Daily Market Outlook, November 22, 2019

Daily Market Outlook, November 22, 2019 

Main Market Themes

Markets edged slightly higher overnight amid cautious sentiment as traders digested mixed trade and political headlines. A WSJ news story reported that China chief trade negotiator had invited his American counterpart for a face-to-face talk that would happen before Thanksgiving in late November but the US is yet to commit to the date. In the meantime, US Congress’ intention to sign the Hong Kong Democracy and Human Rights Act into law set the stage for further confrontation with China and risk putting the ongoing trade negotiations at risk. 

Wall Street main indexes finished around 0.2% lower, treasuries yields picked up by 2-3bps, the dollar continued to strengthen modestly amidst trade uncertainty. 

The commodity market instead focused on trade optimism over China’s latest gesture - Gold slipped 0.5% while oil prices rallied by more than 2.5%. Brent crude settled at $63.97/barrel. 

US Philly Fed Index edged up; initial jobless claims unchanged: The Philadelphia Fed Manufacturing Survey reported that its general business activity index rose nearly 5pts to 10.4 in November (Oct: 5.6), mainly supported by firms’ brighter outlook as the gauge of the current state of new orders, shipments and unemployment dropped. The “six-month from now” general business activity rose 2pts as firms see better new orders and employment. On a separate note, initial jobless claims amounted to 227k for the week ended 16 Nov (previous: 227k revised), unchanged from the revised figure in the week before, leaving the 4-week moving at a higher 221k (previous: 217.5k) thus offering signs of a softer labour market. The Conference Board Leading Index slipped for the third straight month by 0.1% MOM in October (Sep: -0.2% revised, dragged down by negative contributions from ISM new orders, average workweek, stock prices and interest rate spread. 

Eurozone consumer confidence improved in November: The preliminary reading of the European Commission Consumer Confidence Index came in higher at -7.2 in November (Oct: -7.6) to indicate a slight improvement in Euro Area consumer sentiment. 

Japan inflation gained a little on sales tax hike: The headline National CPI rose 0.2% YOY in October (Sep: +0.2%), unchanged from September’s rate. The CPI ex. fresh food, BOJ’s preferred inflation gauge meanwhile picked up a mere 0.4% YOY (Sep: +0.3%), to reflect benign inflationary pressure despite the newly implemented sales tax hike in October. Prices of household goods rose 4.2% YOY (Sep: +2.7%) while prices of clothing & footwear gained 1.2% YOY (Sep: 0.0%).  

Japan All Industry Index registered strong gain All Industry Activity Index rose 1.5% MOM in September as expected (Aug: 0.0%), its largest gain in more than two years, supported by a rebound in manufacturing and larger expansion in the tertiary industry. Meanwhile, machine tools orders plunged 11.6% MOM in October (Sep: +11.9%) amidst falling domestic orders which left the annual contraction at 37.4% YOY (Sep: -35.5%). 

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

• EURUSD: 1.1100 (EUR839mn)
• USDJPY: 108.00 (USD439mn) 109.00 (USD707mn)
• AUDUSD: 0.6795 (AUD1.1bn)

Technical & Trade Views

EURUSD (Intraday bias: Bullish above 1.1030 targeting 1.1180)

EURUSD From a technical and trading perspective, as 1.1030 now act as support there is a window to set a base targeting a move to test offers and stops above 1.11, a failure below 1.10 would suggest a premature upside attempt, and see prices retreating to test bids at 1.0960, where bulls will likely mount a further attempt to build a base. EURUSD...UPDATE Daily chart has flipped bearish as per the near term VWAP, a sustained breach of 1.1030 will invalidate the bullish view suggesting a deeper decline to test 1.0960. Note volatility is currently at the lowest levels of the year.

GBPUSD (Intraday bias: Bullish above 1.2870 targeting 1.3000)

GBPUSD From a technical and trading perspective, as 1.2870 supports look for a grind higher to retest offers and stops above 1.30 en route to the broader upside objective of 1.32, on the week only a failure below 1.2820 would concern the bullish bias suggesting further consolidation in the 1.27/1.29 range. NO CHANGE IN VIEW

USDJPY (intraday bias: Bearish below 109 targeting 107.90)

USDJPY From a technical and trading perspective, the anticipated further long liquidation to test bids back towards 108.50 played out and bulls once again defended the key support, a failure to quickly recapture ground above 109 would open a move to retest Fridays lows and likely see newly minted longs throw in the towel again, with the pullback extending to test bids below 108. NO CHANGE IN VIEW

AUDUSD (Intraday bias: Bearish below .6830 targeting .6750)

AUDUSD From a technical and trading perspective, pivotal .6830 prior support now acts as resistance only a sustained drive through this level would suggest a false donside break and confirm a base for another assault on .6900 offers and stops. As .6830 caps upside attempts expect a retest of Fridays low enroute to a test of .6735. NO CHANGE IN VIEW

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