Asian equity markets were little changed in thin holiday markets, with trading volumes being light as Hong Kong, New Zealand and Australia closed for Boxing Day on Thursday. Still, the Japanese and Chinese stocks saw an upside bias, supported by optimism that the US and China are finally moving towards concluding their phase one trade deal due to be signed next month. As such, China Foreign Ministry confirmed that the two sides were in close communication about detailed arrangements for the deal's signing. Meanwhile, the Chinese central bank set the daily yuan reference rate at 6.9801 – the strongest level since early-August. European markets are closed today in observance of Boxing day while US stock index futures point to a slightly higher open.
In currencies, the dollar is higher against major counterparts, with USDJPY extended intraday gains to the 109.60 area, just below the double top formed around 109.70. The pair resumed the ascent amid positive risk sentiment in anticipation of a partial trade deal signing. Once above the double top, the dollar could target the 110.00 figure but the pair will hardly be able to challenge this figure any time soon as trading activity remains low due to Christmas holidays. On Wednesday, the greenback received a local support around 109.30 and shifted into a recovery mode after two days of modest losses.
GBPUSD is flat around 1.2970, following a rejection from early-December lows just above the 1.29 handle earlier in the week. Despite the recent recovery attempts, the cable remains depressed as market concerns over a possible no-deal Brexit reemerged. In the near term, the pair needs to hold above the 1.29 support in order to escape further losses. On the upside, the initial significant target comes around 1.30 and then at 1.3040.
EURUSD meanwhile struggled around 1.11 again and was rejected from this local resistance. As a result, the pair turned negative in the daily timeframes but still confined to a tight range amid thin trading volumes. At the same time, the common currency continues to derive support around the 100-DMA at 1.1060. If this level manages to cap the bears’ efforts, the euro could stage a more sustained rebound. Still, to get back above 1.11, the pair could need the additional catalyst.
Brent crude sees a subdued upside bias and holds above the $66 handle on Thursday. The sentiment in the market remains upbeat but the bullish momentum seems to be waning now due to the lack of fresh positive drivers. The API report showed that US crude oil stockpiles declined by 7.9 million barrels last week but the data gave only a limited and short term support to the market. In a wider picture, Brent remains within the upside trend.
Nathan Lambert, Head of Global FX Analytical Department