18 Nov: Stocks, US$ ease after soft R/S figures. Powell says recovery has significant downside risks in near term. Wednesday focus: EU/UK CPI.

18 Nov: Stocks, US$ ease after soft R/S figures. Powell says recovery has significant downside risks in near term. Wednesday focus: EU/UK CPI.

The US$ and the main US stock indices have dipped on Tuesday, with both the S&P and the DJI retreating from Monday’s all-time highs following some  disappointing retail sales data and the spike in Covid cases across the country. The main indices are down by around 0.2/0.4% at the end of trade although the Nasdaq actually finished +0.1%, underpinned by Tesla’s 7.6% rise on the back of the announcement that the company will join the S&P 500 in December.

The FX markets have traded sideways/mixed, for the most part, although the DXY is down by around 0.2% after the Euro made a run towards 1.1900, before giving up some of the ground to close near levels seen yesterday. Of note, Sterling had a positive session following reports that the UK and the EU could reach a Brexit divorce agreement by the beginning of next week. That remains to be seen and is, I suspect, doubtful, and Cable remains highly reliant in the latest Brexit headline but the daily and weekly charts are supportive of Sterling so I would rather be long than short.

WTI is down by around 1% at the start of Wednesday trade, taking its lead from the soft retail sales data and stock markets, with sentiment not helped by OPEC and its allies failing to give a clear signal over its future output policy. The precious metals did little and re unchanged from yesterday.

The economic figures for Tuesday indicated that US retail sales rose for the sixth successive month, up by 0.3% mm in October but below expectation of 0.5% mm – and well below a 1.6% increase in September, – with the ex-auto sales up by 0.2% mm, missing the expectation of 0.6% mm. In other data, the import price index dropped -0.1% mm in October versus expectation of 0.3% mm, while industrial production rose 1.1% mm in October, slightly above expectation of 1.0% mm and capacity utilization rose to 72.8% in October, above expectation of 72.3%.

Wednesday kicks off with the NZ Q3 PPI and the Australian October Wage Price Index and New Home Sales, along with a speech from the RBA Governor, Phillip Lowe. The main focus of the day will come from Europe, where the October inflation data is due from both the EU (CPI, exp +0.1%mm, -0.3%yy; Core, exp +0.2%yy) and the UK (CPI, exp -0.1%mm, +0.6%yy; PPI, exp -2.5%yy).  Otherwise it will be comments from central bank speakers that will dominate the headlines, with speakers to include Haldane, Bailey (BOE), Williams (Fed), Wilkins (BOC). Have a good day.

Economic data highlights will include:                                                       

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,

Market moves, in brief:                                                     

FX: DXY 92.40 (-0.25%)

Bonds: US10Y; 0.870% (-4.15%), German 10Y; -0.561% (-2.82%), UK 10Y; +0.325% (-4.39%), Australian 10Y; 0.967% (+7.05%), NZ 10Y; 0.923% (+8.96 %), China 10Y; 3.282% (+0.78%)

Stock Indices: DJI; -0.35%, S+P; -0.13%, NASDAQ; +0.13%, EUStoxx50; +0.07%, FTSE100; -0.87%, Shanghai Composite; -0.21%, ASX200SPI: +0.43%

Metals: Gold $1885 oz (-0.18%), Silver $24.55 oz (-0.88%), Copper $3.2055 lb (-0.50%), Iron Ore $122.78 per tonne (NYMEX) (-0.80%),

Oil: WTI $41.10 pb (-0.80%)

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Trend Table: November 18, 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, especially in the crosses so I would leave them alone right now. The charts for the US$ are not a lot better although there does seem to be a little downside pressure on the dollar and I suspect that the Aud$ and the NZ$ may have more upside in them, although both are approaching strong downside trend resistance. US$Jpy currently looks a bit heavy but seems likely to remain stuck in the 104/105 range for the time being, while the longer term Sterling charts may be trying to suggest a move to higher ground. The Euro may be carving out a bull flag – as seen on the daily chart below – but until the Dec 10th ECB meeting, at which we can expect an ultra dovish outlook for the EU, I cannot bring myself to buy the Euro. Having said that, the DXY charts may be picking up some mild downside momentum so a slightly weaker US$ in the days ahead would not suprise.

With regard to stocks, 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. Having said that, the short term momentum indicators do hint at some more sideways trade in the next day or two, possibly retreating towards uptrend support, where I would be a buyer.

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

EurUsd Daily

GbpUsd Daily

AudUsd Weekly

NzdUsd Weekly

ASX SPI 4 Hour

S+P 4 Hour

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