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Market movers today

Market sentiment remains on a weak footing amid Brexit uncertainties. Italy could also come into the limelight again today, with the European Commission expected to issue its final opinion on Italy's budget draft. As Italy did not made any material changes to its budget, we expect the EC to start the process of opening an excessive deficit procedure against Italy relatively quickly. Finance Minister Giovanni Tria will also hold a question round in the Lower House of parliament in the afternoon.

In the US, core capex figures for October are released today. Due to the tax reform and high business confidence, we expect core capex to increase further today and in coming months. However, keep in mind that the print is very volatile from month to month.

In Scandinavia, Danish and Norwegian employment/unemployment figures for September are due out (see next page).

Selected market news

Another day, another sour day for risk sentiment. Global risk sentiment had another dreadful day, marking the fifth consecutive day of declines (Eurostoxx). Despite the pressure on global credit, equity and commodity markets, US treasuries moved very little last night - the front end of the curve even came slightly under pressure and the 2s10s curve flattened. It underlines that it is difficult for the market to price out more hikes from the Fed as long as it is on 'autopilot'. However, cracks are starting to emerge. Last night, Fed member Kashkari (non-voter and dove) said that the Fed should pause its hiking campaign. That said, he is not going as far as Trump, who said he would like to see Fed rates lower.

Oil prices declined with Brent falling more than USD4/bbl, now standing at USD63.4/bbl, some USD22/bbl lower than the peak just six weeks ago The move seems to be triggered by negative sentiment in stock markets and a stronger USD yesterday. Furthermore, Trump rejected imposing sanctions on US trade partner Saudi Arabia (Khashoggi case).

US Trade Representative Robert Lighthizer presented a 53-page document accusing China of having continued its intellectual property rights theft, only 10 days prior to the Xi Jinping-Trump G20 meeting. White House Economic Advisor Larry Kudlow said that Trump 'believes that China would like to have a deal'. Our base case is still for a deal at the meeting next week.

On Brexit, Spain said it will vote against the Brexit deal as it looks now. However, Spain cannot block the agreement in itself as it 'only' requires a strong qualified majority, i.e. 72% of the 27 member states (i.e. 20 member states) representing 65% of the EU27 population. Spain accounts for slightly more than 10% of the EU27 (and represents only one member state). Therefore, it cannot block the deal alone, as it would mean 96.3% of the EU member states, representing nearly 90% of the EU27 population vote in favour of the deal. Sources suggest that a lengthier document on the future relationship may not be published before the Sunday after the EU's approval of the text.

Markets pare losses but sentiment remains weak

Another troubling start to the week in financial markets is further denting investor sentiment as we approach the open on Wednesday, with futures currently stable but vulnerable to another tumble.

US tech stocks are once again leading the way, plunging on the back of a combination of individual concerns – Apple iPhone sales for example – and general weaker risk appetite. The FAANG stocks extraordinary performance in the first half of the year has put them front and centre once the market turned and some now find themselves in negative territory for 2018, with others not far behind.

While many would argue a correction has been on the cards for some time due to the growing list of risks to the outlook, be that rising US interest rates, Trump’s aggressive trade agenda, Brexit, Italy or one of a number of other headwinds, how bad it will get is difficult to say. We’re already near the October lows and in correction territory, even close to bear market in some cases such as the DAX, if this is just a corrective move, I would expect investors to start eyeing up some bargains soon.

Oil plunge continues ahead of OPEC+ meeting

Oil prices are creeping higher again on Wednesday after enduring another sharp sell-off the day before, as Brent and WTI smashed through technical support around $65 and $55, respectively. Traders are simply not buying into the rumours of a production cut from OPEC+ countries in a couple of weeks, be that the significance of a 1-1.4 million barrel a day cut or the prospect of one at all.

Oil is just continuing to tank and has now fallen around 30% from its peak last month, with global economic growth, demand growth and oversupply - linked to record output from the largest producers and Iranian waivers – all contributing to its fall from grace. We’re certainly not talking about $100 a barrel any more as some were at the start of October. The API report on Tuesday provided some support for prices and similarly, the EIA could today if similar inventory numbers are reported but sentiment is very weak.

May heads to Brussels buoyed by (seemingly) failed leadership challenge

The more domestic issues look to be temporarily on hold, as various MPs voice their disgust at Theresa May’s Brexit deal while at the same time not adding their letters to the pile calling for a leadership challenge. It would appear this movement doesn’t quite have the momentum that certain factions of the party would have us believe and if they’re struggling to collect the necessary 48 letters to trigger a vote, what chance do they have of securing the other 111 necessary to unseat her? Of course, even slightly fewer could still make her position untenable.

Still, the silence will be music to the ears of May who heads to Brussels today to meet with Jean-Claude Juncker and discuss the future relationship beyond the transition. Various member states have expressed concerns in recent days about the deal which the two may look to iron out during the talks as we edge closer to the 27 remaining countries signing off on the agreement.

During Tuesday's trading session, the currency pair passed through most of the technical indicators to end the trading session at the 1.1366 mark. On Wednesday, the currency exchange rate was resisted by the 200-hour SMA to trade at 1.1376.

In regards to the near-term future, the currency exchange rate could be resisted by the technical indicators to push the rate to trade sideways at the 1.1380 level during the trading session on Wednesday.

However, today's US Durable Goods Orders data release at 13:30 GMT could support the rate to break the resistance of the monthly pivot point at the 1.1413 mark to trade at the 1.1400 level.

During Tuesday's trading session, the currency exchange rate was resisted by 200-hour simple moving average to end the trading session at the 1.2782 mark. During Wednesday morning hours, the British pound declined to trade at the 1.2793 mark.

In regards to the near-term future, in all likelihood, the British Pound will keep trading sideways to stay at the 1.2750 level during the trading session. Besides, the 55-hour and the 200-hour simple moving averages will resist the rate during the session.

On the other side, the British Pound could break the resistance of the simple moving averages to take its support to surge to the 1.2850 level.

During Tuesday's trading session, the currency exchange rate broke the resistance of the 61.80% Fibonacci retracement level to end the trading session at the 112.70 mark. During Wednesday morning hours, the US Dollar was located between the 55-hour and the 200-hour simple moving averages to trade at the 112.87 mark.

In regards to the near-term future, most likely, the US Dollar will be resisted by the monthly pivot point at the 112.96 mark to trade downwards at the 112.40 level during the trading session on Wednesday.

On the other side, the rate could break the resistances of the 200-hour SMA and the monthly PP at 112.96 to trade near the weekly pivot point at the 113.00 level

During Tuesday's trading session, the yellow metal was resisted by the descending medium pattern line at the 1,219.95 level to end the trading session at the 1,222.68 mark. On Wednesday morning, the gold was trading between the 55-hour and the 200-hour simple moving averages at the 1,222.42 mark.

In regards to the near-term future, most likely, the gold will trade sideways to remain at the 1,220.00 level during the trading session on Wednesday.

On the other side, the yellow metal could pass through the support of the 200-hour simple moving average at 1,213.06 to trade at the 1,215.00 level.

Minneapolis Fed President Neel Kashkari, a known dove, sounded cautious in on interest rates on his comments again. He said in a radio interview yesterday that "one of my concerns is that if we preemptively raise interest rates, and it's not in fact necessary, we might be the cause of ending the expansion".

He reiterated that Fed should "pause and see how the economy continues to evolve." Also, he said "I'm not seeing signs that the U.S. economy is overheating, so I don't think we need to preemptively raise interest rates."

EUR/USD declined after trading towards the 1.1470 level and tested an important support. USD/CHF is currently under pressure below the 0.9960 and 0.9970 resistances.

Important Takeaways for EUR/USD and USD/CHF

• The Euro recovered recently before sellers appeared near the 1.1470 level against the US Dollar.
• There was a break below a major bullish trend line with support at 1.1395 on the hourly chart of EUR/USD.
• USD/CHF is trading below the 0.9960 and 0.9970 resistance levels.
• The pair traded below a major declining channel with support at 1.0010 on the hourly chart.

EUR/USD Technical Analysis

The Euro started a solid recovery from the 1.1220 swing low against the US Dollar. The EUR/USD pair traded above the 1.1300 and 1.1380 resistance levels to move into a positive zone.

The pair even broke the 1.1420 resistance and traded towards the 1.1480 resistance. It traded as high as 1.1472 on FXOpen and later started a downside correction. It declined below the 1.1420 support and the 50 hourly simple moving average.

It opened the doors for more declines and the pair broke a major bullish trend line with support at 1.1395 on the hourly chart. Moreover, there was a break below the 50% Fib retracement level of the last wave from the 1.1228 low to 1.1472 high.

The pair declined below the 1.1380 support before buyers appeared near the 1.1360 support area. Besides, the 76.4% Fib retracement level of the last wave from the 1.1228 low to 1.1472 high is also acting as a support.

In the short term, the pair could recover above the 1.1380 and 1.1400 levels. However, upsides are likely to be capped near the 1.1420 level and the 50 hourly SMA.

On the downside, a break below the 1.1360 and 1.1350 support levels could start a fresh decline in EUR/USD. The next support awaits at 1.1280.

USD/CHF Technical Analysis

The US Dollar failed to move above the 1.0120 resistance area against the Swiss franc. The USD/CHF pair started a downside move and traded below the 1.0050 and 1.0020 support levels.

During the decline, the pair broke a major declining channel with support at 1.0010 on the hourly chart. Sellers took control and pushed the pair below the 0.9980 support and the 50 hourly simple moving average.

The pair traded towards the 0.9900 level and formed a low at 0.9908. Later, the pair corrected higher and moved above the 0.9930 level. However, the pair is facing resistance near the 0.9950 level, 50 hourly SMA and the 23.6% Fib retracement level of the last decline from the 1.0089 high to 0.9908 low.

If the pair moves above the 0.9950 resistance, the next major resistances are at 0.9960 and 0.9970. Overall, it won’t be easy for buyers to clear 0.9970 since it represents a major pivot zone.

Therefore, there are high chances that the pair could decline once again if buyers fail to clear the 0.9950-0.9970 resistance zone. On the downside, an initial support is at 0.9930, below which the pair may revisit the 0.9900 support.

On the other hand, if buyers manage to push USD/CHF above 0.9970, the pair will most likely climb further above the 1.0000 and 1.0020 resistance levels in the near term.

For the 24 hours to 23:00 GMT, the EUR declined 0.73% against the USD and closed at 1.1370.

On the macro front, Germany’s producer price index (PPI) climbed 3.3% on an annual basis in October, in line with market expectations and notching its highest level since April 2017. In the prior month, the PPI had risen 3.2%.

The US dollar climbed against its major peers yesterday, following a rebound in the US housing starts in October.

In the US, data showed that the US housing starts jumped 1.5%, on a monthly basis, to an annual rate of 1228.0K in October, following a revised level of 1210.0K in the previous month. Housing starts fell 5.5% in the previous month. On the contrary, the nation’s building permits fell 0.6%, on a monthly basis, to an annual rate of 1263.0K in October. In the preceding month, building permits had registered a revised level of 1270.0K.

In the Asian session, at GMT0400, the pair is trading at 1.1373, with the EUR trading slightly higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1331, and a fall through could take it to the next support level of 1.1288. The pair is expected to find its first resistance at 1.1444, and a rise through could take it to the next resistance level of 1.1514.

Moving forward, traders would closely monitor the Euro-zone’s OECD economic outlook, set to release in a few hours. Later in the day, the US durable goods orders, leading index and existing home sales, all for October and the Michigan consumer sentiment index for November, will keep investors on their toes. Additionally, initial jobless claims and the MBA mortgage applications, will pique significant amount of investors’ attention.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP declined 0.62% against the USD and closed at 1.2784.

Macroeconomic data showed that UK’s CBI balance of firms reporting total order book above normal unexpectedly climbed to a level of 10.0 in November, compared to a reading of -6.0 in the prior month.

In the Asian session, at GMT0400, the pair is trading at 1.2791, with the GBP trading 0.05% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2751, and a fall through could take it to the next support level of 1.2711. The pair is expected to find its first resistance at 1.2857, and a rise through could take it to the next resistance level of 1.2923.

Trading trend in the Sterling today is expected to be determined by UK’s public sector net borrowing for October, scheduled to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.