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CNH Advances Following Covid Press Conference, Greenback Recovers

FOREX
  • The offshore Yuan looks set to post strong 1.5% gains on Tuesday as China's health authorities announced that the country will fast-track the vaccination of the elderly and implement more precise measures to control outbreaks. Furthermore, officials said they will resolve the reasonable demands of the masses, underpinning the Yuan’s strength throughout the trading session.
  • With a slight downtick in Covid cases and no escalation in social unrest USDCNH has erased the previous two sessions advance and now narrows the gap with last weeks lows around 7.12.
  • Initially, the more optimistic risk backdrop weighed on the greenback and high beta plays across G10 such as AUD, NZD and NOK led the moves higher.
  • However, as global equity indices continued their grind lower amid a grind higher in core yields, the greenback steadily gained through US trade and is clocking at best levels approaching the APAC crossover.
  • The price action has weighed on the single currency with some below estimate German CPI reads also providing a marginal headwind for the Euro. EURUSD’s weak close Monday is a potential bearish development that points to a possible top. In pattern terms, Monday is a shooting star candle - a reversal signal. An extension lower would expose key support at 1.0223, Nov 21 low. Clearance of this level would confirm a reversal and signal scope for a deeper pullback. A break of 1.0497, yesterday’s high, is required to resume recent bullish price action.
  • Particular weakness was seen in the likes of CAD (-0.67%) and CHF (-0.51%), that had failed to capitalise on the early bout of greenback pessimism.
  • Chinese Manufacturing and non-manu PMIs overnight before the key Eurozone CPI and core CPI Flash Estimates ahead of the Dec 15 ECB meeting.
  • In the US, second reading of GDP follows ADP employment as well as JOLTS job openings. Fed Chair Powell is due to speak about the economic outlook, inflation, and the labor market at the Brooking Institution.
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