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In The US, Industrial Production Data For October Is Due For Release
Market movers today
In the euro area, the final October HICP inflation figures are due to be released, likely confirming that headline inflation fell back to 1.4%. Focus will be on what items caused the unexpected fall in service price inflation, bringing core inflation down to 0.9%. Judging from the country figures released already, we expect the drop to be due mainly to volatile items such as package tours and hence not point towards the start of any sustained downward trend in service price inflation.
In the US, industrial production data for October is due for release. We believe that the current development in industrial product ion broadly reflects the strength of the economy and henceestimate industrial production increased 0.25% in October.
In the UK, we will get retail sales excluding fuels for October. Retail sales growth has slowed due to negative real wage growth and is one of the reasons GDP growth has slowed this year. That said, UK retail sales is not the best indicator of actual consumption growth .
Selected market news
Who dares t o 'buy on dips' in the equity market? The sell-off in the US equity market continued yesterday even though both US CPI and US retail sales were stronger than expected and support the view that the US economy is not about to entera slowdown as 'predicted' by the flat tening of the US yield curve. This supported market expectations of a hike in December and the odds of a December rate hike by the Federal Reserve rose to 97%.
However, looking at t he Asian market s then 'buying on dips' in the equity market has perhaps begun already. Nikkei is 1.4% this morning after a significant slide this morning. In our view, there is simply 'too much money chasing t oo few asset s' for a prolonged decline in the equity market .
Furthermore, the 'bull' flattening of the US yield curve continued as 10Y US Treasury yields yesterday declined despite higher CPI and stronger retail sales. However, the US tax reform seems to be running into problems in the Senate, as several republican senators have reservations on the tax reform.
In the currency market , the USD bounced back against the euro and the short move above 118 was reversed as the market is being confirmed in the rate hike from the Federal Reserve. It has stayed below 118 in Asian trading this morning.
In Europe, German Chancellor Merkel is trying to form a coalition government but is facing tough discussions with the potential coalition partners – FDP and the Greens. She has made a self-imposed deadline this weekend and thus we are looking at an interesting few days in German politics as she tries to form a government .
Trade Idea : GBP/USD – Buy at 1.3100
GBP/USD - 1.3158
Most recent candlesticks pattern : N/A
Trend : Near term down
Tenkan-Sen level : 1.3168
Kijun-Sen level : 1.3174
Ichimoku cloud top : 1.3140
Ichimoku cloud bottom : 1.3125
Original strategy :
Buy at 1.3100, Target: 1.3210, Stop: 1.3065
Position : -
Target : -
Stop : -
New strategy :
Buy at 1.3100, Target: 1.3210, Stop: 1.3065
Position : -
Target : -
Stop : -
As the British pound retreated after rising to 1.3214 yesterday, retaining our view that further consolidation would take place, however, reckon downside would be limited to 1.3100 and 1.3075-80 should hold, bring another bounce to 1.3210-15, then towards resistance at 1.3230 would be seen, having said that, as broad outlook remains consolidative, reckon upside would be limited to 1.3250 and price should falter below 1.3275-80.
In view of this, we are looking to buy cable on dips as 1.3100-05 should limit downside. Below 1.3075 would risk test of said support at 1.3062 but break there is needed to suggest a downside break of recent broad range has taken place, bring retest of strong support area at 1.3027-39, only break there would confirm and extend recent decline to psychological support at 1.3000 first.
Trade Idea : EUR/USD – Buy at 1.1745
EUR/USD - 1.1794
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 1.1786
Kijun-Sen level : 1.1815
Ichimoku cloud top : 1.1765
Ichimoku cloud bottom : 1.1721
Original strategy :
Buy at 1.1745, Target: 1.1845, Stop: 1.1710
Position : -
Target : -
Stop : -
New strategy :
Buy at 1.1745, Target: 1.1845, Stop: 1.1710
Position : -
Target : -
Stop : -
As the single currency retreated after rising to 1.1861 yesterday, retaining our view that consolidation below this level would be seen, however, reckon 1.1745-50 (50% Fibonacci retracement of 1.1637-1.1861) would limit downside and bring another rise later, above 1.1830-35 would bring a retest of said resistance at 1.1861, break there would extend recent rise from 1.1554 low to previous resistance at 1.1880, then 1.1900-10.
In view of this, would not chase this rise here and we are looking to buy euro on subsequent pullback as 1.1745-50 should limit downside. Below the lower Kumo (now at 1.1721) would defer and signal a temporary top is formed instead, bring weakness to previous resistance at 1.1678 (now support) but only break there would provide confirmation.
Trade Idea : USD/JPY – Hold long entered at 112.60
USD/JPY - 113.09
Most recent candlesticks pattern : N/A
Trend : Near term down
Tenkan-Sen level : 112.94
Kijun-Sen level : 112.86
Ichimoku cloud top : 113.47
Ichimoku cloud bottom : 113.37
Original strategy :
Bought at 112.60, Target: 113.60, Stop: 112.25
Position : - Long at 112.60
Target : - 113.60
Stop : - 112.25
New strategy :
Hold long entered at 112.60, Target: 113.60, Stop: 112.60
Position : - Long at 112.60
Target : - 113.60
Stop : - 112.60
Although the greenback extended recent decline to as low as 112.48, the subsequent rebound has retained our near term bullishness and consolidation with mild upside bias is seen for recovery to 113.40, then 113.60, however, as top has been formed at 114.74 earlier this month, reckon upside would be limited and price should falter well below resistance at 113.91, bring another decline later.
In view of this, we are holding on to our long position entered at 112.60. Below said support at 112.48 would risk weakness to 112.26-30 (100% projection of 114.74-113.09 measuring from 113.91 and previous support) but loss of momentum should prevent sharp fall below 112.00-05.
Australia’s Unemployment Rate Fell To Its Lowest Level Since February 2013 In October
For the 24 hours to 23:00 GMT, the AUD declined 0.54% against the USD and closed at 0.7587.
LME Copper prices declined 1.6% or $107.0/MT to $6715.5/MT. Aluminium prices declined 0.1% or $3.0/MT to $2082.0/MT.
In the Asian session, at GMT0400, the pair is trading at 0.7596, with the AUD trading 0.12% higher against the USD from yesterday's close, on the back of a surprise drop in Australian unemployment rate.
Data indicated that Australia's seasonally adjusted unemployment rate unexpectedly declined to 5.4% in October, hitting its lowest in more than four years, thus boosting optimism over the health of the nation's labour market. Markets were expecting unemployment rate to remain steady at 5.5% registered in the previous month. However, the number of people employed climbed less-than-expected by 3.7K in October, against market consensus for a rise of 18.8K and following an increase of 19.8K in the prior month.
Other data revealed that the nation's consumer inflation expectations eased to 3.7% in November, compared to a level of 4.3% in the previous month.
The pair is expected to find support at 0.7571, and a fall through could take it to the next support level of 0.7547. The pair is expected to find its first resistance at 0.762, and a rise through could take it to the next resistance level of 0.7645.
The currency pair is trading between its 20 Hr and 50 Hr moving averages.
Euro-Zone’s Trade Surplus Surprisingly Widened In September
For the 24 hours to 23:00 GMT, the EUR declined 0.18% against the USD and closed at 1.1775.
On the macro front, the Euro-zone's seasonally adjusted trade surplus surprisingly widened to a record high of €25.0 billion in September, thus countering concerns about the impact of a stronger Euro on exporters. Market participants had anticipated the region's trade surplus to remain steady at €21.0 billion.
The US Dollar trimmed some of its prior losses against other currencies, after a surprise rise in October retail sales as well as an uptick in consumer inflation cemented expectations for an interest rate hike in December.
Data showed that the US consumer price index (CPI) edged up 0.1% on a monthly basis in October, at par with market expectations, after jumping 0.5% in September. Further, the nation's advance retail sales surprised to the upside, rising 0.2% MoM in October, offering further evidence of strength in US consumer spending. Investors had envisaged retail sales record a flat reading, after surging by a revised 1.9% in the prior month. Also, the nation's MBA mortgage applications climbed 3.1% in the week ended 10 November, following a flat reading in the prior week.
Meanwhile, the nation's business inventories remained flat in September, meeting market expectations. In the prior month, business inventories had registered a revised rise of 0.6%. On the other hand, the New York Empire State manufacturing index fell to a level of 19.4 in November, more than market consensus for a drop to a level of 25.1. The index had registered a reading of 30.2 in the prior month.
Meanwhile, the Federal Reserve (Fed) Bank of Boston President, Eric Rosengren, advocated for a December interest rate hike and stated that falling unemployment and sustained economic growth calls for gradual interest rate hikes.
In the Asian session, at GMT0400, the pair is trading at 1.1777, with the EUR trading marginally higher against the USD from yesterday's close.
The pair is expected to find support at 1.1744, and a fall through could take it to the next support level of 1.1710. The pair is expected to find its first resistance at 1.1836, and a rise through could take it to the next resistance level of 1.1894.
Going ahead, traders would keep a close watch on the Euro-zone's final inflation numbers for October, scheduled to release in a few hours. Later in the day, the release of US initial jobless claims followed by industrial and manufacturing production data for October as well as the NAHB housing market index for November, will pique significant amount of market attention.
The currency pair is trading below its 20 Hr moving average and showing convergence with its 50 Hr moving average.
UK’s ILO Unemployment Rate Remained Steady At A 4-Decade Low In The Three Months To September
For the 24 hours to 23:00 GMT, the GBP marginally rose against the USD and closed at 1.3169, after UK's ILO unemployment rate remained steady at a 42-year low of 4.3% in the three months to September, meeting market expectations. Further, the nation's average earnings including bonus advanced more-than-anticipated by 2.2% in the July-September period, but remained firmly behind inflation, indicating that the squeeze on consumers may continue for some time. Average earnings including bonus had registered a revised gain of 2.3% in the June-August period, while markets were expecting for a rise of 2.1%.
However, the number of people employed in the nation unexpectedly fell by 14.0K in the July-September period, declining for the first time since October 2016. Markets were expecting employment to rise 52.0K, following an increase of 94.0K in the June-August 2017 period.
In the Asian session, at GMT0400, the pair is trading at 1.3170, with the GBP trading a tad higher against the USD from yesterday's close.
The pair is expected to find support at 1.3131, and a fall through could take it to the next support level of 1.3093. The pair is expected to find its first resistance at 1.3211, and a rise through could take it to the next resistance level of 1.3253.
Moving ahead, market participants will focus on Britain's retail sales data for October, due to release in a few hours. Also, a speech by the Bank of England (BoE) Governor, Mark Carney, due later in the day, will keep investors on their toes.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Japanese Yen Trading On A Weaker Footing This Morning
For the 24 hours to 23:00 GMT, the USD declined 0.52% against the JPY and closed at 112.86.
In the Asian session, at GMT0400, the pair is trading at 113.03, with the USD trading 0.15% higher against the JPY from yesterday’s close.
The pair is expected to find support at 112.58, and a fall through could take it to the next support level of 112.13. The pair is expected to find its first resistance at 113.38, and a rise through could take it to the next resistance level of 113.73.
Amid no major macroeconomic releases in Japan today, Yen investors would look forward to global macroeconomic factors for further direction.
The currency pair is trading between its 20 Hr and 50 Hr moving averages.
Swiss Franc Trading Marginally Lower This Morning
For the 24 hours to 23:00 GMT, the USD slightly declined against the CHF and closed at 0.9893.
In the Asian session, at GMT0400, the pair is trading at 0.9894, with the USD trading a tad higher against the CHF from yesterday’s close.
The pair is expected to find support at 0.9857, and a fall through could take it to the next support level of 0.9820. The pair is expected to find its first resistance at 0.9921, and a rise through could take it to the next resistance level of 0.9948.
The currency pair is trading between its 20 Hr and 50 Hr moving averages.
Canada’s Existing Home Sales Advanced For A Third Consecutive Month In October
For the 24 hours to 23:00 GMT, the USD rose 0.25% against the CAD and closed at 1.2768.
Macroeconomic data revealed that Canada's existing home sales rose 0.9% on a monthly basis in October, climbing for a third straight month, thus indicating that the nation's housing market remains on a strong footing in the final quarter of the year. Existing home sales had recorded a gain of 2.1% in the previous month.
In the Asian session, at GMT0400, the pair is trading at 1.2767, with the USD trading marginally lower against the CAD from yesterday's close.
The pair is expected to find support at 1.2724, and a fall through could take it to the next support level of 1.2680. The pair is expected to find its first resistance at 1.2800, and a rise through could take it to the next resistance level of 1.2832.
Ahead in the day, Canada's manufacturing shipments for September, will be on investors' radar.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
