There is an uncertain feel coming into markets as the Thanksgiving holiday approaches in the US. A dominant USD positive trend is still in place, but with commodities beginning to build support and equity markets also ticking back higher, there may be a shift in sentiment coming. There is a whole raft of US data points brought forward into today due to the Thanksgiving holiday tomorrow. With volatility already elevated and thinning markets for the holiday, it could make for choppy moves later in the session.
- Main drivers: Sentiment remains choppy; RBNZ hike as expected; Oil rebounds; no Fed speakers due; economic calendar: a slew of US data including Prelim GDP, Durable Goods, and FOMC minutes.
- Mixed sentiment uncertain: The USD dominant trend remains in place but is on pause this morning. Commodities and indices have stopped falling
- Reserve Bank of New Zealand hikes as expected: The OCR was raised by +25 basis points with a steady approach to rate rises. This was entirely expected but some had called for +50bps and so NZD has underperformed on this. This is likely to be a near term move though [NZD weaker for now]
- Oil rebounds on reserves announcement: The US is releasing 50 million barrels from its reserves. However, this was lower than markets had expected, pulling the oil price higher. [Oil positive]
- Thanksgiving tomorrow: there is a swathe of US data to increase volatility later and this may add to thinning markets with the Thanksgiving holiday tomorrow. [Volatility increasing]
- Central bank speakers: there are no Fed speakers due today.
- Economic Data:
-US Prelim GDP (Q3) at 1330GMT is expected to be revised higher to +2.2% (from +2.0% Advance Q3)
-US Weekly Jobless Claims at 1330GMT are forecast to reduce slightly to 259,000 (from 268,000 last week)
-US Durable Goods Orders at 1330GMT are expected to see core (ex transport) orders growing by +0.5% on the month
-Michigan Sentiment (revised) at 1500GMT, is expected to be unrevised at 66.8
-FOMC minutes (November meeting) at 1900GMT will be watched for any comments about inflation and the speed of tapering
Broad outlook: USD remains strong but it could become stretched. Commodities remain under negative pressure and indices now also pulling back on risk aversion.
- Forex: USD strength continues but is beginning to show signs of consolidation.
-EUR/USD tentative support forming around 1.1225 could be the early signs of a near-term rebound. We would still be very wary of buying for a rally and prefer selling into strength. Initial resistance is around 1.1275/1.1290 but resistance around 1.1355/1.1385 is growing in importance.
-GBP/USD with an early consolidation today but negative pressure is still dominant. Initial resistance is at 1.3410 with 1.3513 now looking like important near term resistance.
-AUD/USD still trending lower, with little suggestion of sustainable support. We favour pressure towards the next support at 1.7170. Resistance is growing at 0.7275/0.7290.
- Commodities: precious metals have seen a pause in the near term correction, oil is breaking higher again.
-Gold has started to pick up from $1782 but this now needs to hold and form higher lows to generate recovery momentum again. We still see this as a pullback within the recovery and once support begins to build we are looking to buy. Resistance is at $1812.
-Silver possible signs of support forming at $23.26. We are still buyers into the weakness but look for confirmation to the end of selling. We now look for the formation of higher lows to suggest a new positive trend formation.
-Brent Crude oil with another shift in the outlook as recovery is now building on a break above $82.50 resistance. A move above $83.50 would be a key improvement now.
- Indices: Wall Street has been choppy but support is forming. , DAX struggling to recover, FTSE still performing relatively well.
-S&P 500 futures have seen a choppy recovery back towards the 4690/46955 resistance area. This is now a near-term inflexion point. Decisively above 4695 improves, but a bull failure re-opens 4648 initial support.
-DAX is struggling near term to hold recoveries. Resistance around 16,000/16,070 is growing as a result. A retreat back towards support at 15,760/15,810 cannot be ruled out.
-FTSE 100 looks technically strong for recovery now as a move through 7300 resistance engages a new positive near-term trend. We look to buy into weakness and retain our medium-term upside target of 7700 whilst the key support at 7180 is intact.