November 23, 2016

Daily Observations:

Asian stocks rose amid optimism the global economy is strong enough to withstand higher US interest rates. Oil declined after OPEC deferred a decision on production cuts, while the ringgit weakened for an eleventh straight day. Gold maintained near its lows but remain supported above the $1,200/Oz level.

US:

  • Existing home sales last month rose 2.0% from September to the highest since Feb 2007, beating the consensus estimate of a 0.6% drop; the prior month’s rise of 3.2% was revised higher to 3.6%. Existing home sales’ rise could be a sign of momentum in the housing markets before a widely-expected borrowing costs increase kicks in in December.
  • The Richmond Fed Manufacturing Index rose from -4 to 4 in November, exceeding the consensus forecast of 0.
  • The Dow Jones topped 19,000 for the first time ever, while the Nasdaq Composite and Russell 2000 indices extended gains to record highs. Equities have risen on speculation the world’s largest economy will gain positive growth momentum in the wake of Trump’s policies.
  • The S&P 500 Index rose 02% to close above 2,200, its highest closing on record. Telecommunication shares led gainers.
  • The US dollar regained some strength following Monday’s pullback, with the Bloomberg Spot Dollar Index gaining 0.1% in New York.
  • The benchmark 10yr Treasury yield was little changed at 2.32%, will Treasury yields continuing to hover near 1 year-highs.
  • Along with Fed minutes, US data on durable goods orders, jobless claims, home prices and manufacturing are due later today.

Canada:

  • September retail sales rose 0.6% month-on-month, matching expectations, while the prior month’s decline of 0.1% was revised to a 0.1% rise. Excluding auto sales, retail sales were unchanged, lower than the projected 0.5% rise.

UK:

  • Chancellor of Exchequer Philip Hammond will pledge 1 billion pounds to improve Britain’s broadband infrastructure, part of a program of investment to boost productivity.
  • The Treasury has already announced other infrastructure projects which includes a 1.3 billion pound-initiative to improve Britain’s roads.

Europe:

  • ECB Mario Draghi said on Monday that the central bank is “committed to preserving the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation toward” the target of just under 2%.
  • This followed comments from Governing Council members Benoit Coeure and Francois Villeroy de Galhau on Monday signalling the time to start scaling down the QE program has not yet arrived.
  • Euro-area bonds rallied on renewed QE, finding relief after weeks of being whipsawed by political headlines and speculation of higher US interest rates.

China:

  • The US withdrawal from the 12-nation TPP, reaffirmed by Donald Trump in a speech on Monday, has focused attention on a competing set of trade talks planned for Indonesia next week. The negotiations, which unlike TPP include China and not the US, aim to synchronize existing pacts across much of Asia and would over 30% of the global economy and almost half the world’s population.

Australia:

  • Construction work done in 3Q fell 4.9% quarter-on-quarter, more than the 1.6% estimated, according to the Australian Bureau of Statistics, registering its biggest fall since 4Q 2000.

Precious Metals:

  • Spot gold continues to be supported above the key $1,200/Oz region, despite trading 0.9% lower to $1,206.21/Oz earlier in the sessions. The $1,200/Oz price level is likely to provide further support, at least for the time being, while the $1,233.18/Oz high last week will act as a resistance point.
  • Spot silver fell 1.5% to an intra-day low of $16.5376/Oz. A close below the $16.50/Oz level would result in more than a 20% retreat from its August highs, or a technical bear market for the metal.

Oil:

  • Crude oil for December delivery settled 0.4% lower last night at $48.03/bbl, despite Libya’s OPEC governor Oun saying member nations reached consensus during talks on production cuts on Tuesday. However, Oun had declined to comment on whether Iraq and Iran were willing to limit output.

 

USDSGD:

  • Spot 1.4249
  • USDSGD continues to be supported above the 1.4200 handle; the currency pair was 0.1% higher at 1.4259 earlier today.
  • Near-term resistance lies around 1.4350, while support lies above the 1.4100 handle.

 

AUDUSD:

  • Spot 0.7419
  • Following a 5% decline over the past 2 weeks, AUDUSD seems to have found some footing above the 0.7300 handle. The currency pair extended upon previous day’s gains to rise 0.5% to 0.7430 earlier today.
  • Goldman Sachs have noted that the currency pair could rise to 0.8000 should commodity prices sustain some of their recent strong gains.
  • Support levels further below come in at 0.7259 and 0.7145.

 

USDCAD:

  • Spot 1.3440
  • USDCAD continues to remain above the technically-important 1.3400 level, gaining 0.5% to 1.3467 last night.
  • The currency pair’s recent pullback to 1.3400 can be strongly attributed to strengthening crude oil prices, which have helped to negate post-US presidential election effects.
  • Below 1.3400, the next support comes in at 1.3265 – its month-to-date low.

 

USDCNH:

  • Spot 6.9194
  • The PBOC resumed its weakening of its daily reference rate, lowering it by 0.18% to 6.8904.
  • USDCNH rose 0.3% to 6.9222, inching above the high on Monday to a new
  • The 6.9000 continues to act as a support level.

 

USDJPY:

  • Spot 111.08
  • USDJPY recovered from Monday’s pullback, gaining 0.6% to 111.36 last night.
  • The currency pair continues to maintain above the 110 level and the next key resistances lies at 111.45 and 114.50.

 

GBPUSD:

  • Spot 1.2385
  • GBPUSD declined 0.5% to 1.2385, amid renewed US dollar strength overnight.
  • The 1.2100 handle remains a key support level, while 1.2800 acts as an important resistance handle.
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