Daily market outlook, November 5, 2019

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Main market themes

  • Daily market outlook: US stocks extended further gains overnight over ongoing trade optimism, leading all major indexes higher by 0.4-0.6% to hit record highs. Markets begin to view the partial US-China trade deal as promising, given that both sides spoke of progress on Friday and Commerce Secretary Wilbur Ross mentioned incoming approval of licenses for U.S. companies to sell components to blacklisted Chinese firms Huawei. Expectations have grown recently that a deal could be signed this month.
  • Benchmark treasuries yields rose 3-7bps as risk-on mode prompted investors to exit safe havens. Dollar broadly rose.
  • Oil prices went up by 0.6-0.7% on positive trade sentiment.
  • U.K. parliament voted for a new speaker, Christine Lagarde delivered her first public speech as ECB chief but made no reference to monetary policy.
  • The RBA as expected to kept the overnight cash rate unchanged at 0.75%, Governor Lowe implied that the RBA are on hold for now and will watch data developments.
  • Decline in US factory orders reflect subdued demand; firms cut capex: Leading indicators show that demand for American manufactured goods remained subdued at the end of 3Q as the headline factory orders slipped more than expected by 0.6% MOM in September (Aug:-0.1%), its largest decline in four months. The sub-category, durable goods orders dropped 1.2% MOM (Aug: +0.2%) more than initially expected in the preliminary report, pointing to likely decline in manufacturing production in October. Core capital orders (Nondefense capital orders excluding aircrafts) contracted for the second month by 0.6% MOM (Aug: -0.8%), reflecting US firms’ capex cut.
  • The US economic docket on Tuesday features September trade data (Bloomberg est: US$52.5bn deficit from US$54.9bn deficit in August), the October ISM non-manufacturing index (Bloomberg est: 53.4 from 52.6 in September) and the JOLTS job openings data for September. Richmond Fed President Thomas Barkin will be speaking today in Baltimore. Dallas Fed President Robert Kaplan will be speaking Wednesday, whilst Minneapolis Fed President Neel Kashkari will also speaking Wednesday.

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

  • EURUSD: 1.1200 (EUR710mn)
  • USDJPY: 108.00 (USD480mn); 108.15 (USD405mn); 110.00 (USD740mn)
  • GBPUSD: 1.2890 (GBP245mn); 1.2900 (GBP1.5bn); 1.2950 (GBP752mn); 1.3000 (GBP294mn)
  • AUDUSD: 0.6810 (AUD521mn); 0.6830 (AUD250mn); 0.6900 (AUD1.0bn); 0.6905 (AUD508mn); 0.6930 (AUD282mn); 0.6980 (AUD552mn)

EURUSD (Intraday bias: Neutral: bullish above 1.1150 bearish below 1.1110)

From a technical and trading perspective, 1.1130 support being eroded (daily chart has flipped bearish as per the near term VWAP) this delays the anticipated 1.12 upside objective. As 1.1150 now act as resistance expect a test of pivotal support back at 1.1070 participation at this level will be key for further upside trend development.

GBPUSD (Intraday bias: Neutral: bullish above 1.2915, bearish below 1.2870)

From a technical and trading perspective, Daily chart has flipped bearish as per the daily VWAP, currently the upside breach of the symmetrical triangle appears to have been a false break, on the day look for a test of 1.2840 to find some initial support, leading to further consolidation in the 1.2840/1.290 area. A breach of 1.2820 would suggest a deeper correction to test pivotal 1.2720.

USDJPY (intraday bias: Bullish above 108.50 target 109.40)

From a technical and trading perspective, 108.50 failed to acts as resistance, the daily chart has flipped bullish as per the near term VWAP, suggesting further upside potential, with stops above 109.30 eyed. On the day a failure below 108.40 would open another test of bids at 108.00.

AUDUSD (Intraday bias: Bullish above .6865 target .7000)

From a technical and trading perspective,initial bullish objective achieved, as .6880 now acts as support look for a test of offers towards .6950 and then stops above. Caution today as daily chart has flipped bearish as per the near term VWAP, failure to recapture ground above .6910 could see a breach of yesterday’s low and open a test of pivotal support sited .6840/30.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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