US stock futures are pointing to a strong start to the week. Stocks fell last week, but the broader indices bounced on Friday, led by the Nasdaq 100. The Dow sat out that rebound and is now looking at a 559-point gain at the open. The first test is whether buyers can build on those gains once the cash market opens.
Crude oil is back below $90 after President Trump downplayed the likelihood of renewed strikes on Iran as long as diplomatic talks keep moving forward. Reuters reported fresh attacks on ships near the Strait of Hormuz, so the risk to supply remains. Meanwhile, Treasury yields are higher across the curve this morning. Stocks are getting a lift alongside cheaper oil, while the bond market heads into Tuesday’s US CPI with the 10-year yield near 4.87%.
The US dollar is lower against all seven majors on my screen. The NZD is out in front, up 1.15% against the dollar, followed by the GBP at 0.50%, AUD at 0.47% and EUR at 0.39%. The dollar’s losses are smaller against the JPY, CAD and CHF. The kiwi started firming in Asia after New Zealand’s close election, with special votes still to be counted and the final result due November 27. InvestingLive’s New Zealand election coverage.
In the morning video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control.
The technical outlook
EURUSD. Buyers have the intraday edge. The pair is trading at 1.1186, above the midpoint of today’s range near 1.1168 and is trading right at the 200 hour MA. The 100 hour MA is at 1.12046 and is another key target that would increase the bullish bias.
USDJPY. Sellers have the edge with the price breaking below the 100 hour MA at 158.178 and the 200hour MA at 157.973. Staying below would give the sellers the edge.
GBPUSD. Buyers are trying to take more control with the price rebounding above the 100 day MA at 1.3392, the 200 hour MA at 1.3400, the 50% at 1.35056. The price is testing the 200 day MA at 1.34177 but is short of the 100 hour MA at 1.3432.
Currency ranges
Using the latest session highs and lows against the 22-day average ranges:
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EURUSD — 1.1138 to 1.1197, 59 pips or 72% of average.
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USDJPY — 157.86 to 158.53, 67 pips or 78% of average.
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GBPUSD — 1.3350 to 1.3422, 72 pips or 97% of average.
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USDCHF — 0.8175 to 0.8212, 37 pips or 55% of average.
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USDCAD — 1.4078 to 1.4138, 60 pips or 105% of average.
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AUDUSD — 0.6856 to 0.6905, 49 pips or 98% of average.
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NZDUSD — 0.5550 to 0.5616, 66 pips or 138% of average.
USDCHF has the most room to extend on this measure. EURUSD and USDJPY also have room if their session extremes give way. GBPUSD and AUDUSD have already covered nearly a normal day’s range, while USDCAD and NZDUSD have exceeded theirs. A pair can keep trending after it has covered its average range. I use that number to judge how much ground it has already covered before deciding where I can define risk.
Stocks are higher in US and Europe while and bond yields are modestly higher
US stock futures
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Dow +559 points
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S&P 500 +68 points
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Nasdaq 100 +226 points
Friday’s close
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Dow −0.46%
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S&P 500 +0.31%
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Nasdaq Composite +1.09%
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Nasdaq 100 +1.35%
European equities are higher across the board, with Italy leading. Benchmark 10-year yields are lower across the major European markets, in contrast with the move higher in US yields.
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Germany’s DAX +1.08%
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France’s CAC 40 +0.79%
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UK’s FTSE 100 +0.65%
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Spain’s IBEX 35 +1.52%
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Italy’s FTSE MIB +2.13%
US Treasury yields
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2-year 4.5469%, up 2.49 basis points
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5-year 4.6661%, up 1.81 basis points
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10-year 4.8718%, up 1.28 basis points
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30-year 5.2645%, up 0.45 basis points
Crude oil falls helping equities, while metals move higher
US crude oil is trading at $88.31, down $2.52 or 2.77%, after reaching a low of $87.54. Spot gold is up 1.27% near $4,122, silver is up 1.67% near $52.77, and copper is up 1.71% at $6.3440. Gold’s move alongside higher Treasury yields is worth watching, particularly with the dollar broadly lower.
Bitcoin approaches its 200-day moving average
Bitcoin traded down to $73,650, its lowest level since August 21, before bouncing to around $74,821. The low was just $497 above the 200-day moving average at $73,153. August 21 was also the last time Bitcoin traded below that moving average.
The first downside target is back at $73,650. A break would put the 200-day moving average in play. That’s the bigger barometer for buyers and sellers. If the price tests the average and bounces, buyers have a level to lean against with risk defined. A break that holds below it would give sellers more control. If the price breaks below and quickly gets back above, I’ll be watching for a failed break.
Binance is also in focus. The exchange said Saturday that CFO Kaiser Ng is leaving to pursue another venture and that Justin Yek, formerly of Airwallex, will take over. Co-CEO Yi He said the transition had been in the works for six months. The announcement followed the October 29 theft of about $6.3 billion in cryptocurrency. Binance said the attackers compromised employee computers through malicious downloads and fake recruiting efforts targeting engineers, and the exchange pledged to reimburse affected customers in full. The FBI attributed the theft to a North Korean group. Pyongyang denied involvement.
The breach puts Binance’s security controls and its handling of reimbursements in focus. For Bitcoin, the immediate question is whether buyers can defend the August low and the 200-day moving average if the price rolls over again.
North American calendar
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8:40 AM ET – Fed Vice Chair for Supervision Michelle Bowman speaks.
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10:00 AM ET – US September wholesale inventories – Forecast +0.6% – Previous +0.5%.
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10:00 AM ET – Chicago Fed President Austan Goolsbee speaks.
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11:00 AM ET – New York Fed Survey of Consumer Expectations.
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12:15 PM ET – Richmond Fed President Thomas Barkin speaks.
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1:00 PM ET – US Treasury 3-year note auction.
The bigger test for the dollar and yields comes Tuesday at 8:30 AM ET with US October CPI. Today I’ll be watching whether the dollar stays under pressure even as US yields rise. A move through the session highs in EURUSD and GBPUSD would show that buyers are still willing to press that trade heading into the inflation report.
This article was written by Greg Michalowski at investinglive.com.