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Once again, Asian equity markets are refusing to chase the carrots dangled by an impressive US earnings season, with regional markets all under pressure again today. China, once again, appears to be the culprit, although not all the negativity is its own making. China Industrial Profits rose by a healthy 16.30% YoY this morning, although the YTD number retreated to a still impressive 44.70%.

China concerns weighing on Asian markets

Elsewhere though, the news is somewhat gloomier. Covid-19 cases moved higher to 59 with the fears of wider lockdowns weighing on sentiment. The US withdrew China Telecom’s US license, citing national security fears. The Global Times, China’s English language daily, reported that more real estate bond defaults are likely, and China has halted China/Europe freight trains thanks to massive border congestion. Hong Kong coal futures are also 5.30% higher in early trading and with oil prices stuck at recent highs and winter coming, China’s energy crunch hasn’t gone away. Taken in totality, it appears to be enough to weigh on equity markets in China, and by default, the rest of the region, with Microsoft and Alphabets impressive results unable to lift the malaise in US markets either.

Australian Inflation moved to a 6-year high today, increasing nerves that the RBA will shift from its ultra-dovish stance. The RBA Weighted Mean CPI YoY rose from 1.70% to 2.10% this morning. I suspect those nerves are overdone though, as even at 2.10%, the CPI has only just managed to creep into the RBA’s preferred 2.0% to 3.0% range. Nevertheless, the Australian dollar has gained some support and down under stocks are in the red.

The rest of the day’s calendar is empty in Asia with only German Import Prices to give food for thought ahead of tomorrow’s ECB meeting, where the biggest job for Ms Lagarde will be dousing down inflationary expectation fires and assuring the market that ECB remains on its Japanification track. The euro’s rally has stopped dead in the water, and if the ECB reaffirms that they intend to continue life-support forever, with low longer-term inflation projections, the single currencies retreat should start once again.

The US calendar is more interesting with September Durable Goods Orders and the official US Crude Inventory report. The former is going to be drowned out by earnings from Apple and other heavyweights such as General Motors and Boeing. The music of a strong US earnings season should continue even as it appears that some declining marginal utility is creeping in. Earnings are enough to hold the big three indexes at record highs, but not enough to reinvigorate the rally onto new highs. I wouldn’t bet it won’t happen, but investors may now be quietly turning their attention to next week’s FOMC meeting, which, as yet could be an unpriced judgement day for markets.

The FTSE 100 breaks higher as confidence grew after fresh highs on Wall Street. The rally above August’s high at 7220 is an indication of a strong commitment from the long side.

Breakout candles and a bullish MA cross confirm that the uptrend has resumed. The index is now on its way to the pre-pandemic level around 7550.

7350 would be an intermediate hurdle as an overbought RSI may trigger some profit-taking. 7220 has become fresh support if the bulls need to catch their breath.

The Norwegian krone keeps the high ground supported by continued strength in oil prices.

Sentiment has remained downbeat after a break below the daily support at 8.4700. Rebounds have so far been checked by solid selling interest.

The current sideways action under 8.4100 could be another phase of distribution. Then the bears would be pushing towards June’s low at 8.2400, the last support before reaching this year’s low at 8.1500.

8.4800 near the 20-day moving average would be the second resistance in case of a bullish attempt.

The Australian dollar rallied after Q3 inflation exceeded expectations.

A bullish MA cross on the daily chart indicates an acceleration in the upward movement. Pullbacks are likely to attract a ‘buy the dips’ crowd.

The pair has been consolidating its recent gains above 0.7450, a former major resistance that has turned into support. A close above 0.7545 may extend the rally to last July’s high at 0.7610.

On the downside, a deeper retracement would test the demand area between 0.7380 and the psychological level of 0.7400.

Germany Gfk consumer sentiment for November rose to 0.9, up from 0.4, above expectation of -0.4. For October, economic expectations dropped from 48.5 to 46.6. Income expectations dropped sharply from 37.4 to 23.3. Propensity to buy rose from 13.4 to 19.4.

"This second increase to consumer sentiment in a row defies increasing inflation. German citizens are clearly expecting further price increases. That is why they consider to make purchases, in order to avoid even higher prices", explains Rolf Bürkl, GfK consumer expert. "If the surge in prices continues, it would put a strain on consumer sentiment and a fundamental recovery would likely be further delayed."

Full release here.

USDJPY has rebounded off the 113.40 support level with the simple moving averages (SMAs) following the market action. However, the MACD oscillator is diving below its trigger line in the positive region, while the RSI is sloping down around the 70 level. Both are suggesting that the next move may be to the downside rather to the upside.

If the pair slips below the 113.40 barrier, it could take the market towards the 20-day SMA at 113.00 ahead of the 112.07 support. Driving lower, the bears could meet the 40-day SMA at 111.53 before challenging the 110.45-110.80 area.

In the positive scenario, a jump beyond the almost four-year high of 114.70 could open the door for the 115.50 resistance, taken from the peak on March 2017.

To sum up, USDJPY has been in a strong positive mode over the last six months, remaining well above the ascending trend line. Only a fall below the 200-day SMA at 109.35 may change the current outlook.

Daily Pivots: (S1) 156.47; (P) 157.12; (R1) 157.77; More...

Intraday bias in GBP/JPY remains neutral and consolidation from 158.19 could extend further. On the upside, break of 158.19 will resume larger up trend from 123.94. Next target will be 61.8% projection of 136.96 to 156.05 from 148.93 at 160.72.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). The stay above 55 week EMA affirms medium term bullishness. Current rise should now target 61.8% retracement 195.86 (2015 high) to 122.75 at 167.93 next. In any case, outlook will remain bullish as long as 148.93 structural support hold, even in case of deep pull back.

Daily Pivots: (S1) 132.01; (P) 132.34; (R1) 132.71....

Intraday bias in EUR/JPY remains neutral first and corrective pattern from 133.44 could extend further. On the upside, break of 133.44 will target 134.11 high first. Firm break there will resume larger up trend from 114.42. Next target is 61.8% projection of 121.63 to 134.11 from 127.91 at 135.62.

In the bigger picture, rise from 114.42 (2020 low) is still in progress and the strong support support from 55 week EMA affirms medium term bullishness. Further rise would be seen to retest 137.49 (2018 high). Decisive break there will resume the whole long term rise from 109.03 (2016 low). Next target will be 100% projection of 109.03 to 137.49 from 114.42 at 142.88. This will now remain the favored case as long as 127.91 support holds.

EUR/USD

Current level - 1.1598

After the bulls’ unsuccessful attempt at violating the resistance zone of 1.1618, the euro lost some ground against the dollar and, at the time of writing, the pair is trading 20 or so pips below the mentioned resistance. If the bearish attack continues, a test of the support of 1.1575 would be the most likely scenario and, if breached, the decline should deepen towards the local lows at around 1.1535. In the positive direction, a breach of the mentioned zone of 1.1618 could encourage the bulls to test the resistance between the levels of 1.1663 and 1.1687.

USD/JPY

Current level - 114.16

The dollar regained some of its recent losses against the yen and, during the early hours of today`s trading, the pair is holding positions above the zone of 114.10, which is now acting as a support. At the time of writing the analysis, the expectations are for a test of the resistance of 114.42 and, if successful, this should lead to a continuation of the rally and even more gains for the greenback against the yen. If the bears re-enter the market, the corrective move should remain limited to the level of 113.21.

GBP/USD

Current level - 1.3769

The pound has halted its uptrend and a complex retracement is currently developing on the market. The first support for the bulls is the area of around 1.3760, and the first resistance is 1.3830. If it takes longer for the pullback to develop, it is expected to remain limited above the local support of 1.3720. Current sentiment remains positive, and should 1.3830 be breached, the next target for the buyers could be the area at around 1.3900.

Technical analysis

The RSI is below level 50.

The Stochastics left the oversold zone and headed upwards to level 50.

Most likely scenario – SELL

Target prices: 1,785.35 1,782.47

Alternative scenario – BUY

Target prices: 1,793.32 1,799.15

Key levels

Support 1,785.35 1,782.47

Resistance 1,793.32 1,799.15