Financial market research and analysis

The week kicked off with limited appetite for stocks on news that Saudi’s billionaire Prince Alwaleed bin Talal, one of the world’s biggest investors, has been arrested in an anti-corruption purge in Saudi Arabia. Prince Alwaleed holds hundreds of million-dollar worth of stake in international hotel groups, including Four Seasons, AccorHotels and the Savoy, and global names such as Twitter, Lyft, JD.com, Citigroup and 21st Century Fox. Investors will be watching what could happen to Alwaleed’s holdings under his arrest and how these companies’ stock prices will react to the news. For many of them, the impact should not extend beyond an eventual knee-jerk sell-off. His large allocations could take a more significant hit.

Intercontinental Hotels Group slid by 1.12% in London, AccorHotels, which is 5.70% owned by Prince Alwaleed, lost up to 1.80%.

In the same context, the WTI crude extended gains past $56/barrel as Saudi Arabia’s anti-corruption probe would consolidate the power of Crown Prince Mohammad bin Salman, who supports the OPEC’s production cut policy. This is encouroagin news before the OPEC's November meeting in Vienna.

Mining (+1.15%) and energy stocks (+0.13%) opened on a positive note. Iron ore futures rallied by 5%, COMEX copper futures gained 1.12%.

The GBPUSD traded in the tight range of 1.3059/1.3089.

The EURUSD trades near its lowest levels in more than three months. The decline in the Eurozone yields discourage traders from opening fresh long positions. The latest CFTC data confirms that the future net long positions retreated from decade highs over the past three weeks.

The Eurozone final services PMI data is due today. A good surprise could have a limited positive drive as trend and momentum indicators remain comfortably negative. The pair is preparing to test the critical 1.1509-support (major 38.2% retrace on April – September rise). A slide below this level would suggest a mid-term bearish reversal against the US dollar.


Yen slides on Trump’s language, BoJ

The yen was the biggest loser against the greenback in Tokyo, as the Bank of Japan (BoJ) meeting minutes reiterated the bank’s commitment to its ultra-loose monetary policy and the US President Donald Trump didn’t mention the weak yen as he called for a ‘fair’ trade relationship between the US and Japan.

During his visit in Japan, Trump said that the trade between the two countries is not fair due to ‘massive trade deficits’ and should be renegotiated in ‘quick and friendly way’.

The US recorded a trade deficit of $691’131.3 million against Japan between 2006 and 2016, an average of $62’830 per year. If the US steps up its efforts in reducing this deficit, that would mean that the Japanese trade surplus would have to decline symmetrically. A lower trade surplus would further weigh on the Japanese yen.

The USDJPY advanced to 114.73. It is perhaps just a matter of time before the USDJPY pushes above the 115 level. Exporters are hedging against a softer yen. Large call options are seen at 114.50/115.00 at today’s expiry.


US dollar, stocks gain

The US dollar gained in Asia. The US nonfarm payrolls (NFP) data were perceived as being strong, although the October figure missed the analysts’ ambitious estimate of 313K on hurricane rebound. The US economy added 216K new nonfarm jobs in October, versus -33K printed a month earlier. The August and September figures were revised higher as well, suggesting that the improvement in the US labour market remains satisfactory after the hurricane impact is filtered out.

Nasdaq (+0.74%) traded at an all-time high on Friday (6’297.625) as Apple gapped higher and hit a record high (174.262) on the back of solid holiday sales forecast for the newly launched iPhone X. The Dow Jones (+0.10%) and the S&P500 (+0.31%) also stretched to uncharted territories (23557.06 & 2588.42 respectively).

US stocks came off their all-time highs on Prince Alwaleed's arrest, the negative reaction could remain short lived.

Demand in gold continues fading, as money flows into the bonds and stocks. Offers are eyed at $1’275 (200-hour moving average, 100-day moving average). Next critical support stands at $1’261 (200-day moving average).


AUDUSD tests 50-wma pre-RBA

The AUDUSD is testing the 50-week moving average (0.7638) on the downside. Last week’s failure to consolidate gains above the 200-day moving average (0.7708) has been an invitation to the bears before the Reserve Bank of Australia (AUD) meeting due tomorrow. The RBA is expected to stay pat and maintain its accommodative tone, as the relatively soft inflation allows the policymakers to maintain a supportive monetary policy to deal with the high household debt and the relatively strong Aussie. Leveraged funds cut their longs AUD-positions to three-and-a-half month lows. Breaking the 0.7638 support could encourage a further slide to 0.7583 (lower Bollinger band on weekly chart).


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