It was a generally consolidative session on Tuesday as stocks retraced a little of their sharp rally seen on Monday, while the FX were mostly rangebound, with the exception of a sharp move higher in Sterling on the back of political headlines.
The general theme of the stock markets was a continued rotation out of the tech sector and into other sectors that are currently seen as providing better value, with the travel, industrial, aerospace/defence and consumer defensive sectors all being a particular beneficiary on Tuesday. While the likes of Netflix, Amazon, Facebook and Microsoft all extended their losses from Monday, dragging down the Nasdaq by 1.20% on Tuesday, the DJI is up by 1.0%. In the travel sector, TripAdvisor up 10% and Boeing by 4.7% did well, while, amongst others, GE, MMM, Lockheed and General Motors all gained 4+% . The S+P ended the day flat.
In the FX markets, although consolidation was the general theme, Sterling jumped higher after the UK House of Lords voted against the controversial part of a bill that has been perceived as breaching the “Brexit Withdrawal Agreement”. The Lords voted to pass an amendment to the Bill, removing measures that are seen to “disapply” some of the Northern Ireland protocol. This could now cause major issues for the UK, as the PM, Boris Johnson has put himself on a collision course with the incoming Biden administration in the US, after the UK Government said it would press ahead with legislation designed to override the Brexit deal on Northern Ireland – measures that Biden has previously said would put the Good Friday agreement in Ireland at risk. That aside, official comments that Brexit negotiations are making progress, generally underpinned Cable through the session.
Elsewhere, apart from the Sterling crosses, the US$ is steady, with the DXY down by just 0.05% on the day.
In the commodities sector, WTI continued its positive start to the week in putting on another 4.4% as hopes of a post-pandemic economic recovery takes place, while the precious metals gained about 0.5% in holding on above the lows, seen following the selloff on Monday.
In terms of data on Tuesday, the German ZEW Economic Sentiment dropped to 39.0 in November, down from 56.1 and slightly below expectation of 40.0, while the Current Situation index dropped to -64.3, down from -59.5, slightly above expectation of -65.0. The Eurozone ZEW Economic Sentiment dropped to 32.8, down from 52.4, missing expectations of 43.3, while the Current Situation indicator rose slightly by 0.2 pts to -76.4. The Euro fell quite sharply to 1.1780 but then spent the rest of the day grinding higher to close unchanged on the day.
The UK unemployment data was weaker than expectations, with September’s unemployment rate rising to 4.8% (3m/yy) from 4.5% in August, with the 3m/3m decline in employment at -164k – above expectations of -150k (prior -153k).
The US NFIB small business confidence survey held steady at 104.0 (vs. est. 104.1), still above the average for 2019 (103.0).
The highlight on Wednesday’s calendar will be the RBNZ Interest Rate Decision although no change to policy is expected and it will be the statement/Press Conference that will be the main focus. Otherwise it is going to be a thin session due to the Veterans Day holiday in the US/Canada, with the only other points of interest being various ECB speakers including Lagarde, Lane and De Guindos. Have a good day.
Economic data highlights will include:
Wed: REINZ House Price Index, RBNZ Meeting/Interest Rate Decision/Press Conference/Statement, ECB speakers; Lagarde, Lane and De Guindos, US/Canada Veterans Day Holiday, API Weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 92.78 (-0.02%)
Bonds: US10Y; 0.961% (+3.13%), German 10Y; -0.486% (+4.48%), UK 10Y; 0.400% (+44.77%), Australian 10Y; 0.933% (+19.35%), NZ 10Y; 0.733% (+21.81 %), China 10Y; 3.216% (-1.0%)
Stock Indices: DJI; +0.90%, S+P; -0.10%, NASDAQ; xxxx%, EUStoxx50; xxxx%, FTSE100; xxxx%, Shanghai Composite; -0.40%, ASX200SPI: -0.37%
Metals: Gold $+1876 oz (+0.75%), Silver $24.14 oz (+0.25%), Copper $3.1515 lb (-0.05%), Iron Ore $120.85 per tonne (NYMEX) (+0.47%),
Oil: WTI $41.32 pb (+3.80%)
Trend Table: November 11, 2020
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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility). The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are ignored for the coming session.
For instance, if we see consecutive green boxes in the 1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required. The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.
In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.
Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.
While stocks are consolidating, allowing the short term momentum indicators to unwind after becoming overbought, the longer term charts seem to be building some upside momentum, so trading the indices from the long side remain preferred.
In the FX markets, Sterling seems to be trying to head higher but rather than buy it through the US$, I prefer to sell EurGbp.
Elsewhere, things look patchy so I would not be too confident of very much, but as long as the stock markets remain firm, negating the need for safe haven currencies, the Jpy crosses should remain bid. GbpJpy seems the most obvious candidate to trade from the long side (although it may just be building a large triangle formation – see chart below), but EurJpy also looks to be building a bid tone.
|1 Hour||Turning Higher?||Turning Lower||Neutral – Turning Lower?||Turning Lower||Neutral||Turning Neutral|
|4 Hour||Turning Lower?||Up – Overbought||Neutral – Turning Higher?||Turning Higher?||Turning Lower||Neutral – Turning Lower?|
|1 Day||Turning Neutral||Turning Higher?||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Neutral – Turning Higher?|
|1 Week||Turning Lower?||Turning Neutral||Neutral – Turning Higher?||Possible Basing Formation||Turning Neutral||Turning Neutral|
|1 Hour||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Higher||Turning Higher||Turning Higher?|
|4 Hour||Turning Higher?||Turning Lower||Overbought – Turning Lower?||Down||Turning Neutral||Up|
|1 Day||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Basing Formation||Neutral – Turning Higher?||Turning Neutral||Turning Lower||Turning Lower||Neutral|
|1 Hour||Turning Neutral||Oversold – Turning higher?||Overbought – Turning Lower?||Turning Neutral||Turning Neutral||Turning Higher|
|4 Hour||Up – Overbought||Turning Lower||Neutral – Turning Higher?||Possible Topping Formation||Bullish Divergence||Turning Lower?|
|1 Day||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral|
|1 Week||Turning Neutral||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Lower|
S&P 4 Hour