There is a risk positive bias that continues to run through equity markets as Wall Street has once more broken to all-time highs. The US dollar has been slipping back against major forex in recent days, but this move is stalling slightly today. The consolidation continues on precious metals, but oil has managed to swing back higher once more. The economic calendar is fairly light today with little to shake up sentiment.
- Main drivers: Risk positive bias for indices despite USD finding support; UK retail sales recover well; Hawkish Fed member comments; COVID resurgence in Europe; two Fed speakers; economic calendar: Canadian Retail Sales.
- Indices positive, USD finding support: Wall Street breaking to all-time highs on strong runs for tech giants Nvidia and Apple. However, hints of USD finding support again are weighing through forex majors and commodities.
- UK Retail Sales improve: After a difficult September, UK retail sales have bounced back strongly in October, beating expectations on both headline and core sales[GBP supportive]
- Hawkish Fed member comments: John Williams (permanent voter, leans dovish) has said that inflation is becoming more broad-based and expectations for future price increases are rising. Coming from a dovish FOMC member, this is a hawkish comment and increases the potential for sooner Fed rate hikes. [USD supportive]
- COVID infections rising again: Europe is feeling the pressure of increased infections, with restrictions starting to be imposed across several countries such as Austria, Greece, Czechia, The Netherlands and maybe even Germany [risk negative]
- Central bank speakers: two Fed speakers today:
-FOMC’s Waller at 1230GMT (permanent voter, leans hawkish)
-FOMC’s Clarida at 1430GMT (permanent voter, centrist)
- Economic Data:
-Canada Retail Sales at 1330GMT, expected to decrease by -1.7% MoM in September (after rising +2.1% in August)
Broad outlook: risk positive for indices but USD finding support is hitting forex and commodities.
- Forex: a USD corrective move has stalled and is threatening to resume USD strengthening again.
-EUR/USD has recovered and formed a “morning star” candlestick pattern, but needs to find support into today’s weakness. Support 1.1310/1.1325 needs to hold otherwise any hint of recovery will be broken. Resistance now 1.1375.
-GBP/USD is slipping this morning within the recovery uptrend channel. Support around at 1.3470. This slide will question recovery potential if support is breached. Resistance growing around 1.3510. We still look for medium-term selling opportunities after any near-term rebound.
-AUD/USD consolidating above 0.7250 but the negative outlook remains and the bulls are struggling. We look to sell intraday rebounds within the three-week downtrend. Resistance is strengthening around 0.7360/0.7390.
- Commodities: precious metals are still in a week-long consolidation, oil has rebounded but looks to be another chance to sell.
-Gold Tuesday’s bearish engulfing candlestick still has a mild negative bias within a one-week consolidation. Consolidation above $1848 but near-term momentum is turning corrective. An unwind back towards the $1834 breakout would be a chance to buy. Resistance is strengthening at $1877.
-Silver a one-week consolidation is turning into a slight corrective bias as support around $24.80 is giving way this morning. We would look to use supported weakness within the uptrend channel as an opportunity to buy in due course. Resistance is growing around $25.40.
-Brent Crude oil a technical rally following the breakdown of support. We are still sellers into the strength whilst resistance at $83.45 is intact.
- Indices: Wall Street breaking to all-time highs, European markets also ticking higher.
-S&P 500 futures a breakout above 4711 has opened upside once more. Potential near-term upside target of 4795. We look to use intraday pullbacks as a chance to buy, with support initially 4690/4711.
-DAX tentative moves into all-time highs in recent days but remains stretched on momentum and we prefer to buy into weakness. Six-week uptrend support at 16,130 with price support around 16,000/16,100.
-FTSE 100 A pullback to breakout support around 7250 has formed support and this looks to be a buying opportunity. We retain our medium-term upside target of 7700 whilst the key support at 7180 is intact.