Daily Market Outlook, November 15, 2021
Overnight Headlines
- China Economy Stabilizes As Spending, Power Supply Picks Up In October
- China's New Home Prices In October Fell By The Most Since February 2015
- China C.Bank Injects 1Tln Yuan Via Medium-Term Loans, Rate Unchanged
- Japan's Economy Shrinks More Than Expected As Supply Shortages Hit
- BoJ Gov Kuroda Projects Japanese Inflation Approaching 1% Mid-Next Year
- Fed’s Neel Kashkari: FOMC Policy Shouldn’t Overreact To Inflation Data
- US Treasury Sec Yellen: Quashing Covid-19 Is Key To Lowering Inflation
- Sen Schumer: US Pres Biden Must Tap Oil Reserves To Lower Gas Prices
- UK Ministers Will This Week Announce A New £1T A Yr Export Target By 2030
- Putin Warns Of 'Nothing Good' If Belarus Halts Gas Flows To EU - Politico
- US Dollar Near Sixteen Month High, Market Awaits Clues On Fed Policy
- Hong Kong Mandates Banks For US Dollar, Euro Green Bond Deal - Terms
- Oil Prices Slide Amid Fears Of Supply Boost, Weaker Demand, Gold Falls
- Bitcoin Network Activates Taproot, Most Significant Upgrade Since 2017
- Asia Shares Trade Mixed As China's October Data Beats Economists Forecasts
- Beijing's First Ever Stock Exchange Launches With Focus On ‘Little Giants’
- Airbus Wins Multi-Billion Dollar Order From Low-Cost Airline Investor Franke
The Day Ahead
- Data from China showed the economy holding up better-than-expected at the start of Q4. The annual rate of growth picked up for retail sales and industrial production last month, confounding expectations of a deceleration. That should ease fears of a sharp further slowdown in growth momentum heading into the final quarter of the year. Despite this, Asian equity market sentiment has been mixed with stocks in China and Hong Kong down modestly on the day, while equities across Japan are trading higher.
- The past week has seen further evidence of near-term inflationary pressures in the global economy. In China, the fastest rise in producer prices in 26 years provided further evidence of the impact on goods prices of the surge in commodity prices and supply bottlenecks. Such sharp price rises in a key global producer suggests that worldwide inflationary pressures are unlikely to ease near term. Meanwhile, the October US CPI inflation recorded a 30-year high of 6.2%y/y, led by energy prices but also showed signs that the inflation rise is becoming broad based.
- Today’s data focus is limited to the US Empire/NY State manufacturing survey. While the headline measure is expected to show a modest rise this month, following the sharp drop in October, the survey will be watched for any sign that the recent worsening in delivery times and shortages of materials was abating.
- Early tomorrow morning, the latest UK labour market report will be watched for additional clues on inflationary pressures. Evidence remains mixed with record levels of unfilled vacancies seemingly suggesting excess demand for workers but other indicators pointing to an ample supply of potential recruits. The update largely covers the period up to September before the furlough scheme expired. It is expected to show a further rise in employment (of 175k) and a fall in the unemployment rate to 4.4% from 4.5%. However, HMRC payrolls figures, along with ONS vacancy and claimant count data for October will provide some clues over labour market trends post the end of the furlough scheme.
The Week Ahead
- Biden-Xi virtual meet, RBA minutes draw focus This week's highlight is the virtual meet between leaders of the U.S. and China, as consumer sentiment wanes due to inflation and pandemic-related fears returning. Close attention will be placed on the tone of the virtual meeting between U.S President Joe Biden and China President Xi Jinping on Monday, for clues pointing to any improvement in trade relations and other key issues. Major U.S. retailers – including Walmart and Home Depot – will report earnings, providing additional colour to U.S. retail sales data also due this week. From that, investors may get more clarification after Friday's weak University of Michigan consumer sentiment survey. Consumer attitudes will impact both the growth and inflation outlook.
- Europe is experiencing another wave of COVID-19 infections that may impact the regional economy and the ECB's outlook. Europe is once again the epicentre of the coronavirus, accounting for half of worldwide cases and deaths. The prolonged pandemic may derail a fragile economic recovery. Countries including the Netherlands, Germany, Austria and the Czech Republic are taking or planning measures to curb the spread. In Australia, Tuesday's release of the RBA minutes from their November meeting and a speech by Governor Lowe on “Recent trends in inflation” will be in focusChina and US retail sales eyed amid inflation Mounting global inflation concerns place a harsh spotlight on U.S. data due this week, taking some focus away from Japanese and European economic data. Fragile consumer sentiment might get corroborated by U.S. retail sales due Tuesday. Other key U.S. data includes industrial production and the Philadelphia Fed index, along with housing data, building permits and housing starts. Eurozone data due this week includes flash Q3 GDP, EZ employment, EZ HICP inflation and EZ current account. It will be a busy week for UK data-watchers with CPI, PPI, retail sales and employment on tap. There is a full calendar of Japan data with Q3 GDP, nationwide CPI, machinery orders and exports due this week. No key data from Australia is scheduled.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )
USDJPY - 114.70 570m. 114.40/50 500m. 114.20 418m. 113.80/114.00 731m.
EURUSD - 1.1640 491m. 1.1600/10 790m. 1.1580/90 818m. 1.1370 553m.
AUDNZD - 1.0400 1.03bn (802m P).
USDCNH - 6.38 426m.
Technical & Trade Views
EURUSD Bias: Bearish below 1.17 Bullish above
- EUR/USD opened 1.1452 after closing Friday at 1.1443
- After trading down to 1.1441 it tracked higher as USD broadly eased
- It is settling around 1.1460 after trading at session high at 1.1464
- EUR/USD trending lower with 5, 10 & 21-day MAs in a bearish alignment
- Resistance is at the 10-day MA at 1.1532 and break would ease pressure
- Support is at Friday's 1.1433 low with no decent support until 1.1290
- The 61.8 of the 1.0636/1.2349 move is at 1.1290
- EUR/USD may struggle while concerns grow over new COVID wave in Europe
GBPUSD Bias: Bearish below 1.37 Bullish above.
- +0.15%, towards top of a 1.3413-1.3437 range with only occasional interest
- Softer USD behind modest bounce, as Asian stocks rise on better China data
- UK employers plan modest pay rises, easing BoE inflation fears
- Weak investment, innovation and management slow UK productivity
- Charts 5, 10 & 21 daily and weekly MAs slide, 21 day Bollinger bands slip
- Mixed momentum studies - downtrend targets 1.3162, 38.2% 2020-21 rise
- 1.3501 10 DMA is initial significant resistance, 1.3634 21 DMA pivotal
- Friday's 1.3354 low and 1.3339 lower 21 day Bollinger band first support
USDJPY Bias: Bullish above 112.50 Bearish below
- USD/JPY in holding pattern mostly just below 114.00, upside/downside limited
- Asia range 113.76-114.03 EBS in lacklustre trading
- Offers from Japanese exporters, specs on 114, offers trail up
- Bids from Japanese importers, specs booking profits, bids from @113.80
- Option expiries in area today - 113.95-114.00 $569 mln,114.20-50 $918 mln
- Japan Q3 GDP, comments from BoJ Gov Kuroda taken in stride
- Yield on US Treasury 10s soft, 1.575% to 1.553%, currently @1.554%
- Nikkei up small, +0.5% @29,754, AXJ mostly up, E-Minis @par at 4680
- Crosses heavy, EUR/JPY 130.37-48, GBP/JPY 152.75-153.02, AUD/JPY 83.30-66
AUDUSD Bias: Bearish below 0.75 Bullish above
- Moves higher in Asia as strong China data helps
- AUD/USD opened 0.7330 and sipped to 0.7321 on AUD/JPY selling
- That was the low, as USD started to move broadly lower through the morning
- It traded to 0.7338 before China data came in stronger than expected
- It nudged up to 0.7344 before sellers ahead of 0.7350 capped
- Heading into the afternoon the AUD/USD is trading around 0.7340
- Resistance is at the 55-day MA at 0.7365 and 10-day MA at 0.7376
- Support is at the 76.4 of the 0.7170/0.7555 move at 0.7261
- RBA Minutes and Lowe speech tomorrow likely to push back against early rate hike
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Written by Patrick Munnelly
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!