A strong Aussie open shaped by Brexit, US/China trade calm & Earnings
Better risk sentiment seen in NY helped by a confluence of positive soundbites is set to carry over into the Aussie open; ASX Dec Futures are already up 0.8% on the day while risk-on/risk-off proxy USDJPY has breached 108.4 near-term resistance and trades at 108.9. Headlines concerning Brexit suggested a breakthrough could be seen before the end of Tuesday and that PM Johnson “believes he has the support of UK Parliament” for an Oct-31 exit of the EU. While, an SCMP report noted that despite the questionable follow-through of Trump’s “substantial phase 1 deal” and some conflicting signals to date, “both sides essentially share the same stance”. As earnings season also gets underway, positive results across financials has seen jumps in most major benchmark indices.
For Aussie stock traders, one thing to be aware of is that we’re likely to see E&P oil and gas stocks slide – Santos (STO.AX), Woodside Petroleum (WPL.AX) – following the weakness (-0.9%) seen in Brent Crude Futures overnight partially offset by better performance in Nat Gas Futures (+2.7%).
NZD catches quarterly inflation print
At 8.45am AEDT New Zealand CPI q/q is released. Given it’s only seen quarterly, this will be an important event to watch for markets and especially for those trading NZDUSD; expect volatility. CPI q/q consensus currently falls at 0.6% while the y/y forecast sits around 1.4%, down on the prior q/q’s 1.7% inflation reading. Taking into consideration that markets have priced in a 95% implied probability that the RBNZ cut at their Nov. 13 meeting, we’re expecting an asymmetric impact on NZDUSD price action. Meaning that the risks lie to NZDUSD upside if we see a beat. And not to the downside given a Nov. 25bps rate cut is already largely priced in.
Current NZDUSD spot price: 0.6284
Next intra-week upside resistance level: 0.6313-4 (+30 pips).
Next intra-week downside support level: 0.6260 (-24 pips).