The market is running down the year of 2020 with stocks at elevated levels after pricing in stimulus and trade deals. Markets in Japan and Germany are closed today for New Year celebrations and will not reopen until next week. The early closure means that liquidity which was already lower than average will be much lower today. Traders should take caution as a result. In the UK the Queen signed the Brexit trade deal into law after the deal won approval from the House of Lords. This has removed a substantial amount of risk from the market but there is an expectation that the deal has already been priced into the market. A report in the Guardian overnight said that the rollout of the vaccine has been delayed by up to 3 months in the UK because the Government has decided to administer the first round to a bigger portion of the population than originally planned for. This has delayed the giving of the second round of vaccine. The vaccine requires two rounds to be effective but there is concern that the increased length of time between the injection of the first and second doses may result in a much lower response from patients. In the US Senate Majority Leader Mitch McConnell has said that there is no realistic path to quickly pass the $2000 stimulus. He said that the Senate won't split the three issues President Trump wants: $2000 checks, Section 230 repeal and an election fraud commission. This has caused a pause in the move higher in US markets. Chinese Manufacturing PMI declined to 51.9 against an expected 52.0 and a previous read of 52.1. Chinese Non-Manufacturing PMI declined to 55.7 against an expected 56.3 and a previous read of 56.4. The Hang Seng has closed higher by 0.31% and the Shanghai Composite has closed up 1.72%. Gold is trading at 1893.00 while USDJPY is trading at 103.150.

The focus of the calendar today will be on US Unemployment Claims which are expected to come in at 832K from 803K last week.



The USDJPY is consolidating after it found resistance at the 105.678 level last month and went in search of support with a move that took price down to 103.180 area. Support was broken around the 104.000/103.850 area followed by 103.500. The loss of this area opened the way to 103.300, with further support at the 103.150 level, which is followed by 103.180 and the 103.000 area. These levels have been tested and 103.000 is now acting as support. The 102.900/102.800 area may also provide some support on a break of 102.750 followed by the 102.500. This is in turn followed by potential support at 102.275. The 102.000 level may be used in price break these potential support with a view to testing down into 101.000.

In the short term the 103.180 area is being tested as resistance and above this the 103.500 is followed by the 103.685 level and 103.910. The potentially resistive 104.000 area is followed by 104.480/104.500, 104.750 and 105.000. The 105.500 area is acting as resistance followed by 106.000, 106.500 and the former support levels at 106.680/106.630. Above the 107.000 round number, the 107.680/107.600 area, may be used as resistance, followed by 108.000 and 108.480, with the 109.500 area above. A rally above the 109.500 level may seek to take price up to engage the 109.700 area of resistance from December which is followed by the 109.850/110.000 area. This area has acted on price in the past and was retested as resistance in February, with a breakout to the high at 112.227. The lower high at 111.700 may also act as resistance. A break above this area may open the path to the pair potentially attempting to gain a foothold above this resistance and establish a base to engage the 113.000 area. A break above this level may seek to test the 114.000 level followed by the potential resistance at 115.000.




The EURGBP chart is showing that the pair has broken down from the March high, 0.9500 level and is currently trading around 0.9000 after finding support at 0.8865. The pair tested 0.9292 early last month and has created lower highs at 0.9230 and 0.9217. The pair is now trading at the 0.9000 round number, after the breakout above the trend line stalled just above 0.9200. Support has been re-established at the 0.8865 area as the key support as the June low and is now where the trend line is positioned. This is creating a temporary floor under the price action. Support at 0.8813 is followed by the 0.8750 area and the 0.8700 level. A loss of this level may push price down to 0.8660 level. Support may be seen at 0.8645 followed by 0.8620/0.8600. Below this level, the 0.8500 area may be supportive again, followed by the 0.8412 area. The low at 0.8276, from December 2019, and then the 0.8250 level may also be used as potential support for the pair.

Resistance may be used at 0.9050/0.9065 followed by 0.9084 area, followed by 0.9068. The area above 0.9100 may continue to offer resistance, with a focus on 0.9150 followed by 0.9177. The 0.9200 round number may provide further resistance followed by the 0.9235 area. A move back higher from there, targets the 0.9250 area, followed by the higher high at 0.9275. Above this area the 0.9290/0.9300 area comes into play followed by the August high around 0.9323. The current high at 0.9500 remains the level to beat for buyers. A break higher may seek to test the 0.9550/0.9560. Beyond this the potential resistance area at 0.9620 might be used ahead of the 0.9700 level. The next area of interest may be found at 0.9720, followed by 0.9750 which may also be used as resistance to any potential move higher, while above the area the 0.9800 area may further resist attempts to push price up to the 0.9900 level. The round number level may also come into play at 1.0000.

Phillip Konchar

Core Spreads

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