What we are looking for
- USD with mild losses early today: USD has been weaker during the mornings this week, only to strengthen against major forex into the US close on each occasion. USD losses are coming again early today, but can they last through a key speech by Fed Chair Powell later?
- Indices rebound: Mild losses in recent sessions have turned positive early today. US futures are slightly higher and European markets are trading solidly higher.
- Commodities are higher: Metals are trading slightly higher and are tracking moves on major forex, whilst oil continues its rebound from yesterday.
- Data traders: EUR will move on Eurozone inflation. There is plenty of US data throughout the session. Initially, the ADP and then GDP will be key before the opening bell on Wall Street. The JOLTS and Pending Home Sales will also be watched at 15:00 GMT. However, the big event for USD traders will come with the speech from Fed Chair Powell at 18:30 GMT.
Markets have fluctuated in recent days, but there has been a hint of a USD recovery, especially in US trading on Monday and Tuesday. However, coming into the belly of the week today is packed with important events that will drive markets. Eurozone inflation is expected to fall, which would solidify market expectations of a 50bps ECB hike in December. However, Fed Chair Powell’s speech at 18:30 GMT will be key. Powell is likely to remain vigilant on inflation and this should be USD positive. Given how the USD has been positive into the close in recent sessions, this could help to add momentum to a near-term bounce for the USD.
Elsewhere, after sliding back early this week, there is a degree of support forming in major equity markets. However, if the USD continues to rebound, the gains on equities may struggle to be sustained. It sets up for a continuation of what has been a choppy couple of weeks on equities.
It is another busy day for the economic calendar. Eurozone inflation will be a key highlight. After German inflation showed signs of tailing off, the trend for euro area inflation is expected to follow suit on the headline, whilst core inflation is expected to plateau. The ADP Employment Change is expected to reduce to 200,000 which is also around where Friday’s payrolls are expected to sit. US Q3 GDP is expected to be revised marginally higher in the second reading. The JOLTs are expected to show job openings reducing more than the quit rate. Pending Home Sales are expected to deteriorate once more, falling by -5% MoM. However, the big event of the day could turn out to be the speech by Fed Chair Powell later in the US session. Any insight into Powell’s outlook on the rate hikes (both speed and terminal rate) would be market-moving.
Market sentiment marginally improves: After sentiment has struggled in recent days, there is a marginally positive risk bias this morning.
Treasury yields edge lower after yesterday’s rebound: The early move is lower this morning, but this is bucking the trend of early this week which has seen yields rising into the US close.
Chinese official PMIs disappoint: The official government PMIs have all deteriorated and missed expectations. The General PMI dropped to 47.1 in November from 49.0 in October. The expectation was for a slight improvement to 49.3. Whilst this has barely budged sentiment this morning, it is still not very positive looking forward.
OPEC+ meets on 4th December: The production levels will be discussed. According to the Wall Street Journal (sourcing “delegates”), production levels are unlikely to be changed.
Fed Chair Powell speaking today: There is an increasing focus on FOMC speakers in recent weeks. Fed Chair Powell will be taken as a crucial guide for the next meeting. This is likely to mean significant market volatility around his speech at 18:30 GMT.
Cryptocurrencies rebound with risk appetite: With positive sentiment this morning, cryptos are bouncing. Bitcoin is +2.5% at c. $16900, with Ethereum +4% at $1268.
- Eurozone flash HICP inflation (at 10:00 GMT). Inflation is expected to fall slightly on the headline to 10.4% in November (from 10.6% in October), with core HICP flat at 5.0%.
- ADP Employment Change (at 13:15 GMT). The ADP is expected to be 200,000 in November (239,000 in October)
- US GDP - Q3 Prelim (at 13:30 GMT). Prelim GDP (2nd reading) is expected to increase slightly to +2.7% (from 2.6% with the Advance Q3). T
- US JOLTS jobs openings - (at 15:00 GMT). Openings are expected to decline to 10.3m in October (from 10.717m in September)
- US JOLTS job quits - (at 15:00 GMT). The quit rate is expected to decrease only marginally to 4.05m (from 4.061m)
- US Pending Home Sales (at 15:00 GMT). Pending sales are expected to fall by another -3.8% in October, with the YoY sales falling by -24% (September -31%).
Major markets outlook
Broad outlook: Risk appetite has recovered early today.
Forex: USD has once more weakened during the European session. The NZD, AUD and EUR are mild outperformers.
- EUR/USD has picked up marginally this morning after closing lower for three consecutive sessions. However, the big “Shooting Star” candle that left resistance at 1.0496 remains a near-term corrective signal that hints at a USD rebound. Despite this though, with the RSI above 60, we still see weakness in EUR/USD as a chance to buy. Any supported correction that finds a low above 1.0220 would be another opportunity. A breakout into the 1.05s opens 1.0615 as the next test.
- GBP/USD has been finding buyers in the important 1.1950/1.2030 breakout area in the past few sessions. With RSI momentum still in the 60s and recently hitting its strongest since January, the outlook remains positive. This continues to suggest near-term corrections remain a chance to buy. The next important resistance remains the August high of 1.2295. The support between 1.1710/1.1780 continues to strengthen with recent moves.
- AUD/USD has fluctuated in the past couple of weeks under the 0.6797 resistance. The market is higher today and is looking to bolster the support at 0.6642 above the key near-term low at 0.6585. Momentum remains strong with the RSI positively configured above 50, weakness is being seen as a chance to buy. A close above 0.6797 would be a key breakout and would open 0.6915 as the next test.
Commodities: Precious metals are positive again today, backing up yesterday’s rebound, but they need to hold the gains. Oil has also recovered from recent weakness, but is still at threat of selling into strength.
- Gold has fluctuated over the past week. However, a positive close yesterday and early gains today are encouraging. A move above $1764 would open the upside for a test of the $1786 reaction high. With the RSI holding decisively above 50 and moving back into the 60s, the outlook remains positive and we still favour buying into weakness. The low at $1728 continues to grow in importance.
- Silver has been trading around the old pivot band between $20.85/$21.23 for over a week now but has followed yesterday’s rebound with early gains today. The bulls will be looking for a move above the initial resistance at $21.67 to open a retest of the $22.24 high in due course. The encouraging outlook is helped by the RSI momentum remaining above 50. Initial support is at $20.86 but a close under $20.57 would be a disappointment and neutralise the outlook.
- Brent Crude oil has picked up from $81.40 following a brief breach of the support of the $20 multi-month trading range between $82.85/$101.20. This reaction is encouraging for the continuation of the medium-term range, but a near four-week downtrend and the pivot band of $88.30/$90.40 are barriers to recovery. The RSI has room to unwind towards 50 but would likely be seen as another chance to sell.
Indices: The recovery uptrends are holding for now.
- S&P 500 futures have retreated from a test of the 4050 resistance and is now testing the support of a seven-week recovery uptrend. For now, the outlook remains encouraging to buy into weakness though. The support band of the previous breakout between 3883/3935 is key and is holding. Also, the RSI is still holding above 50. While these conditions continue, we favour buying into weakness for a test of the resistance at 4050 again.
- German DAX has eased back from the 14575 high in recent days, but the recovery uptrend continues to be an encouragement for renewed buying. The uptrend is supportive around 14320, with initial support also at 14323. A move below 14125 would be a corrective signal now. Above 14575 opens 14700/14800 key resistance.
- FTSE 100 has continued to grind higher within the support of the six-week recovery uptrend is around 7485. A decisive close above 7516 is testing the key August high of 7578. A breakout opens 7650 as the next test. There is initial breakout support around 7515 with 7440 strengthening too.
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