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USD, stocks fall on US reform worries
Global equity markets are under pressure. Japanese stocks had a bad session. Nikkei (-1.57%), Topix (-1.96), Hang Seng (-1.03%), Shanghai’s Composite (-0.79%) and Australia’s ASX 200 (-0.58%) traded lower.

Bloomberg’s commodity index recorded the biggest slide in six months.

The FTSE 100 slipped below the 7400p. Mining stocks (-0.70%) lead losses, energy stocks (-0.41%) traded on the back foot as oil prices lost as much as 1%.

WTI crude fell to $55/barrel as API data showed that US oil inventories increased by 6.51 million barrels last week. More official EIA data is due today. Analysts have penciled in a 2.2-million-contraction in last week’s stockpiles versus +2.2 million positive surprise printed a week earlier. A second consecutive week of positive surprise could encourage a deeper correction in oil, given that all oil-positive news, such as OPEC’s plans to extend production cut and tighter market forecasts, have already been priced in. In addition, the EIA cut its demand estimate for 2018, which could give an extra motivation for the sellers to join the market. Support to October-November positive trend stands at $54.66.

Cable extended gains to 1.3214 after the UK wages growth steadied at 2.2% year-on-year in September, instead of slowing to 2.1% as predicted by analysts. The knee-jerk rise has been rapidly balanced out as wages growth remained relatively soft compared with 3% rise in headline consumer price inflation. The gap between the price and wages growth means that British households’ purchasing power is still under pressure and the Bank of England (BoE) will need to stay accommodative for a sufficiently long period to avoid a deeper crisis on individual level. Therefore, the slightly better-than-expected wages data will hardly hush the BoE doves. Dovish BoE expectations could continue weighing on the pound along with the Brexit shenanigans. The price jump could be followed by a correction toward 1.3135/1.3125, are including 50, 100 and 200-day moving averages. Offers are touted by 1.3230 (November peak).

Euro gains positive momentum

The upswing in the EURUSD convinced traders to jump on the back of a bull after the pair surpassed the 1.17 level. The euro’s rise was supported by solid German and Italian GDP data and the oversold reversal in EURUSD. French GDP came in line with expectations. The pair advanced past 1.1850, clearing the resistance near its 100-day moving average (1.1793) and the major 50% retracement on September – November pullback (1.1822). The upside correction could continue despite the low-rate pressure. If the euro gains enough in value to compensate the opportunity cost of holding it despite low yields, new long positions could join the market. The next resistance is eyed at 1.1886 (major 61.8% retracement on September – November pullback). Support to the positive reversal stands at 1.1760 (major 38.2% retrace).

The EURGBP pulled out the 0.8970-resistance (100-day moving average) and is testing the 0.90 mark.

Republicans could find it hard to pass a joint proposal on Obamacare repeal and tax reforms

The US 10-year yield eased to 2.35% and the US stocks retreated on the US’ complex tax reform debate. Latest news suggest that Republicans would add the repeal of Obamacare’s individual mandate to their legislation. The goal of adding the Obamacare repeal into the mix is to propose a financing solution for the major tax reforms, but of course the joint-proposal on two controversial subjects could also decrease their chances of success for passing the bill on the Congress.

US equity futures traded lower. Dow Jones (-0.41%), S&P500 (-0.41%) and NASDAQ (-0.43%) futures hint at a softer open in New York.

The US economic calendar is busy today. The US headline inflation may have slowed to 0.1% on month to October from 0.5% printed a month earlier; the consensus for October retail sales is 0.0% month-on-month versus 1.6% previously. Soft data could keep the USD-bulls on the sidelines, a subdued inflation read will unlikely impact odds for the Federal Reserve (Fed) rate hike by the end of the year, although some began asking if the Fed is about to make a policy mistake by raising the rates by additional 25 basis points before the year ends. The probability of a December rate hike stands at a solid 92.3% and is mostly priced in.

Japanese stocks plunge, yen strengthens

The preliminary data showed that the Japanese GDP growth slowed more than analysts expected in 3Q. Japan’s gross domestic product expanded by 0.3% in the third quarter. This is equal to 1.4% on annualized basis, down from 2.5% at the previous read and softer than 1.5% expected. Japanese stocks sold off.

Nikkei (-1.57%) and Topix (-1.96%) edged lower on the back of soft growth figures and a stronger yen. The USDJPY dived below the 113.00 mark (lower Bollinger band on daily basis), the broad-based USD weakness has been a major catalyzer. Further deterioration in US yields could reinforce the sell-off and move the attention away from the 115 level. The key support to September – November positive trend stands at 111.91 (major 38.2% retracement).

Aussie dives on commodity sell-off, decline in yields and wages data

The Aussie was the leading loser against the greenback. Softer wage price index weighed on the sentiment before Thursday’s labour market data. Meanwhile, the downside pressures remain in place with declining Australian yields and falling iron ore prices. The 10-year AU yield fell 6.9 points in Sydney, as iron ore futures cheapened by 3.76% in the overnight session. The AUDUSD extended losses below the 0.7580 level (lower Bollinger band on daily chart) and daily relative strength index approaches the oversold threshold (30%). Therefore, price pullbacks below 0.7580 could encourage some traders to take profit. On the topside, sellers should show up by 0.7708/0.7712 (minor 23.6% retrace on Sep – Oct decline / 200-day moving average).

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