November 28, 2016

Daily Observations:

The dollar fell the most since September against major peers earlier today as traders focused on events this week that could derail its rally – OPEC’s meeting, the Italian referendum and US nonfarm payrolls. Most Asian stocks, aside from Japanese equities, gained alongside gold.

US:

  • Wholesale inventories in October unexpectedly declined 0.4% from a month earlier, missing the consensus estimate of a 0.2% gain; September’s 0.1% rise was revised to a 0.1% drop.
  • The Markit US Services PMI in November fell to 54.7, from 54.8, missing the consensus projection of 54.8. The US Composite PMI remained steady at 54.9.
  • The US dollar extended declines from record high levels reached last week, falling 0.2% in New York on Friday and a further 0.6% in Asia this morning.
  • All 4 major US equity benchmarks reached all-time highs on Friday as trading resumed following the Thanksgiving holiday, logging the third consecutive weekly advance since Trump’s victory.
  • The S&P 500 Index gained 0.4%, led by utilities and telecommunications stocks. Energy companies led decliners following oil’s slump.
  • US Treasury yields maintained near their highest levels in more than a year, since July 2015. The benchmark 10yr yield gained 1bp on Friday to 2.36%, but was retreated earlier this morning to 2.32%, on the back of a weaker US dollar.

UK:

  • The economy expanded 0.5% quarter-on-quarter and 2.3% year-on-year during the third quarter this year, matching expectations and maintain similar expansion numbers from 2Q.

Europe:

  • The ECB is next due to meet on 8th Dec but according to euro-area officials familiar with the matter, may have room to put off some decision on the future of its bond-buying program until early next year.
  • While the ECB continues to pledge monetary support, rising bond yields have eased scarcity concerns and there is no longer a sense of urgency to adjust the parameters of quantitative easing.

Japan:

  • In a report released by the Cabinet Office on Friday, the government maintained its assessment of the economy for November, while raising its view of the global economy for the first time since February 2014.

China:

  • PBOC Deputy Governor Yi Gang said the yuan’s recent depreciation is less than other currencies, and the market should refer to its performance against a basket instead of a single currency when gauging strength.

Singapore:

  • Industrial production in October rose 1.2% form a year earlier, beating expectations of 1.0%, while the prior figure of 6.7% was revised upwards to 7.7%.

Precious Metals:

  • Spot gold rebounded from a 9-month low and key level of $1,171/Oz on Friday, and was 1.2% higher earlier today 1t $1,197.72/Oz, as overnight weakness in the US dollar buoyed the precious metal.
  • The previous support of $1,200/Oz now acts as a level of resistance; support levels for gold lie at $1,170/Oz and $1,145/Oz.
  • Spot silver gained 1.9% earlier to $16.8448/Oz, and looks set to extend upon Friday’s 1.1% gain. Resistance lies around the 200-day moving average of $17.70/Oz.

Oil:

  • Crude oil for January delivery slumped 3.9% on Friday to $46.06/bbl, after Saudi Arabia pulled out of talks scheduled for Monday with non-OPEC producers, including Russia, because of internal divisions within the group.
  • Crude rebounded from an intraday low earlier today, 2.0% at $45.14/bbl, back towards the $46/bbl handle, closing the gap from Friday.
  • As part of the final push to reach an agreement on curbing supply, oil ministers from Algeria and Venezuela headed to Moscow in a bid to get OPEC’s biggest rival on board.

 

USDSGD:

  • Spot 1.4226
  • USDSGD retreated 0.5% to 1.4208, following an overnight retracement in the US dollar.
  • The currency pair should be supported around the current 1.4200 handle while the next level of resistance comes in at 1.4444, the year-to-date high.

 

AUDUSD:

  • Spot 0.7469
  • AUDUSD extended recent gains, rising 0.4% to 0.7476 earlier today.
  • A rise back to the 200-day moving average of 0.7523 is possible, especially if iron ore continues to rally, but on a longer-term basis, the momentum remains to the downside.
  • Support levels further below come in at 0.7259 and 0.7145.

 

USDCAD:

  • Spot 1.3471
  • Crude oil’s intraday recovery from the low earlier today helped drive USCAD below the 1.3500, with the currency pair falling 0.4% to 1.3461.
  • Support levels below come in at 1.3265 and 1.3000, while the currency pair’s recent rise over the past few weeks could mean the resistance of 1.3588 may be tested again soon.

 

USDCNH:

  • Spot 6.9261
  • The PBOC strengthened its fixing for the first time in four days, 0.18% to 6.9042 per US dollar.
  • USDCNH declined 0.4% to 6.9198, its steepest drop in 3 months, and looks likely to snap a 6-day winning streak.

 

USDJPY:

  • Spot 111.92
  • USDJPY is headed for its biggest decline in 2 months, sliding 1.6% to 111.36, after reaching the 114.00 handle last Friday and following a retreat in Treasury yields today which is damping demand for the greenback
  • The 111.00 handle should provide some near-term support while the next key resistance lies at 114.50.

 

GBPUSD:

  • Spot 1.2512
  • GBPUSD reached a two week-high, rising 0.5% beyond its 50-day moving average to 1.2532.
  • After a torrid few months, the pound seems to be calming with volatility falling to its lowest since early October. The pound has recovered some of its post-Brexit loses and is the only currency to have risen against the US dollar this month.
  • On a longer-term basis, the 1.2100 handle remains a key support level, while 1.2800 acts as an important resistance handle.
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