Risk appetite has been smashed this morning amid renewed COVID fears. A new variant has taken hold and could be more dangerous than the delta variant. This will mean traders fearful of the potential impact of renewed social restrictions and less tightening of monetary policy. This is all driving risk assets lower and safe-haven plays higher. Thin trading conditions (with many US traders off for Thanksgiving) will mean fast-moving markets.
- Main drivers: Sentiment dives on COVID fears; a Thanksgiving hangover, thin markets are likely again, expect high volatility; Swiss GDP misses forecasts; economic calendar: a quiet day.
- Sentiment dives renewed fears of COVID as a new variant takes hold in Africa. Fears will now be over what this means for social restrictions, but also the attitude of central bankers to tighten monetary policy. Will this change the Fed’s thinking towards less hawkish? Also could the same be said of the Bank of England?
- Thanksgiving hangover: Many US trading desks will remain shut so expect continued low liquidity and thin volumes. [Relatively thin markets, but likely high volatility and fast-moving markets]
- Swiss GDP misses: QoQ GDP comes in at 1.7% slightly lower than the 2.0% forecast.
- Central bank speakers: no central bank speakers due today:
- Economic Data:
-No major economic announcements today
Broad outlook: Risk negative sentiment taking hold. Safe havens performing well, higher-risk assets sharply sold off. Volatility is high in thin markets, except for wild swings.
- Forex: USD remains strong against commodity currencies and GBP, USD is turning corrective against safe havens (CHF, JPY, EUR).
-EUR/USD starting to rally. Needs to hold a move above 1.1275 to suggest a sustainable rebound is coming. Resistance then 1.1290/1.1325/1.1375. Building a higher low above 1.1225 will also encourage the bulls.
-GBP/USD is volatile this morning but the outlook remains negative for now. Needs to hold above 1.3330 to improve but needs above 1.3350 to open recovery.
-AUD/USD has come close to testing 0.7105 in the early volatility. Looking oversold but still very negative for now.
- Commodities: precious metals are beginning to build from support; oil is sharply lower. Volatility is heightened in the thin markets.
-Gold has picked up from $1778 and is now looking to hold back above $1800. There is resistance in the band $1802/$1812 which needs to be breached to gather decisive momentum in recovery. $1787 is now a mini higher low.
-Silver looked to be recovering until thin markets hit the price sharply lower early in the European session. Very volatile, but support around $23.25 is holding for now. Needs above $23.75 to engage recovery now.
-Brent Crude oil has jagged lower in recent hours but remains highly volatile to intraday rebounds. The market has picked up off $77.55 but it is hard to see this as sustainable.
- Indices: Highly volatile trading. Wall Street has been sharply lower overnight but has just hinted at an intraday rebound in the past hour. DAX and FTSE are also off their overnight lows.
-S&P 500 futures have rebounded off 4597 and back into near-term resistance 4625/4650. Sentiment remains weak but in thin markets, this is fast-moving and could quickly change again.
-DAX accelerated lower through support around 15,500/15,600 which is now resistant as the intraday rebound takes hold. Initial support is now 15,300.
-FTSE 100 breaching 7180 breaks the medium-term recovery outlook. This now sees 7180/7200 as a basis of resistance for a rebound. The market has rebounded off 7054 in the last hour and is now tentative support.