• +0.6% - no market moving weekend news, but optimistic U.S. news on COVID-19

• U.S. health expert Fauci upbeat on new vaccines and rollout nL4N2JS06B

• Fauci comments are a potential risk positive for Asian markets

• Austria lockdown extends nL1N2JS083, COVID surges in Portugal nL8N2JS0FA

• Charts; momentum studies, 5, 10 & 21 DMAs track south - negative setup

• Key support at 1.2063, 38.2% November-January rise in view

• Sustained 1.2060 break would be a strong bearish signal

• NY 1.2074 - 1.2114 range is initial support-resistance

For more click on FXBUZ

• AUD/USD starts week on cautious note as reflation trade runs into p/taking

• Weighed down by risk aversion as Wall Street and commodities correct lower

• Weak U.S. data Fri, rising virus toll cast doubts on global growth prospects

• Traders eye China Q4 GDP data due Mon, recovery seen quickeningnL4N2JM0VQ

• U.S. holiday Monday likely to affect trading activity

• Support 0.7675-80, 0.7660-65, resistance 0.7725-30, 0.7750

• For more click on FXBUZ

• Fade from Thursday high stalled above the cluster of support at 103.50-59

• That includes the 10- & 21-DMAs, kijun, tenkan & 50% of January's rebound

• Shorts likely to lighten up near 103.60, but go with flow below 103.50

• Stops set above 104.20, Thur's EBS high & down TL from March come Monday

• Burden of proof on bulls while below the TL, cloud & 100-DMA

For more click on FXBUZ

The dollar rose broadly on Friday as dour U.S. retail sales sparked safe-haven flows, augmenting gains that started when investors took profits on popular reflation trades after President-elect Joe Biden nL1N2JP30B announced his economic relief package.

Italian political uncertainty added to the drag on the euro, helping to guide EUR/USD down to its lowest since Dec.
10 and close to important support from the 50-day moving average, the 38.2% Fibo of the November-January advance and Dec.
9 swing low at 1.2076/64/58 on EBS.

A bearish 10- and 21-DMA cross nL1N2JQ1NM and overbought sell signals from weekly RSIs and Bolli bands make holding the nearby supports all the more important for a market still quite heavily spec long.

The dollar index extended its recovery from pandemic lows to new January highs, largely on the back of the EUR/USD's fall, as risk-off flows outweighed slippage in TIPS yields as global demand for Treasuries led the price action nL1N2JQ1FR.

Markets gave stellar U.S. industrial production data nAQN03OGJ6 less weight than the retail sales miss since retail and services, the sectors most undermined by the pandemic, far outweigh manufacturing as GDP inputs.

Sterling's repeated run-ins with resistance above 1.3700 ended poorly again amid broader dollar gains and stocks losses, but it suffered no major damage to its uptrend nL1N2JQ1IY.
A close below last week's 1.3533 low would be needed to undermine the dip-buying bias.

The safe-haven currencies -- dollar, yen and Swiss franc -- ran as a pack, leaving USD/JPY in the middle of Thursday's range, with prices this week stuck below the down trend-line from March, last at 104.23, and above the 10-DMA, kijun, tenkan/50% Fibo at 103.63/59/50.

USD/JPY's positive correlation to the broader dollar and good demand above 103.50 kept it aloft, if in consolidation.

The bigger yen price swings were against the retreating aussie and other high-beta currencies caught in the de-leveraging undertow nL1N2JQ1SE.
But the yen also scored haven gains against the euro and pound, with EUR/JPY breaking below its last five weeks' range lows.

Commodities weakened amid the dollar's gains, lousy U.S. retail sales and pandemic lockdowns in Europe nL4N2JQ22J and China nL1N2JQ0B4.

A bevy of Chinese data will start the new week, one without U.S. participation during Monday's holiday and no top-tier U.S. data until jobless claims on Thursday.

Instead, investors will watch the Jan.
20 U.S. presidential inauguration and opening agenda from Congress.

For more click on FXBUZ

• Downbeat risk drives US$ & yen buys in Europe's am, NY opens near 0.7740

• Equities, copper fall hard in early NY, AUD/JPY sinks near 79.70

• AUD/USD falls to 0.7682, drop aided by USD/CNH rally near 6.4850

• Equity bounce helps AUD/USD lift near 0.7730, pair still down ~0.84% late

• Techs favor bears, daily RSI drops, 10-DMA & t-l off Nov low pierced

• For more click on FXBUZ

Credit Suisse discusses USD/JPY technical outlook and sees a scope for a move towards 104.77 ahead of 105.86.

"We remain of the view we may be witnessing the construction of a bullish falling “wedge” reversal. Only above 104.77 would see this confirmed though to mark a more important reversal higher to open up a move to 105.68 next, then likely the 200 -day average at 105.86, which we would expect to cap at first," CS notes. 

"Support moves to 103.52/45 initially, then 103.28. Below this latter level would now lessen thoughts of a “wedge” and instead warn of a direct resumption of the downtrend back to the lows and trend support from last July at 102.59/47. Key resistance is seen at the downtrend," CS adds. 

• Jan. 14 rally erased; 10-DMA, t-l off November's low both get pierced

• The bull trend off November's low looks to be in jeopardy again

• Daily RSI implies s-t bear momentum in place, deeper correction due

• The long-term rally off the 2020 low remains intact though

• Longer-term bulls look to buy dips, good support near 0.7400/20

• August, September, November monthly highs sit in that zone

• For more click on FXBUZ

Citi discusses the outlook for the Fed policy trajectory.

"FOMC heavyweights have confirmed that any talk of tapering is premature – with Powell bringing up the rear after Clarida and Brainard earlier in the week. Powell confirmed that the Fed would wait for a sustainable overshoot of their 2% inflation target, and would not seek to “hike rates anytime soon.”.. This confirms CitiFX Strategy’s view that the Fed will undoubtedly remain very dovish," Citi notes. 

"Biden’s announcement was largely in line with expectations, coming in at USD1.9tn. CitiFX notes that this could temper the recent rise in US yields. We believe that the latest moves higher have largely been a function of increased supply expectations and likely overshot," Citi adds. 

GBP/USD tumbled more than a penny from Thursday's 2021 trend high at 1.3712 nL1N2JQ160 as risk markets went into retreat, but cable's relatively shallow pullbacks lately, combined with reliable recent support at the 21- and 30-day moving averages should bolster sterling bulls' confidence.

The pound has struggled to hold above 1.37 in this month's rally as expectations of 2021 dollar weakness have yet to pan out.

But, the bulk of end-2020 positions were held in EUR/USD and to a lesser degree the yen 1097741NNET.
Recent weakness in the euro and yen have been accompanied by relative strength in GBP, AUD and CAD.

The redistribution of short USD positioning, away from the euro 1099741NNET, may continue to push the pound higher while success in UK lockdowns -- despite near-term economic pain -- and the removal of Brexit-related obstacles could potentially resuscitate UK growth.

GBP/USD's bullish structure remains intact above 1.3451, the 50% Fib of 1.3190-1.3712.
A rise above 2021's 1.3712 high would put upper 30-day and weekly Bolli's at 1.3740 and 1.3757 and the April 27, 2018 weekly high at 1.3792 in sharper focus.
For more click on FXBUZ

Bank of America Global Research discusses EUR/USD technical outlook and flags a scope for a dip towards 1.20 which should provide a good entry for longs.

"Euro divergences from RSI and MACD warned of a correction, the channel line has since broken and a decline is underway. We see Fibonacci retracements of 1.2064, 1.1976 and 1.1888 to be aware of. We are uncertain if spot breaks below 1.20. Our year ahead technical view suggests positioning for further upside in 1H21 when this dip looks to be ending. We think the dip in euro is tied to the overbought oil rally and the oversold bond market," BofA notes. 

"We think a dip in euro to 1.20, Brent into the $52s and 30Y UST to 1.75% is the first collusive area to evaluate entering a higher euro, higher 30Y yield and higher Brent oil trend again," BofA adds. 

CIBC Research discusses its reaction to today's US retail sales for the month of December.

"Retail sales disappointed in the US in December, with the 0.7% drop in total sales worse than the consensus forecast for a flat reading and even worse than our below consensus call. Surprisingly, it was online sales that saw the largest drop at 5.8% on the month, although that group remains up by 21% y/y," CIBC notes.

"The disappointment coincided with surging Covid cases and a deterioration in the labor market, but with fresh fiscal stimulus on its way to Americans, spending on goods should have a floor under it while services could continue to struggle," CIBC adds. 

The FX options market is already aware of the downside risk to EUR/USD nL1N2JQ0F5, but next week could see it increase, along with actual volatility, given some significant events that might warrant protection.

President-elect Joe Biden's inauguration and Janet Yellen's confirmation hearing for U.S. Treasury Secretary might give them the opportunity to comment on future policy.
A showdown in Italian politics nL1N2JQ0OE and a European Central bank meeting, with EU PMIs in the mix, too.

A simple one-week expiry straddle offers the right to buy, or sell EUR/USD at a set rate (strike) for an upfront premium.
It's a volatility play, so holders will offset strike risk by adjusting an opposing cash hedge as the spot market moves.

At 6.7, one-week implied volatility is in line with one-week daily historic volatility, which suggests fair value.
It means that EUR/USD's actual volatility only has to match its past week's performance to cover the premium with once daily cash hedging, while any increase can bring unlimited profit potential.

For more click on FXBUZ

• AUD/USD elicited support at 0.7730 after extending south from 0.7805

• 0.7730 approximates to Thursday's low. 0.7805 was Thursday's one-week high

• Thursday's high was notched after dovish Powell comments nL1N2JP2A9

• Subsequent decline influenced by modest Asian and European equity losses

• Nikkei closed down 0.6%. Pan-European STOXX 600 down 0.4% nL4N2JQ22J

• AUD is a liquid proxy for risk. 0.7805 = 14 pips shy of recent 34-month high

• Solid USD/JPY buying seen on EBS since Wed has run into solid resistance

• USD/JPY bulls blocked by cloud and falling trend-line supply nL1N2JQ0I0

• Daily cloud spans 104.32-65 region. TL from March 2020 peak now at 104.22

• USD/JPY sees a 103.65-85 range so far, according to EBS prices Friday

• Japanese importer, investor and other bids trail down from 103.50

• USD/JPY, EUR/JPY relationship weak, 30-day log correlation well under +0.50

• Bears are keeping the EUR/USD well under broken 1.2173 Fibonacci support

• 1.2173 Fibo: 23.6% of the 1.1602 to 1.2349 (November to January) EBS rise

• That increases the odds of a deeper drop to 1.2064 Fibo of the same rise

• S-term there needs to be a break under Thur's 2020 1.2111 low

• EUR/USD Trader TGM2334. Previous update nL1N2JP17R

• EUR/USD has been rallying for months regardless of rising U.S. yields

• U.S/German 10 year yield spreads has been widening but EUR/USD rising

• EUR/USD rose 1.1602 to 1.2349 Nov 4-Jan 6

• Nov-4-Jan 6 US/German 10 yr spread widened 20bps and 40bps Jul-Nov 2020

• EUR/USD traded 1.17-20 Jul-Nov after rising from 1.12

• Spread has widened about 10bps since Jan 6 EUR/USD down 1.2349-1.2110

• Yield swings is an adjustment of an extreme which may soon be completed

• 38.2% 2018-2020 tightening 10 year spread is 170bps, last 165bps

• 
  

• New trend high Thurs but again air above 1.3700 proving to be too thin

• However, pullback from 1.3712 modest at best but easing o/b conditions

• GBP ready to climb again while above 10DMA, 1.3610

• Weeklies building for a more concerted push above 1.3700

• Long lower weekly shadows highlight demand: 10WMA key support 1.3425

• Bulls can still win big on weekly close above the figure nL1N2JO0N3

  For more click on FXBUZ

  
  

• Forward looking FX options reflect near term outlook for EUR/USD

• Two clear themes at play - range trading, and downside protection

• Implied volatility down since last week, consistent with range trading

• Premiums for downside strikes have increased - fear of deeper setback

• Outright buyers of 1.20 EUR put strikes this week - although not large

• We suggested 1-month 1.20 last week, now cost double nL1N2JJ0FK

• Related comments nL1N2JP0NXnL1N2JP0ZB

  
  

  
  

  
  

• AUD/USD swings down to 0.7754 from day high 0.7788

• Tentatively falls back out of Bollinger uptrend channel

• Fri close below 0.7763 dims odds of AUD strength ahead

• Pullback comes with widespread risk-off in Asia stocks

• S&P eMinis slide 0.5% after Biden's stimulus announcement

• Market had mostly factored it in; buy-rumor-sell-fact due

• For more click on FXBUZ

  
  

• EUR/USD opened unchanged at 1.2155 and traded 1.2144/61 in the Asian morning

• Heading into the afternoon session it is trading 1.2140/50

• Muted reaction to leaked Biden stimulus plan and some profit taking on risk

• E-mini futures are down around 0.20% after being up 0.20% earlier

• EUR/USD buyers are tipped ahead of 1.2100 with yesterday's low at 1.2111

• Support is at the 38.2 of the 1.1602/1.2349 move at 1.2063

• Sellers are tipped around 1.2200 with resistance at 21-day MA at 1.2223

• Risk is for lower EUR/USD while the 21-day MA contains rallies

• For more click on FXBUZ

• AUD/USD opened 0.58% higher at 0.7779 as strong commodities underpinned

• It traded up to 0.7788 when Biden's fiscal relief plan was leaked early nL1N2JP30B

• Rally stalled and AUD/USD eased after the plan was officially announced

• E-mini futures went from +0.20% to around minus 0.20% later in the morning

• AUD/USD slipped to 0.7765 and was around 0.7770 into the afternoon

• Support is at the 10-day MA at 0.7752 with buyers tipped at 0.7720/30

• Key support is found at the 21-day MA at 0.7676

• Sellers are tipped around 0.7800 with resistance at the Jan 6 high at 0.7818

• AUD/USD will likely stay in demand on dips while commodities remain buoyant

• For more click on FXBUZ

• AUD/USD slipped to 0.7770/75 from earlier high at 0.7788

• E-minis down 0.25% after being up 0.20% earlier in the session

• Biden stimulus plan already priced in so positive impact starting to fade nL1N2JP30B

• Market may price possible stumbling blocks to get plan through Congress

• AUD/USD 10-day MA at 0.7752 with buyers tipped between 0.7720/30

• Sellers are lined up around 0.7800 with resistance at Jan 6 high at 0.7819

• For more click on FXBUZ

• EUR/USD opens unchanged at 1.2155 after recovering from 1-month low @ 1.2111

• Surge in US jobless claims and dovish Powell offset higher Treasury yields nL1N2JP2JOnL1N2JP2JS

• EUR/USD resistance @ 21-day MA @ 1.2224 and break would ease pressure

• Buyers ahead of 1.2100 limiting downside for now

• Support is at the 38.2 of the 1.1602/1.2349 move at 1.2063

• Key in Asia today will be reaction to Biden unveiling stimulus plan nL1N2JP2UX

• For more click on FXBUZ

Bank of America Global research discusses the ECB policy trajectory in light of EUR/USD rally through the end of 2020.

"We believe that the ECB is a key theme for the EUR this year. The ECB is facing substantial challenges, with limited policy tools. The Strategy Review in the first half of the year is supposed to come up with a plan, but we don't see easy solutions. It is also not clear which way it will affect the EUR, as ECB monetary policy easing tends to support the periphery spreads and sometimes ends up supporting the EUR. In more detail, the ECB is the furthest away from its inflation target it has ever been. Eurozone core inflation is at its lowest level ever, while headline inflation is negative " BofA notes. 

"Although the EUR is currently at its long-term equilibrium, the 2020 EURUSD rally is still a problem for the ECB, in our view. As we argued above, the weak Eurozone data, particularly for inflation and particularly compared with the US, would justify a EUR level well below its long-term equilibrium and therefore current levels. The EUR rally last year contributed to the drop of Eurozone inflation and keeping it down," BofA adds.