While the US$ remains under pressure, stockmarkets have ended mixed on Wednesday, as surging layoffs in the wake of a new round of shutdowns to contain spiraling Covid infections have dampened risk appetite ahead of the Thanksgiving holiday.
The FX markets saw the Euro squeeze up to levels last seen in early September (high; 1.1929), while the other notable move was in the Kiwi which has ended Wednesday back above 0.7000 for the first time since June 2018. Some important technical levels are under severe pressure against the EU majors and the commodity currencies, and the momentum indicators do suggest that they are about to put the dollar under increasing pressure in the weeks ahead. On the other hand, the options market is not suggesting any large swings in the coming months, with implied volatility near the lowest since March.
Stocks have seen the DJI and the S+P end down by 0.25%-0.5% although the Nasdaq bucked the trend and ended 0.5% higher.
A wide array of data was released ahead of today’s holiday, and it was dominated by news of a second consecutive week of unexpected jump in jobless claims, suggesting that new restrictions to combat the spiking coronavirus cases in the US could cause ongoing headwinds for any ongoing labor market recovery. The initial jobless claims rose 30k to 778k in the week ending November 21, well above expectation of 725k, although continuing claims dropped by 229k to 6071k in the week ending November 14.
Other major data points showed that Durable Goods Orders rose 1.3% mm to in October, better than the expectation of 1.0% mm, while US GDP grew 33.1%, annualised, in Q3, according to the second estimate, compared to Q2’s -31.4% annualised contraction. New home sales dropped to 999k in October, while the Goods Trade Deficit rose by 1.2% mm and wholesale inventories rose by 0.9%mm. The FOMC Minutes were also released with little market effect, although there was a mention that while and adjustment to the pace and composition of asset purchases are currently unnecessary, circumstances could change, which might warrant some fine-tuning down the track.
While the metals were relatively rangebound, oil put in a strong performance and ended 1.8% higher, reaching levels last seen in March, after data showed that oil stockpiles in the US fell by almost 800K barrels last week, compared to analyst’s expectations for a build of 127K.
Looking ahead, Thursday should be quiet with the US out for the Thanksgiving Holiday and very little otherwise on the calendar. The NZ Trade Balance and the Q3 Australian Capex (exp -1.5%qq) may create some interest in the Kiwi and the Aussie but that aside the only other point of interest will be in ECB Minutes, which are likely to remain very dovish. Have a good day.
Economic data highlights will include:
Thur: US Thanksgiving Day Holiday, NZ Trade Balance, Australian Capex, Japan Coincident Index, Leading Economic Index, German Consumer Confidence, EBC Minutes ECB Speakers; Lane; Schnabel
Market moves, in brief:
FX: DXY 91.94 (-0.30%)
Bonds: US10Y; 0.880% (-0.37%), German 10Y; -0.567% (-0.39%), UK 10Y; 0.313% (-1.94%), Australian 10Y; 0.944% (+4.64%), NZ 10Y; 0.975% (+6.31 %), China 10Y; 3.310% (-0.17%)
Stock Indices: DJI; -0.53%, S+P; -0.07%, NASDAQ; +0.60%, EUStoxx50; +0.11%, FTSE100; -0.65%, Shanghai Composite; -1.19%, ASX200SPI: -0.06%
Metals: Gold $1807 oz (-0.02%), Silver $23.35 oz (+0.37%), Copper $3.311 lb (+0.35%), Iron Ore $124.15 per tonne (NYMEX) (+0.47%),
Oil: WTI $45.63 pb (+1.88%)
Trend Table: November 26, 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||Neutral – Turning Higher?||Neutral||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Up|
|4 Hour||Turning Higher?||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral||Neutral – Turning Higher?|
|1 Day||Neutral – Turning Higher?||Neutral – Turning Higher?||Neutral – Turning Higher?||Neutral||Neutral – Turning Higher?||Turning Higher|
|1 Week||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Turning Higher?||Neutral – Turning Higher?||Turning Higher|
|1 Hour||Neutral – Turning Lower?||Turning Lower||Turning Neutral||Turning Neutral||Turning Neutral||Turning Higher?|
|4 Hour||Neutral – Turning Lower?||Neutral – Turning Lower?||Possible Topping Formation||Possible Basing Formation||Turning Neutral||Possible Topping Formation|
|1 Day||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Higher||Turning Lower||Turning Neutral||Turning Higher?|
|1 Week||Possible Basing Formation||Up – Overbought||Up||Down||Down||Neutral|
|1 Hour||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower|
|4 Hour||Turning Higher||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||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|
There is no detailed outlook today as I think it will be very quiet because of the US holiday although the charts do suggest that the dollar will remain under pressure for the foreseeable future, so buying dips in the EU majors, Aud$ and NZ$ is still preferred from a strategic stance.
Stocks look rangebound for the next day or two but, as I said before, I like to be long the stock markets in general; especially the ASX, but I would not be overly enthusiastic up at these levels.
Gold has steadied near 1800 and may well do so again today although a break of the 200 DMA at 1797 would seem set to see a run towards 1770, possibly 1725.
WTI is doing the right thing in reaching a new 8 month high of 46.22 on Wednesday. It is breaking above strong resistance and may now be looking for a stronger trend higher, where I think the target is somewhere around 50/55.