Main market themes
- Daily market outlook – Major equity indices in the US ended mildly higher but off their fresh record intraday high amid rejuvenated trade deal optimism and some positive vibes from US economic data.
- President Trump said that a mini trade deal is in its “final throes”, spurring risk sentiment, even though it was not the first time he had passed those remarks.
- UST’s came under pressure as a result, with the curve shifting lower by 1-2bps as the 10s settled at 1.74%. The USD Index traded within a narrow band of 98.23-98.38 before ending just slightly above its intraday low at 98.26, from 98.32 a day ago.
- European and Asian stock indices closed mixed while sovereign bond yields were generally higher supported by risk-on sentiments in the markets.
- Brent crude extended its leg up to $64.17/ barrel, as trade talk optimism helped shore up expectations of a recovery in demand.
- RBA Governor Lowe said QE is not imminent, and that could only be an option if the cash rate has been reduced to 0.25%.
- US consumers less upbeat but expectations rose: Conference Board consumer confidence softened for the 4th straight month to 125.5 in October (Sept: 126.1 revised) as optimism surrounding present situation weakened along with lower confidence over labour market conditions, raising risks of slower consumer spending in the final quarter of the year. However, its outlook component covering future expectations climbed higher to 97.9 during the said month (Sept: 94.5), suggesting growth may still stay supported in the medium term.
- US new home sales fell but house prices ticked up: New home sales surprisingly fell 0.7% MOM in October dragged by lower sales in Northeast and the South but this was soothed by the upward revision in previous month’s figure from a 0.7% decline to a 4.5% gain. S&P CaseShiller house prices for the 20 major cities rose more than expected by 2.1% YOY in September (Aug: +2.0%), thanks to improving demand for housing amid lower mortgage rates. A separate report by FHFA also showed house prices rose more than expected by 0.6% MOM in September (Aug: +0.2%). This, coupled with earlier data showing positive home sales, housing starts, building permits and home builder confidence, reinforced signs of a recovery in the US housing market
- Today, US economic data will be the focus ahead of the US Thanksgiving holiday on Thursday. The preliminary (second) estimate of 3Q19 GDP is due, alongside October durable goods orders. The weekly initial claims release will be pushed forward to Wednesday due to Thanksgiving. Thereafter, the Chicago PMI for November, October’s personal income and spending data, October’s core PCE price index, as well as October’s pending home sales will be due.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.0900 (EUR2.0bn); 1.0995 (EUR863mn); 1.1000 (EUR1.1bn); 1.1035 (EUR770mn); 1.1050 (EUR684mn); 1.1100 (EUR457mn); 1.1120 (EUR716mn); 1.1125 (EUR1.7bn); 1.1130 (EUR453mn); 1.1135 (EUR374mn)
- USDJPY: 108.00 (USD1.5bn); 108.10 (USD603mn); 108.35 (USD626mn); 108.40 (USD400mn); 108.45 (USD740mn); 108.50 (USD810mn); 108.65 (USD454mn); 108.70 (USD429mn); 108.72 (USD419mn); 108.75 (USD400mn); 108.90 (USD532mn); 108.95 (USD1.3bn)
- GBPUSD: 1.2700 (GBP1.1bn); 1.2750 (GBP201mn); 1.2800 (GBP335mn); 1.2845 (GBP259mn); 1.2850 (GBP251mn); 1.2855 (GBP331mn); 1.2860 (GBP259mn); 1.2870 (GBP218mn); 1.2900 (GBP315mn);
- AUDUSD: 0.6760 (AUD482mn); 0.6775 (AUD409mn); 0.6835 (AUD322mn); 0.6860 (AUD825mn)
EURUSD (Intraday bias: Bearish below 1.1070 targeting 1.0960)
From a technical and trading perspective, the failure to hold 1.1030 combined with Thursday & Fridays bearish reversals suggests tactical USD bullish bias into this week. I retain short exposure from Friday, look for 1.1050 to cap upside attempts targeting a test of bids sub 1.1000. On the day only a close above 1.1070 would suggest downside failure and a return to range. NO CHANGE IN VIEW, note EURUSD volatility made new lows on the year yesterday as trading range contract significantly.
GBPUSD (Intraday bias: Neutral bearish below 1.29 bullish above)
From a technical and trading perspective, 1.29 is the bull bear line in the sand this week, a drive through offers and stops here will set up a grind higher to retest offers and stops above 1.30 en route to the broader upside objective of 1.32, on the week only a failure below 1.2820 would open a test of support towards 1.2720 with further consolidation in the 1.27/1.29 range. NO CHANGE IN VIEW
USDJPY (intraday bias: Bearish below 109 targeting 107.90)
From a technical and trading perspective, the anticipated further long liquidation to test bids back towards 108.50 played out and bulls once again defended the key support, a failure to recapture ground above 109 suggests another test of bids towards 108.50. A close above 109.50 opens 110.50 test. NO CHANGE IN VIEW
AUDUSD (Intraday bias: Bearish below .6830 targeting .6750)
From a technical and trading perspective, pivotal .6830 prior support now acts as resistance only a sustained drive through this level would suggest a false donside break and confirm a base for another assault on .6900 offers and stops. As .6830 caps upside attempts expect a retest of Fridays low enroute to a test of .6765 NO CHANGE IN VIEW
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