Sterling Recovers in Quiet Trading, Oil and Gold Strengthen

Market overviews

Trading in the forex markets is generally quiet in Asian session. Sterling’s broad based recovery suggests that last week’s steep pull back could have completed. Yen crosses are also mildly firmer on optimism over US-China trade deal. These two developments would be the focuses for the rest of the holiday week. Meanwhile, WTI crude oil and gold strengthen quite notably and are worth some attentions too.

Technically, 1.3079 minor resistance in GBP/USD, 143.05 minor resistance in GBP/JPY and 0.8476 minor support in EUR/GBP would be watched. Break will indicate completion of recent pull back in the Pound. USD/JPY recovered after drawing support from 4 hour 55 EMA. Focus will be back to 109.72 resistance and break will resume larger rally from 104.45. That could take other Yen crosses higher too.

In Asia, Nikkei is currently up 0.49%. Hong Kong HSI is down -0.15%. China Shanghai SSE is up 0.30%. Singapore Strait Times is down -0.36%. Japan 10-year JGB yield is up 0.0119 at -0.002.

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China’s soybean import from US surged as both sides prepare for trade deal signing

China’s import of US soybeans surged to 2.6m tonnes in November, hitting the highest level since March 2018. That compared to 1.1m tonnes in October and virtually zero from a year ago. On the other hand, soybean shipments from Brazil was nearly unchanged at 3.9m tonnes, comparing to 3.8m tonnes in October, but down -24% from 5.1m tonnes last year.

Agricultural purchases by China is set to rises further as the US and China are set to sign the phase one trade deal soon, likely in January. US President Donald Trump said on Tuesday that “we will be having a signing ceremony, yes. We will ultimately, yes, when we get together. And we’ll be having a quicker signing because we want to get it done. The deal is done, it’s just being translated right now.”

Chinese Foreign Ministry spokesman Geng Shuang said on Wednesday, “both sides’ economic and trade teams are in close communication about detailed arrangements for the deal’s signing and other follow-up work.”

WTI’s corrective rise sets to extend, for a short while

WTI crude oil jumps notably in Asian session today and it’s now back above 61 handle. With strong support seen from 4 hour 55 EMA, current rebound should be setting the stage for resumption of whole rise form 50.86, through 61.38 temporary top.

However, we’d reiterate our view that such choppy rise from 50.86 should be corrective in nature, as part of the pattern that started back at 66.49. At this point, we don’t expect We don’t expect strong pick up in upside momentum with the next move.

Indeed, WTI shouldn’t sustain above channel resistance for now and upside should be limited below 63.04 resistance. Meanwhile, break of 59.95 support should indicate short term topping and at least bring test on channel support (now at 56.83).

Gold ready to resume up trend through 1557, to target 1625 projection level

Gold surges sharply in the past two days after getting rid of 55 day EMA decisively, breaking 1500 handle. The development now suggests that corrective fall from 1557.04 has completed at 1445.59 already, supported by 38.2% retracement of 1266.26 to 1557.04 at 1445.95.

Further rise should now be seen to retest 1557.04 first. Break will resume whole up trend form 1160.17, as well as that from 1046.37. Next target will be 61.8% projection of 1266.26 to 1557.04 from 1445.59 at 1625.29. As rise from 1445.59 could be the fifth leg of the five-wave sequence from 1160.17, we’d expect strong resistance from 1625.29 to limit upside to bring medium term correction.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2922; (P) 1.2954; (R1) 1.2985; More….

A temporary low is formed at 1.2905, after drawing support from 38.2% retracement of 1.1958 to 1.3514 at 1.2920. Intraday bias in GBP/USD turned neutral first. On the upside, break of 1.3079 minor resistance will suggest that the pull back from 1.3514 has completed. Intraday bias will be turned back to the upside for retesting 1.3514. On the downside, sustained break of 1.2905 will pave the way to 61.8% retracement at 1.2552.

In the bigger picture, rise from 1.1958 medium term bottom expected to extend higher to retest 1.4376 key resistance. Reactions from there would decide whether it’s in consolidation from 1.1946 (2016 low). Or, firm break of 1.4376 will indicate long term bullish reversal. In any case, for now, outlook will stay bullish as long as 1.2582 resistance turned support holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
05:00 JPY Housing Starts Y/Y Nov -12.70% -8.10% -7.40%
13:30 USD Initial Jobless Claims (Dec 20) 222K 234K