Overview
There has been a slight risk positive bias that has taken hold early on Monday morning. This comes after a decent close on Wall Street into the weekend and better than expected Chinese economic data. We are still looking at any near-term unwinding move on the USD strength as being short-lived and will be another chance to buy.
Today’s news
- Main drivers: Mild risk positive bias across markets, China data beats estimates, Japanese Industrial Production in line with forecasts; Empire State Manufacturing on the calendar later.
- Mild risk positive: After a positive close on Wall Street on Friday and Chinese data beat forecasts this morning, there is a sense that the glass is half full today. AUD outperforming major forex, with USD slipping back reflects this.
- Encouraging China data: Retail Sales beat estimates at +4.9% (+3.5% exp) whilst Industrial Production also came in ahead at +3.5% (+3.0% exp). The only disappointment was a slight miss on the Fixed Asset Investment at +6.1% (+6.2% exp) [mild risk positive].
- Japanese Industrial Production in-line: falls by -5.4% MoM in September, which was as forecast (and down from -3.6% MoM in August) [risk neutral].
- Central bank speakers: Lagarde speaks today, no Fed speakers:
ECB President Christine Lagarde at 1000GMT
- Economic Data:
Empire State (New York Fed) Manufacturing at 1330GMT, expected to improve to 22.1% in October (from 19.8 in September)
Markets Outlook
- Broad outlook: mild risk positive bias.
- Forex: USD continues to slip back but any weakness looks to be a chance to buy, AUD outperforming after China data.
EUR/USD selling pressure eased on Friday, up from support forming around 1.1435 and holding ground today. We would still look to use any unwinding technical rally towards the old breakdown support at 1.1515/1.1525 as another chance to sell.
GBP/USD rebound from 1.3355 is into the resistance of old key support 13410/1.3470. We look for renewed sell signals under 1.3500.
AUD/USD rebounding well but now approaching initial resistance of 0.7360/0.7390. A bull failure would be another chance to sell.
- Commodities: precious metals losing a little upside momentum but no corrections yet, oil into a mild negative drift
Gold is again pulling back from $1868 as momentum in the bull run wanes. Support at $1841/$1845 now will be watched for a potential correction. We look to buy into weakness for the upswing continues towards $1900. Key breakout support is at $1810/$1834.
Silver run of higher lows continues and the support above $24.80 is holding. After such a strong run higher, we still look to buy into supported weakness. Strong breakout support now $24.50/$24.80.
Brent Crude oil phase of volatility seems to be settling as the market again just drifts lower towards the bottom of the trading range between $80.80/$86.65. A mild near-term negative bias but with little conviction.
- Indices: Wall Street has stabilized corrective momentum, European markets still finding intraday buyers into weakness.
S&P 500 futures consolidation above the support at 4625 and looks a little quiet initially today after Friday’s positive session. Hints of a near-term consolidation forming. k. We still look to buy supported weakness. Key resistance 4700/4711.
DAX outlook remains positive but tentative into all-time highs. If a correction sets in it would be a chance to buy into weakness. Initial support 15,988 with good support 15,755/15,845.
FTSE 100 is seeing a good response to Friday’s initial profit-taking. Buyers are still happy to support intraday weakness. We retain our medium-term upside target of 7700. Good support now 7250/7330 area.
