The larger-than-forecast drop in U.S. initial jobless claims nL1N2II2LR isn't helping the dollar, which leaves USD/JPY on track to fall to Friday's 103.835 EBS low after large 104 expiries at 10:00ET.

The dollar index is making multi-year lows, forcing USD/JPY, as the second biggest component of the index, lower as well.
Friday's 103.835 low is also the 161.8% Fibo-projected low off yesterday's 104.75-104.40 drop.

It's in play again after the daily tenkan at 104.22, that held Wednesday's low and today's lows until New York opened, gave way.
That comes after Wednesday's 104.75 high was rejected by last week's 104.76 high.

If prices break last week's 103.685 low, the string of four higher weekly lows will also have been broken, signaling resumption of the downtrend since March following a period of consolidation to reset oversold weekly RSIs.

The ISM non-manufacturing report also hits at 10:00 today and may be a catalyst.
Hourly charts are already deeply oversold, so a corrective bounce off 103.83 or 103.68 is possible, but the tenkan at 104.22 would then be favored as a fade point on the way to retesting November's 103.18 nadir.

For more click on FXBUZ

MUFG Research discusses the EUR outlook around next week's ECB policy meeting.

"EUR/USD has advanced further and we have fielded some questions from clients over the potential for more assertive rhetoric or action from the ECB next week when it meets. For sure, FX will get a lot of focus but this has already been a feature of communications – in the minutes of the last meeting the ECB cited “FX developments” alongside COVID infections and vaccine developments as key to determining the monetary policy setting, a clear elevation in importance of EUR movement," MUFG notes. 

"However, as stated yesterday, given the move in this current phase of optimism is more USD selling related, the ECB will be reluctant to escalate their complaint too substantially given the potential for losing credibility. All that is likely is a repeat of the obvious – FX moves have implications for inflation pass-through and therefore is a factor in policy deliberations," MUFG adds. 

Danske Research likes short EUR/GBP exposure around current levels targeting a move towards 0.8650, with a stop at 0.9300.

"While EUR/GBP has been on a steady decline since mid-September, when the cross traded at 0.925, we think there is still room left for further declines near term. We see two main reasons for a stronger GBP near term," Danske notes. 

"Firstly, we expect a relief rally in GBP on the back of a Brexit deal, which remains our base case (60%). A deal is also likely to lead to a slight repricing of the Bank of England, where investors are still pricing in a probability of a rate cut into negative territory, which we think is unlikely in case of a Brexit deal. At the time of writing, investors are pricing in a nearly 30% probability of a 25bp rate cut over the next year.

Secondly, we think GBP, as a cyclically sensitive currency, will benefit near term from risk-on supported by continued positive vaccine news and easing of restrictions in Europe in spring," Danske adds. 

• Clinging to its underlying bull trend but volatility clouding direction

• Early Thurs action negating previous bear session: eyes 1.3481 Sep 1 high

• Consolidation just above 1.3400 giving way to fresh gains: 1.3437 high

• Broad based dollar weakness in the mix but UK vaccine roll out noted

• Brexit remains a loose cannon: EU's Barnier urged not to rush nL1N2II0U6

• London blames EU for impasse: would not agree to extending nL8N2II2E0

  For more click on FXBUZ

  
  

One-week EUR/USD FX option expiry now captures next Thursday's European Central Bank meeting, but dealers haven't added much in the way of event-risk premium, which might be a mistake.

The ECB has already signalled more easing for December, potentially tweaking PEPP, LTRO and APP, so no surprises if they do, but any mention of the exchange rate can prompt a reaction, more likely after recent EUR/USD gains.

Implied volatility gauges actual volatility expectations over a given period and determines the option's premium - holders want actual volatility to outperform it.
One-week implied volatility reflects the spot rally, with an impressive 6.0 to 7.6 gain Monday-Wednesday.
However, even without Thursday's EUR/USD extension to 1.2139, today's 8.3 peak seems a timid gain from 7.6, given that it now includes the ECB announcment.
By comparison, one-week EUR/USD implied volatility added 1.5 when it first captured the September meeting.

Buying one-week-expiry implied volatility dips may therefore be prudent, or alternatively, consider two-week expiry, which also captures the U.S. Federal Reserve meeting and its own FX volatility risk.

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• The signs point to a USD/JPY bearish resumption in coming sessions

• FX traders have steadily exited USD/JPY since Tuesday EBS flow data shows

• USD/JPY bulls fight back ends in failure above kijun line nL1N2IJ0GA Wed

• Spot has seen a 104.23-53 range on Thursday, according to EBS prices

• A break under the 104.00 level would see a deeper drop in coming sessions

• USD/JPY and EUR/JPY 30/60-day correlations remain well above +0.50

• EUR/USD leaning higher for months, but maybe didn't expect break so soon

• However, 1.2100-10 barriers/resistance cleared, opens 1.25+ nL1N2II0LF

• No panic in options, but positioning for continued EUR/USD grind higher

• Implied volatility remains elevated after recent fresh gains across curve

• Risk reversals add more premium for EUR calls over puts this week (upside)

  
  

  
  

  
  

• EUR/USD reaches 1.2125 EBS in Asia. Last higher Apr 30 2018 @ 1.2140

• Monthly low in March 2018 was 1.2155

• High probability that option barriers around 1.2150 will be defended

• Pair poised just below 1.2167 or 50% of the drop from 2014 peak at 1.3995

• Close above 1.2167 would heighten prospects that 1.25-1.26 targets met

• 61.8% of decline from 1.3995 is 1.2599. 200-WMA is 1.2622

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• FX options expire at 10-am New York/3-pm London - Thurs Dec 3

• EUR/USD: 1.2000 (661M), 1.2115 (206M), 1.2200 (390M)

• GBP/USD: 1.3200 (400M), 1.3450 (208M)

• EUR/GBP: 0.9000 (236M). AUD/USD: 0.7385 (200M)

• USD/CAD: 1.2800 (460M), 1.3000 (610M)

• USD/JPY: 104.00 (3.4BLN), 104.45-50 (1.5BLN), 105.00-10 (1BLN)

• Clinging to its underlying bull trend but volatility clouding direction

• Double day high 1.3341-42 in place and trend consolidation low 1.3284

• Wed long lower candle shadow suggests demand is holding

• However, a Dec 16 1.3079-86 cloud twist could drag on price

• Weeklies set for fifth straight bull week but 14-wk positive momentum fading

• Big levels, 1.3481 and 1.3516 standing over the market: we offer at 1.3475

• AUD/USD opened 0.60% higher @ 0.7416 after making fresh 2-year high @ 0.7420

• Profit taking in early Asia resulted in dip to 0.7398 before buyers returned

• There wasn't any reaction to better than expected Aus trade data [nAZN0MUB00

• Buoyant Asian equity markets underpinned AUD/USD later in the morning

• Heading into the afternoon the AUD/USD was unchanged around 0.7415

• A break above 0.7420 targets the 76.4 of the 0.8136/0.5510 move at 0.7516

• Support is at the 10-day MA at 0.7360 and break eases upward pressure

• For more click on FXBUZ

CIBC Research discusses EUR/CHF outlook and flags a scope for a move into 1.10 over the coming months.

"The upcoming ECB policy recalibration, code for more stimulus could risk putting more pressure on the SNB, especially were the ECB to surprise and look to take rates further into negative territory. However, as such an outcome remains a low probability scenario, we do not anticipate that the SNB will have to materially dial up the scale of intervention. This comes as recent weekly sight deposit data reveals a substantial moderation in activity compared to July/August," CIBC notes. 

"The prospect of a more constructive macro outlook in 2021, predicated upon a vaccine supporting a macro recovery, points towards leveraged CHF long positions, from near six-year highs, being unwound. The position reversal will allow SNB activity to be progressively reduced, this comes as EURCHF should head back towards 1.10 for the first time since November 2019," CIBC adds. 

• EUR/USD opened 0.37% higher @ 1.2117, as USD selling resumed during US session nL1N2II2HU

• Light profit taking early Asia took it to 1.2104 before bids underpinned

• Heading into the afternoon it was trading at session high around 1.2120

• Trend higher conformed by break and close above 76.4 fibo at 1.2102

• There isn't technical resistance of note ahead of 2018 highs above 1.2500

• Support is at former resistance at 1.2000/20 where buyers are tipped

• Trend higher in place while 10-day MA (1.1961) holds

• For more click on FXBUZ

• Flat - busy 1.3353-1.3380 range - strong EUR/GBP volumes 90.54-90.66 range

• Brexit trade deal is possible in next few days - BBC nL8N2II5Y5

• BBC uses sources, but has more credibility than most news outlets

• Door open for a Brexit deal - sterling could fly - nL1N2II3C8

• Charts; momentum studies, daily and weekly 5, 10 & 21 MAs head north

• Bias remains higher while 1.3277 21 DMA holds on the close

• 1.3481 September and 2020 high is the initial longer term target

• Cresting 1.3449 upper 21 day Bolli band likely resilient resistance

  For more click on FXBUZ

• AUD/USD is drifting back to 0.7400 after trading at 0.7419 earlier

• Aus trade data a bit better than expected but not having an impact nAZN0MUB00

• Sentiment is bullish, but offers camped at 0.7420 encouraging profit taking

• Trend is higher and only a break of 10-day MA at 0.7359 suggests exhaustion

• For more click on FXBUZ

A Brexit deal, combined with the successful rollout of the Pfizer-BioNTech COVID-19 vaccine announced on Wednesday nL8N2II10B, would be a strong positive for the UK economy and sterling in 2021.

The market expects a deal, as the economic consequences of no deal will be severe, especially for the UK. So far there has been little movement on the key issues throughout the long negotiations.
As always in the Brexit saga, signals on the outcome are mixed, but time is running out.

Sterling came under pressure on Wednesday, with GBP/USD off 0.4% and EUR/GBP up 0.7%, after European Union Brexit negotiator Michel Barnier informed member states there has been little progress on the key differences of fishing rights, ensuring fair competition guarantees and a mechanism to solve future disputes nL1N2II0U6.

The Click here after Wednesday's New York close that a Brexit trade deal could be done in the next few days as negotiating teams work late into the night nL8N2II5Y5.
The key word in the story is 'could', but the BBC are a more reliable news source than most.

Key topside GBP/USD levels are the 1.3481 September and 2020 high, 1.3516 2019 top, 1.3677, which is 76.4% of the 2018-2020 fall, and finally, the 2018 high at 1.4377.

For more click on FXBUZ

• EUR/USD opens 0.37% higher at 1.2117 - a 31 month high

• It closed above the 76.4 of the 1.2556/1.0636 move at 1.2102

• The strong close reinforces the short and medium-term higher

• Sentiment towards the USD is bearish, as various factors weigh nL1N2II2HUnL4N2II010

• Support for EUR/USD at former resistance at 1.2000/20 where buyers tipped

• For more click on FXBUZ

TD Research highlights a scope for 2-way risks for G10 FX into year-end.

"The dollar is starting off December on a weaker footing after a messy end to the prior month saw a sharp squeeze in some key pairs. This comes as equities are also posting solid gains. The final weeks of the year are often kind to stocks, but November’s stellar performance could present some challenges," TD notes. 

"In any case, we note that correlations between equities and the USD are starting to ebb ahead of year-end. This could see more two-way risks emerge in G10FX," TD adds.

• Day's 104.75 high capped by last week's 104.76 high on EBS

• Break above 104.76 needed to avert a third straight inside week

• And target the falling daily cloud and down TL from March, Thur at 105.32

• Prices traded wholly above the 104.22 tenkan first time since Nov. 13

• But prices still stuck in middle of Nov's 103.18-5.68 range

• Best fade trade would be into the main down TL and nearby 100-DMA

• Stop could be placed above Nov's 105.68 high, with a 104 initial target

For more click on FXBUZ

• Cable fell almost to Friday's low on early Brexit threat nL1N2II1B5

• But dollar weakness and S&P's rebound cuts much of those losses

• Markets hoping for Brexit and U.S. fiscal deals nL1N2II2GT

• Neither assured, but big downside if Brexit deal doesn't happen

• Cable is stuck below September's 1.3481 peak, needs deal for clearance

• Second day of minor breach above down TL from 2007, Thursday at 1.3414

• Overbought bearish divergence pattern also warrants watching

• UK's vaccine approval is supportive ceteris paribus nL8N2II10B

For more click on FXBUZ

• Risk-off sinks equities, copper overnight & lifts the US$

• AUD/USD falls in Europe's am, NY opens near 0.7370, slide extends

• 0.7351 trades but a bounce ensues after US ADP report nL1N2IH2IL

• US$ softens on improved risk; equities & copper bounce off their lows

• Yen sales lift AUD/JPY above 77.30, AUD/USD trades above 0.7400 late

• Shallow AUD/USD pull backs makes dip buyers anxious nL1N2II20O

• For more click on FXBUZ

• AUD/USD drops in overnight trade, soured risk sentiment weighed

• Fall stalls short of the 10-DMA, bounce ensues & pair turns +ve on day

• Equity .SPX, copper HGv1, AUD/JPY rallies off lows help buoy AUD/USD

• Pair nears resistance, consolidation range top in 0.7410/15 region

• Those looking to buy a deeper dip might have to become more aggressive

• Should consolidation range top break the phase is likely complete

• Completion implies big rally possible, above 0.8100 can't be ruled-out

• For more click on FXBUZ

ANZ Research discusses GBP outlook into 2021 and targeting GBP/USD at 1.36 by end of Q1 ahead of 1.40 by end of 2021.

"Optimism is skewed towards the UK and EU reaching a trade deal, but the familiar hurdles around fisheries and level-playing-field arrangements persist. Sterling may experience a relief rally if agreement is reached, but we anticipate the GBP’s upside is now more constrained than it would be under a comprehensive economic accord. Much of GBP’s projected rise vs USD next year is down to USD weakness," ANZ notes. 

"Although welcome, a narrow trade deal will inevitably result in heightened trade friction, which will weigh on growth as the economy adjusts. We look for GBP/USD to move towards 1.40 but remain below its post ERM average of 1.58," ANZ adds.