Outlook:
While we await the real news (the stimulus bill), we have to plough through some data, including the Dec Empire State manufacturing survey today and the Nov industrial output. At the end of the day, we get the Treasury International Capital flow report (TICS), which only about three persons have the patience to untangle.
When there is a shortage of compelling news, traders fall back on examining positions. Name an indicator and you find the euro and others (AUD) overbought and the dollar and pound mostly oversold. That can send traders searching for reasons to pare positions, and there is never a shortage of factors. In the case of the AUD, there’s the China trade war. In the case of sterling, it’s restored hope for a Brexit deal.
Picking up on the thesis yesterday that economies and currencies will follow success or failure in beating back Covid, the US is still a loser. So is the UK, although new measures that come into effect tomorrow may mitigate. The BBC reports “Greater London and parts of Essex and Hertfordshire will move into tier three restrictions from 00:01 GMT on Wednesday, Health Secretary Matt Hancock has confirmed. This is the strictest tier of coronavirus rules and means the closure of pubs and restaurants except for takeaway and delivery, and tighter rules on household mixing. It means that from Wednesday, more than 34 million people will be living under tier three rules.”
Maybe Brexit talks don’t get all the credit for the bounce in the pound, but some should be apportioned to lockdown. If so, how do we think of the California shutdown and the pending one in New York? The overall national lack of obedience to sensible rules and lockdowns may be stronger than conditions in two of 50 states. In other words, if the dollar loses its bounce, blame North Dakota.
Still, we see a bounce on the oversold condition but not much of one. Day traders will be okay fading the trend and strategic trend-traders may suffer a bit. The euro chart may suggest a pullback today. Yesterday it came within one point of the Dec 4 high, 1.2177 vs. 1.2178. So far today we have a high of 1.2166. On the 240-minute chart, we see support from the ichimoku cloud AND the linear regression at about 1.2114. We also see a line in the sand at the previous spike low, 1.2078 from Dec 9. A hundred point retracement is a worry but not fatal.
Politics: The Electors chose Biden/Harris yesterday, albeit with a new threat from Republicans that they will vote against affirming the Electoral College vote when the final vote comes up in Congress on Jan 6. They don’t have enough votes to overturn the Electoral College, so an empty gesture; a handful of senior Republicans have accepted the outcome.
Meanwhile, in one state the Republican electors tried to crash the voting yesterday (Michigan) and another state sent in a fake electors’ certification to the National Archives (Arizona), probably a felony (forgery). All of these actions are, like Trump, ridiculous and pathetic. So is the fake letter of resignation by Attorney General Barr, who praises Trump in flowery language and speaks of the ongoing investigation into voter fraud (after announcing no voter fraud) but then resigns, sort of. TV commentators say Barr is probably happy he got fired because now he doesn’t have to deal with the flood of pardons Trump will inflict upon the public’s sense of decency.
The growing worry is that new Republican leadership is failing to emerge and the Trump party is sliding into the slough of despond and building muscle for civil war. Make no mistake—this whole thing is based on a single premise—that black people don’t deserve the vote and to be the deciding factor in a presidential election. Shades of former black crooks in office (Adam Clayton Powell in New York, Washington, DC Mayor Barry) lurk in the bushes. But it’s a new generation, or may be, in the form of the black leaders in Georgia getting out the vote and overcoming voter suppression. Again.
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