What we are looking for

  • USD rebounding, for now: The USD has bounced versus major forex on Monday amid the concerns over the zero-COVID policy in China which is weighing on risk appetite.
  • Indices fall back: With a negative bias to market, sentiment equities are on the back foot. US futures are around -0.5% lower with similar early moves on European indices.
  • Commodities are also dragged lower: Oil is especially under selling pressure on the implications for demand in China. Silver is underperforming gold.
  • Data traders: It is a fairly quiet start to the week, but USD traders might like to keep an eye out for the Dallas Fed Manufacturing Index survey.


Markets have been relatively subdued in recent sessions as traders have navigated the Thanksgiving holiday in the US. However, the focus has turned to China over the weekend and the implications of the zero-COVID strategy. Record COVID rates, lockdown protests over the weekend and the negative implications for economic growth are weighing on risk appetite. This is pulling flow towards safe-haven assets, with US Treasury yields lower, whilst the USD and especially JPY are outperforming. Equity markets are being weighed down along with growth-driven commodities. The oil price has fallen below support and is now trading at its lowest level since January on Brent Crude.

Moving forward it will be interesting to see how developments in China play out. Chinese people are being periodically locked down whilst seeing the rest of the world free to enjoy the World Cup. Could the protests bring about a shift in Chinese policy on COVID? Whilst there is still low vaccine takeup, it may be difficult.

It is a quiet start to the week for the economic calendar. The only data of note is the Dallas Fed Manufacturing, which is expected to continue to deteriorate well below zero.

Today’s news

Market sentiment sours on China concerns: JPY and USD are outperforming on major forex. Oil is sharply lower in the commodities space whilst equity markets are also on the back foot.

Treasury yields fall on risk appetite concerns: Yields have started the week lower, with the US 10-year yield -7bps at 3.63%. However, lower yields may not support the USD for long.

China social unrest: Large protests have been taking place in major cities across China to the COVID lockdowns. Uncertainty over what this means for China, this has been leading to concerns over Chinese growth, negatively impacting broader risk appetite. 

Cryptocurrencies fall as risk appetite declines: Crypto has fallen back once more, with Bitcoin -1.6% at $16230 and Ethereum -2% at $1174.

Economic Data:

  • Dallas Fed Manufacturing (at 15:30 GMT). The survey is expected to continue to deteriorate in November to -20.9 (from -19.4 in October).

Major markets outlook

Broad outlook: Risk appetite has turned negative, for now. 

Forex: The commodity currencies (AUD, NZD and CAD) are especially lower, with JPY strengthening on lower yields.

  • EUR/USD consolidated around Thanksgiving but already looks far more active on Monday. Initial declines have been bought into and support around 1.0345/1.0390 has encouraged buyers. With the RSI above 60 and a real sense that the weakness is a chance to buy. The importance of holding the higher low at 1.0220 is growing, with the bulls still eyeing a test of the 1.0480 reaction high. A breakout opens 1.0615 as the next test.

  • GBP/USD has held above the 1.1950/1.2030 breakout in recent days and is looking to move higher along an expanding uptrend channel. Momentum is strongly positive, with the RSI in the 60s and at its strongest since January. This continues to suggest near-term corrections remain a chance to buy. The next important resistance is the August high of 1.2295. The support between 1.1710/1.1780 continues to strengthen with recent moves.
  • AUD/USD has pulled back from the test of 0.6797 resistance, but although the market is lower this morning, there is still a sense that weakness is a buying opportunity. Holding above the reaction low at 0.6585 will help to sustain this bias. Momentum remains strong with the RSI positively configured, weakness is being seen as a chance to buy. A move above 0.6797 would be a key breakout and would open 0.6915 as the next test.

Commodities: Precious metals are just holding up well, but oil has broken down.

  • Gold consolidated into the weekend but continues to look solid for the recovery. Holding the support at the neckline of the base pattern around $1730/$1735 remains key to the recovery continuing. Once more this morning, initial weakness has been bought into and with the RSI holding decisively above 50 and moving into the 60s now, the outlook gains are positive. Moving above $1767 would be the next trigger for further upside. The big base pattern implies $1844. The low at $1728 continues to grow in importance.
  • Silver holding on to the support of the old pivot band between $20.85/$21.23 has helped to sustain an improving outlook. The early dip to find support at $21.04 this morning will add to the sense of buying into weakness. This is helped also by the RSI momentum remaining above 50 and now ticking into the 60s. We favour a retest of the $22.24 high in due course. A close under $20.57 would be a disappointment now.
  • Brent Crude oil has broken the $20 multi-month trading range between $82.85/$101.20 in a move that has taken the price to its lowest since January. A decisive close below support at $82.85/$83.50 opens the next support around $890 and then $77. The RSI is bearishly configured but is now around levels where near-term lows have been posted in recent months. Initial resistance is at $84.50 and then $87.60.

Indices: Equity markets are pulling back early on Monday. We would still see this as a chance to buy into supported weakness.

  • S&P 500 futures have pulled back from 4050 after the consolidation over Thanksgiving. The key will once more be the support band of the previous breakout between 3883/3935 but also the recovery uptrend which today comes in around 3915. Momentum is positively configured to suggest that weakness is still a chance to buy. However, looking for support first would be preferable. 
  • German DAX has just eased back slightly early today. Initial support is at 14323/14360 whilst the support of the recovery uptrend is around 14200. The RSI is worth watching now, as it has dropped back below 70 today. This would be a near-term profit-taking signal if confirmed into the close. Weakness would be seen as a chance to buy whilst the market remains above 14125 support. Initial resistance is now at 14582 above which the next important resistance is at the June high of 14708 which marks the bottom of a hugely important resistance band between 14700/14800.
  • FTSE 100 has eased back this morning and is threatening to break the six-week uptrend. With the RSI also pulling back from 70, there is a growing threat of a near-term pullback. Reaction to support will be key, with good initial breakout support around 7380/7440. However, a close below 7304 would be corrective. Initial resistance is now 7513/7516 under the key 7578 reaction high from August.

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