Novosti i prognoe: devizno tržište od 26-12-2021

• GBP/USD seesaws around monthly high amid holiday-thinned trading session.
• UK covid infections refresh record top, PM Johnson may unveil new activity restrictions for London.
• Chancellor Sunak braces for job cuts over the next three years, UK voters believe Brexit has gone badly, worse.
• Off in the UK, a light calendar could restrict market moves.

GBP/USD takes rounds to 1.3400 during an inactive Asian session on Monday. The cable pair snapped a three-day uptrend near the monthly high the previous day as fears over South Africa-linked covid variant and Brexit escalate. However, an offer in the UK and holiday mood elsewhere in the west restricts the market’s moves of late.

With a sustained run-up beyond 100,000 daily covid infections in the UK, recently around 120,000 cases, the British policymakers are pushed to consider experts’ advice for tougher activity restrictions. “Prime Minister Boris Johnson and his Cabinet are expected to review the latest data and advice from experts on Monday to decide if further restrictions need to be brought in for England as well,” said LiveMint. It’s worth noting that Wales, Scotland and Northern Ireland have fresh virus-led lockdown measures starting from Sunday.

On a different page, a survey from the research and strategic insight agency Opinuim states, “Six out of 10 voters in the UK now believe that the country's split from the European Union has either gone bad or worse than they expected.” The findings also mentioned, “42% of people who voted to leave the EU in 2016 now have a negative view of how Brexit has materialized.”

It’s worth noting that the UK’s newly appointed Brexit Minister Liz Truss held her first phone talks with European Commission vice-president Maros Sefcovic but couldn’t provide any major positives.

Elsewhere, UK Chancellor Rishi Sunak is said to prepare for job cuts on the UK civil service across Whitehall over the next three years, per the Financial Times (FT). “Sunak is working with the Cabinet Office to oversee the cuts as part of efforts to secure savings worth 5% of Whitehall departments’ day-to-day spending budgets by 2024-25,” the news adds.

On a broader front, the Omicron woes are firming and so do the Russia-Ukraine tussles, which in turn weigh on the GBP/USD prices. However, optimism surrounding President Joe Biden’s Build Back Better (BBB) stimulus plan and an 8.5% jump in US retail sales, per Mastercard data, challenge the pair bears.

Amid these plays, GBP/USD prices grind higher surrounding the monthly peak but the bears remain hopeful considering the negatives.

Given the off in the UK and holiday mood across the board, GBP/USD may remain sidelined. However, US Dallas Fed Manufacturing Index for December, expected 13.2 versus 11.8 prior, can offer intermediate moves, in addition to the Brexit and covid headlines.

Technical analysis

Failures to cross 50-day EMA and 38.2% Fibonacci retracement of October-December declines, around 1.3415-20, keep GBP/USD sellers hopeful to revisit the sub-1.3300 area. However, tops marked during November 30 and mid-December around 1.3375-70 offer immediate support to the cable pair.

Amid a slew of negative news concerning the COVID-19 variant linked to South Africa, Reuters shared a positive update from the global payment network Mastercard.

“US retail sales rose 8.5% during this year's holiday shopping season from Nov. 1 to Dec. 24, powered by soaring e-commerce sales,” said the news.

Mastercard’s SpendingPulse also mentioned, “US e-commerce sales jumped 11% in this year's holiday shopping season, yet again underscoring the COVID-19 pandemic's role in transforming customers' shopping habits.”

On the same line, Senior Advisor for Mastercard Steve Sadove said, “Shoppers were eager to secure their gifts ahead of the retail rush, with conversations surrounding supply chain and labor supply issues sending consumers online and to stores in droves.”

“Holiday e-commerce sales made up 20.9% of total retail sales this year, the data showed, noting that the sector continues to see growth as consumers enjoy the ease of browsing and buying in the comfort of their homes,” adds the news.

FX implications

The news seems to have played a role in restricting the market’s negative reaction to the Omicron fears, helping the AUD/USD to defend 0.7200 during the early Asian session on Monday.

Read: AUD/USD extends pullback from monthly high towards 0.7200 amid Omicron woes

“I'm the tiebreaker. I'm the tie vote,” said US Vice President Kamala Harris while shrugging off fears over US President Joe Biden’s Build Back Better (BBB) stimulus plan during an interview on CBS' "Face The Nation" television show.

US VP Harris also cited battling inflation and coronavirus as major concerns and mentioned, “The United States must address the rising cost of consumer goods,” on the stated TV appearance.

“The United States and Russia are in direct talks about Ukraine,” adds US VP Harris.

It’s worth noting that Goldman Sachs recently raised doubts over the passage of the BBB while saying, “While Congress is likely to approve some new spending on manufacturing and supply chain-related incentives, we no longer expect the Senate to pass the Build Back Better bill and the near-term spending it includes on the extension of the expanded child tax credit."

FX reaction

Given the push for inflation control hints at tighter monetary policy, the US dollar should have benefited from the news. However, holiday mood restricts the market reaction despite helping the greenback and adding to the risk-off mood.

Read: AUD/USD extends pullback from monthly high towards 0.7200 amid Omicron woes

• EUR/USD fades bounce off 200-SMA, grinds lower amid an inactive session.
• Bearish MACD signals, repeated failures to cross monthly resistance line favor sellers.
• Convergence of 100-SMA, 50-SMA adds to the downside filters.

EUR/USD stays pressured towards 1.1300 during a holiday thin Asian trading session on Monday.

The major currency pair bounced off the 200-SMA level, near 1.1305, the previous day but the virus-led market fears seem to weigh on the quote, joined by bearish MACD signals and multiple pullbacks below a downwards sloping trend line from November 30.

Even so, a confluence of the 100-SMA and 50-SMA, around 1.1290-95, becomes a tough nut to crack for the pair sellers before targeting 1.1260 and the monthly low surrounding 1.1260.

Meanwhile, recovery moves remain elusive until staying under the stated resistance line, close to 1.1350 at the latest.

Following that, the November 30 peak of 1.1382 and the 1.1400 threshold will be crucial before activating the run-up towards October’s low of 1.1524.

To sum up, EUR/USD bears remain in command but the key resistance line and SMA confluence could restrict the pair’s short-term moves.

EUR/USD: Four-hour chart

Trend: Further weakness expected

• AUD/USD begins the week with a downside gap, seesaws above 0.7200.
• Omicron covid fears escalate as virus variant restricts year-end celebration.
• US VP Kamala Harris stays hopeful over BBB, US retail sales jumped 8.5% in holiday season.
• Markets in Australia, New Zealand, UK and Canada are off, light calendar also signals an inactive session.

AUD/USD remains on the back foot around 0.7220, stretching Friday’s pullback from the monthly top during the early Monday morning in Asia.

The risk barometer portrays the market’s sour sentiment as the COVID-19 variant linked to South Africa, dubbed as Omicron, ruins the Christmas celebrations. Adding to the bearish bias are the escalating geopolitical tensions between Russia and Ukraine. However, an off in multiple global markets, including Australia, limits the liquidity in the market amid an absence of major data/events.

“Airline carriers globally scrapped at least 2,401 flights on Friday, which fell on Christmas Eve and is typically a heavy day for air travel, according to a running tally on the flight-tracking website FlightAware.com,” said Reuters during its latest report. “Commercial airlines around the world canceled more than 4,500 flights over the Christmas weekend, as a mounting wave of COVID-19 infections driven by the Omicron variant created greater uncertainty and misery for holiday travelers,” adds the news.

On December 25, China reported 206 new COVID-19 cases versus 140 the previous day whereas Australia’s most populous state New South Wales (NSW) unfortunately reported a new high in coronavirus infections, to 6,394, while ABC news cites 36% fall in tests. It’s worth noting that South Australia announced new activity restrictions considering a record 774 infections, per ABC news. On a broader front, Reuters’ tally signals, “More than 279.06 million people have been reported to be infected by the novel coronavirus globally and 5,693,749​ have died.”

Elsewhere, Russia-Ukraine tussles couldn’t benefit from Moscow’s withdrawal of 10,000 tops from drill near Kyiv, term as Christmas de-escalation by The Guardian. While US Vice President Kamala Harris said on the CBS interview that the US and Russia are in talks about Ukraine, German officials will hold a meeting with their Russian counterpart for the same on Monday.

Alternatively, US VP Harris sounds optimistic about getting President Joe Biden’s Build Back Better (BBB) plan despite the latest challenges raised by Senator Joe Manchin. Goldman Sachs raised doubt on the issue while saying, “While Congress is likely to approve some new spending on manufacturing and supply chain-related incentives, we no longer expect the Senate to pass the Build Back Better bill and the near-term spending it includes on the extension of the expanded child tax credit"

Also, a report from Mastercard, shared by Reuters, shows that the US retail sales rose 8.5% during this year's holiday shopping season from Nov. 1 to Dec. 24.

It’s worth noting that the bond markets were off on Friday and the equities were open for a short session and hence couldn’t offer much direction to the AUD/USD prices. Also, the holiday mood, light calendar and off in Australia add to the trading barriers. Even so, fears relating to the Omicron, uncertainty over the US BBB stimulus plan and geopolitical tension between Russia and Ukraine may weigh on the Aussie pair for the short term.

Technical analysis

AUD/USD fails to extend the upside break of 200-SMA beyond a monthly resistance line as the MACD teases bears and RSI flirts with the overbought territory. This, in turn, hints at a pullback towards the key SMA level surrounding 0.7180 and then to 100-SMA near 0.7135. However, bears may wait for a clear break of horizontal support from November 30, close to 0.7090, for confirmation before challenging the yearly low of 0.6993.

Meanwhile, an upside clearance of the stated resistance line, around 0.7255, will need validation from the November 12 low of 0.7274 before pulling the trigger for 0.7370.