What we are looking for
- USD begins to weaken again: As US yields slip lower, so too is the USD. There is USD underperformance against most major forex pairs this morning.
- NZD outperforming on RBNZ hike: A hawkish hike from the RBNZ is helping NZD to outperform.
- Indices continue to edge higher: A positive bias to risk appetite is pulling equity markets higher. US futures are only marginally higher, but European indices are mixed (DAX) to slightly higher (FTSE 100) as they build on yesterday’s gains.
- Commodities looking to build support: Precious metals have been consolidating around breakout supports and are looking to build higher. Oil continues to rebound. A weaker USD will help.
- Data traders: GBP traders will be reacting to the UK flash PMIs. Then, throughout the US session, there is plenty for USD traders to digest. At 13:30 GMT the Durable Goods and Weekly Jobless Claims. Then at 14:45 GMT, the Flash PMIs will drive moves. Then at 15:00 GMT there is the New Home Sales and revised Michigan Sentiment. Finally, the FOMC minutes are at 19:00GMT.
As markets prepare for the lull of the Thanksgiving holiday in the US, there is an edge of positive risk appetite taking hold. With US Treasury yields tailing off again, this is dragging the USD lower. Commodities are looking to build support after recent weakness. We also see the positive sentiment playing out through gains in equity markets, especially in Europe.
A decisively hawkish hike from the Reserve Bank of New Zealand is driving NZD outperformance today with the move helped by the more positive risk outlook. Traders will need to be ready for a US data dump throughout today’s session. It will be interesting to see how much of a view traders are willing to take ahead of Thanksgiving.
There is a deluge of US data to watch for on the economic calendar today as announcements have been brought forward due to Thanksgiving. Initially, the UK Flash PMIs are expected to show continued deterioration into further contraction in November. Then the US data begins. Durable Goods Orders are expected to be flat on the month, whilst Weekly Jobless Claims are expected to be only marginally higher than the previous week. The US Flash PMIs are expected to show a mild uptick in the composite, but to remain slightly in contraction. New Home Sales continue to show a sharp decline in October, whilst the final Michigan Sentiment is expected to be revised slightly higher. Finally, watch out for the Fed minutes later in the session.
Market sentiment looks marginally risk positive: The USD underperformance on major forex, commodities ticking higher. Indices mixed to positive.
Treasury yields mixed this morning: Yields fell yesterday and are mixed this morning.
RBNZ hikes by 75bps and raised OCR forecast: In what looks to have been a “hawkish hike” the Reserve Bank of New Zealand has raised its OCR rate by 75 basis points to 4.25%, broadly as expected. However, it also considered a 100bps hike. The OCR is now expected to peak at 5.50% (another 125bps from current levels).
Cryptocurrencies move higher for a second day: A positive close yesterday and further recoveries today are building on crypto. Bitcoin is +2.5% at just over $16500, with Ethereum at +3% and $1163.
Economic Data :
- UK Flash PMIs (at 09:30 GMT). The consensus is looking for the flash Composite PMI to fall to 47.5 in November (from 48.2 in October)
- US Durable Goods Orders (at 13:30 GMT). Core orders (ex transport) are expected to be flat in the month of October.
- US Weekly Jobless Claims (at 13:30 GMT). Claims are expected to tick slightly higher to 225,000 (from 223,000)
- US Flash PMIs (at 14:45 GMT). Analysts are looking for the Composite PMI to improve slightly to 49.5 in November (from 48.2 in October)
- Michigan Sentiment - final (at 15:00 GMT) The consensus suggests that the final sentiment for November is expected to be revised slightly higher to 55.0 (from 54.7 at the flash reading). The final October sentiment was 59.9.
- New Home Sales (at 15:00 GMT) Sales are expected to decline by 5.5% in October to 570,000 (from 603,000 in September)
- FOMC meeting mintues (at 19:00 GMT)
Major markets outlook
Broad outlook: A marginally positive bias to risk appetite, although nothing too decisive.
Forex : USD underperforming on major forex (aside from a shade of JPY weakness). The NZD is again the main outperformer.
- EUR/USD has started to build support again having pulled back from 1.1470. Crucially, this support is forming around 1.0220 which is above the 1.0100/1.0200 old key breakouts. This is leaving positively configured momentum with the RSI around 60 and a real sense that the weakness is a chance to buy. There is an old pivot resistance around 1.035/1.0370 which needs to be breached to generate decisive positive momentum.
- GBP/USD has edged back higher within the recent consolidation. This has strengthened the support between 1.1710/1.1760 which is preventing a deeper pullback towards the 1.1500/1.1645 key breakout support area. A move above resistance between 1.1950/1.2030 would re-engage the recovery momentum.
- AUD/USD has ended a run of bear candles with a solid rebound yesterday. More importantly, the market has bounced from 0.6585 which is above the key breakout support band 0.6520/0.6550. With the RSI holding above 50, it looks like the weakness is being seen as a chance to buy. However, for this to be confirmed, the bulls need to push above 0.6670/0.6700 resistance again and not form a lower high below 0.6730.
Commodities : Precious metals have pulled back towards support. Oil is trying to recover losses.
- Gold has pulled back to the neckline support of the base pattern around $1730/$1735. Holding this support would be ideal for the bulls, so this is an important phase of trading. A move back above $1750 would suggest that the upside momentum was building again. A move below $1730 would be disappointing but the recovery pattern would not be aborted until the loss of the $1680/$1690 support band.
- Silver has been threatening below the old breakout resistance between $20.85/$21.23 but it is interesting to see the last few sessions have shown growing support again. A close under $20.85 would open a move potentially back towards the support band around $20.00, but for now, the bulls are holding on. The RSI momentum remains above 50 and with the market ticking higher again today, there is a basis of support now at $20.58/$20.85. A close above the initial resistance around $21.35 would be positive.
- Brent Crude oil has moved higher following the big bull hammer candle on Monday. The price is again higher today and a near-term recovery is building. A close above $90.40 would add recovery momentum within what is now a multi-month trading range. The next resistance is then around $92.50/$93.00.
Indices : Wall Street now looks positive within the consolidation. European markets are being bought into weakness within the move higher.
- S&P 500 futures ticked decisively higher yesterday as the consolidation of the past week and a half looks to move to test the resistance at 4050. Holding on to the support band of the previous breakout between 3883/3935 is an important positive development with the recovery looking for the next upside break.
- German DAX continues to move higher with a succession of higher lows and higher highs as it moves to its highest level since early June. There has been a slight early pullback this morning and support at 14323 will be watched. The RSI has been above 70 now for two weeks and the risk is that the move runs out of steam. Support around 14125 remains an important gauge. The next important resistance is at the June high of 14708.
- FTSE 100 remains strong and continues to push higher along the support of a six-week uptrend. A close above 7516 would open the key August high of 7578, the July rally high. There is good initial breakout support around 7380/7440. A close below 7304 would be corrective.
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