Both the FX and the stock markets are more or less flat at the end of Thursday trade as traders balance out the concerns of mounting Covid-inspired shutdowns and layoffs with the growing enthusiasm for a possible vaccine.
The US$ is mixed but not too far removed from Wednesday’s levels, with the Euro and Sterling both chopping around, uncertain of their direction after one of the EU Brexit negotiators tested positive for Covid causing a suspension of face-to-face talks. The pause risks derailing an already tight deadline for a successful outcome from the negotiations, with just six weeks to go until the UK’s transition period will end and it will leave the EU single market and customs union.
Elsewhere, the Jpy is mildly stronger, with the dollar unable to hold on to 104.00, but above the most recent lows of 103.65 seen earlier in the week. The Aud$ was unable to gain from yesterday’s generally upbeat employment data, and for the time being it sits back below 0.7300.
Stocks have traded generally flat although they did make a mild run higher into the close, with the Nasdaq leading the way, up by 0.82%, on the back of some whispers that the Republicans and the Democrats may be getting together to speak about Covid relief. The DJI ended the day up by 0.11%, and the S+P by +0.32%.
Commodities were mixed and generally uninspired on Thursday, with Gold down by 0.4%, while WTI is hanging close to 42.00, right in the middle of its recent range as traders sit on the sidelines while the OPEC+ group considers extending production cuts for another three months.
In terms of data, the weekly US initial jobless claims rose 31k to 742k for the period ending November 14th, above expectation of 707k, while the continuing claims dropped -429k to 6372k in the week ending November 7.Also from the US, Philly Fed manufacturing survey dropped to 26.3 in November, down from 32.3, but beat expectation of 24.0.
From Europe, ECB President Lagarde reiterated her commitment to monetary stimulus, which helped to cap the Euro. She reiterated that the EU economy “is expected to be severely affected by the fallout from the rapid increase in infections and the reinstatement of containment measures, posing a clear downside risk to the near-term economic outlook”. With the next ECB Meeting coming up on December 10, Lagarde also noted that the pandemic emergency purchase programme (PEPP) and the targeted longer-term refinancing operations (TLTROs) “have proven their effectiveness in the current environment and can be dynamically adjusted to react to how the pandemic evolves”, and repeated that these tools are likely to remain the main means for adjusting EU monetary policy.
Friday will focus on the Japan October CPI (exp -0.3%yy), Australian Retail Sales (October; Preliminary exp 0.3%mm), China Interest Rate Setting, UK Public Sector Net Borrowing Requirements, German PPI (exp +0.1%mm, -0.7%yy )and EU Consumer Confidence although there will be nothing to come from the US so it could be a quiet end to the week. There will be a G20 Meeting heading into the weekend while central bank speakers will include Lagarde (ECB), Weidmann (Buba), Kaplan (Fed). Have a good weekend.
Economic data highlights will include:
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 92.28 (-0.04%)
Bonds: US10Y; 0.852% (-3.16%), German 10Y; -0.570% (-3.15%), UK 10Y; 0.322% (-4.03%), Australian 10Y; 0.898% (-0.16%), NZ 10Y; 0.847% (-2.13 %), China 10Y; 3.350% (+1.15%)
Stock Indices: DJI; +0.10%, S+P; +0.32%, NASDAQ; +0.82%, EUStoxx50; -0.87%, FTSE100; -0.80%, Shanghai Composite; +0.47%, ASX200SPI: +0.83%
Metals: Gold $1865 oz (-0.42%), Silver $24.05 oz (-1.17%), Copper $3.2125 lb (+0.45%), Iron Ore $124.07 per tonne (NYMEX) (+0.58%),
Oil: WTI $41.92 pb (+0.79%)
Trend Table: November 20, 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.
Once again, there is a lot of blue on the heat map, underlining the current indecision on the markets, especially in the FX 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 the Aud$, the NZ$ and Gbp tables hint that they may each have some upside potential in them. Note that both the Aud and the Nzd remain near strong technical resistance which may be tricky to overcome as we head into the weekend, while Sterling will be buffeted around by Brexit headlines. 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.
With regard to stocks, risk sentiment seems to remain generally upbeat, and on that basis I still like to be long stocks, particularly the ASX, which looks positive on the medium/longer term 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. With little overnight movement, it may end up being a quiet end to the week in Asia.
|1 Hour||Neutral – Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Higher?|
|4 Hour||Turning Neutral||Possible Basing Formation||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Neutral – Turning Lower?|
|1 Day||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Neutral||Neutral – Turning Higher?||Turning Higher|
|1 Week||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Higher?||Turning Higher?||Neutral – Turning Higher?||Neutral – Turning Higher?|
|1 Hour||Turning Lower?||Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Neutral|
|4 Hour||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Turning Neutral|
|1 Day||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Higher||Turning Neutral||Turning Neutral||Neutral – Turning Higher?|
|1 Week||Possible Basing Formation||Up – Overbought||Turning Higher||Down||Turning Lower||Neutral|
|1 Hour||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Lower?|
|4 Hour||Possible Basing Formation||Turning Neutral||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Turning Lower?|
|1 Day||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower?|
|1 Week||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower|