There is a sense of consolidation across major markets this morning as traders look ahead to the crucial US CPI inflation data later in the session. With a lack of driving newsflow, traders are seeing the slightest USD positive bias with indices also a shade lower. However, all eyes will be on the US inflation data after last month's massive upside surprise caused shockwaves across markets. The Michigan Sentiment is also on the docket.
- Main drivers: Market markets are cautious in early moves; slight USD positive bias; UK monthly GDP misses estimates; Economic calendar: US CPI inflation and Michigan Sentiment later
- Sentiment mixed: European indices are weaker again but off earlier session lows, a mild USD positive bias, precious metals slipping again, oil flat.
- UK data disappoints: a raft of UK data for October has disappointed this morning. Monthly GDP growth of just +0.1% (+0.4% exp), Industrial Production also weaker than expected and a worse than expected trade balance [GBP negative]
- USD positive bias ahead of inflation: USD strengthened significantly after an upside surprise in last month’s US CPI data. There is a slight upside USD bias ahead of the latest data which is expected to show another rise in inflation
- Central bank speakers: the FOMC is in its Blackout Period. There will be no FOMC speakers until after the next FOMC meeting on Wednesday 15th December.
- Economic Data:
- US CPI at 1330GMT is expected to see the headline CPI increasing to 6.8% YoY in November (from 6.2% in October) and core CPI increasing to 4.9% (from 4.6%).
- Michigan Sentiment at 1500GMT is expected to slip slightly in December to 67.1 (from 67.4 in November)
Broad outlook: a cautious look across major markets ahead of US CPI data, with a slight USD positive bias. This is a drag on precious metals however, there are hints that indices may be getting ready for the next leg higher again.
- Forex: a slight USD positive bias forming ahead of US CPI. We are anticipating a significant reaction across major forex following the US inflation data.
- EUR/USD a drift lower from 1.1355 continues as the pair unwinds into the middle of the range between 1.1185/1.1385. Initial support 1.1227.
- GBP/USD with another rally into downtrend resistance which is now seeing the pair falling over. We look for further weakness and a retest of the recent lows of 1.3160/1.3170. Below 1.3130 the next real support is 1.2850. Resistance comes in between 1.3260 and 1.3290.
- AUD/USD the recovery is consolidating. We would look to use weakness as a chance to buy, with support between 0.7115/0.7140. A move above 0.7185 opens 0.7275.
- Commodities: having built support precious metals are starting to fall over again. Oil is drifting back slightly.
- Gold has once more fallen over between $1790/$1800 and a renewing negative drift is now testing the support at $1762/$1772. Technical signals continue to favour selling into strength for a retest of $1758. The bulls need a break above $1815.
- Silver breaking down below support at $22.00/$22.25 to continue the trend lower for a test of crucial support at $21.40. The old support is now acting as resistance. Above $22.60 needed to engage a recovery.
- Brent Crude oil recovery has just eased back slightly towards the near term breakout support around $73.20/$73.50 and is looking to build a higher low for the next leg higher. Key resistance overhead at $77.80.
Indices: A near term unwinding drift looks to be starting to form the support needed for the basis of the next leg higher. We look to use supported weakness as a chance to buy.
- S&P 500 futures have unwound from 4711 and is looking to build support around the pivot band 4650/4669. We look for a retest of the highs again at 4740.
- DAX has corrected back into the support band 15,510/15,600 and the bulls will look to build a new higher low. Although the correction is still trending lower over the past couple of days, there are signs of a shift in sentiment forming. Initial resistance is 15,685/15,760.
- FTSE 100 after the corrective drift into the band of support around 7260/7320 there are signs of a shift in sentiment coming as the market picks up from session lows at 7297. A move above 7341 re-opens the resistance at 7401.