GBP/USD trims monthly gains while declining in the last week to re-test 1.3300. The pair awaits the Asian session’s reaction to the latest news concerning Brexit and the covid vaccine on early Monday. Although broad US dollar weakness and hopes concerning the coronavirus (COVID-19) vaccine have mainly propelled the Cable during November, bulls are turning cautious off-late as Brexit uncertainty weighs.
During the weekend the Financial Times (FT) came out with the news suggesting that the UK’s medical regulator, the Medicines and Healthcare Products Regulatory Agency (MHRA), is set to approve Pfizer-BioNTech coronavirus vaccine from December 7. The news follows the previous chatters that the British government is pushing MHRA to approve AstraZeneca’s covid vaccine. Elsewhere, the FT also claimed that the European Medicines Agency is set to consider next month whether to approve Pfizer/BioNTech vaccine and a rival candidate developed by Moderna.
Hence, vaccine hopes are on full stream at a time when the market needs it the most, especially when the UK’s economy is already fragile with two national lockdowns.
On the other hand, Brexit talks continue to dwindle. After much hype, the European Union’s (EU) Chief Negotiator Michel Barnier landed in London for a one-to-one talk. However, nothing strong has come out as both the parties blame each other for the deadlock. Fisheries have recently been the major hurdle. Chatters also crossed grapevine that talks could be held between European Commission President Ursula von der Leyen and UK PM Boris Johnson. However, nothing could be confirmed by the UK PM Johnson’s office.
Over the counter, US dollar weakness, mainly led by the market optimism concerning vaccine and Joe Biden’s election as the President, probe the GBP/USD bears.
Moving on, the pair traders will keep their eyes on the risk events, mainly concerning the Brexit and virus vaccine, for fresh impulse. Though, US dollar moves will also be the key to watch.
A clear downside break of an ascending trend line from November 02, at 1.3385 now, directs GBP/USD bears toward October high near 1.3175. Alternatively, the monthly high near 1.3400 adds to the upside filters.Full Article
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For the economic impact, “our baseline forecast that widespread immunization should drive a sharp pickup in global growth starting in Q2.”
GS note risks to that outlook are for a later timeline.
OPEC and allies led by Russia have yet to find a consensus on oil output policy for 2021, after an initial round of talks on Sunday and ahead of crucial meetings on Monday and Tuesday, four OPEC+ sources told Reuters.
There was support in delaying the hike but there was no widespread agreement between members. Therefore, as it currently stands, output will be increased by 1.9m barrels a day in January.
”OPEC+, a grouping comprising members of the of Organization of the Petroleum Exporting Countries, plus Russia and others, had been due to ease production cuts from January 2021, but a second coronavirus wave has reduced demand for fuel around the world.”
”OPEC+ is now considering rolling over existing cuts of 7.7 million barrels per day, or around 8% of global demand, into the first months of 2021, sources have said.”
”Preliminary consultations on Sunday between the key ministers, including from OPEC’s leader Saudi Arabia and Russia, had not reached a compromise on the duration of the rollover.”
”Sources have said talks were now focusing on extending cuts by three to four months, or on a gradual increase in output. Ideas of deeper cuts or a six-month rollover were much less likely, the sources said.”
“There is no consensus as yet,” one of the four sources said.
A second source said: “There are many different ideas on the table… Also, a gradual increase (in production).”
The main meeting was expected to begin at 1300 GMT on Monday.
It is ‘wait-and-see-mode’ for oil markets in anticipation of the continuation of talks this week.
”Brent spreads narrowly moved into backwardation, implying the market has discounted the near-term deficits that are likely to materialize with an OPEC+ tapering delay, combined with a continued recovery in demand. This fits well with our expectations, suggesting that the market has fully discounted a likely OPEC+ tapering delay,” analysts at TD Securities noted last week ahead of the meetings.Full Article
Its almost like the perfect storm for stock markets at the moment.
Financial and commodities markets are trading in a post covid world in so much that they have priced for a faster rate of economic recovery due to the knowledge that a vaccine is well on the way.
In the UK, for instance, we already have the risk-on weekend news to kick-start a positive mood right off the bat for the month ahead.
The Financial Times has reported that deliveries of the vaccine developed by BioNTech and Pfizer, which data has found to be more than 95% effective in preventing the disease, would begin within hours of the authorisation drug regulator. The First injections could take place as soon as 7th December.
However, that is not to suggest that covid is going to go away anytime soon, for any vaccine will take time to take effect. Friday’s US Treasury yields fell which indicate lingering concerns over rising cases globally. That being said, the stock markets are always looking for the light at the end of the tunnel.
Moreover, several trials have been reporting very good efficacy which leads us to want to believe that covid is a virus that we can defeat with vaccination for the entire globe.
Pfizer/BioNTech says it can manufacture up to 50 million doses in 2020 and 1.3 billion in 2021, while Moderna says it expects to be able to deliver approximately 500 million doses per year and possibly up to 1 billion doses per year beginning in 2021.
Other front runners, such as AstraZeneca, says it expects to be able to have the capacity to produce up to 3 billion doses of the vaccine in 2021 on a rolling basis.
As a result, US stocks have continued to price in the good news and rose across the globe on Friday to close at a fresh all-time high.
In fact, stocks have remained on track for their strongest monthly performance on record heading into a month that has yielded an average 1.37% return in the S&P 500 since 1950. (Note that over the same stretch, December has been better than January, (52 up years vs Jan’s 42 up years and just a 0.98% average return), which contradicts two popular myths: the December Selloff, and the January Effect).
Looking to the FX space for insight, the dollar index, and what has been widely used as a risk-barometer throughout the covid crisis, fell to a three-month low on Friday and closed at its lowest since April 2018.
This also indicates the potential of a prolonged period of risk-on sentiment for the foreseeable future. (A key level of expansion is 92.20 on the daily chart as a point of control while liquidy support is at 91.75. 92.80 is resistance on the upside):
It is as if the fog is clearing for investors, with the level of the stock market reflecting all known information up to this point. The S&P 500 is up 6% in just a few weeks.
However, there are a number of key events that could take place which would rattle Mr. Market and will be highly unwelcomed, especially during the holiday season and thin markets where price swings could be exaggerated.
Those who trade with the glass half empty could well be quick to call this a cycle top, arguing that all the good news, including the US election result, is priced in.
Therefore, where is the path of least resistance against a fundamental backdrop whereby the pandemic peaks in, say, mid-December?
Just imagine a scenario of 200k daily cases propelling the death rate towards estimates of a 2,500 peak for early January.
States would be forced to impose restrictions on businesses in desperate attempts to flatten the curve.
When we combine such a hypothetical, yet highly probable scenario to say, a US government shutdown, with the expiration of the Federal 13-week unemployment extension, then we have the perfect storm of negative economic shocks. Shocks that a very vulnerable stock market, arguably built on a house of cards, may not be able to withstand, vaccine or not.
There has been an apparent disconnect with the broader economy and persistent uncertainty over the years, but particularly this year in 2020.
The S&P 500 index bottomed out on March 23, having lost a stunning 33.9% in less than five weeks.
Since then, we have had an incredible rally, with the S&P 500 exceeding its February high as of Sept. 2 and then moving beyond those highs earlier this month before finally closing at an all-time closing high on Friday.
What this means is the smart money that stocked up in a phase of accumulation in the 2020 lows and on the incline may have little left in stock to sell to the retail market. This should be a consideration for any short term investor chasing this market.
There are definitely a number of event dates to be aware of for the month of December and aligning risk factors to watch out for.
We have touched on the prospects of a government shutdown.
The last potential shutdown was avoided back in September where a continuing resolution was agreed to expire on the 11th Dec.
What this means is that on the 12th December, a very distracted incumbent US President Donald Trump has to sign a new resolution that first needs to be passed by the House and the Senate.
This would be in order to avert the fourth shutdown in as many years. Such a shut down would put further strain on an already buckled American labour force.
Last week we saw the first increase in new state unemployment claims in five weeks. In a government shutdown, it will put a further 2.1 million Federal workers at risk.
In such an event, 800,000 workers might instantly see their income drop to zero. This number may not be such an impactful number off the bat, but when you throw in the 12 million already that are unemployed…(Those unemployed are already facing the prospects of their unemployment benefit falling to zero the day after Xmas Day).
You may be asking yourself, ”at a time where small businesses are already on the brink due to the epidemic, one that the Institute for Health Metrics and evaluation expects to get steadily worse for the next three weeks, could the US government make such a terrible mistake?”
But, in all seriousness, this leads us to another very important date.
The electoral college vote for President will take place on the 14th Dec and right now, that seems to be about all Trump is concerned about.
Trump refuses to concede, insisting that it has been all a massive fraud. If he continues to be distracted by his own ego, then there is a higher chance that the government could shut-down.
Then, besides the local data events, namely November’s employment report and ISM manufacturing data in the week ahead, we have the 5th January Georgia Senate runoff. This will happen right at the time where the US is expected to be peaking in terms of covid waves and deaths.
There is a great deal that needs to be achieved in US politics in just a matter of weeks.
Judging by 2020’s congressional performances, the likelihood is the eleventh hour will be stretched in what will be several weeks of hyper-political chaos and another major risk for markets.
However, even though how stretched the market might be on the bid, built on a house of cards, this could all very well play into the hands of the smart money once again.
So, in conclusion, there could be a short term opportunity for traders and a long term opportunity for investors.
A healthy near term correction will be the pain trade for many before a strong rally in 2021.
Markets will enjoy a vaccinated global population while the US economy will be rescued from a double-dip recession due to an even bigger stimulus package passed within a month of President-elect Biden taking office on January 20th.
As illustrated above, there are a number of support zones that range from a worst-case scenario, 3,234 and the Nov. lows, to the near term 61.8% Fibonacci retracement confluence 3,587, March 2020 highs.
A break of the current daily support at 3,617 opens prospects of such a pullback.
On the upside, its blue skies above the 3,556 all-time highs.Full Article
The matter heads to a full meeting of OPEC and its allies today, Monday November 30.
The chatter is many participants supported delaying the hike, but not all, hence no agreement. The current plan is to increase output by 1.9m barrels a day in January (if no delay is agreed to).Full Article
2350 GMT Japan Industrial
Production for October (preliminary)
expected 2.2% m/m, prior 3.9%
expected -4.6% y/y, prior -9.0%
2350 GMT Japan Retail sales
expected +0.5% m/m, prior -0.1%
expected +6.3% y/y, prior -8.7%
0000 GMT Australia –
Melbourne Institute monthly CPI inflation for November
prior -0.1% m/m and +1.1% y/y
Official CPI data is once a
quarter in Australia, this monthly guide is a good heads up for the
0000 GMT New Zealand ANZ
business survey for November, final
0030 GMT Australia Inventories
for Q3, expected -0.7% q/q, prior -3.0%
0030 GMT Australia Private
Sector Credit for October
expected 0.1% m/m, prior 0.1%
expected 1.9% y/y, prior 2.0%
0100 GMT China official PMIs
Manufacturing expected 51.5,
Non-manufacturing expected 56.0,
Composite prior 55.3
I’ll have more to come on this separately
0110 GMT BOJ JGB purchase
As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come on online … prices are liable to swing around on not too much at all, so take care out there. Some small change from late Friday levels:
Be back soon with weekend news.
The Canadian Dollar scored a trifecta this week with crude oil prices rising to their best level since the March pandemic advent, favorable technical indicators and the continuing aversion to the American currency from the still rising COVID-19 count in the United States.
West Texas Intermediate (WTI) cleared 6.75% on the week but it was Tuesday’s 4.57% jump from $42.93 to $44.89 that prompted the largest drop in the USD/CAD which shed 81 points to finish at 1.3000. Crude prices have reached their highest point since plunging through $46 in early March.
Expectations that the OPEC and Russian production cuts enacted last year will be extended through the end of the first quarter and a growing conviction that a global economic recovery will commence sometime in the spring have brought WTI back to the pandemic start line.
Technical indicators continue to point the USD/CAD lower. The six-month old descending channel is intact and the scarcity of support lines below 1.3000 and the plenitude above add practical trading pressure to the decline.
Finally, markets fear that the continuing climb in COVID-19 diagnoses and hospitalizations in the US and the concomitant business and personal restrictions in some but by no means all states, may have reversed labor market improvements.
Initial Jobless Claims have increased from 711,00 to 778,000 in the last two weeks. While this is not the only or the largest jump in the eight months of the pandemic, it is only one coordinated with a specific cause.
The Canadian economy through October had restored 78.8% of the spring jobs losses, the US 54.4%. The US unemployment rate was 6.9% last month, in Canada it was 8.9%.
Even though the fears over the new lockdowns in the US appear vastly overstated, the Atlanta Fed estimates annualized growth is 11% in the fourth quarter, markets have yet to escape the psychological fetters of the spring panic.
The US dollar has continued lower as much out of habit as fact. The responses in the USD/JPY, and USD/CHF, pairs with safety status on the currency side, to the Pfizer vaccine trial on November 9 and the Markit PMI figures on November 23, with strong ascents, show the likely dollar direction when the pandemic loses its grip on the currency markets.
Currency markets remain dominated by the mindset of the pandemic. Even though the safety premium of the US dollar has long since been removed, markets have been unwilling to return to comparative economics while COVID-19 is prevalent. Virus diagnoses and hospitalizations are as common in Europe as the US but it is the rising cases in the states that keep the dollar moving lower.
Trading momentum is down, with support below 1.3000, such as exists, stemming from a few sessions in the first week of January. Before that the USD/CAD had not been south of 1.3000 since the late summer and fall of 2018. The brief low of 1.2928 on November 9 is unimportant.
The Canadian third-quarter GDP number on Thursday, expected to be +47.0 annualized, and employment figures on Friday that could bring the labor market restoration to over 80% could, if accurate provide the loonie with additional support. As will crude oil, especially if WTI can move above $47.
The USD/CAD should continue lower largely from the lack of any conceptual alternative. Immediate support at 1.2965 is weak as are the lower levels but the logic for continued slide is equally insubstantial. The relative tenuous nature of the decline also makes it susceptible to an unexpected reversal.
No economic data was released this week.
A mixed group of figures were displayed this week. Purchasing Managers’ Indexes for November were better than predicted as were Durable Goods Orders. Initial Jobless Claims rose for the second time, likely confirming the impact of new pandemic closures in some states. Consumer Confidence dropped and the housing market continued its excellent run. Third-quarter GDP confirmed the active recovery.
Markit’s Preliminary Manufacturing PMI for November was considerably better at 56.7 than its 53 forecast and October’s 53.4. It was the highest reading since September 2017. Services PMI registered 57.7 on a 55.3 prediction and the 56.9 September score. It was the highest level since March 2015. The Markit Composite PMI rose to 57.9 in November from 56.9.
Conference Board Consumer Confidence dropped to 96.1 in November from 101.4 in October.
Durable Goods orders rose 1.3% in October, ahead of the 0.9% indication and September was revised to 2.1% from 1.9%. Goods Orders ex Transportation also climbed 1.3%, more than tripling the 0.4% forecast. September’s orders almost doubled to 1.5% from 0.8% with revision. Durable Goods Orders ex Defense rose 0.2% in October after a 3.8% gain prior.
Gross Domestic Product in the third quarter expanded at a 33.1% annual pace as expected, reversing the 31.4% pandemic decline in the second. Michigan Consumer Sentiment in November was adjusted to 76.9 from 77. Personal Income in October fell 0.7%. It had been predicted to be flat after September’s 0.7% increase. Personal Spending gained 0.5% in October, 0.4% had been projected and September was revised to 1.2% from 1.4%.
New Home Sales fell 0.3% on an annualized basis to 999,000, 1.5% and 970,000 had been forecast.
The Personal Consumption Expenditures (PCE) Price Index was flat in October on a -0.1% estimate and September’s 0.2% rise. The annual rate was 1.2% after September’s 1.4%. The core PCE Price Index was flat in October from 0.2% and 1.4% on the year, down from 1.6% in September.
Initial Jobless Claims rose to 778,000 in the week of November 20 from 730,000 and 748,000 in the two previous weeks. Continuing Claims fell to 6.071 million on November 13 from 6.37 million prior.
The November labor market report and third quarter GDP figures, on Tuesday and Friday are the most relevant. Each can affect trading with stronger numbers generally good for the Canadian dollar.
The Raw Material Price Index for October, which traces prices paid by Canadian manufacturers is out on Monday. This index fell 2.2% in September The Industrial Prices Index, which follow selling prices for commodity producer is forecast to be unchanged at -0.1% in October.
Gross Domestic Product (GDP) is forecast to decline 39.6% at an annualized rate in the third quarter after dropping 38.7% in the second. On the month GDP is expected to decrease 0.9% in September, following the 1.2% fall in August. Markit Manufacturing PMI for November is predicted to rise to 55.8 in November form 55.5 in October.
The Unemployment Rate in November is forecast to drop 0.1% to 8.8%. Net Change in Employment is projected to add 100,000 jobs after the 83,600 gain in October. The Participation Rate is projected to rise to slip to 65% from 65.2%. Average Hourly Wages rose 5.25% on theyear in October. Exports are forecast to fall to C$45.2 billion from C$45.54 billion and imports to drop to C$47.9 billion from C$48.79 billion. The International Merchandise Trade [balance] is expected to be -C$2.6 billion in October from -C$3.25 million in August.
The Employment Situation Report from the Labor Department for November leads the information parade. After the recent reversal in Jobless Claims markets will be looking for reassurance that the employment recovery is on track. Weakness in Nonfarm Payrolls could damage equity markets and the dollar. The better than expected PMI reading for November from Markit will need confirmation from the Institute for Supply Management (ISM) before the business improvement is accepted.
The ISM Manufacturing PMI is forecast to drop to 57.8 in November from 59.3. The New Orders Index is expected to fall to 53.4 from 67.9. This forward looking index has beaten estimates for five straight months. In October it was forecast to drop to 45.9 from 60.2, it rose to 67.9. The Employment Index is predicted to slip to 51.4 from 53.2 in October.
Federal Reserve Chairman Jerome Powell will testify before the US Senate Committee on Banking, Housing, and Urban Affairs as required by the Coronavirus Aid, Relief, and Economic Security Act (CARES).
Construction Spending is forecast to rise 0.8% in October after a 0.3% increase in September.
Private Payrolls from ADP are projected to rise 500,000 in November following 365,000 in September. The Fed’s Beige Book of anecdotal economic assessments for the December 4-5 FOMC meeting is out on Wednesday.
Initial Jobless Claims for the week of November 27 are forecast to slip to 770,000 from 778,000 previously. Continuing Claims are forecast to drop to 5.915 million in the November 21 week from 6.071 million previous. The ISM Services PMI is forecast to dip to 56.4 in November from 56.6. The New Orders Index was 58.8 in October and the Employment Index 50.1.
Nonfarm Payrolls are forecast to add 520,000 in November after 638,000 in October. The unemployment rate (U-3) is expected to be 6.8% in November after 6.9% in October. Average Hourly Earnings should be unchanged on the month in November at 0.1% and 4.6% from 4.5% on the year. The Underemployment Rate (U-6) was 12.1% in October and the Labor Force Participation Rate was 61.7%. Average Weekly Hours will be unchanged at 34.8. Factory Orders are forecast to rise 1% in October, they increased 1.1% in September. The negative Trade Balance is expected to expand to $-65.2 billion in October from $-63.9 billion.
The Relative Strength Index has been below 50 since November 13 though it has not reached oversold status since early September. Closing the week at 37.14 it suggests further losses. The declines of the last two week have left the moving averages trailing the market by substantial margins. The 21-day line at 1.3087 fronts resistance at 1.3100, the 100-day at 1,3289 and the 200-day at 1.3528 await the USD/CAD’s change of fortune.
The descending channel is of less import as current levels are far from the upper and lower borders. Of more importance is the relative weakness of support wth the first line at 1.2965 the result of a few days trading in early January, the next from a brief drop on November 9 and the rest dating from trading levels more than two years old. Resistance lines in contrast are recent, numerous and well-traded.
Resistance: 1.3020; 1.3065; 1.3100; 1.3150; 1.3215
Support: 1.2965; 1.2930; 1.2890; 1.2855
The weakness of the USD/CAD decline is evident in the FXStreet Forecast Poll. The one-week forecast is heavily bearish but the destination at 1.2957 makes no penetration of support. The one-month and one-quarter views move back above support at 1.3000, poised, perhaps for a change in fundamental status.
Ripple (XRP/USD) sellers have returned this Sunday, as the recent recovery from sub-$0.50 levels appears to lose steam.
However, from a technical perspective, it looks like the bulls have taken a breather before the bullish reversal picks up pace.
XRP/USD: 12-hour chart
Looking at the 12-hour chart, Ripple continues to face strong offers at the one-week-old descending trendline resistance, now at $0.6262.
Closing on the candle above that level could trigger a fresh breakout, with the bullish Relative Strength Index (RSI) favoring the move higher. Although the follow-through buying interest could weaken at $0.6576, which is the critical resistance of the 61.8% Fibonacci Retracement of the pullback from the highest level since May 2018 reached at $0.7842 last Tuesday.
Acceptance above the latter is critical to reviving XRP/USD’s journey towards the $1 mark. Alternatively, the bullish 21-simple moving average (SMA) at $0.5226 is the level to beat for the bears. The next relevant downside target awaits at the 50-SMA of $0.3762.
All in all, the upside appears more compelling in the week ahead.
Here is what you need to know on Monday, November 30:
The American dollar was the worst performer on Friday, falling against all of its major rivals, but the pound. The EUR/USD pair was the best performer, reaching a fresh 2-month high of 1.1963.
The GBP/USD pair fell for a second consecutive day as the Brexit drama continues. On Friday, EU’s chief negotiator Michel Barnier traveled to London for in-person discussions, as the critical issues remain unsolved. The EU and the UK keep playing the blame game, accusing each other of not conceding on key issues. UK PM Boris Johnson stated that Britain would do great with or without a trade deal with the Union.
AUD/USD pressured the 0.7400 level but holds below it. Tensions between Beijing and Canberra continue. Over the weekend, Australia’s trade minister said China’s steps to curb imports of his country’s goods are “aggressive,” adding that such measures undermined confidence in the global economic recovery.
Gold plummeted to $1,774.25 a troy ounce. There was no certain catalyst beyond such slump, but a technical one, as the slump came in thin trading conditions and once the metal lost the 1,8000 mark.
Weekend news indicate that the UK’s medical regulator will likely approve the emergency use of the Pfizer-BioNTech vaccine, to be applied as soon as December 7.Full Article
Heading into the ETH 2.0 launch on December 1, the Ethereum holders remain wary over the prospects for the second-most widely traded digital asset.
Following last week’s slide, has Ethereum’s time finally arrived or is it a sell on the rollout news?
The next generation of Ethereum set to be launched this week is only the initial phase and “there’s still a lot of work left to do for the full ETH2 upgrade,” Justin Drake, ETH2 researcher at the Ethereum Foundation said last Wednesday.
ETH/USD: 4-hour chart
As observed in the four-hour chart, ETH bulls are struggling to extend the recovery mode from weekly lows of $480.08, as the upward-sloping 50-simple moving average (SMA) at $553 offers strong resistance.
Acceptance above the latter is critical to unleashing additional upside. Thursday’s high of $577 could challenge the bulls’ commitment. The Relative Strength Index (RSI) points higher, currently at 67.78, backing the case for more gains.
On the flip side, powerful support awaits at the 21-SMA of $523. The upside bias likely remains intact so long as the bulls hold above the bullish 100-SMA at $513.
ETH/USD: Daily chart
The 14-day RSI looks north (at 61.82) while above the midline, adding credence to the upbeat picture. Also, the price trades above all the major averages, as the path of least resistance appears to the upside.Full Article