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China FX reserves jump most in 7 years

CAD/JPY – Daily Candlesticks
Source: GKFX / MT4 (December 8, 2020)

CAD/JPY has been in a wide trading range between 78 and 81.5 since the summer, It is now testing the top of the range and also appears to have already broken above a down-sloping trendline connecting the June, August and October peaks. 

TAKEAWAYS

•    China FX reserves jump most in 7 years as PBOC intervenes
•    S&P 500 closes above 3,700 for first time
•    Tesla closed higher despite $5 billion stock sale 
•    Bitcoin falls back below $19,000
•    Supreme court will hear US election fraud case
•    DAY AHEAD: China inflation, Bank of Canada meeting

 

GURU WISDOM

Those who don’t use stop-loss, eventually stop trading.” – Mark Minervini

MARKETS

*Daily closing price
↘ EUR/USD    1.2106        (-0.01%)
↘ GBP/USD    1.3353        (-0.17%)
↗ USD/JPY    104.06        (+0.09%)
↗ S&P 500    3702.62    (+0.28%)
↘ Hang Seng    26,460.35    (-0.76%)
↗ Gold        1870.47    (+0.36%)
↗ Oil (Brent)    48.80        (+0.02%)
↘ Bitcoin    18,790        (-2.12%)
 

NEWS

China FX

USD/CNH has been dropping like a stone and it appears the People’s Bank of China have decided it is time to put the brakes on. The PBOC has apparently been selling yuan in the open market and thereby adding the foreign currency it bought to the country’s foreign exchange reserves. It is beneficial for China to have a weaker yuan to support exports but moreover it is important to have stable exchange rate to the US where China sells the most goods. It will be interesting to see whether the PBOC intervention helps shape a turnaround in the USD more broadly.
 

S&P 3700

The S&P 500 closed above 3700 for the first time with narrow gains that reversed early losses. The market had been twitchy about the chances for new US stimulus but Republican Senate leader Mitch McConnell saying that he is willing to compromise bolstered sentiment before the day closed.
 

Tesla sale


After a massive 7% share price gain on Monday that took the value of Tesla over $600 billion for the first time, Elon Musk’s company decided to sell $5 billion in new stock on Tuesday. Amazingly the stock still closed higher since that huge sale now just represents 1% of the company’s market cap and did little to dilute existing shareholders. FYI normally you’d expect the stock price to fall because there are now more shares and so if the company as a whole is valued the same, each share should be worth less.
 

DAY AHEAD 


*Times in GMT
01:30    CNY    Producer Price Index (YoY)(Nov)     -1.8 %    -2.1 %    
01:30    CNY    Consumer Price Index (YoY)(Nov)     0 %    0.5 %
07:00    EUR    Germany Trade Balance s.a.(Oct)     €18 B    €17.8 B
15:00    CAD    BoC Interest Rate Decision         0.25 %    0.25 %
 

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