It has been a full risk-on session on Tuesday, with global stock markets rallying by 1.0%-1.75%, and the FX majors generally enjoying a strong rally against the US$ on the back of renewed hopes of US fiscal stimulus and further positive vaccine news, which has lifted investor sentiment after the soft start to the week, seen on Monday. Both the S+P and the Nasdaq has made a new all-time high on Tuesday, while the Euro and the Kiwi have led the way in the FX markets, both making new long term highs against the dollar in reaching levels last seen in April 2018 (@ 1.2054/0.7067 respectively).
Underpinning the risk mood, both Pfizer and Moderna have now sought and are hoping to receive EU approval for their respective Covid-19 vaccines, after the European Medicines Agency said it could complete its assessment of both companies’ vaccines within the coming month. Elsewhere, both the Fed Chair, Powell and the outgoing Treasury Secretary, Mnuchin have reiterated the need for action to combat the pandemic, which has helped the markets head higher. Powell said that the Fed will not preemptively raise rates until he sees signs of some real inflation and that it would be premature to be thinking about pulling back the current level of support for the US economy. He added that he thinks that grants would be appropriate at this point, in order to help businesses and families survive the winter. Mnuchin urged Congress to provide more help for small business amid the surging Covid figures amid concern that relief from any vaccine may not arrive in time to keep them from failing.
In other markets, global bond yields have all moved sharply higher, as hopes grow of an economic revival, while the precious metals have enjoyed a strong session on the back of the softer dollar, with Gold up by 2% and Silver by a massive 6%. Note also, that Copper, a barometer of economic strength, has continued its strong run higher, up another 2.5% today at $3.5lb, last seen in March 2013.
Oil had a tough session, down 1% amid fears that the collective discipline of the major OPEC+ producers is fraying, and that they will, after all, proceed with at least a small increase in output at the start of next year.
In terms of data on Tuesday, Eurozone CPI was unchanged at -0.3% yy in November, versus expectation of -0.2% yy, while the Core CPI was unchanged at 0.2% yy. The Manufacturing PMIs were the main focus through the session and the Eurozone PMI was finalised at 53.8 in November, down from October’s 54.8 but better than expectations of 53.6. The German Mfg figure led the way at a strong 57.8, while the UK was also strong, at 55.6. The US figures were mixed with the ISM Mfg figure at 57.5, strong but below expectations, while the Employment Index was back below 50, at 48.4, and comes ahead of the ADP reading, today, and then the official US employment report on Friday.
Wednesday will kick off with the Australian Q3 GDP (exp +2.5%qq, -4.5%yy%), which will be important in taking Australia out of the Covid-inspired recession, along with a speech from the RBA Governor Lowe, when he testifies before the Australian Parliament’s House of Representatives Standing Committee on Economics. Later in the day, the ECB Non-Monetary Policy Meeting will take place, along with the release of the EU PPI/Unemployment figures for October and the German Retail Sales for October. The US will not have too much data being released but the November ADP Jobs data is due (exp +420K), along with speeches from the Fed’s Williams and the ECB’s Lane. Have a good day.
Economic data highlights will include:
Wed: NZ Terms of Trade, Australian Q3 GDP, Speech; RBA Governor Lowe, Japan Consumer Confidence, German Retail Sales, ECB Non-Monetary Policy Meeting, EU PPI, Unemployment, US ADP Jobs data, EIA Weekly Crude Stocks Change, Speech; Fed’s Williams
Market moves, in brief:
FX: DXY 91.30 (-0.60%)
Bonds: US10Y; 0.933% (+12.05%), German 10Y; -0.524% (+7.97%), UK 10Y; 0.350% (+11.96%), Australian 10Y; 0.932% (+2.50%), NZ 10Y; 0.856% (-0.50 %), China 10Y; 3.289% (+0.12%)
Stock Indices: DJI; +0.80%, S+P; +1.25%, NASDAQ; +1.10%, EUStoxx50; +0.94%, FTSE100; +1.89%, Shanghai Composite; +1.75%, ASX200SPI: +1.55%
Metals: Gold $1815 oz (+2.13%), Silver $24.00 oz (+6.10%), Copper $3.505 lb (+2.47%), Iron Ore $131.21 per tonne (NYMEX) (+0.18%),
Oil: WTI $44.56 pb (-1.10%)
Trend Table: December 2, 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.
|1 Hour||Up||Neutral||Turning Higher||Turning Lower||Turning Higher?||Turning Higher|
|4 Hour||Turning Higher||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Higher?|
|1 Day||Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Higher|
|1 Week||Turning Neutral||Turning Neutral||Turning Higher?||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Higher|
|1 Hour||Down||Turning Higher?||Turning Higher?||Turning Higher||Up||Neutral – Turning Lower?|
|4 Hour||Neutral – Turning Lower?||Turning Higher?||Neutral – Turning Higher?||Turning Higher||Neutral – Turning Higher?||Turning Lower|
|1 Day||Turning Lower?||Neutral – Turning Higher?||Possible Topping Formation||Possible Basing Formation||Turning Neutral||Turning Higher|
|1 Week||Possible Basing Formation||Up – Overbought||Up||Down||Down||Neutral|
|1 Hour||Up||Neutral – Turning Lower?||Up||Turning Neutral||Up||Possible Basing Formation|
|4 Hour||Turning Higher||Turning Neutral||Neutral – Turning Higher?||Turning Neutral||Turning Higher?||Down|
|1 Day||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower|
|1 Week||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower|
Markets have bounced strongly from the soft start seen on Monday and, with the S+P/Nasdaq both at a new all-time high, we could now see further gains for global stocks although volatility is likely to remain relatively high so keep a tight traling SL.
The Euro and the Kiwi have led the FX markets higher against the US$, with the Aud$ notably seen to be lagging on Monday. Sterling is also breaking higher and seems to be heading towards 1.35+. On the other hand, note that US$Chf has yet to take out the lows seen in early November and it could be telling us that the Euro has made a false break. The US$Chf momentum indicators are turning lower though, so I think that eventually a stronger test of levels sub 0.9000 will be seen.
As far as the Aud$ is concerned, with the Australian Q3 GDP and RBA Governor Lowe testifying to the Australian Parliament this morning, it could be that the Aud$ does play catch-up today. The GDP figure is likely to be strong, while Lowe is likely to look towards the positives to be found in the economic outlook. The ASX has had a strong rally as well, and again, will take its lead from the domestic data/Governor Lowe today.
The trend table has also shown a sharp move up in the momentum indicators for Gold. Right now it looks as though a base has set in but it is very choppy. In the longer term, as long as the US$ remains soft, then commodities, including Gold, should benefit.