Financial market research and analysis

Asian traders handed over a bullish market. Nikkei (+1.75%) closed at the highest level since 1992, Hang Seng (+1.25%) and ASX 200 (+1.02%) rallied as well. Australian mining stocks closed the session 2.36% higher, energy stocks added 1.83% in Sydney.

The FTSE 100 stocks opened upbeat, energy stocks (+1.40%) led gains, mining stocks (+0.16%) traded on the back foot. The toppish outlook on Cable could partly revive capital inflows into the UK’s big caps, which realize roughly fifty percent of their revenues in foreign currencies.

The GBPUSD rebounded to the 50, 100, 200-hour moving average zone, 1.3155/1.3175. The intra-day positive trend is losing momentum. Bears join the market pre-1.3180 (50% retrace on Nov 1 – Nov 3 decline). Solid resistance is eyed at 1.3213 (major 61.8% retrace) after the Bank of England (BoE) rate hike failed to bring the bulls back to the market.


Soft German production weighs on EUR

The EURUSD fell to 1.1582 as the German industrial production contracted by 1.6% month-on-month in September, more than analysts’ forecast of -0.9% versus +2.6% printed a month earlier. The low yield environment in the Eurozone remains supportive of the EUR-bears as well. The critical support stands at 1.1509 (major 38.2% retrace on April – September rise) against the US dollar.

The EURGBP is preparing to test the 200-day moving average (0.8797).


Saudi suspends funds, global risks limited

The attention is on Saudi Arabia’s anti-corruption purge. The authorities began freezing the accounts of people accused with corruption. There is some discomfort in the global security markets, provided that Saudi investors have hundreds of million-dollar worth investments in international companies, including hotel groups, tech giants and other. The stocks under watch gave diverse reaction to the Saudi crisis. Apple closed 1.01% higher, Citigroup weakened 0.34%, as Twitter wrote off 2.56%. AccorHotels almost fully recovered the first-reaction losses in Paris.

Moving forward, the investigations could momentarily dampen the appetite in some of the stocks mentioned in the context of the Saudi investigations, yet the knee-jerk price impact should remain short-lived and even generate correction opportunities as soon as the dust will be settled from the first shock because most of the companies’ underlying fundamentals remain intact.

This reasoning does not apply to regional stocks, which have seen their idiosyncratic risks rising substantially. Stocks in Dubai wrote off more than 2% over the past two trading sessions.


OPEC to release 2017 World Oil Outlook

OPEC will release its 2017 World Oil Outlook (WOO) later today. Investors will focus on key messages regarding the global oil industry, as well as supply and demand trends in medium and long term before the November 30 meeting in Vienna.

The market is presently pricing in an extension of the production cut agreement at least until late 2018, as OPEC will likely prefer providing extra support to the market as the global demand strengthens.

The WTI crude extended gains to $57.70, Brent crude surged to $64.65 on expectation that the Saudi purge would strengthen the power of Crown Prince Mohammad bin Salman, who supports the OPEC’s production cut agreement to sustain oil prices.


RBA stands pat, AUD tests 50-wma

As expected, the Reserve Bank of Australia maintained its cash rate target unchanged at 1.50% and delivered a dovish accompanying statement. The headline and core inflation remain below the bank’s bottom range of 2-3%. Australian retail sales fell to the weakest levels in three-month. Although the unemployment eased to 5.5% from 5.9% since March, the RBA stated that there is a ‘sizable scare capacity’ in the jobs markets. As a result, the RBA is expected to stay pat as long as the inflation remains soft to deal with high household debt, despite its upbeat view on growth.

The AUDUSD gave little reaction to already-priced RBA statement and successfully held ground above its 50-week moving average (0.7638) as iron ore futures bounced 9% higher between Friday and Monday. Yet the decline in the Aussie rates have started ringing the alarm bell for carry traders. In a recent article, Bloomberg wrote that the Australian dollar could retrace to 70 cents level against the US dollar ‘as the extra yield on the nation’s bonds over US treasuries is about to vanish’. The 10-year AU/US spread has fallen to the lowest level since June. With the Federal Reserve (Fed) preparing to raise rates with 92.3% probability in December and the RBA seen steady until at least mid-2018, the fading rate differential could in fact weigh on the AUDUSD.


Nikkei closes at highest since 1992

The USDJPY found buyers at 113.70, more support is eyed at 113.40 (lower Bollinger band on daily chart). The Nikkei (+1.73%) and Topix (+1.15%) rallied on the back of decent downside pressure on yen. Nikkei closed at the highest level since January 1992. Decent call options stand between 113.50 and 115.00 as investors step up their hedges against a further yen depreciation against the greenback.


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