Fundamental Analysis

Pound Shines On Brexit Hopes, Tech Stocks Decline, OPEC Meeting, US & Eurozone Inflation Take The Stage


Here are the latest developments in global markets:

FOREX: The dollar was firmer against its major peers but headed for a monthly loss as a rising pound and a stronger euro capped gains arising from investors’ positive sentiment on the US economy despite ongoing geopolitical tensions in the Korean peninsula. Against the yen, the greenback hit a fresh one-week high, while it gained the most relative to the kiwi.

STOCKS: The Nikkei 225 closed 0.6% higher and the Hang Seng was down by 1.3%; tech stocks underperformed in Asia following yesterday’s selloff in the US that saw the Nasdaq Composite losing 1.3% on the day; Euro Stoxx 50 futures traded 0.2% higher at 0729 GMT; Dow futures were 0.2% higher with S&P 500 and Nasdaq 100 equivalents little changed.

COMMODITIES: Oil prices edged higher but remained near yesterday’s one-week lows as concerns over the future of the production-cut deal debated today at the OPEC/non-OPEC meeting weighed on the markets. The EIA report showed unexpectedly a sharp decline in US crude inventories, but gasoline inventories increased. WTI crude was 0.30% up at $57.47 per barrel and Brent rose by 0.48% to $63.41. Gold hit a fresh one-week low of $1,281.38 per ounce.

Major movers: Pound at two-month high; kiwi tumbles on weaker business confidence

The pound stretched its uptrend against the dollar, breaking the 1.3400 key level to reach a fresh two-month high of $1.3478 as investors were optimistic that the UK and the EU will reach a compromise on the financial settlement despite British consumer confidence falling back to four-year lows on November according to the Gfk measure.

Euro/dollar gained 0.17% to 1.1869, while euro/yen jumped by 0.46% to a two-week high of 133.29, finding support on Reuters polls showing that a majority of economists are expecting the ECB to terminate its monetary stimulus probably by the end of 2018.

The kiwi sank by 0.55% to a one-week low of $0.6831 after the ANZ business confidence gauge declined to an eight-year low in November, while the aussie posted moderate gains following better than expected readings on October’s building approvals. Australian capital expenditures for the third quarter and private housing credit grew in line with expectations, while Chinese manufacturing and non-manufacturing PMIs showed some improvement in November.

Day ahead: Senate tax bill, consumption & PCE inflation closely watched in US; eurozone flash CPI & unemployment rate attract interest; OPEC meeting coming up

Out of the US, October consumption data and the Federal Reserve’s preferred inflation measure, the core PCE price index, will be at the center of attention in terms of data releases. Those are due at 1330 GMT alongside personal consumption and personal income data, as well as weekly figures for initial and continuing jobless claimants.

A possible Senate vote on the tax bill later today is of course of great significance. If the bill does pass, then it is expected to provide a boost to the greenback as well as spur positive sentiment in stock markets.

The eurozone will see the release of November flash inflation and October unemployment rate figures at 1000 GMT. Headline inflation is expected to grow by 1.6% y/y (October’s reading was at 1.4%) and core inflation by 1.0% annually (October’s reading was at 1.1%). Before that, Germany will see the release of unemployment data (0900 GMT).

OPEC alongside some non-OPEC members including Russia will be meeting today in Vienna. A decision to extend supply cuts beyond March 2018 is expected to provide some support to oil prices.

Technical Analysis: AUDUSD in consolidation phase but bearish bias intact

Bears still have the upper hand on AUDUSD as the pair has been posting lower lows and lower highs since early September, with markets pricing no rate hikes this year and only gradual rate rises in 2018. The RSI is below its neutral level (50), suggesting that negative movements are more likely to emerge in the short term, while the Ichimoku analysis also backs this view as market action is currently taking place below the cloud. To the downside, an immediate support could be found at the previous bottom of 0.7531 before the 0.7500 psychological level and the 161.8% Fibonacci of 0.7453 of the upleg from 0.7531 to 0.7644 come into view. Should the pair head up, potential resistance levels could be met between the previous top of 0.7644 and the 0.7700 key level, where the 200-day exponential moving average also lays.
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