The US$ is mixed in early Tuesday trade, while stocks are lower, after US House Speaker Nancy Pelosi reportedly signalled that any economic stimulus deal is not imminent, counteracting the previous hopeful headlines and denting hopes of an agreement ahead of the deadline imposed by Pelosi, and suggesting that any breakthrough ahead of the election may be increasingly unlikely. The major indices are down by around 1.5%, while the US$ is lower against the majors, but a little firmer against the commodity currencies, with the DXY ending the day down by around 0.3%.
In the FX space, the Aud$ is probably the most interesting to watch today, with the RBA Minutes lying ahead, with the chance of November rate cut possibly getting a mention. The Aud$, having squeezed back above 0.7100 on Monday (0.7115 high), is lower again and sitting at session lows, 0.7060 and looks as though it may be about to head lower still, against both the US$ and on the crosses.
The commodities were choppy and sideways and ended near to where they had begun the week although the metals in particular were quite volatile. Gold reached 1918 and Silver 24.96 before turning lower once again to finish a t1900 and 24.30 respectively.
Oil prices initially rose on Monday after Saudi Arabia and Russia both dropped hints that they may need to abandon, or at least delay, the increase in production that they expect to carry out at the start of 2021. Later in the day, the price retreated from its high, with WTI falling back to 40.80 after peaking at 41.45.
Looking ahead, Tuesday will see the RBA Minutes of the October meeting along with a speech from the RBA’s Kent, either or both of which could well be lining us up for a November 3rd rate cut , while the PBOC will provide their monthly interest rate adjustment. The EU August Current Account is due, while from the US will come the September Building Permits (exp +1.5mio)/Housing Starts (exp +1.45mio). The Fed’s Quarles will be speaking and both the Global Dairy Trade Index and the API Weekly Crude Oil Stock Inventory are due.
Economic data highlights will include:
Tue: NZIER Business Confidence, RBA Minutes, RBA’s Kent Speech, German PPI, EU Current Account, US Building Permits, Housing Starts, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 93.41 (-0.32%)
Bonds: US10Y; 0.761% (+1.1%), German 10Y; -0.626% (-0.50%), UK 10Y; 0.169% (-4.82%), Australian 10Y; 0.762% (+2.70%), NZ 10Y; 0.553% (+1.49 %), China 10Y; 3.197% (-0.55%)
Stock Indices: DJI; -1.38%, S+P; -1.49%, NASDAQ; -1.62%, EUStoxx50; -0.09%, FTSE100; -0.59%, Shanghai Composite; -0.71%, ASX200SPI: -0.64%
Metals: Gold $1901 oz (+0.09%), Silver $24.26 oz (+0.42%), Copper $3.078 lb (+0.34%), Iron Ore $120.73 per tonne (NYMEX) (+0.30%),
Oil: WTI $40.56 pb (-0.45%)
Trend Table: October 20, 2020
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Markets are mixed on Tuesday but stocks look heavy today and may have some more downside ahead I suspect.
FX markets look set to remain choppy but the focus seems set to be on the Aud$, which is on the point of breaking support levels on several fronts.
|1 Hour||Overbought – Turning Lower?||Turning Neutral||Turning Lower||Oversold – Turning higher?||Neutral – Turning Lower?||Turning Lower?|
|4 Hour||Turning Higher?||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Neutral|
|1 Week||Turning Lower?||Turning Neutral||Turning Neutral||Possible Basing Formation||Possible Topping Formation||Possible Topping Formation|
|1 Hour||Oversold – Turning higher?||Down||Neutral – Turning Lower?||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Neutral|
|4 Hour||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Lower||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Neutral|
|1 Week||Possible Basing Formation||Possible Topping Formation||Turning Neutral||Turning Lower||Turning Lower||Neutral|
|1 Hour||Overbought – Turning Lower?||Turning Higher||Bearish Divergence||Turning Neutral||Up||Bullish Divergence|
|4 Hour||Up||Turning Neutral||Turning Neutral||Turning Neutral||Turning Higher||Turning Lower?|
|1 Day||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Turning Neutral||Neutral||Neutral – Turning Lower?|
|1 Week||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Possible Topping Formation||Turning Neutral||Turning Lower?|
ASX SPI: Having reached 6240 on Monday, the SPI is now back at 6170 after coming under pressure from the heavy start to the week in the US markets. The bearish divergence seen on the 4 hour charts would suggest that there may be further downside potential today, where support should arrive at 6135/40 and again at 6115 (23.6% of 5703/6240). The daily/weekly charts still look very mildly positive, so another run to 6200 and on to 6240 should not be ruled out in the next few days, but progress will be dependent on progress in the US stimulus talks I suspect. A dovish RBA Minutes may also underpin the markets today. Look for a range of 0.6140/6200 to cover it.
AudUsd: having squeezed up to 0.7115 on Monday, it is now back at 0.7060 and appears to be about to break the 4 month rising trend support at around 0.7050; a dovish RBA Minutes today may help it on its way. If so, look for a return to the 25 Sept low of 0.7005, and below 0.7000 we may see a run towards 0.6960 (23.6% of 0.5506/0.7313). On the topside, resistance will be seen at 0.7100 and again at 0.7115 (session high/100 HMA), although I don’t see it up here today. If wrong, the 200 HMA is at 0.7145.
EurAud: The cross is making a big effort to break above the 200DMA, which it really has not done since early June. With the daily/weekly momentum indicators possibly picking up some momentum to the topside we could see some fresh buying that would propel it towards the Fibo resistance, as per the charts, at 1.6915. I would keep a SL at around 1.6870/50 in case the cross does run out of steam here.
GbpAud: As with EurAud, GbpAud looks as though it could be about to break a bit higher, and above the trend resistance seen at 1.8375 we could see a quick move towards 1.8450, above which there is little resistance ahead of 1.8540 (100 WMA) and 1.8660 (29 May high). Keep a SL below 1.8250.