17 Nov: Risk sentiment underpinned by more positve vaccine headlines. RBA Minutes ahead. US R/S, I/P, C/U & NAHB all due later.

17 Nov: Risk sentiment underpinned by more positve vaccine headlines. RBA Minutes ahead. US R/S, I/P, C/U & NAHB all due later.

Risk-sentiment remains positive on Tuesday, underpinned by some more good news on the coronavirus vaccine, with the announcement from Moderna Inc; who said that its vaccine was shown to be 94.5% effective in a preliminary analysis of a large late-stage clinical trial. The news produced another round of stock rotation, into value and cyclical sectors that have been hardest hit by the pandemic, and out of technology stocks. The DJI ended the day up by around 1.3% -after having made a new all-time high during the session, just shy of 30,000, wwhile the Nasdaq ended up by 0.5% on the day. US equities were also boosted early in the session after advisers to Joe Biden said that they opposed a nationwide shutdown despite surging virus cases.

The FX majors were mostly fairly steady although the Aud and Nzd are both higher as the positive risk mood underpinned commodity based currencies. EurUsd was rangebound and sits near levels seen on Monday, while US$Jpy had an interesting session, in spiking from 104.50 to 105.13 and then back again. The Moderna news caused the spike higher but as stocks came off their earlier highs, so the sellers reappeared in US$Jpy, and it currently sits back at 104.55.

Commodities had a mixed session, with Gold ending the day flat, but not before enduring a quick $20oz dip after the Moderna headlines, which caused an immediate move away from the need to own safe haven assets. The drop to 1864 did not last long though, and bargain hunters quickly pushed Gold back to as high as 1895, before settling at 1885. WTI had a strong session, up by 3% after news that OPEC and other oil producers, including Russia, are leaning towards a postponement of the previously planned January increase in oil production by at least 3 months, in order to support prices as the pandemic continues its second wave.

Tuesday is going to be rather thin with just the RBA Minutes on the agenda until the US session, when the October US Retail Sales (exp 0.5%mm) will be released along with some secondary data, while various central bank speakers are on the agenda. The Retail Sales will be watched for any signs that the economic recovery has been losing momentum as pandemic restrictions increase and fiscal relief recedes, and will be compared to last Friday’s weak University of Michigan consumer sentiment and Monday’s soft US Empire State Manufacturing general business conditions index, which dropped to 6.3 in November, well below expectation of 13.0. Aside from the Retail Sales,  the monthly US Industrial Production (exp +1.0%), Capacity Utilisation (exp 72.3%), Business Inventories (exp +0.4%)  and NAHB Housing Market Index (exp 85) are all due, while the Fed’s Williams, the BOE’s Bailey and Ramsden, and the BOC Governor, Macklem, will all be speaking.  The API Weekly Crude Oil Stock Inventory and the Global Dairy Trade Index will also be released. Have a good day.

Economic data highlights will include:                                                       

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

Market moves, in brief:

FX: DXY 92.63 (-0.02%)

Bonds: US10Y; 0.906% (+0.37%), German 10Y; -0.546% (+0.11%), UK 10Y; 0.348% (+2.29%), Australian 10Y; 0.904% (+2.20%), NZ 10Y; 0.847% (+1.38 %), China 10Y; 3.247% (-0.40%)

Stock Indices: DJI; +1.30%, S+P; +0.88%, NASDAQ; +0.6%, EUStoxx50; +0.99%, FTSE100; +1.66%, Shanghai Composite; +1.11%, ASX200SPI: +0.58%

Metals: Gold $1886 oz (-0.17%), Silver $24.67 oz (+0.04%), Copper $3.22 lb (+1.22%), Iron Ore $121.42 per tonne (NYMEX) (-0.07%),

Oil: WTI $41.35 pb (+3.08%)

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Trend Table: November 14, 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:                        

There is a lot of blue on the heat map, underlining the current indecision on the markets. Risk sentiment seems to remain positive – at least for now while positive vaccine headlines draw the attention of traders – and on that basis I still like to be long stocks, particularly the ASX, which looks positive on the charts.

The FX markets seem set to remain rangebound, although I suspect that the Aud$ and the NZ$ may have more upside in them, both against the US$ and also on the crosses, with EurAud and GbpAud both looking heavy in the short term.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourTurning NeutralTurning NeutralNeutralTurning NeutralNeutral – Turning Higher?Turning Neutral
4 HourTurning NeutralTurning Lower?Turning NeutralNeutral – Turning Lower?Turning Higher?Neutral – Turning Lower?
1 DayTurning NeutralTurning NeutralTurning NeutralNeutralNeutral – Turning Higher?Turning Higher?
1 WeekNeutral – Turning Lower?Turning NeutralNeutral – Turning Higher?Turning Higher?Turning NeutralNeutral – Turning Higher?
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourTurning NeutralTurning Lower?Turning NeutralTurning NeutralTurning NeutralNeutral – Turning Lower?
4 HourTurning NeutralTurning NeutralTurning NeutralTurning HigherTurning NeutralTurning Neutral
1 DayTurning NeutralTurning Higher?Turning Higher?Turning NeutralTurning NeutralNeutral
1 WeekPossible Basing FormationUp – OverboughtTurning HigherTurning LowerTurning LowerNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning NeutralTurning NeutralTurning Lower?Turning NeutralTurning Lower?Turning Neutral
4 HourTurning Lower?Turning NeutralNeutral – Turning Lower?Turning NeutralNeutral – Turning Lower?Turning Higher
1 DayNeutral – Turning Higher?Turning NeutralTurning NeutralTurning NeutralTurning NeutralTurning Lower?
1 WeekNeutral – Turning Lower?Neutral – Turning Lower?Neutral – Turning Higher?Turning NeutralTurning NeutralTurning Lower

ASX- SPI

AUDUSD – Daily

NZDUSD – Daily

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