16 Nov: Stocks firm, FX mixed, oil lower as traders weigh up vaccine hopes against a 2nd Covid wave. China data in focus on Monday.

16 Nov: Stocks firm, FX mixed, oil lower as traders weigh up vaccine hopes against a 2nd Covid wave. China data in focus on Monday.

The US$ was mixed but generally a little lower on Friday, with the DXY ending the session down by -0.22%, and once again the real action was in the stockmarkets which rallied into the weekend despite the fact that the latest  Covid count in the US rose by 195K, up from 143K the previous day.

In the FX markets, the US$ remained heavy as traders enthusiasm about a possible COVID-19 vaccine was somewhat counteracted by the huge rise in Covid cases in the US and also in Europe. The main interest was in the Jpy, which seemed to be trying to reverse the sharp losses posted earlier this week. US$Jpy failed to hold on to 105.00 as some safe-haven demand set in on the back of the Covid numbers, and closed near the lows but in the middle of the week’s range, suggesting further choppy consolidation. Elsewhere, EurUsd was confined to a 35 point range, but finished the day near its highs, while the Aud and the Nzd seemed to follow the US stock markets and ended a tight session towards their own highs. Sterling ended a 2 week losing streak as hopes for a softened Brexit deal were given a boost after UK PM Boris Johnson’s top aide, Dominic Cummings was ousted ahead of “make or break” Brexit talks. Cummings is a staunch Brexiteer and his sacking has led to speculation that the UK is preparing to cave in on the EU’s trade demands. The current stand-off between the UK and the EU, if it were to continue, would otherwise lead to the high chance of a no-deal Brexit by the end of the year – and the UK reverting to WTO terms of trade. Sterling will remain very dependent of Brexit headlines as the negotiations continue, and there will be an EU leader’s summit on Thursday which will no doubt be very closely watched. In the meantime, various reports over the weekend now suggest that talks may be extended beyond this week as progress continues, albeit at a slower pace than either the UK or the EU would wish.

Stocks ended Friday higher by 1.02% (Nasdaq)/1.36% (S+P/DJI) and the Treasury yield curve steepened as upbeat earnings from Cisco and Disney gave the markets a boost. Also helping sentiment, President-elect Biden announced the makeup of his Covid advisory team, reassuring investors and boosting expectations that any recommendations will be backed by science and will reflect public health best practices.

The commodities were choppy but the metals gained from the back to the softer US$ while WTI which overall had a good week, slipped back on Friday, down by 1.9%, as concerns over the current explosion in US Covid cases saw traders take a defensive stand, concerned over the ramifications about the effect on future economic growth.

Looking ahead, the coming week will be relatively thin with regards to the calendar and it looks as though politics will dominate the agenda. Monday will get under way with some China data, inclusion the October Retail Sales, Industrial Production House Price Index and the NBS Press Conference although otherwise there will be no data of consequence and it will be central bank speakers in focus RBA; Lowe, BOJ; Masai, BOE; Haskell, Fed; Clarida. Tuesday will be equally thin until late in the session when the US Retail Sales will be released, and ahead of that the RBA Minutes and a speech from the RBA’s Kent will be the only items of interest. Wednesday will see the NZ PPI, Australian Wage Price Index New Home Sales and a speech from the RBA Governor, Lowe, and then from Europe we get the UK CPI, PPI, RPI and the EU CPI figures for October, along with the US Building Permits and Housing Starts. Thursday will feature the Australian Unemployment for October and then, late in the day the US Philadelphia Fed Mfg Survey, Kansas Fed Mfg Activity and Weekly Jobless Claims. Finally, Friday will focus on the Japan October CPI, Australian Retail Sales, China Interest Rate Setting, UK Public Sector Net Borrowing Requirements, German PPI and EU Consumer Confidence although there will be nothing to come from the US so it could be a quiet end to the week.

Economic data highlights will include:

Mon: NZ Business PMI, Japan GDP, Industrial Production, Capacity Utilisation,  China Retail Sales, House Price Index, Industrial Production, NBS Press Conference, RBA Governor Lowe; Speech, US New York State Empire Mfg Index

Tue: RBA Minutes, RBA’s Kent Speech, EU Construction Output, US Retail Sales, Import/Export Index, Industrial Production, Capacity Utilisation, NAHB Housing Market Index, BOE Governor Bailey; Speech, Fed’s Williams; Speech, API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index

Wed: NZ Q3 PPI, RBA Governor Lowe; Speech, Australian WBC Leading Index, New Home Sales, Wage Price Index, UK CPI, PPI, RPI, ECB Non-Monetary Policy Meeting, EU CPI, BOE’s Haldane; Speech, US Building Permits, Housing Starts, EIA Weekly Crude Stocks Change, Fed’s Williams; Speech,

Thur: Australian Unemployment, EU Leaders Summit, Current Account, US weekly jobless claims, Kansas Fed Mfg Activity

Fri: Japan CPI, Australian Retail Sales, China Interest Rate Decision, UK Public Sector Net Borrowing Requirements, German PPI, EU Consumer Confidence, G20 Meeting,

Market moves, in brief:

FX: DXY 92.73 (-0.24%)

Bonds: US10Y; 0.895% (+1.86%), German 10Y; -0.546% (-2.27%), UK 10Y; 0.340% (-17.39%), Australian 10Y; 0.884% (-4.53%), NZ 10Y; 0.836% (-3.32 %), China 10Y; 3.27% (+0.15%)

Stock Indices: DJI; +1.37%, S+P; +1.36%, NASDAQ; +1.02%, EUStoxx50; +0.11%, FTSE100; -0.36%, Shanghai Composite; -0.86%, ASX200SPI: +0.82%

Metals: Gold $1887 oz (+0.59%), Silver $24.63 oz (+1.55%), Copper $3.178 lb (+1.05%), Iron Ore $120.51 per tonne (NYMEX) (-0.30%),

Oil: WTI $40.15 pb (-1.8%)

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Trend Table: November 13, 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.

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Outlook:

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourTurning NeutralTurning LowerNeutral – Turning Higher?Turning NeutralNeutral – Turning Higher?Turning Higher
4 HourNeutral – Turning Higher?DownTurning NeutralTurning Lower?Turning NeutralTurning Lower
1 DayTurning NeutralTurning NeutralTurning NeutralNeutralTurning NeutralTurning Higher?
1 WeekNeutral – Turning Lower?Turning NeutralNeutral – Turning Higher?Turning Higher?Turning NeutralNeutral – Turning Higher?
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourTurning NeutralTurning HigherNeutral – Turning Higher?Turning NeutralTurning NeutralNeutral
4 HourNeutral – Turning Lower?Turning NeutralTurning NeutralTurning HigherTurning NeutralTurning Lower
1 DayTurning NeutralTurning Higher?Turning HigherTurning NeutralTurning NeutralNeutral
1 WeekPossible Basing FormationNeutral – Turning Higher?Turning HigherTurning LowerTurning LowerNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning NeutralNeutral – Turning Lower?Turning NeutralTurning NeutralTurning LowerTurning Neutral
4 HourTurning LowerTurning NeutralTurning NeutralTurning LowerTurning NeutralTurning Higher
1 DayTurning Higher?Turning NeutralTurning NeutralTurning NeutralTurning NeutralTurning Lower?
1 WeekNeutral – Turning Lower?Neutral – Turning Lower?Neutral – Turning Higher?Turning NeutralTurning NeutralTurning Lower

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