हर दिन बाजार विश्लेषण

Risk sentiment has been hit hard by the new and more evolved Covid-19 variant first detected out of South Africa. Asian and European markets are firmly in the red with hospitality and travel stocks taking the brunt of the losses. Safe haven currencies are in demand with the yen, swissie and USD being bought. Investors are shooting first and looking for answers later with this worrying news.

Early indications suggest the new variant has shown a high number of mutations and this has the potential to make the current vaccines less effective. Further evidence on the Covid strain is still lacking given that it is still in its infancy. Any new clarity on the spread of the variant and its potential to evade vaccines will be a key driver of markets today. The WHO is set to meet later this morning to discuss the new variant and many countries will be guided by their advice.

US stocks market reopen, risk assets all red

There are early closes in the US later today due to the Thanksgiving holiday. This will naturally reduce liquidity in the market and could exacerbate some of the price action throughout the trading day. Stock futures are showing steep losses at present, following European bourses which are down over 3%.

More risky currencies like AUD and NZD are being sold while the South African rand posted new year-to-date lows.

JPY and CHF outperforming

In the current “risk-off” environment, investors are seeking safe havens like government bonds. This means yields are turning lower with the widely watched 10-year US treasury yields now dropping below the 50-day simple moving average and closing in on the psychological 1.50% level.

The Japanese yen and Swiss franc are the go-to safe haven currencies, along the US dollar. This contrasts with the heavy losses in AUD and NZD which are close to posting new year-to-date lows.

A classic risk gauge in the FX space is AUD/JPY which has fallen over 2% this morning. The pair had been trading around the 50-day and 200-day simple moving averages near 83 over the last few sessions. But today’s collapse has taken prices sharply down through those moving averages, as well as the 100-day indicator.

Oil plunges as pandemic fears grow

After the reserve release by major oil consuming countries underwhelmed, oil markets are down over 5% today. While there has been lots of talk of more supply coming into the market, the bullish noise mostly hinged around demand conditions improving amid a global reopening.

The new Covid variant threatens to close borders and dampen global travel. (See IAG, the international airlines group which is down over 12% at the time of writing.) Brent crude is nearing its 100-day moving average with the 50% retracement level at $75.72.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

It’s Thanksgiving in the US which means stock markets and bond markets are closed across the pond. Trading volumes will be thin elsewhere. That doesn’t mean there’s not a lot going on to analyse, trade and cogitate over.

Asian stocks had a mixed day and European equities are trading modestly higher. The broadest index of Asia—Pacific shares outside Japan fell to a six-week low, having posted a small decline in each of the past six trading sessions. Wall Street ended higher overnight and is back testing record highs as tech stocks bounced back from a selloff earlier in the week.

Decent US data to push US growth higher

Yesterday, we got the release of the Fed’s preferred measures of inflation for October which saw headline and core PCE running at 5% and 4.1%, new cycle highs.  The weekly initial jobless claims figures dropped to their lowest in over 50 years. Even if statistical issues were at work, this suggests ongoing improvement in the labour market. The figure is also in many ways remarkable after prints of six million less than two years ago.

Spending and income data also suggest a solid start to the fourth quarter, even as prices accelerate further. US growth of between six and seven per cent are being forecast for the last three months of the year, while interest rates remain near zero.

Fed tilting to quicker taper, earlier rate rise

It’s no surprise that the dollar is trading near its highest in almost five years versus the Japanese yen and nearly 18 months to the euro, just above 1.12. The stronger greenback is a headwind for emerging market equities and was also supported yesterday by the hawkish bias evident in the FOMC minutes.

Several policymakers said they would be open to speeding up the tapering of the Fed’s bond-buying if the high rate of inflation continued to run higher. In turn, they would move more quickly to raise interest rates. Bond yields moved north with the short end of the bond curve (2-year yield) touching post-Covid highs at 0.65%. The market is currently pricing in over two 25bp rate hikes next year, with the first fully priced in for the June FOMC meeting.

USD pausing at the top

The dollar index, heavily weighted by the euro, is pulling back from the highs this morning. The combination of a bullish Fed and fourth waves in Europe has propelled the DXY to overbought levels. German business confidence (IFO) published yesterday also painted a less upbeat picture on the outlook for Europe’s largest economy.

The weekly dollar index chart shows the clear upside break in early November. The greenback is now heading for five straight weeks of gains. Bulls will target highs made back in June 2020 around 97.80. Stretched levels of buying may see a pullback with support around 96.27.

Happy Thanksgiving to one and all!

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

The Thanksgiving holiday is a celebration of feasts and traditionally marks the start of the holiday season in the US in the build up to Christmas. Well, it is the US dollar which is feasting on its major peers today, continuing the theme of this week and this month.

The widely watched Dollar Index (DXY) is soaring to fresh cycle highs, with EUR/USD plunging ever lower towards 1.12. There are few catalysts for a material dollar correction at present, before the holiday break, with the long-term trend in full effect.

Data dump expected to support strong buck

We get a deluge of US data today which includes the weekly initial job claims, durable goods data and more inflation numbers. These are all expected to improve on the prior month and support hawkish bets being laid on the Fed tightening cycle.

The FOMC minutes out this evening covers the Fed meeting when policymakers announced the tapering of bond purchases. Although a little stale, we may get to hear about the next steps around policy tightening. Comment around inflation and events which could lead to a change in the pace of tapering will also be seized on by the market.

EUR hit hard by more lockdowns

There is much speculation that Germany will follow Austria and impose a national lockdown very soon. This will of course impact economic activity going forward. This morning saw the release of the important German IFO Business survey. The readings were more or less in line with estimates, though the outlook did slide reflecting growing pessimism towards the economy.

The now familiar supply bottlenecks, rising cost pressures and the worsening Covid situation are all weighing on business sentiment. A nervous winter awaits the region, which will potentially lead into the new year.

EUR/USD has dropped below long-term support just around 1.1250 as we head towards the June 2020 lows at 1.1167. Prices are overstretched on several indicators with near-term resistance around 1.13, if there are any bulls around.

EUR/GBP met resistance at 0.8430 yesterday ahead of 0.8450. Previous October support at 0.84015 has been broken today with the move lower in EUR/USD. Sellers have their eyes firmly fixed on the recent cycle low at 0.83795.

Long-term targets if this is broken are the February 2020 low at 0.8281 and the December 2019 low at 0.8275.

If the UK has managed to escape more lockdowns through the fourth wave, investors could start to price in diverging growth and contagion paths, giving a stronger bid to GBP.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

The mood across European markets darkened on Tuesday as surging Covid-19 cases on the continent dented risk sentiment.

Austria reintroduced a national lockdown on Monday to curb new infections spreading across Europe. However, fears continue to mount over larger countries in Europe following Austria’s lead, with Germany at the top of the list.

Across the Atlantic, US futures are pointing to a negative open as investors evaluate Jay Powell’s nomination for a second term as Federal Reserve Chair. When considering how his renomination boosted rate hike expectations and propelled Treasury yields higher, US equity bulls could face some obstacles down the road.

Dollar boosted by rate hike bets

Dollar bulls trampled on the currency markets yesterday after President Joe Biden nominated Jerome Powell for a second four-year term as Fed Chair. Lael Brainard, the other candidate, was seen as more dovish than Powell, although she will become Vice Chair, the White House announced.

Powell’s renomination injected dollar bulls with renewed confidence, as this means there will be policy continuity at a crucial time when US inflation is at a 30-year high. Markets are now expecting the Fed to raise interest rates from near zero in June 2022. This could fuel the dollar’s upside momentum if we hear more Fed chatter around a faster tapering of bond buying, with the Dollar Index already hitting a fresh 16-month high today.

On the data front, all eyes will be on the flash PMI for November which will provide insight into the health of the US economy. The dollar could extend gains if this data meets or exceeds market expectations.

Commodity spotlight – Gold

The likely re-election of Jerome Powell sent gold prices tumbling yesterday with bearish momentum rolling over into Tuesday’s session. 

Gold stood little chance against an appreciating dollar and rising US Treasury yields, as markets continued to price in higher interest rates next year and beyond. Given how gold is a zero-yielding asset, it tends to perform poorly in a high interest rate environment. With prices down almost 3% since the start of the week, bears are clearly in the driving seat and may remain there for the rest of November, especially if bond yields advance higher.

Looking at the technical picture, it is certainly a painful sight to behold with gold falling from five-month highs into the 50, 100, and 200-day Simple Moving Averages. If bears break through this key support region and secure a solid weekly close below $1777, this could signal further downside in the short to medium term. Alternatively, a move back above $1800 could encourage gold bugs to push towards $1813 and $1832.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

Dollar bulls dominated the G10 space on Monday after Jerome Powell was nominated for a second four-year term as Fed chair by President Joe Biden. Lael Brainard, the other-front running candidate for the job will be vice chair, the White House announced.

The Dollar Index (DXY) extended gains to hit a fresh 16 month high beyond 96.50.

We also witnessed some action on the equally-weighted dollar index which approached resistance at 1.1120.

Powell’s renomination was certainly a welcome development for the greenback, as this meant policy continuity in a post-pandemic landscape where US inflation was at a 30-year high.

Markets now expect the Fed to raise interest rates from near zero in June 2022 - something that could fuel the dollar’s upside gains. It's worth keeping in mind that US inflation remains hot and the US labour market is on the road to recovery, fuelling speculation over the Fed acting sooner than expected. Generally, higher interest rates tend to attract foreign investment, increasing the value of the country’s currency.

With bulls kicking off the week in a position of power, the path of least resistance for the dollar may remain north.

Nevertheless, there are some key economic reports which could impact the greenback’s short-term trajectory. Much attention will be directed towards the Markit PMI’s for November scheduled for release on Tuesday. Mid-week, all eyes will be on the US weekly initial jobless claims, 3Q GDP (second estimate), and October's PCE deflator among other economic important data. Most importantly will be the release of the November FOMC’s meeting minutes which could provide insight into how the discussions might have played out. It will be interesting to see whether more policymakers were leaning towards moving their dot plots when they meet in December for the last time in 2021.

Should the minutes strike a hawkish tone, this may propel the mighty dollar higher. Alternatively, if the minutes come across as dovish – dollar bears may re-enter the scene.

Keep an eye on the USD.

Watch this space as the equally-weighted USD Index could be gearing up for a major breakout. Prices are already bullish on the daily and weekly timeframe with monthly in the process of creating a fresh higher high. It's all about how prices react to the 1.1120 resistance level.

The last time the index secured a strong daily close above this level was back in November 2020. A solid break above this level could lead to further strength, with bulls targeting 1.1150. Now, this is where things get interesting…

If the upside momentum propels prices beyond 1.1150, the equally-weighted USD Index could test 1.1250 and 1.1330. If 1.1120 proves to be reliable resistance, prices may decline back towards 1.1040 and 1.0930.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।