The significant strength of the dollar is just one pause this morning, with the potential for a pullback. This comes amidst a mild positive risk bias and also strengthening of currencies such as GBP and NZD due to domestic factors. Indices continue to trade with a positive bias too, something that is a potential drag on precious metals near term. 

Today’s news

  • Main drivers: Marginal risk positive bias; UK inflation jumps again; Biden to choose Fed chair soon; New Zealand to move out of lockdown; a flood of Fed speakers; economic calendar: final Eurozone inflation, Canadian inflation, and US housing data.
  • Positive bias for markets: Indices continue to trade with a positive bias after US retail sales jumped yesterday.  
  • GBP support grows as UK inflation rises again: UK headline CPI jumps to 4.2% (3.9% exp) and core CPI to 3.4% (3.1% exp). This strengthens the likelihood of a Bank of England December rate hike [GBP supportive]
  • US President Biden’s choice of Fed chair: he said yesterday that the decision will be made in about “four days” [risk uncertain].
  • New Zealand to end lockdown: Prime Minister Arden has said that she expects the whole country to be out of lockdown at the end of November, with a move to a traffic light system [NZD supportive].
  • Central bank speakers: a flood of six Fed speakers:

       -FOMC’s Williams at 1410GMT (permanent voter, mild dove)

       -FOMC’s Bowman at 1600GMT (permanent voter, centrist)

       -FOMC’s Waller at 1740GMT (permanent voter, mild hawk)

       -FOMC’s Daly at 1740GMT (2021 voter, dove)

       -FOMC’s Evans at 2105GMT (2021 voter, dove)

       -FOMC’s Bostic at 2110GMT (2021 voter, hawk)

  • Economic Data:

        -Eurozone final inflation at 1000GMT, both core and headline expected to be unrevised at +2.1% and +4.1% respectively

        -US Building Permits and Housing Starts at 1330GMT, to increase slightly to 1.64m and 1.58m respectively

        -Canada CPI at 1330GMT, core CPI expected to drop slightly to +3.5% (from +3.7%)

Markets Outlook

Broad outlook: mild risk positive bias, signs of a possible USD pullback.

  • Forex: USD has maintained strength against the EUR, but is broadly consolidating elsewhere. GBP outperforming after UK employment data.
  •  EUR/USD rebounding from a spike of selling pressure overnight. Still stretched aWe remain bearish but momentum is beginning to look stretched and could be due to a technical rally. We would prefer to sell into strength. Resistance not until 1.1460/1.1525.

        -GBP/USD rally is still threatening but is yet to overcome resistance at 1.3470. We hold off our strategy of selling into strength for now at the potential for a near-term technical rally. Support at 1.3435 is growing.

        -AUD/USD still trading within the downtrend and selling into intraday strength. Resistance is strengthening around 0.7360/0.7390. A bull failure would be another chance to sell.

  • Commodities: precious metals are beginning to post near-term corrective signals, oil is consolidating.

-Gold signs of near-term correction after a “bearish engulfing” candle yesterday. An unwind back towards $1834 breakout would be a chance to buy. Resistance is now at $1877.

        -Silver also with a bearish engulfing candle, but support around $24.80 is holding for now. We see supported weakness as an opportunity to buy. Key resistance is now $25.40.

        -Brent Crude oil in consolidation and uncertain trading has taken hold in recent sessions, but the bottom of the $80.80/$86.65 trading range is holding. We remain neutral within the range.

  • Indices: Wall Street has regained its poise and is looking higher once more, European markets still finding intraday buyers into weakness.

        -S&P 500 futures ticking higher to test the all-time high of 4711 again yesterday. Mild positive bias today. A break to new highs opens upside once more.

        -DAX outlook remains strong but is increasingly looking stretched makes us cautiously optimistic. We prefer to buy into supported weakness, with support good support around 16,000 now.

        -FTSE 100 has pulled back to the 2-month uptrend and supports around 7300/7340. We look to buy into supported weakness. We retain our medium-term upside target of 7700.