Yesterday, the day was once again filled with negotiations happening between EU and UK. But apart from talks in regards to the Brexit dilemma, there were discussions happening to sort out the problem, relating to the travel ban, which was imposed by several European and non-European states on the UK. It was late on Tuesday, when President Trump came out with a threat that he will not sign the aid bill, which was approved by Congress earlier. The current running president stated that the proposed aid package is a “disgrace” and is “different than anticipated”.
EU and Britain’s Drama Continues
Yesterday, the UK delivered its Q3 QoQ and YoY GDP figures. Both numbers managed to beat their initial forecasts. The QoQ figure showed up at +16.0%, instead of the forecasted +15.5%. The YoY reading was -8.6%, comparing to the initially expected -9.6%. At first, the positive news helped GBP to strengthen against some of its major counterparts, but later on, when the Brexit issues and the new-coronavirus type in Britain started weighing in again, the pound ended up losing ground again.
Yesterday, the day was once again filled with negotiations happening between EU and UK. But apart from talks in regards to the Brexit dilemma, there were discussions happening to sort out the problem, relating to the travel ban, which was imposed by several European and non-European states on the UK. Many countries in Europe and outside have restricted travels from and to Britain, after it announced that it has a new form of coronavirus spreading fast in the south of the country. Not only that travellers were not able to proceed with their journeys, but there was a huge logistical nightmare on the French and British boarder sides, as trucks were not able to get neither on the ferries, nor on the Eurostar trains. But closer to the end of day yesterday, headlines started appearing that an agreement has been reached and that the logistics connection will get restored soon. However, hauliers are advised to wait for further instructions, before setting off for the border checks. This morning, reports were coming out, stating that some passengers will be allowed to travel to and from Britain, but mainly to get back home. France will also allow trucks to pass, but only after drivers prove to be negative after a COVID-19 test. All this may still prove positive for the pound for the time being. However, let’s not forget that any negative comments out of the Brexit talks could quickly turn around that positivity.
GBP/CAD — Technical Outlook
GBP/CAD continues to balance above a short-term tentative upside support line taken from the low of December 11th. But at the same time, the rate is still trading below its key resistance area between the 1.7315 and 1.7338 levels, marked by the highs of December 21st and 17th respectively. After yesterday’s failed attempt to overcome that resistance area, the pair is already trying to do that this morning. Until we see a strong break above that area, we will stay cautiously bullish with the near-term outlook.
If, eventually, the rate manages to pop above the previously discussed 1.7338 barrier, this will confirm a forthcoming higher high, potentially opening the door for further advances. We will then target the 1.7408 obstacle, a break of which could set the stage for a move to the 1.7497 level, marked by the highest point of November.
Alternatively, if GBP/CAD falls sharply and breaks the aforementioned upside line and then drops below the 1.7167 hurdle, marked by an intraday swing high of December 21st, that could put the bears behind the steering wheel for a while longer. The pair might then travel to the 1.7048 obstacle, a break of which may clear the path to the 1.6946 level, marked by the low of December 15th.
Trump’s Response And US Data
It was late on Tuesday, when President Trump came out with a threat that he will not sign the aid bill, which was approved by Congress earlier. The current running president stated that the proposed aid package is a “disgrace” and is “different than anticipated”. Trump suggests that the financial support to Americans should be lifted from initially agreed $600 to $2000 for every individual. Although this sounds very expensive for the US government, one of the biggest Trump’s political opponents, Nancy Pelosi, agreed with that initiative. However, she stated that the Republicans repeatedly refused to specify the amount that the President wanted in the beginning. It is expected that on Christmas Eve lawmakers will try to pass the motion of increasing pay-outs to Americans. But it may not pass, if at least one lawmaker votes against it. One thing for sure, it seems that nothing can go as easy, or as planned, as it should be. Markets could remain under pressure, as some investors may decide to lock in their profits, in order to avoid any market turmoil, if nothing is agreed on the political front. But worst situation would still be for the people, who are currently struggling to have their ends meet.
The US also delivered its QoQ GDP figure for Q3 yesterday. The number came out at +33.4%, which is slightly better than the initial forecast of +33.1%. The US also released its CB consumer confidence reading for the month of December. That figure disappointed investors, as it was below, not only the forecast, but also the previous reading. The actual number showed up at 88.6, when the forecast stood at 97.0. US existing home sales we are also something that didn’t bring relief for investors, as the figure showed slightly below the initial forecast of 6.70mln, at 6.69mln.
Today, the US will deliver its Personal income and spending figures on a MoM basis for the month of November. Although the personal income figure is expected to improve from -0.7% to -0.3%, the spending one is forecasted to have declined from +0.5% to -0.2%. In addition to those readings, the US is set to release its PCE price index on a MoM and YoY basis, both core and headline. There are no expectations for the headline reading, but the core MoM one is believed to have declined slightly, from +0.2% to +0.1%, but the YoY number is expected to rise from +1.4% to +1.5%.
But still, the main focus will fall on the US initial and continuing jobless claims. The current forecast for the initial claims sits at 900k, which is above the previous number of 885k. The continuing claims are also believed to have increased from 5508k to 5598k. If the actual readings come out as expected, or even worse, this could have a negative implication on the US equity market.
DJIA — Technical Outlook
From the beginning of this week, the Dow Jones Industrial Average index has been under a bit of selling pressure, due to the political instability in the US, which lead to some end-of-year profit taking by investors. The cash price is currently trading below a short-term tentative downside resistance line taken from the high of December 20th. As long as that downside line stays intact, we will aim for slightly lower areas.
A bit of a push higher might bring DJIA to the aforementioned downside line, which if continues to remain intact, may force the price to decline again. The index could then travel to the 29845 obstacle, a break of which may clear the way to further declines. Our next target could be near the 29666 level, marked by an intraday swing low of December 21st, which also coincides with the 200 EMA on our 4-hour chart.
On the upside, if the previously-mentioned downside line breaks and the price rises above the 30160 barrier, marked by yesterday’s intraday swing high, that could attract more buyers into the game. DJIA might get lifted to the 30300 zone, which if fails to halt the uprise and breaks, that may send the price to the current all-time high on the cash index, at 30424.
As For The Rest Of Today’s Events
Also, on Wednesday, Canada will deliver its GDP figure on a MoM basis for the month of October. The current reading is for a +0.2%, when the previous is sat at +0.8%.
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