USD moves higher across the board

Yesterday the U.S. Congress passed a $892 billion COVID-19 aid package which is now awaiting the singing of the US president Donald Trump in order to be finalized. The positivity from the announcement could be strengthening the USD. After the package was announced various institution stepped in to provide their forecasts on the possible impact of the new package on the economy. According to Capital Economics, U.S. gross domestic product could reach 5.5% next year, higher compared to previous forecast of 5%. Despite the fact that many analysts and market participants view the package as rather small compared to what is believed to be required for a swift economic recovery, the greenback strengthened across the board. Nevertheless, for the time being the general sentiment is that more fiscal stimulus packages are required and could possibly be passed in the near future. The USD could also be supported by the fact that vaccines continue to be distributed and used around the world. Some analysts believe that if the vaccines prove to be effective, then the US government and the Federal Reserve may not be so bearish thus pushing the greenback higher. However, vaccine effectiveness may require as much as the first quarter of 2021 to provide solid evidence over its effectiveness. In addition, yesterday US consumer Confidence for December dropped. Consumer confidence continues to be hurt by a rise in COVID-19 making the last quarter of 2020 a continuation of economic deterioration in the US. Looking forward, Wednesday seems to be a very interesting day for the USD due to the volume of financial releases. In our view, releases that relate to December as is the case of the University of Michigan Sentiment Final reading could be of more interest for traders.
EUR/USD was forced below our current (R1) 1.2210 resistance level after its drop on Tuesday. However EUR/USD’s resurgence in today’s Asian session seems to point out that traders may be targeting the pre mentioned level once again. If the upward momentum continues then the (R2) 1.2275 and the (R3) 1.2345 could be the next levels higher noted in our H4 chart. On the other hand if the currency continues to shed ground the (S1) 1.2125 support level could come into play first. Even lower and if the currency pair extends its drop then the (S2) 1.2060 hurdle could be tested first while the (S3) 1.1990 barrier is our lowest level for this analysis. At the moment the RSI indicator below our chart is below the 50 level possibly displaying the bears are in control.

GBP remains in focus on Brexit hopes

Negotiations on the Brexit front are still ongoing thus chances of a deal are still on the table. If a deal is finalized GBP is expected to take on tremendous volatility. Deal or no deal the UK is scheduled to leave the EU on Dec. 31 when its current free trade arrangements will be terminated. Thus more pressure is currently placed on both sides to make adjustments. Headlines regarding the matter could also provide volatility for GBP.
In the latest 4 hour sessions GBP/USD was trading between our (R1) 1.3415 resistance level and our (S1) 1.3360 support level. If the currency is to ascend then the next levels higher above the (R1) could be the (R2) 1.3460 that was last tested on the 22nd of December but cable moved lower thereafter. We have also noted the (R3) 1.3505 that was last seen on the 18th of December and in our opinion an attempt to test this level could confirm the bulls are in charge. However if traders are in favor of selling cable then the (S1) could be tested first. Even lower we have noted the (S2) 1.3310 hurdle and the (S3) 1.3265 line. We tend to see the (S2) 1.3310 as a defining level for the bears as it was tested yesterday but the currency pair bounced off it and moved higher.

Other economic highlights today and early Wednesday

In the European morning today we get the German Import prices for November and a little bit later we get the France Producer Prices for November. In the US session we get the Consumption, Adjusted for November, US Durable Goods for November and the Weekly Initial Jobless Clm. Later in the American session we get the Canadian GDP for October, the US University of Michigan Sentiment Final for December and the New Home Sales-Units for November. On Thursday’s Asia session Bank of Japan Governor Haruhiko Kuroda delivers speech at Japan’s business lobby Keidanren.

EUR/USD 4時間チャート