There is a tentative feel across major markets as we get ever closer to a deluge of central bank decisions later in the week. Markets are lacking trend and traders appear intent on a wait and see approach for what is likely to be a volatile few days ahead. A quiet session yesterday could be repeated today though, with little on the economic calendar. The US producers prices inflation could cause some interest later, but markets will likely remain cautious in the run-up to the Fed meeting tomorrow.
- Main drivers: Markets tentatively recovering; caution still ahead of huge risk factors later in the week; UK unemployment reduces as expected, wages fall too; Economic calendar: US PPI later.
- Broad sentiment lacking intent: European indices are rebounding after selling pressure during the US session yesterday. There is a cautious tone though as indices were looking to tick higher yesterday too. There is a subdued look to forex majors with little decisive direction. Commodities are mixed with precious metals slightly weaker, but oil slightly higher.
- UK unemployment broadly as expected: UK unemployment fell as expected in October to 4.2% (from 4.3% in September). The November claimant count fell more than expected. Wages also fell but not as far as expected, with average weekly earnings (including bonus) felling to 4.9% (from 5.9% in September) [GBP supportive]
- Central bank speakers: the FOMC is in its Blackout Period. There will be no FOMC speakers until after the FOMC meeting tomorrow.
- Economic Data:
US PPI (at 1330GMT) November headline PPI is expected to increase by +0.5% on the month to 9.2% (from 8.6% in October), with core PPI increasing to 7.2% (from 6.8%)
Broad outlook: a cautious tone amidst a tentative risk rebound. Forex majors still lack intent. Indices have ticked back higher after yesterday’s weakness. Precious metals a shade lower, oil a shade higher.
Forex: There is very little direction which is understandable ahead of five major central banks later in the week.
- EUR/USD is still lacking intent around the middle of the consolidation range between 1.1185/1.1385. Initial support at 1.1260 today and then 1.1227. Initial resistance 1.1325 and then 1.1355.
- GBP/USD despite breaking the 6-week downtrend the bulls have been unable to engage a recovery. Until 1.3290 resistance is decisively broken this will remain the case. Subsequently, we favour short positions for further tests of 1.3160/1.3195.
- AUD/USD the recovery tailed off disappointingly and the support at 0.7090 is crucial for the near to medium-term outlook. A bull failure around 0.7140/0.7160 would increase the negative pressure again.
Commodities: precious metals continue to consolidate, but struggle for recovery traction. Oil recovery has lost momentum in a consolidation of its own.
- Gold ticking higher from $1770 is again looking to test resistance around $1790/$1800. However, once more failing to close above $1790 is a concern. Although the selling pressure has eased, it still looks to be a struggle for sustainable recovery. Technical signals continue to favour selling into strength for a retest of $1758. The bulls need a break above $1815.
- Silver the market has rebounded from $21.82 but into the resistance band around $22.20/$22.60. It is difficult to see serious recovery traction until $22.60 is breached.
- Brent Crude oil recovery has stalled at $77.20 and is now formed a consolidation with a series of contradictory daily candles. A range between $74.10/$77.20 has formed near term above $73.20/$73.50 support. The outlook remains uncertain whilst this range continues. Key resistance overhead remains at $77.80.
Indices: just when it looked as though the bulls were ready to go again, a failed breakout and a false start. Support is tentatively forming again, but any traction is unlikely now ahead of the Fed.
- S&P 500 futures have pulled back sharply into the support around the pivot band 4650/4669. Consolidation is now likely. A drift back under 4650 could weigh the market down to 4590/4610. Resistance is growing between 4711/4740.
- DAX looked to be finding upside traction but has been weighed down again. Despite this the support at 15,532 is intact and the market is looking to build above 15,586. Near term technicals still favour upside and pressure on the reaction high at 15,868.
- FTSE 100 has been tracking lower but is looking to build from 7240. However, reaction around resistance at 7300 will be key and the bulls need a move above 7350 to resume control.