Australia’sASX 200index stormed 1.47% higher and Hong Kong’s Hang Seng index rose 0.7%, while China’s CSI 300 soared 1.25%. Japan’sNikkei 225failed to follow its regional counterparts higher, sliding 0.68% lower as Prime Minister Yoshide Suga stated he is considering declaring a state of emergency in Tokyo to stem a marked increase in Covid-19 infections.
In FX markets, the cyclically-sensitive Norwegian Krone largely outperformed alongside the Euro, as the haven-associatedUS Dollarcontinued to lose ground against its major counterparts. The second-most heavily traded cryptocurrencyEthereum extended its recent surge higher, climbing over 13% whileBitcoinhovered just shy of the $34,000 mark.
Goldandsilveralso benefited from the Greenback’s slide, gaining 1.3% and 2.83% respectively despite yields on US 10-year Treasuries pushing back above 0.94%. Looking ahead, a slew of PMI figures out of Europe and the US headline the economic docket alongside Brazil’s trade balance release for the month of December.
The Euro stormed higher against its haven-associated counterparts in 2020, climbing 3.4% and 8.8% respectively against the Japanese Yen and US Dollar. These gains look set to continue into the first quarter of 2021, asbullish technical setupsbegin to take shape across multiple different timeframes.
However, rising infection rates and tightening coronavirus restrictions in several European nations may limit the currency’s upside potential in the near term. German Chancellor Angela Merkel and her government are considering extending thehard lockdown implemented in December, as the 7-day moving average tracking Covid-19 deaths surges above 670.
Moreover, the cumbersome rollout of the vaccine also threatens to hamper the region’s economic recovery, with strong anti-vaccine sentiment in France resulting in only 516 citizens – as of January 1 – receiving the shot. Indeed, health authorities across the trading bloc have warned that it will take several months before the vaccine will have a noticeable impact on infection rates.
That being said, investors may choose to dismiss these worrisome developments and turn their attention to the flurry of PMI and inflation releases coming out of the EU this week. Better-than-expected figures may discount the need for further easing from the European Central Bank and in turn underpin the Euro against the Greenback and the Yen.
From a technical perspective, EUR/USD looks set to extend its push to multi-year highs, as price consolidates constructively above key support at the December 4 high (1.2178) and continues to track within the confines of an Ascending Channel.
Bullish moving average stacking, combined with the RSI holding above 60, suggests that the path of least resistance is higher.
A daily close above the 50% Fibonacci (1.2290) would likely signal the resumption of the primary uptrend and carve a path for prices to probe psychological resistance at the 1.2400 mark. Clearing that opens the door for buyers to challenge the 61.8% Fibonacci (1.2453).
Alternatively, slipping back below the 8-day exponential moving average (1.2227) and channel support could allow sellers to drive prices back towards confluent support at the 21-EMA and December 23 low (1.2154).