The FX market finally stole some of the focus away from the stockmarkets on Thursday as traders heavily sold the dollar although the US stock indices did manage another 2% rally of their own, and the metals finally got in on the act, with Gold up by 2.4% and Silver by almost 5%. Late in the day the FOMC Meeting has taken place and has gone by almost un-noticed, with the Statement being virtually the same as that of the previous month after the Fed left rates unchanged. The statement repeated that the Fed will keep policy at ultra-loose levels and will do whatever is necessary in order to underpin the US economy. Earlier in the day, the BOE also left UK rates unchanged although the BOE did increase the QE programme by more than expected, by £150 per month, now at £875 per month.
The Dollar Index (DXY) is down by 0.83%, currently at 92.62, with the Jpy leading the way in breaking below the long-term 104.00 double bottom, to currently sit at new 8 month low of 103.55. The commodity currencies have performed well, particularly the Aud$, which is closing in on 0.7300 despite the RBA cutting rates and introducing their own QE programme earlier in the week. The Euro, now back above 1.1800 seems to be building for a run to test 1.1900/1.200, while Cable also looks capable for further gains despite the shadow of Brexit, which continues to overhang the markets as does, increasingly, the new lockdown in the UK.
While the final result of US presidential election is still unknown, albeit that Biden seems to be almost home, investors have not waited to push stocks higher as they grow increasingly confident that the Republicans will retain control of the Senate, easing worries of major policy changes that could hurt corporate America under a Biden administration. At the end of the Thursday session the major indices are up by around 2%, with the Nasdaq leading the way in rising by 2.5%.
Gold and Silver both had big upside sessions as the dollar tumbled on expectations that the election might soon deliver a winner, which would provide clarity to allow work to progress on issuing an economic stimulus for some relief to the situation caused by the pandemic..
In other data, aside from the FOMC Meeting decision, the US initial jobless claims dropped by -7k to 751k in the week ending October 31, slightly above expectation of 746k, while the continuing claims dropped -538k to 7.285mio in the week ending October 24.
The BOE Monetary Policy Report lowered the UK’s Q4 GDP forecast for 2020 Q4 to -11%, down from -5.4% although a strong rebound is then expected with Q4 GDP growth being revised to 11% (up from 6.2%) in Q4 2021 and 3.1% (up from 2.3%) in Q4 2022. The UK unemployment rate was notably lower for 2020 Q4, at 6.3%, having been revised down from 7.5%.
Looking ahead, Friday will begin with the RBA’s Monetary Policy Statement, which is likely to underline the theme of Tuesday’s RBA Statement, after which the calendar will be thin until the release of the US employment data, which will round off a big few days. Expectations here are: Headline rate (7.7%), NFP (+600), Average Hourly Earnings (+0.2%mm), Average Weekly Hours (34.7). Note that the China Trade Balance for October will be released on Saturday. Have a good week.
Economic data highlights will include:
Fri: Australian RBA Monetary Policy Statement, NZ RBNZ Inflation Expectations, US Unemployment data.
Market moves, in brief:
FX: DXY 92.61 (-0.85%)
Bonds: US10Y; 0.770% (+0.44%), German 10Y; -0.636% (+0.39%), UK 10Y; 0.235% (-14.07%), Australian 10Y; 0.752% (-6.52%), NZ 10Y; 0.531% (-9.26 %), China 10Y; 3.175% (-0.47%)
Stock Indices: DJI; +2.10%, S+P; +2.26%, NASDAQ; +2.74%, EUStoxx50; +1.72%, FTSE100; +0.39%, Shanghai Composite; +1.30%, ASX200SPI: +1.68%
Metals: Gold $1950 oz (+2.44%), Silver $25.20 oz (+5.50%), Copper $3.1175 lb (+0.47%),
Oil: WTI $38.60 pb (-1.35%)
Trend Table: November 6, 2020
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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility). The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are ignored for the coming session.
For instance, if we see consecutive green boxes in the 1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required. The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.
In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.
Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.
The US$ seems to have further downside ahead, with direction likely to accelerate as it becomes clearer that Biden will actually win. In the meantime, conditions seem likely to stay choppy, and we have the NFP data to contend today where a strong number may actually bring about some near term US$ strength. As far as the charts go, Sterling looks as though it may play catch-up against the dollar, albeit that it still looks heavy on the crosses, especially against the Aud$.
AudNzd also looks healthy.
The stockmarkets look a little toppish on the hourly charts but the overall theme of higher stocks in the days ahead remains unchanged.
Gold and Silver hint at further gains, while WTI is mixed.
|1 Hour||Overbought – Turning Lower?||Down – Oversold||Up||Possible Basing Formation||Up – Overbought||Up – Overbought|
|4 Hour||Up||Down||Neutral – Turning Higher?||Turning Lower||Up||Turning Higher|
|1 Day||Turning Neutral||Turning Neutral||Turning Higher?||Turning Neutral||Turning Neutral||Neutral|
|1 Week||Turning Lower?||Turning Neutral||Turning Neutral||Possible Basing Formation||Turning Lower||Possible Topping Formation|
|1 Hour||Oversold – Turning higher?||Possible Topping Formation||Possible Topping Formation||Up||Up||Neutral – Turning Lower?|
|4 Hour||Down||Up||Up||Up||Turning Higher?||Turning Higher?|
|1 Day||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Basing Formation||Possible Topping Formation||Turning Neutral||Turning Lower||Turning Lower||Neutral|
|1 Hour||Turning Lower?||Turning Lower?||Neutral – Turning Lower?||Turning Higher||Turning Lower?||Up – Bearish Divergence|
|4 Hour||Turning Neutral||Turning Neutral||Turning Lower?||Turning Higher||Turning Lower||Up|
|1 Day||Neutral – Turning Lower?||Neutral||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Higher?|
|1 Week||Turning Lower?||Turning Neutral||Neutral – Turning Higher?||Turning Lower||Turning Neutral||Turning Lower|