Daily market outlook, November 12, 2019

Main market themes

• Daily market outlook: US bond markets were shut on Monday for Veterans Day but US equity markets were open. The Dow notched a fresh record closing high, though the rest of the benchmark markets closed lower amid lingering US-China trade worries, as protests in Hong Kong escalated.
• Brexit Party leader Farage saying that he wouldn’t stand candidates in the 317 electorates that the Conservatives won at the last election in 2017, to help boost the chance of Boris Johnson winning a majority government at the 12 December election. The move is aimed to avoid a split of the pro-leave vote and thereby reduce the chance of a second referendum to cancel Brexit. But some say that this move won’t be of much help as the Brexit party will still be contesting seats the Conservatives hoped to win that are currently held by Labour or the Liberal Democrats.
• GBP liked the news and spiked up to just under1.29 before meeting some resistance. It is currently up 0.7% to 1.2860. Earlier, there was little market reaction to economic data showing that UK GDP in Q3 was a slightly softer-than expected 0.3% qoq. This took annual growth down to 1.0%, the weakest in nearly a decade, driven by weaker business investment, not surprising given the fog of Brexit. Industrial production was also on the soft side.
• Japan current condition index tumbled after sales tax hike: The Economic and Social Research Institute in Tokyo reported that its Economy Watchers Survey current conditions index fell sharply by 10pts to 36.7 in October (Sep: 46.7) as sentiment slipped across households and businesses when the latest sales tax hike kicked in last month. It appears though that Japanese households and businesses are more optimistic over outlook of the economy as the expectations index picked up nearly 7pts to 43.7 in the same month (Sep: 36.9).
• The US data calendar on Tuesday is very light with just the release of the NFIB small business optimism index for October. Fed Vice Chair Richard Clarida (permanent FOMC voter) will discuss Monetary Policy and Price Stability. All eyes today will also be on US President Donald Trump, who is giving a luncheon speech at the Economic Club of New York. His speech may offer clarity on a possible trade deal (or not)

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

• USDJPY: 107.50 (USD300mn); 108.62 (USD250mn)
• EURUSD: 1.1000 (EUR1.5bn); 1.1025 (EUR537mn); 1.1075 (EUR835mn); 1.1085 (EUR558mn)
• GBPUSD: 1.2925 (GBP580mn)

EURUSD (Intraday bias: Bearish below 1.1080 targeting 1.0960)

From a technical and trading perspective, as 1.1080 now act as resistance expect a test of pivotal support at 1.1020 abreach here would open a deeper correction to test 1.0960/40. On the day only a breach of 1.11 would stabilize the pair, suggesting the correction is complete. NO CHANGE IN VIEW

GBPUSD (Intraday bias: Bearish below 1.2840 targeting 1.2725)

From a technical and trading perspective, as 1.2840 caps any upside attempts, look for a test of 1.2725/00, watching this area closely as we could set a base to complete the current corrective consolidation, a daily close sub 1.27 would open a deeper pullback to target 1.2580

GBPUSD…UPDATE Farage sponsored spike and stop run proved short lived. 1.2830/20 the bull bear line in the sand if bulls can defend this area this morning there is a window to set a base and retest yesterday’s highs. (Note the daily chart has flipped bullish as confirmed by the near term VWAP) A failure below 1.28 resets sights on the test of 1.2720

USDJPY (intraday bias: Neutral bearish below 109, bullish above 109.50)

From a technical and trading perspective, only a close above 109.60 will inject further upside momentum setting the stage for a grind higher to target the equidistant swing objectives sited at 110.57/69, however a failure to capture ground above 109.60 will likely prompt further long liquidation to test bids back towards 108.50 NO CHANGE IN VIEW

AUDUSD (Intraday bias: Bearish below .6870 for pivotal test of .6830/20)

From a technical and trading perspective, as .6875  caps the topside look for a test of bids and stops below .6850. As .6830 supports there is a window to set a base targeting another test above .6900 and the stops above last week’s highs. A failure below .6800 would open a decline to target bids below .6850

AUDUSD… UPDATE testing pivotal .6830 support area a daily close below here suggests further weakness and a test of bids down to .6750

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