What we are looking for
- USD negative bias continues: Even as major forex has become more settled in recent days, there is still a negative USD bias across major forex.
- Indices remain steady: Equity markets have been steady for several days now, lacking conviction. US futures are a shade higher and higher is helping DAX and CAC to post gains early today, but a breakout is yet to be seen.
- Commodities beginning to drift lower: Precious metals have had a strong run higher but are beginning to pull back slightly early today. Oil has also fallen back to test key support.
- Data traders: EUR traders will be on alert for any surprise revisions to Eurozone inflation. USD traders will need to sift through the US data dump with housing data, jobless claims and regional Fed surveys to consider.
There is more of a sense of consolidation that has taken hold in major markets. As US bond yields have become more settled in recent days, the sting has been taken out of the USD selling, even though the negative bias remains. Equity markets have also begun to consolidate, whilst commodities are threatening to unwind some of the recent gains. Looking at the technicals, some of the recent moves have been hitting overstretched levels on near-term momentum gauges and this could begin to weigh for some profit-taking. Gold and silver are threatening to unwind, but equity markets are holding up OK for now.
UK assets may be in for a rocky ride today. UK Chancellor of the Exchequer Jeremy Hunt is announcing the Autumn Statement on the fiscal position which is likely to contain some considerable tax increases and spending cuts. We will be watching UK bond yields and the associated reaction on GBP.
There is a whole raft of lower-tier US data on the economic calendar today. We start with the final Eurozone inflation for October, although no revision to either core or headline HICP is expected. Then before the bell on Wall Street, there is a deluge of US data. Housing Starts and Building Permits are both expected to continue to decline. Jobless Claims are expected to remain steady after slightly ticking higher in recent weeks. Both Philly Fed Manufacturing and then (a little later) the Kansas Fed surveys are expected to improve slightly but remain in negative territory.
Market sentiment is slightly positive: Amid a growing sense of consolidation, there is still a slight positive bias to sentiment.
Treasury yields are consolidating early today: Yields are all but flat on the 2-year and 10-year Treasuries.
Australian unemployment has unexpectedly fallen: The jobless rate has dropped to 3.4% (from 3.5% in September). Consensus had expected an increase to 3.6%.
ECB officials may prefer a 50bps hike in December: According to Bloomberg coursed, ECB officials may favour a less aggressive 50bps hike (down from 75bps) in December.
FOMC’s Waller “comfortable” with 50bps in December: Christopher Waller is arguably the most hawkish of the FOMC members and has said that the recent inflation decline has made him more “comfortable” with a 50bps hike in the next meeting (December).
US Republicans secure a majority in the House: The tallying of votes continues, but the Republicans have reached the 218 seats needed for a majority in the House of Representatives. Whilst they will not control the Senate this razor-thin majority in the House will still make it harder for President Biden in the final two years of his term in office.
Cryptocurrencies are mixed today: After falling back once more yesterday, crypto is looking mixed today. Bitcoin is +0.3% at $16555 with Ethereum -0.3% at $1201.
A few more Fed speakers today: Michelle Bowman (permanent voter, leans a shade hawkish) is speaking at 14:15 GMT. Loretta Mester (2022 voter, very hawkish) is at 14:50 GMT. Phillip Jefferson (permanent voter, a shade dovish) is speaking at 15:40 GMT. %UK Autumn Statement today: At 12:30GMT the UK Chancellor of the Exchequer Jeremy Hunt will announce the UK Autumn Statement. After the fiasco of the mini-budget in September that brought down the previous chancellor and then Prime Minister Truss, markets will be looking for a reassuring fiscal update. Details on how to close a supposed £50bn black hole in the finances will be expected.
- Eurozone final HICP inflation (at 10:00 GMT) Final HICP is expected to see the headline unrevised at 10.7% (up from 9.9% in September) and core HICP at 5.0% (up from 4.8% in September).
- US Housing Starts (at 13:30 GMT) Starts are expected to fall by -2.7% in October to 1.40m (from 1.44m in September).
- US Building Permits (at 13:30 GMT) Permits are expected to decline by over 6% to 1.465m in October (from 1.564m in September).
- US Weekly Jobless Claims (at 13:30 GMT) Claims are expected to remain steady at 225,000 in the last week.
- Philly Fed Manufacturing (at 13:30 GMT) The survey is expected to improve slightly to -6.2 in November (from -8.7 in October).
- Kansas Fed Composite (at 16:00 GMT) The composite is expected to improve marginally to -5 in November (from -7 in October)
Major markets outlook
Broad outlook: There is still a slightly positive bias to risk appetite, although this is in a growing sense of consolidation.
Forex: USD is marginally underperforming major forex. The AUD is lower after the unemployment data.
- EUR/USD has spent the past few days edging clear of the resistance at 1.035/1.0370 from the August highs. However, this is playing out within inside-day sessions which points to a sense of consolidation. With the RSI momentum creeping towards 70 the concern is that the move is beginning to look tired. There may be growing potential for an overbought correction. For now, though the move is higher. Above 1.0480 would open moves towards 1.0600 the June resistance. We still believe that reaction to near-term weakness will be key, with initial support at 1.0270 and then 1.0197.
- GBP/USD is still edging higher along the top of a six-week uptrend channel. However, the move is a little more tentative than with the RSI creeping into the 60s. Despite this, a move clear above 1.1900 has opened 1.1970/1.2030 as the next resistance area. Initial support is at 1.1790 with good support between 1.1500/1.1645.
- AUD/USD has just started to ease back slightly in the last couple of sessions. This has left resistance at 0.6797 as the market unwinds towards the 0.6670/0.6680 breakout. The next important resistance is around 0.6915. With the RSI into the 60s, we would look to use supported weakness as a chance to buy. Below 0.6670 there is more considerable support at the old resistance band 0.6520/0.6550.
Commodities: Precious metals are threatening to unwind some recent gains. Oil is once more lower and is testing the support again.
- Gold has started to ease back from $1786 as the bull run begins to see a bit of a retracement. This comes as the RSI has started to unwind from 70. Reaction to initial support at $1753 will gauge whether a near-term correction sets in. Above $1786 the next resistance is the $1808 August high. The big base pattern continues to imply a target of $1855 in the coming weeks.
- Silver has been choppy in recent days but following a second successive negative candle yesterday the early weakness today is now testing the support of the old resistance band of $20.85/$21.23. A close under $20.85 would open a deeper correction potentially back towards the support band around $20.00. The RSI momentum has been strong but is now unwinding and could move back towards the 50 area. Initial resistance is $21.40/$21.50 with $22.24 now key.
- Brent Crude oil has seen another intraday rally fall over and has retreated towards the support around $92.50/$93.00. The price is holding up well enough today, but there is a mild negative bias threatening the RSI. For now, with the moving averages flattening the outlook is neutral.
Indices: There is a growing sense of consolidation.
- S&P 500 futures are holding above the old resistance (which is a new basis of support) at 3883/3935 but there is a growing sense of consolidation. Three successive sessions have traded around similar levels. Given the positive bias to momentum, we would still look to use any near-term weakness as a chance to buy. However, for now, we wait for the next signal., with the move lacking decisive conviction. Above yesterday’s high of 4050 opens the recovery once more for the next big test for the bulls is the primary 10-month downtrend (c. 4116). Below 3950 opens a near-term unwind.
- German DAX continues to post daily candles with long upper shadows but which lose momentum to unwind into the close. Subsequently, there is a sense of consolidation amid a lack of conviction. With the RSI still hovering above 70, there is scope for a near-term unwind, potentially back towards the 13970 breakout. The recent resistance at 14447 is holding back a test of the June high of 14708.
- FTSE 100 has been choppy in recent days, failing to hold on to early gains as consolidation has unwound the market back towards the four-week recovery uptrend that comes in around 7339. Positive momentum is beginning to seep away with the RSI edging back under 60 this morning. A move below 7315 opens the next support at 7228/7250. The consolidation needs to break above 7441 to open the next move higher towards the next important high of 7516.
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