Market sentiment has swung towards risk positive once more. A strong set of US data (especially through encouraging Consumer Confidence) has brought forward a more positive risk appetite once more. The question is whether it can last enough to put together a few sessions of decisive moves, or whether there will be a continuation of the yo-yo moves we have seen of late. Today is the last serious day of trading this side of Christmas, so traders will be looking at the slew of US data later in the session. The Fed’s preferred inflation measure, the core PCE will be in focus, along with durable goods orders.
Main drivers: Market sentiment turns positive; strong US data pulls Wall Street higher; UK studies suggest Omicron is less severe than Delta; no Fed speakers scheduled; Economic calendar: core PCE, durable goods, revised Michigan Sentiment and Japanese core inflation
A sentiment more positive: USD is lower with JPY underperforming on major forex, indices and commodities are higher.
US data drives Wall Street gains: A string of higher than expected US data dragged Wall Street higher yesterday. An upward revision to final US Q3 GDP and much better than expected Consumer Confidence drive positive risk appetite through the US session. [Positive risk bias]
UK studies into Omicron give hope: UK university the Imperial College has undertaken a study into the of Omicron and seen that the risk of hospitalisation is 40 to 50% lower than with the previous Delta variant. [Risk positive]
Lagarde’s positive view: The ECB President believes that the growth outlook is strong but they are not quite meeting the ECB inflation goal yet. [EUR supportive]
Central bank speakers: once more there are no Fed speakers scheduled for today
- US core PCE at 1330GMT the Fed’s preferred inflation gauge is expected to increase by +0.4% from October to November and see YoY inflation increase to +4.5% (from +4.1% in October).
- US Durable Goods Orders at 1330GMT core durables (ex transport) are expected to increase by +0.6% for November (stronger than the +0.4% in October)
- US Weekly Jobless Claims at 1330GMT are forecast to be 200,000 in the last week (down from 206,000 the week before)
- US New Homes Sales at 1500GMT are expected to increase by 3.3% to 770,000 in November (up from 745,000 in October)
- Michigan Sentiment (revised) at 1500GMT is expected to be unrevised from the prelim at 70.4 (up from the final October reading of 67.4)
- Japan core CPI at 2330GMT is expected to increase to +0.4% YoY in November (from +0.1% in October)
Broad outlook: A swing towards a more positive risk attitude is holding this morning, however, there are a few question marks over whether the momentum can continue in the move.
Forex: Higher risk majors (AUD and NZD) are performing well, along with GBP. Safer haven majors (JPY and CHF) are slipping.
- EUR/USD has made its way in recent sessions back towards the range resistance at 1.1360/1.1380 but is just stalling again. The lack of traction for a breakout suggests still playing the range. Key supports at 1.1185/1.1220. Back under 1.1300 initial support turns negative within the range again.
- GBP/USD has been strong in the past couple of sessions and has this morning pulled above the resistance of the range highs around 1.3375. Momentum is strong but resistance between 1.3360/1.3410 is strong and trending moves have been consistently failing of late.
- AUD/USD has broken higher with the sharp swing into positive risk appetite. Daily technical momentum has become positive and using the 0.7185 breakout as a basis of support today is encouraging. Chasing breakouts on the Aussie have tended to fail recently, we prefer to look to buy into weakness.
Commodities: precious metals hovering, oil at a key inflection.
- Gold closing above $1800 is encouraging for the bulls. Momentum is more positive and recovery appears to be building. A move above $1815 opens further gains. Support at $1785 is now a key higher low.
- Silver is building a recovery now with a base pattern implying $23.80. The higher low at $22.18 is increasingly important now. We look to buy into supported weakness.
- Brent Crude oil bulls will be looking to stabilize an improving outlook with two consecutive strong positive candles. Breaking through $75.95 resistance is now key to continuing the improvement. Initial support $73.80/$74.75.
Indices: have turned positive again.
- S&P 500 futures Moving through the resistance at 4650/4670 turns the market more bullish in the range. Bulls will be looking for the next higher low around 4640/4675 to act as a springboard for a test of the highs again at 4742.
- DAX has moved through the pivot area of 15,400/15,510 and is now eyeing the next band 15,780/15,868. Momentum has improved and the bulls are looking more positive to buy into intraday weakness.
- FTSE 100 is consolidating around 7375 which is just under the key resistance at 7401. The near-term breakout support of 7300/7332 is now an area of near-term support.