Main market themes
- US stocks ended on a flat note overnight as networking giant Cisco’s weaker forward guidance alongside US-China trade deal uncertainties kept traders on the sidelines. Cisco, largely seen as a proxy for high tech hardware industry, said that it was expecting revenue fall in its fiscal second quarter, sending its shares to plunge by 7%.
- Major indexes were little changed as investors avoided riskier equity and bought bonds instead, leading treasuries yields to slip by 5-7bps. Benchmark 10Y UST yield lost 7 bps to 1.81%, gold extended further gain and JPY edged up.
- The greenback was mostly up through the Asian and European sessions but slipped in the American session.
- Crude oil prices slipped over higher American stockpiles.
- Testifying before the House Budget Committee, Fed Chair Jerome Powell cited US-China trade dispute as among key factors contributing to decline in domestic manufacturing activity, but was confident that the Fed’s rate cut this year would help support the US economy.
- Eurozone economic growth steadied; Germany staved off recession: The second reading of Eurozone 3Q GDP growth was unrevised from its first estimate at 0.2% QOQ (1Q: +0.2%) and was unchanged from 2Q growth, leaving the YOY expansion at a steady 1.2% (2Q: +1.2%). Notably, Germany staved off technical recession to deliver a surprise 0.1% QOQ gain (1Q: -0.2% revised), led by consumer and government spending. The expansion was welcoming but the marginal gain nonetheless reflects the economy’s ongoing weakness, particularly its industrial sector.
- UK retail sales slipped in October; housing market subdued amidst Brexit uncertainty: UK headline retail sales missed forecast to record a 0.1% MOM decline in October (Sep: 0.0%) following a flat reading in the previous month, despite a rebound in sales of auto fuel. Excluding auto fuels, sales experienced an even bigger contraction of 0.3% MOM (Sep: +0.2%), reflecting consumers’ more cautious spending behavior as the holiday season approaches. Sales of textile, clothing and footwear as well as household goods items declined while online sales contracted for the third month but at a slower rate. On a separate note, the Royal Institute of Chartered Surveyor reported that its House Price Balance index slipped to -5% in October (Sep: -3%), a clear sign that the housing market remains soft in the face of Brexit uncertainties.
- US factory gate inflation remained benign; initial jobless claims rose 14k: The producer prices index for final demand accelerated by 0.4% MOM in October (Sep: -0.3%), driven by a rebound in cost of services, the underlying reading rose 0.3% MOM (Sep: -0.3%). YOY, gain in PPI eased to 1.1% (Sep: +1.4%) while the core reading also pulled back to 1.6% YOY (Sep: +2.0%), reaffirming the weakness in factory gate inflation. Meanwhile, initial jobless claims rose by 14k to 225k last week (previous: 211k), its highest since the end of June, potentially reflecting seasonal adjustment and data irregularities during holidays
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.0900 (EUR728mn); 1.1000 (EUR1.1bn); 1.1115 (EUR347mn)
- USDJPY: 107.75 (USD300mn); 108.50 (USD546mn)
- GBPUSD: 1.2825 (GBP398mn); 1.2900 (GBP671mn); 1.2940 (GBP201mn); 1.2950 (GBP1.4bn); 1.3000 (GBP212mn)
EURUSD (Intraday bias: Bearish below 1.1050 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 a breach of 1.1070 would stabilize the pair, suggesting the correction is complete.
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 1.2830/20 the bull bear line in the sand if bulls can defend this area there is a window to set a base and retest stops above 1.29 highs.
USDJPY (intraday bias: Bearish below 109 targeting 107.90)
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 .6830 targeting .6750)
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 pivotal .6830 support eroded the daily close below here suggests further weakness and a test of bids down to .6750
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