Main market themes
- Daily market outlook, President Trump‘s remarks at the Economic Club of New York kept US stock indices near their record highs. Focus was on his comment that a phase one US-China trade deal is “close” even though he stopped short of providing further details. In fact, he also threatened again that the US would substantially raise tariffs if China does not agree on a trade deal, and this was probably what sent markets off from their intraday highs. On top of that, his other remarks touting the success of current policies in boosting the US economy, as well as condemnation on the Fed for raising rates instead of bringing it closer to negative rates, were basically a regurgitation of previous stance.
- Investor pessimism reduced significantly in the Eurozone: ZEW investor expectations reading improved markedly to -1.0 in November (Oct: -23.5), helped by improvement in Germany (-2.1 vs -22.8), its highest in six months thanks to potential progress in inking of a partial US-China trade deal. Investors have turned positive on future outlook (22.5 vs -1.1) but remained pessimistic about current situation even though the degree of pessimism has been reduced (-19.6 vs -26.4).
- UK economy experienced fewer job losses than expected: The UK job market is flashing signs of weakness in recent months as the ONS reported a total of 56k job losses in the economy in the three months to September (Aug: -56k), much lower than analysts’ estimates of -102k. Other job figures painted a mixed picture altogether as wage growth appeared to have cooled as well at 3.6% YOY in the same period (Aug: +3.7%) while the brighter news was that the unemployment rate slipped lower to 3.8% (Aug: 3.9%).
- Japan machine tools orders slipped: Orders for Japanese machine tools dropped by 11.6% MOM in October (Sep: +11.9%), led by a sharp fall in domestic orders (-27.4% vs +22.7%) as foreign orders recorded modest increase for the second month (+2.1% vs +3.9%). YOY, machine orders extended further decline by 37.4% (Sep: -35.5%) reflecting the relatively poor demand compared to the same period a year ago. In a separate release this morning, PPI extended its decline for the 5th straight month, albeit at a slower pace of 0.4% YOY in October (Sept: -1.1%), confirming continued deflation in Japan that could cement the case for a BOJ rate cut as hinted at its previous MPC meeting.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.1015 (EUR549mn); 1.1040 (EUR534mn); 1.1045 (EUR442mn)
- USDJPY: 108.50 (USD503mn); 108.60 (USD371mn); 108.75 (USD407mn); 109.75 (USD1.0bn)
- GBPUSD: 1.2700 (GBP693mn); 1.2800 (GBP778mn); 1.3000 (GBP444mn)
- AUDUSD: 0.6800 (AUD331mn); 0.6850 (AUD216mn); 0.6900 (AUD403mn); 0.6925 (AUD390mn)
EURUSD (Intraday bias: Bearish below 1.1080 targeting 1.0960)
From a technical and trading perspective, as 1.1080 now act as resistance expect a test of pivotal support at 1.1020 abreach here would open a deeper correction to test 1.0960/40. On the day a breach of 1.1050 would stabilize the pair, suggesting the correction is complete. NO CHANGE IN VIEW
GBPUSD (Intraday bias: Bearish below 1.2840 targeting 1.2725)
From a technical and trading perspective, as 1.2840 caps any upside attempts, look for a test of 1.2725/00, watching this area closely as we could set a base to complete the current corrective consolidation, a daily close sub 1.27 would open a deeper pullback to target 1.2580
GBPUSD…UPDATE 1.2830/20 the bull bear line in the sand if bulls can defend this area this morning there is a window to set a base and retest yesterday’s highs. (Note the daily chart has flipped bullish as confirmed by the near term VWAP) A failure below 1.28 resets sights on the test of 1.2720 NO CHANGE IN VIEW
USDJPY (intraday bias: Neutral bearish below 109, bullish above 109.50)
From a technical and trading perspective, only a close above 109.60 will inject further upside momentum setting the stage for a grind higher to target the equidistant swing objectives sited at 110.57/69, however a failure to capture ground above 109.60 will likely prompt further long liquidation to test bids back towards 108.50 NO CHANGE IN VIEW
AUDUSD (Intraday bias: Bearish below .6870 for pivotal test of .6830/20)
From a technical and trading perspective, as .6875 caps the topside look for a test of bids and stops below .6850. As .6830 supports there is a window to set a base targeting another test above .6900 and the stops above last week’s highs. A failure below .6800 would open a decline to target bids below .6850
AUDUSD… UPDATE testing pivotal .6830 support area a daily close below here suggests further weakness and a test of bids down to .6750 NO CHANGE IN VIEW
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