November 30, 2016

Daily Observations:

Oil maintained near two-week lows ahead of a crucial OPEC meeting on stabilizing the crude market, while the US dollar is poised for its steepest monthly advance since May following a recent rally in US yields. Asian stocks were mixed, as investors adopted a more cautious approach ahead of this weekend’s Italian referendum. Gold continues to struggle breach the $1,200/Oz resistance level.

US:

  • The US economy grew 3.2% quarter-on-quarter in the third quarter this year, surpassing expectations of a 3.0% expansion, and accelerating from the 2.9% gain in the second quarter.
  • Personal consumption gained 2.8% over the same period, higher than the expected 2.3% and prior figure of 2.1%.
  • Core PCE, the Fed’s preferred gauge of inflation, rose 1.7% from the previous quarter, matching expectations and maintaining the same pace as in 2Q.
  • November’s consumer confidence index rose 107.1 from a revised-higher 100.8 in September, beating the median estimate of 101.5.
  • Federal Reserve Governor Jerome Powell said the case for a rate hike has “clearly strengthened” and that patience has “paid dividends”. He added that policymakers shouldn’t wait too long before acting as moving too slowly could eventually mean that the committee would have to tighten abruptly to avoid overshooting targets.
  • The US dollar weakened overnight, as the Bloomberg Dollar Spot Index – a gauge which tracks the greenback against 10 major peers, erased an earlier 0.4% advance that came after better-than-expected US GDP data.
  • The benchmark 10yr Treasury yield fell 1bp to 2.30%, falling for a second day after spiking up by 4bps earlier in the session.

Italy:

  • Prime Minister Renzi’s office denied news reports that he is considering stepping down even if he wins the Dec 4 referendum on constitutional reform.
  • According to a Reuters report, the ECB is ready to temporarily step up purchases of Italian government bonds if this weekend’s referendum result “sharply” drives up borrowing costs for Italy.

Japan:

  • Industrial production in October rose 0.1% month-on-month, and fell 1.3% year-on-year, with the former beating expectations of 0.0% and the latter in line with estimates.
  • Government stimulus and recent yen declines are likely to support Japan’s export-dependent economy going forward, and adds to speculation that the BOJ will stay on hold at its December policy meeting.

China:

  • The PBOC, in an emailed statement, said that it hasn’t ordered commercial banks to suspend personal mortgage lending and media reporting on the topic was untrue. People with knowledge of the matter had said earlier that China’s government was stepping up efforts to contain runaway property prices with the PBOC clamping down further on mortgage lending in areas deemed overheated.

Australia:

  • Economists have begun paring back GDP projections after recent data showed construction activity fell the most since 2000, wage gains slumped to a fresh record low and more workers quit the job hunt.
  • Early forecasts from economists surveyed by Bloomberg show a median estimate of just 0.2% growth in 3Q, less than the 0.5%-0.6% range predicted by the RBA. 3Q GDP is due for release on 7th Dec, and a weaker-than-expected number will quell rate-hike speculation over the near term.

Precious Metals:

  • Spot gold gained 0.6% to $1,195.02/Oz earlier today, amid US dollar weakness in Asia this morning and continuing concerns over this weekend’s Italian referendum. The precious metal continues to consolidate within the $1,170/Oz – $1,200/Oz range.
  • 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 rose 1.3% to $16.7669/Oz as the metal continues to be supported above the $16.50/Oz handle.

Oil:

  • Crude oil for January delivery slipped 3.9% to settle at $45.23/bbl in New York, after rising 2.2% on Monday, highlighting the whipsawing nature of the oil market this week.
  • Saudi Arabia has said it is ready to reject an agreement unless all OPEC members, excluding Libya and Nigeria, take part, Bloomberg reported. Iran has continuously stressed that it will not cut output and requested the Saudis trim production by about 1 million barrels a day.

 

USDSGD:

  • Spot 1.4238
  • USDSGD dipped 0.3% to 1.4226, reversing gains from last night when the currency pair breached the 1.4300 handle briefly.
  • 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 0.7481
  • AUDUSD continues to be capped at the 0.7500 resistance, rebounding off the level for the third consecutive session. The currency pair gained as much as 0.4% to 0.7497 earlier today.
  • Support levels further below come in at 0.7259 and 0.7145.

 

USDCAD:

  • Spot 1.3429
  • USDCAD fell 0.3% to 1.3412, reversing gains from last night, as concerns of the prospect of a failed OPEC deal continue to weigh on the Canadian dollar.
  • Support levels below come in at 1.3265 and 1.3000, while the currency pair’s recent rise over the past months could mean the resistance of 1.3588 may be tested again soon.

 

USDCNH:

  • Spot 6.8996
  • The yuan continues its recent run of gains against the US dollar as the PBOC raised its fixing for the third straight day, 0.03% stronger to 6.8865 per USD.
  • USDCNH slid 0.3% to 6.8974, the lowest level in almost 2 weeks.

 

USDJPY:

  • Spot 112.35
  • USDJPY was 0.4% lower at 112.34 earlier today, reversing from last night’s gain above 113.00.
  • The yen could potentially be supported by impending risk events, in the form of this weekend’s Italian referendum and today’s OPEC meeting.
  • Support is likely to be found at the 111.00 handle, while the next key resistance lies at 114.50.

 

GBPUSD:

  • Spot 1.2477
  • GBPUSD gained 0.5% to 1.2526 earlier in the session before erasing gains back below 1.2500
  • On a longer-term basis, the 1.2300 handle remains a key support level, while 1.2800 acts as an important resistance handle.
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