Overview

The positive bias to equities is pulling Wall Street back towards the all-time highs once more. Furthermore, there is also a mild retracement move forming on the dollar which is helping sentiment. It is a light economic calendar today, with nothing for the European morning and just the Philly Fed manufacturing and jobless claims in focus for the US session. 

Today’s news

  • Main drivers: Marginal risk positive bias; USD unwind forming; New Zealand inflation expectations increase; improved EU/UK relations; oil falling; more Fed speakers; economic calendar: Philly Fed and Japanese inflation.
  • Positive bias for markets: equity markets are ticking back higher again today. This comes as bond yields slip back and USD is unwinding lower.
  • USD unwinding: after huge gains, there are signs of a USD unwind. The first real support on Dollar Index is 94.75/95.00. 
  • RBNZ inflation expectations increase: Q4 inflation expectations increased from 2.27% to 2.96%. This increasingly firms the expectations of an RBNZ rate hike. [NZD outperforming]
  • Improved EU/UK relations: the two sides are reportedly close to agreement on medical supplies to Northern Ireland. This is important as it is a significant swing in relations, with the EU previously close to abandoning the whole deal [risk positive, EUR and GBP positive].
  • Oil falling: US President Biden is asking some of the world largest oil consumers (china India, and Japan) to release oil reserves [Oil negative].
  • Central bank speakers: three more Fed speakers and the ECB’s chief economist:

        -FOMC’s Bostic at 1230GMT (2021 voter, hawk)

        -FOMC’s Williams at 1430GMT (permanent voter, centrist)

        -ECB Chief Economist Lane at 1430GMT (permanent voter, very dovish)

        -FOMC’s Evans at 1900GMT (2021 voter, dove)

  • Economic Data:

        -US Weekly Jobless Claims at 1330GMT, expected to improve marginally to 260,000 (from 267,000 last week)

        -Philly Fed Manufacturing at 1330GMT, expected to increase slightly to 24.2 in November (from 23.8 in October)

        -Japan CPI at 2330GMT, core CPI expected to remain at +0.1%

Markets Outlook

Broad outlook: mild risk positive bias, signs are growing of a USD pullback.

  • Forex: USD has been pulling lower across major pairs in the past 24 hours. NZD is the big outperformer today on increased inflation pressure.

        -EUR/USD just beginning to threaten a near-term technical rally from oversold. Initial resistance 1.1355/1.1385. We prefer to sell into strength. Key resistance not until 1.1460/1.1525.

        -GBP/USD rally is developing having broken through resistance at 1.3470. This could now open further unwind towards 1.3570/1.3600. We for medium-term selling opportunities after any near-term rebound.

        -AUD/USD still failing to get any real recovery going, we look to sell intraday rebounds within the three-week downtrend. Resistance is strengthening around 0.7360/0.7390.

  • Commodities: precious metals showing mixed signals now over a one-week consolidation, oil is now under selling pressure.

        -Gold Tuesday’s bearish engulfing candlestick still has a mild negative bias within a one-week consolidation. An unwind back towards the $1834 breakout would be a chance to buy. Resistance is now at $1877.

        -Silver is similar to gold, a one-week consolidation holds a slight corrective bias, but support around $24.80 is holding for now. We see supported weakness within the uptrend channel as an opportunity to buy. Key resistance is now $25.40.

        -Brent Crude oil a downside break below $80.80 puts oil into a corrective bias. We now look to sell into strength. A rebound into $80.80/$82.40 resistance is a chance to sell.

  • Indices: Wall Street has regained its poise and is looking higher once more, European markets a strange mix with DAX higher but FTSE lower.

        -S&P 500 futures a positive bias within a two-week consolidation. Holding above 4666/4677 support maintains pressure on all-time highs. Looking for a break to new highs to open upside once more.

        -DAX outlook remains strong but also stretched on the momentum which makes us cautiously optimistic. We prefer to buy into an unwinding move that finds supported weakness, with good support around 16,000/16,100 now.

       -FTSE 100 an unwinding move has broken the uptrend and is now approaching 7250 support area. This is where the bulls need to support. We retain our medium-term upside target of 7700 whilst the key support at 7180 is intact.