week’s best performer among all major currencies is definitely AUD. The upside movement was probably fuelled by vaccine optimism and the slight risk-on sentiment in the market.
The economic statistics were encouraging too, with ANZ job ads, Performance of Services, business confidence and consumer sentiment showing a signal of robust recovery.
Although the China-Australia relationship worsened and various kinds of Australian products were suspended, many people believe that China must rely on Australian iron ore which is the major export for the foreseeable future, so the market did not lose the confidence on AUD due to the news. All in all, AUD has surged to a new high since mid-June 18 in last week.
Market Change Last Week
Market Focus This Week
Interest Rate Decision (US, UK, Switzerland & Japan)
The central banks of several countries including the US, UK, Switzerland and Japan are going to have their last meeting in 2020 and decide the interest rate. The meetings are expected to respond to economic threats posed by the (second-wave) COVID-19 pandemic. After the plummet of economic output in the second quarter, the conditions became much better and the GDP rebounded in the third quarter in all these four countries. However, the coronavirus revived at the beginning of fourth quarter and the situation was even serious than that in the second quarter, so stricter restrictions and lockdowns were implemented. As a result, the GDP growth is decelerating in some countries like the US and Japan. For the UK and Switzerland, it is highly possible to experience downturns again.
Market Consensus on Monetary Policies
|Central Bank||Market Consensus|
|Fed (US)||Hold the Fed fund rate at near zero Increase monthly US Treasury purchases by about 50% Add measures targeted at encouraging credit provision to business|
|SNB (Switzerland)||No changes are expected as the interest rate is already -0.75% which is the lowest among major countries|
|BoE (UK)||May cut the rate to just above zero May ramp up the pace of QE purchases|
|BoJ (Japan)||Keep the interest rate at -0.1% Maintain large monetary stimulus programme Extend a range of schemes aimed at easing corporate funding strains|
US Dollar Index (H4)
The USD kept hovering between 90.45 and 91.20 for almost two weeks, indicating both bears and bulls could not take control the market.
Both two-line SMA and the RSI are also showing indecisiveness as the SMA is staying flat and the RSI is wavering around 50-interval.
Therefore, it is highly possible to see the sideways price movement in the coming few days. If there are some significant new drivers later, either bulls or bears may dominate and the price will break out the consolidation area, challenging upper resistance at 91.75 or the lower support at 90.00.
Support: 90.45, 90.00, 88.50
Resistance: 91.00, 91.75, 93.20
After breaking the resistance level of consolidation zone at 43.50, the price of black gold continued to surge and it is now trading above 46.00.
The RSI signals the potential trend continuation because it settles firmly between the 50-mark and overbought level. Although the two-line SMA in 4-hour chart do not show a clear direction, we can observe a perfect golden cross when switching into daily chart.
As a result, it is possible for oil price to take a rest around the current price for some days, but the uptrend will resume later, so the price is likely to skyrocket further north in near term.
Support: 43.50, 41.50, 36.50
Resistance: 49.00, 54.30
The New Zealand dollar experienced a strong uptrend last month, but the upward momentums dissipated at the beginning of December. Even though the price rose sharply last week, it is still confined in the consolidation area.
As there is little information provided by the RSI and two-line SMA, it is very likely to continue the sideways trend. Since the price has already reached the significant resistance at 0.7110, it might have a pullback in coming few days. However, the reversal is unlikely to occur, the retracement would be resisted at lower psychological support level at 0.7000.
Support: 0.7000, 0.6800
Resistance: 0.7110, 0.7200
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