Daily market outlook, November 7, 2019


Main market themes

  • US equities ended little changed and mixed as markets turned risk-off again following news that the inking of a partial US-China trade deal could now be delayed to December pending further talks on the terms and venue, with London touted to be the next option where the NATO Summit will be held from 3-4 December.
  • As London traders hit their desks comments from the Chona’s MOFCOM suggesting China and the US have agreed to cancel existing tariffs in different phases. If China And US Reaches Phase 1 trade deal, both sides must cancel existing tariffs at the same time, with the same proportion based on agreement. These comments have been taken positively by markets with US equities popping. Markets now await the early morning Trump tweets, to assess US response.
  • Fed Evans said the US economy is in a good place but the path of inflation will be important in deciding the future path of interest rate, and offered his pledge on readiness to respond should there be a big negative shock. Meanwhile, Fed William said any future policy move will be data dependent, but policy makers should be preemptive in ensuring economic expansion.
  • Economic data releases were a mixed bag with weekly mortgage applications in the US adding to signs of a soft housing market. Services performed overall better than manufacturing, even though the latest readings showed upticks in the Eurozone but contraction in Japan. Australia trade surplus surprised on the upside, as exports to ASEAN, EU, and the UK jumped, easing the pressure on RBA to cut.
  • Thursday’s US economic docket features the usual weekly initial jobless claims and the weekly Bloomberg consumer comfort index. Dallas Fed President Robert Kaplan will be speaking Friday, whilst Atlanta Fed President Raphael Bostic will also be speaking Friday in New York on Monetary Policy.
  • ‘Super Thursday’ will be closely watched in the UK, whereby the Bank of England (BoE) issues a policy decision and statement, as well as its Monetary Policy Report (previously known as Inflation Report), followed by a press conference by BoE Governor Mark Carney. Markets expect the BoE to stick to an air of caution as a highly uncertain election campaign gets underway.

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

  • EURUSD: 1.1050 (EUR665mn); 1.1100 (EUR276mn); 1.1200 (EUR964mn)
  • USDJPY: 107.75 (USD501mn); 109.05 (USD415mn)
  • GBPUSD: no major nearby expiries
  • AUDUSD: no major nearby expiries

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.

EURUSD…UPDATE testing pivotal support a failure to find buyers here and a close below 1.1020 would add to bearish momentum opening a move to test 1.0960. On the day look for resistance at 1.1100/10 NO CHANGE IN VIEW.

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. NO CHANGE IN VIEW

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. Only a failure below 108.40 would open another test of bids at 108.00. NO CHANGE IN VIEW

AUDUSD (Intraday bias: Neutral Bullish above .6870 Bearish below)

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 (note yesterday’s key reversal and second close below 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.

AUDUSD…UPDATE China comments sponsor the latest pop higher as pivotal .6870 supports we could see stops above .6930 taken out en-route to test .6955 offers and stops above.

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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