The US$ remained heavy on Friday, while stock markets were generally choppy and sideways following on from the solid rally seen through the week  as the world waited to find out who will become the next President of the US. Although it is now clear that Biden has won, Trump has yet to concede, so it could turn out to be a protracted fight in the law courts before we can finally get back to day/day business and conditions could remain choppy but without anything too directional over the next few sessions while we wait for some clarity to appear. Overall though, I suspect that a trading stance of being short the US$ and long the stock-markets and the precious metals may be the way to go over the next few days.

The release of the US employment data had little overall effect despite the numbers generally being better than expected, with the Non-Farm Payrolls increasing by 638K last month, better than the expected 600K, but lower than  September’s upwardly revised 672K. The unemployment rate fell to 6.9% from 7.9% in September. The less good news on Friday came from the daily Covid infections which continued to spiral in the US, with more than 100,000 reported in a single day for a second day in a row on Friday and that is going to be one of Biden’s main priorities as the new administration begin s to take charge.

The US indices closed flat, while the US$ remains under some pressure, with the DXY apparently about to break down below major uptrend support which could well begin a new trend to the downside. A potentially divided government in the US, with the democrats holding the cards in Congress but with the Republicans in control of the Senate, seems likely to herald a smaller fiscal stimulus package, thus increasing the pressure on the Fed to prolong the ultra-easy monetary policy conditions and to increase its bond buying programme which is likely to further weigh on the dollar.

The likely big winner of a weaker US$ would be commodity prices, with Gold already looking as though it may be on the start of a new run to the topside. Having reached 1960oz on Friday, a break could quickly head towards 1985 and then possibly back to 2000oz.

Following on from the major events of last week, the coming week will be a little quieter in terms of data/politics although there will still be plenty going on, albeit that the week will start quietly enough, with little on the calendar. Tuesday will see the China CPI/PPI figures for October, and will come ahead of the UK Unemployment figures and the German/EU ZEW Economic Sentiment Survey for November. Wednesday will be mostly quiet due to the Veterans Day holiday in the US/Canada although the RBNZ will meet and will hand down their latest economic outlook. Thursday will begin with the Australian Consumer Inflation Expectation and the China Foreign Direct Investment for October, while there is a fair bit to come from the UK – GDP, Trade Balance and Manufacturing/Industrial Production – along with a speech from the BOE Governor, Bailey. Also from Europe we get the October German CPI/HICP figures and the EU Industrial Production for September, while from the US the October CPI and the weekly jobless claims are due. Finally Friday (13th!) sees the EU Preliminary Q3 GDP, the Michigan Consumer Sentiment Index and the US PPI. Have a good week.

Economic data highlights will include:

Mon: German Trade Balance, Current Account, BOE Speakers; Bailey, Haldane

Tue: NZ Electronic Card Retail Sales, Japan Current Account, Trade Balance, Australian NAB Business Conditions/Confidence, China CPI, PPI, UK Unemployment, German/EU ZEW Economic Sentiment Survey, US NFIB Business Optimism Index

Wed: REINZ House Price Index, RBNZ Meeting/Interest Rate Decision/Press Conference/Statement, US/Canada Veterans Day Holiday, API Weekly Crude Oil Stock Inventory

Thur: NZ Visitor Arrivals, Japan PPI, Machinery Orders, Australian Consumer Inflation Expectation, China Foreign Direct Investment, UK Trade Balance, GDP, Manufacturing/Industrial Production, BOE’s Bailey Speech, German CPI/HICP, EU Inflation Expectations, US CPI, weekly jobless claims, Monthly Budget Statement, Fed’s Williams Speech

Fri: NZ Business PMI, Food Price Index, EU EcoFin Meeting, EU Q3 GDP, Trade Balance, Employment change, US PPI, Michigan Consumer Sentiment Index, Fed’s Williams Speech, BOE’s Bailey Speech

Market moves, in brief:

FX: DXY 92.26 (-0.40%)

Bonds: US10Y; 0.822% (+7.72%), German 10Y; -0.617% (+2.91%), UK 10Y; 0.277% (+33.12%), Australian 10Y; 0.768% (+2.02%), NZ 10Y; 0.581% (+9.36 %), China 10Y; 3.172% (-0.08%)

Stock Indices: DJI; -0.24%, S+P; -0.03%, NASDAQ; =0.04%, EUStoxx50; -0.36%, FTSE100; +0.06%, Shanghai Composite; 0.24%, ASX200SPI: +0.47%

Metals: Gold $1952 oz (+0.14%), Silver $25.60 oz (0.96%), Copper $3.1515 lb (+1.3%%), Iron Ore $118.3 per tonne (NYMEX) (+0.83%),

Oil: WTI $37.42 pb (-2.80%)

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Trend Table: November 9, 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.

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Outlook:

The US$ is looking increasingly precarious on the charts, as seen below on the monthly time frame, where the DXY is sitting right on uptrend support going back to 2011, as well as the 100 month moving average, currently at 92.02. The momentum indicators are clearly pointing lower so I would be using any rally to sell the dollar, but looking for a run in the DXY to around 90.00 in the near term, possibly lower. This would take the Euro to around 1.21, and while I think this is very possible, there are plenty of headwinds for the Euro itself, with the pandemic and lockdowns ensuring that the single currency will run away to the topside. Elsewhere, Brexit remains a big hurdle for Cable, while the BOJ will not like a stronger Yen, so it will not be a one way street for a lower dollar. It may be that the Aud$ and the NZ$ are both looking to squeeze higher although I think it more likely that they will trade into the year end in a range of 0.7000/0.7500 and 0.6600/0.7000 respectively.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourBearish DivergenceTurning HigherTurning NeutralPossible Basing FormationTurning LowerTurning Lower
4 HourUpDownTurning HigherDownPossible Topping FormationPossible Topping Formation
1 DayTurning NeutralTurning Lower?Neutral – Turning Higher?Neutral – Turning Lower?Neutral – Turning Higher?Neutral – Turning Higher?
1 WeekTurning Lower?Turning NeutralTurning NeutralPossible Basing FormationTurning Lower?Possible Topping Formation
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourPossible Basing FormationNeutral – Turning Higher?Bearish DivergenceTurning Lower?Neutral – Turning Lower?Turning Lower
4 HourDownPossible Topping FormationUpUpTurning Higher?Turning Lower
1 DayNeutral – Turning Lower?Turning NeutralTurning NeutralNeutral – Turning Higher?Turning NeutralTurning Neutral
1 WeekPossible Basing FormationPossible Topping FormationTurning NeutralTurning LowerTurning LowerNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning NeutralTurning NeutralTurning Higher?Neutral – Turning Lower?Neutral – Turning Higher?Neutral – Turning Higher?
4 HourTurning NeutralTurning NeutralNeutral – Turning Higher?Possible Topping FormationTurning HigherTurning Lower
1 DayNeutral – Turning Higher?NeutralTurning Lower?Neutral – Turning Higher?Turning NeutralTurning Higher
1 WeekTurning Lower?Turning NeutralNeutral – Turning Lower?Turning LowerTurning NeutralTurning Lower

DXY : Monthly

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