The US$ continued its recovery of the last couple of days with the DXY ending Wednesday up by around 0.3% in limited trade due to the US Veterans Day Holiday. The Euro has been under downside pressure as the economic outlook for the Eurozone remains in some doubt, with fears of a possible double-dip recession weighing on the downside. On the other hand, European shares had another positive session following comments from ECB President Christine Lagarde, who added to here previous dovish outlook and said thatthe Bank will focus on more emergency bond purchases and cheap loans for banks when it puts together its new stimulus package next month.
Elsewhere, Cable had a volatile day in rising to a 2 month high of 1.3313 on the back of further losses in EurGbp, but sellers of Sterling reappeared as the ongoing Brexit negotiations looked set to be pushed back until late next week. Cable also received little help from comments from BoE policymaker Tenreyro, who said that negative rates have had a positive impact in Europe, rekindling worries that the BOE might still see this route as an option in theUK.
Elsewhere, the Kiwi was a standout success through the day after the RBNZ kept rates unchanged and traders began to dial down the possibility of negative interest rates in NZ. The RBNZ also announced that it will begin a new “Funding for Lending Program” in December, offering cheap loans to lenders, to further reduce borrowing costs and stimulate the economy as it recovers from the pandemic. The Kiwi headed to a new 20 month high of 0.6903 before retreating, to currently sit at 0.6880.
Stocks were thin due to the US holiday but it was the turn of the Nasdaq to play catch-up with the S+P/DJI as tech stocks rallied by around 1.82%, while at the end of the day the DJI and the S+P were ending the session at -0.18%/+0.47% respectively. The fact that it was the 8th consecutive day that the US has recorded 100, 000 Covid cases had no apparent effect on the market – yet!
In the commodities sector, the metals were under some mild downside pressure from the stronger US$, while WTI initially reached 43.00pb on continued hopes for an economic rebound but then gave up all of its gains, to end the day down by 0.5%, after OPEC said that oil demand will recover more slowly in 2021 than it previously thought likely. OPEC indicated that it now sees demand rising next year by 6.25mio bpd, 300K less than predicted a month ago.
Looking ahead, Thursday will begin with some secondary Asian data (NZ Visitor Arrivals, Japan PPI, Machinery Orders, Australian Consumer Inflation Expectation, China Foreign Direct Investment) but the main focus of the session will be on the October inflation data to come from both Germany (CPI; exp +0.1%mm, -0.2%yy; HICP, exp -0.5%yy) and then from the US (CPI; exp +0.2%mm, +1.3%yy; EX F/Y, exp +1.8%yy). Elsewhere, interest will be seen in the UK Manufacturing/Industrial Production figures and in the Q3 Preliminary GDP (exp 15.8%qq) which is expected to show a decent recovery from the dire figures seen in Q2 and also, as usual on a Thursday on the weekly jobless claims (Initial 735K/Continuing 6.9mio). The day’s speakers will include BOE Governor Bailey, the ECB’s Panetta/De Guindos/Mersch/Schnabel and the Fed’s Williams. Have a good day.
Economic data highlights will include:
Thur: NZ Visitor Arrivals, Japan PPI, Machinery Orders, Australian Consumer Inflation Expectation, China Foreign Direct Investment, UK Trade Balance, GDP, Manufacturing/Industrial Production, BOE’s Bailey Speech, German CPI/HICP, EU Inflation Expectations, US CPI, weekly jobless claims, Monthly Budget Statement, Fed’s Williams Speech
Market moves, in brief:
FX: DXY 93.03 (+0.32%)
Bonds: US10Y; 0.982% (+1.47%), German 10Y; -0.505% (-4.12%), UK 10Y; 0.411% (+2.70%), Australian 10Y; 1.006% (+7.88%), NZ 10Y; 0.881% (+20.10 %), China 10Y; 3.250% (+1.07%)
Stock Indices: DJI; -0.18%, S+P; +0.47%, NASDAQ; +1.82%, EUStoxx50; +0.72%, FTSE100; +1.35%, Shanghai Composite; -0.53%, ASX200SPI: +1.14%
Metals: Gold $1863 oz (-0.72%), Silver $24.21 oz (-0.06%), Copper $3.1280 lb (-0.06%), Iron Ore $122.00 per tonne (NYMEX) (-0.41%),
Oil: WTI $41.47 pb (-0.80%)
Trend Table: November 12, 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 short/medium/long term 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 pretty much ignored as choppy conditions seem likely to prevail.
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.
As with yesterday, 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. Regarding the individual indices, I like the ASX higher in the longer term but think that a dip to 6350/6280 should not be ruled out. Below 6230 now would most likely see a deeper decline but until then I prefer to buy dips. In the US indices, I think the S+P is a buy, but probably best left until a dip towards 3500, with a SL placed below 3450.
In the FX markets, Sterling still seems to be trying to head higher according to the medium/longer term charts, but once again, rather than buy it through the US$, I prefer to sell EurGbp. The short term momentum indicators look mildly bid, possibly forming a reverse head/shoulder formation with a potential objective of around 0.8980. I would be a seller there with a SL placed tight above 0.9000
AudNzd looks very heavy but as we approach parity I find it very hard to sell it; having said that, the cross does seem to be headed towards 1.05, and possibly to Fibo support at 1.0400.
Against the US$, note that both the Aud$ and particularly the NZ$ are now consolidating above their respective 200 Week MA’s, suggesting that further future gains are possible. In the meantime, the short term charts do look a bit heavy, so I would wait for a dip before entering the market
|1 Hour||Turning Higher?||Bearish Divergence||Neutral – Turning Lower?||Bearish Divergence||Neutral||Turning Lower?|
|4 Hour||Turning Lower||Up – Overbought||Turning Lower?||Turning Higher?||Turning Lower||Possible Topping Formation|
|1 Day||Turning Neutral||Turning Higher?||Neutral – Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Turning Higher?|
|1 Week||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Higher?||Turning Higher?||Turning Neutral||Turning Neutral|
|1 Hour||Turning Neutral||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Lower|
|4 Hour||Turning Higher||Turning Lower||Possible Topping Formation||Down||Turning Neutral||Possible Topping Formation|
|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 Higher?||Turning Lower||Turning Lower||Neutral|
|1 Hour||Turning Neutral||Turning Higher||Turning Neutral||Turning Neutral||Bullish Divergence||Possible Basing Formation|
|4 Hour||Turning Lower||Possible Basing Formation||Turning Neutral||Possible Topping Formation||Bullish Divergence||Down|
|1 Day||Neutral – Turning Higher?||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Neutral – Turning Lower?||Neutral – Turning Lower?|
|1 Week||Neutral – Turning Lower?||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Lower|
ASX SPI 4 hour