eFXplus DATA

ANZ Research discusses its expectations for this week's FOMC and DEC December policy meetings. 

"We expect no change to FOMC policy or rhetoric. Chair Powell is likely to reiterate that the economy remains stable despite elevated uncertainties, while suggesting that policy rates are now at an appropriate level. Furthermore, we expect him to emphasise the need for a material change in the outlook to warrant any further easing," ANZ projects, 

"The ECB meets but, with signs of growth stabilisation and a coming review of policy strategy, it is unlikely we will see any change in policy at present. We expect new forecasts for growth and inflation," ANZ adds. 

• Last week's USD/JPY 108.43 low retested before a modest bounce

• USD/JPY yet to close below 23.6% of Sep-Dec rise, 55DMA at 108.48

• Huge NFP beats Friday finally gets some notice amid events risks

• Massive $2.3bln of 109 expiries Tuesday a likely a delta-hedging draw

• A sub-108.23 - cloud top & Nov. 14 pullback low - close ends uptrend

• Three weekly sell signals on Friday put the onus on bulls nL1N28J0J9

• GBP/JPY will fall nL1N28J0RD if UK vote, trade war news disappoint

• GBP/USD ends NY 1.3150, +0.11%; NorAm range 1.3176-1.3136

• Pair drifts higher on upbeat Tory elex vibe, exp'd orderly Brexit Jan 31

• UK Tory election hope propels GBP/USD to 7-mos high abv key Fib nL1N28J0IN

• USD soft on back of China exp miss, Dec 15 tariff uncertainty nL4N28I11X

• EUR/GBP adds to gains +0.12% at 0.8410, Mon range 0.8426-0.8394 nL1N28J0RL

Danske Research discusses its expectations around this week's FOMC meeting. 

Following three cuts in a row, we expect the Fed to remain on hold (target range 1.50-1.75%) when it meets this week. We do not expect major changes to the statement.

Focus is likely to be on the updated ‘dots’ (i.e. policy rate projection). The Fed cutting once more than the median projected at the last dot update in September will automatically lower the ‘dots’ this year. The big uncertainty is what the Fed will signal for next year. We expect most members to signal that they expect the Fed funds target rate to remain unchanged in 2020 but we are looking to see whether one to two FOMC members signal an easing bias (however, this is not our base case)," Danske projects. 

"The Fed funds market is pricing the Fed keeping rates on hold in December and with a high probability in January too (based on the effective Fed funds at 1.55%). Hence, this week’s Fed meeting might not end up being a significant market mover on the day. That said, the market is still pricing some probability of another 25bp rate cut in H1 next year. If the Fed affirms its wait-and-see stance, we could see USD rates go a bit higher, which should send EUR/USD lower. We forecast EUR/USD will go to 1.09 in 1-month," Danske adds. 

GBP/USD remains bid, trading near recent 7-month highs by 1.3150, though off overnight and early NY peaks by 1.3175-80 nL1N28J06J, extending its rally with the help of polls indicating PM Johnson Conservatives will win.
The latest polls show a 14 percentage point Tory nL1N28J05Q, suggesting a Tory majority would deliver the UK withdrawal from the EU by the current Jan.
31 deadline.
That is soothing fears of economic uncertainty related to a disorderly Brexit.
Technically, continued GBP/USD strength seems in order with the pound's rise above the key 50% Fib of April 2018's 1.4377 high and 1.1959, September 2019's low at 1.1959 by 1.3168.
Adding to bullish GBP sentiment is the further reduction of GBP/USD spec shorts.
In the recently closed IMM reporting period nL1N28G1DR, Nov.
27 to Dec.
3, GBP/USD long positioning grew from 38.6k to 47.8k outstripping GBP short-covering, which has been the catalyst for recent GBP/USD gains. Despite that, shorts actually rose from 75.2k to 77.8k.
A close above the 50% Fib at 1.3168, and further GBP long position gains, would open the way for further GBP/USD gains with 1.3190, the May 2019 high, a mere speed bump on the way to 1.3380, March's 2019 high.

MUFG Research discusses GBP/USD outlook around this week's UK election. 

"Thursday 12th December at 10pm London time we will get the exit poll results of the general election and we believe the market is now very well positioned for a Conservative Party majority that is substantial enough to “Get Brexit Done” by 31st January 2020. The opinion polls have been remarkably stable in showing a consistent gap in favour of the Tories of no less than 10ppts. Spread betting markets suggest this might translate into a 30-seat majority.

We see that as sizeable enough to propel the pound further on Thursday night into Friday. We have long argued GBP/USD settling into a 1.3000-1.3500 trading range on the Withdrawal Agreement being passed. So by the end of the week we may well see GBP/USD at the top of the range – a temporary breach is feasible but is unlikely to be sustained," MUFG notes. 

"Why? Well we would argue on a few metrics GBP/USD is looking stretched...GBP/USD at or above 1.3500 will be attractive levels to sell post an expected Tory election victory," MUFG adds. 

• Bears very much in control but weekly action could warn of a turn

• Six-consecutive lower seven-month lows defining the trend

• Daily action below 30DMA Bolli envelope: risk of adj back inside envelope

• Last week's acceleration could warn of a change in direction

• Weeklies also outside the Bolli envelope: rebound risk high

• If trend extends the 0.8315 low from April 2017 serves as a target

  
  

• Huge option expiry hedging is helping to contain EUR/USD this week

• Massive EUR 3-bln expiries by 1.1070 Mon-Tues, big strikes 1.1100 all week

• Long gamma a real bane for volatility through most of December nL1N28J03N

• Options expiring pre Fed/ECB low, reflect lack of n-t expected volatility

• Overnight (Tuesday) expiry vol 5.0 - break-even for straddle just 23 pips

• Only 33 pips for Wed's. Thursday gets ECB/Fed, still only 7.0 vol/56 pips

• Straddle captures spot moves in either direction

  
  

• For umpteenth time EUR/USD has gravitated back to the middle of the range

• Range seen 1.09-1.12. Highest for over 4 months 1.1250. Low 1.0879

• Middle of the range 1.1065. 21-DMA is 1.1066

• One-month EUR/USD volatility is just 4.03. Record low traded in Nov @ 3.8

• Low vols exacerbate the importance of interest rate gaps

• Rate gap weighing EUR/USD is 2%. Small maybe, big in zero/neg rate world

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• Implied vols which measure volatility risk to USD/JPY are higher

• Especially true of 1-week - now gets Dec. 15 U.S/China tariff deadline

• It's a 2-month high, 6.0 from 4.0 early Dec. Straddle break-even 75 pips

• Captures Fed meeting too, but that's seen as low risk nL1N28F06D

• Risk reversals added JPY call vs put vol premium last week, now 1.1 vs 0.6

• That shows growing fear of deeper USD/JPY setback toward/though 108.00

  
  

  
  

  
  

• EUR/USD: 1.1030 (260M), 1.1055 (265M), 1.1070-80 (1BLN),

• 1.1090 (210M), 1.1100-05 (1BLN)

• GBP/USD: 1.3100 (522M), 1.3115 (200M), 1.3200 (434M)

• EUR/GBP: 0.8500 (526M), 0.8525 (650M), 0.8550 (450M)

• USD/CAD: 1.3220 (1BLN), 1.3285 (440M), 1.3300 (1.5BLN)

• USD/JPY: 108.50-60 (600M), 108.70-80 (1.2BLN),

• Up 0.1% with interest once Asia fully opened in a tight 1.3132/1.3151 range

• Busy EUR/GBP trades -0.1%, despite a very tight 0.8441/0.844175 range

• PM Johnson still has a solid lead after weekend polls nL1N28I07P

• 1.3100 522M and 1.3115 200M and 1.3200 434M are today's close strikes

• Charts - 5, 10 & 21 daily and weekly MAs head north - a trending setup

• Bounce stalled late last week at 1.3168/90, 50% 2018/19 fall and May high

• Sustained 1.3200 break would open the door to the 1.3380 2019 high in March

• Close below the prior 1.3000 range high needed to undermine topside bias

• AUD/USD traded to 0.6830 from New York closing level at 0.6843

• Heading into the afternoon it is hovering just above the session low

• Mixed China trade data released on weekend had little impact nL4N28I11X

• Market side-lined ahead of key events this week nL4N28I0N9

• AUD/USD support at 0.6810 where the 10, 21, 55 and 100-day-day MAs converge

• Usually such dense convergence signals there is a break-out coming soon

• More support at the 61.8 of the 0.6754/0.6862 move at 0.6795

• Resistance formed around 0.6860 where decent selling orders are tipped

• Of 0.1%, with modest interest in Asia, as 0.6862, 61.8% Oct/Nov fall caps

• No tier 1 data or significant RBA speeches this week - risk and the USD lead

• Market remains more dovish than the RBA - OIS prices a Feb cut at 48.4%

• Charts - Horizontal Tenkan & Kijun lines suggest more choppy consolidation

• Cloud rises later this week, which may provide underlying support

• NY 0.6824 low then 0.6808 Tenkan line is initial support

• 0.6841 Kijun line then NY 0.6857 high first resistance

  
  

  
  

• Off 0.05% in a low key start - EUR struggled above 1.1100 last week

• 1.1030 260M, 1.1055 265M, 1.1070-80 1BLN, 1.1090-05 1.210BLN close strikes

• First ECB meeting for Lagarde will be interesting, no policy shift expected

• Charts - EUR in the middle of a 1.1029/1.1076 horizontal daily cloud

• Flat lining Tenkan and Kijun lines suggest further choppy consolidation

• 1.1076 cloud top and 1.1078 Kijun line are initial resistance

• 1.1048 Tenkan line and Friday's 1.1039 NY low first support

• Flat, as Johnson maintains his election lead in weekend polls nL1N28I07P

• 1.3100 522M and 1.3115 200M strikes provide a base in Asia, 1.3200 434M caps

• Charts - 5, 10 & 21 daily and weekly MAs head north - a trending setup

• Bounce stalled late last week at 1.3168/90, 50% 2018/19 fall and May high

• Strong resistance into 1.3200, close above 1.3200 would be a major positive

• Sustained 1.3200 break would open the door to the 1.3380 2019 high in March

• Close below the prior 1.3000 range high needed to undermine topside bias

• AUD/USD to consolidate in 0.6810-60 range ahead of week's key risk events

• Upside capped by strong U.S. data Fri that supports Fed pausing rate cuts

• Downside protected by increased trade optimism; Dec 15 tariff deadline looms

• Wednesday FOMC, Thursday ECB and U.K. election Thursday key risk events

• China Nov exports fall, import growth hints of recovering demandnL4N28I04E

• Resistance 0.6863, 0.6890-0.6900; support 0.6820, 0.6805-10

Barclays Research discusses its expectations for next week's ECB policy meeting. 

"The next monetary policy meeting will take place on 12 December, and this will be the first one chaired by Christine Lagarde.

We expect her to re-iterate the need for maintaining an accommodative policy stance in the current economic environment, and the call to euro area governments to support ECB action with appropriate fiscal policies. She will present the updated macroeconomic projections, which we believe will remain broadly unchanged from September, and we expect her to repeat the message of patience delivered by outgoing President Draghi at his last meeting in October," Barclays projects. 

"Given our view on the economic outlook for 2020, we now expect monetary policy to remain unchanged for the whole of 2020," Barclays adds. 

• USD/JPY holding above the 55-DMA that caught this week's low

• But price action is disconcerting for the uptrend since mid-October

• The daily cloud top and Nov. 14 swing low at 108.235 look crucial

• A break and close below them would end the uptrend from Oct's 106.48 low

• Bulls need a 110+ close to take on Fibo targets by 110.50