Daily Market Outlook, November 10, 2020

Asian equity market performance is mixed this morning as some calm returns after yesterday’s big gains. Global equities soared following news of a Pfizer/BioNtech vaccine, which was described as 90% successful in combating Covid-19. US equities were generally up but ‘tech’ stocks slipped, pulling down the Nasdaq index. UK Chancellor Sunak hinted at the possibility of extra infrastructure spending for the regions but warned that the question of how to pay for the pandemic will also need to be faced. He expressed optimism that a Brexit trade deal would be completed. Some press reports suggest that the UK is ready/prepared to compromise on fishing rights.

Data for the UK labour market in the 3-months to September showed a rise in the unemployment rate to 4.8% (from 4.5%), while employment fell by 164k. There are concerns that the unemployment rate could rise significantly over the winter despite the government’s extending its furlough scheme to end March. Meanwhile, the October British Retail Consortium spending measure rose 5.2%y/y in October.

Germany’s November ZEW survey today will provide one of the first indications of the economic impact of the latest lockdown. As a survey of financial analysts it can be less reliable than other indicators such as the PMIs but the expectation component has often proved to be a good leading indicator. The current conditions and expectations index are both likely to have slipped sharply this month.

US President-elect Biden yesterday formed a taskforce to advise on Covid-19. He has also set up his transition team and speculation about his potential cabinet appointments is already underway. However, US President Trump is still refusing to concede defeat and Attorney General Barr has ordered an investigation into electoral irregularities. With Congress again in session, markets will be looking for signs that an agreement can be reached on a new fiscal stimulus deal. Some Republican politicians have indicated that they may be prepared to compromise on a smaller package. There will be interest in whether Fed speakers today say any more about the chances that the continuing lack of a fiscal package pushes them into providing further monetary stimulus.

The New Zealand central bank will unveil a new ‘funding for lending’ scheme early on Wednesday, modelled on similar schemes elsewhere. Markets will also look for further hints on whether interest rates will be cut below zero next year.

Today’s Options Expiries for 10AM New York Cut

  • EURUSD: 1.1800 (1.6BLN), 1.1805 (326M), 1.1825 (450M), 1.1840-50 (670M) 1.1900 (378M)
  • USDJPY: 104.30 (715M), 104.50 (2.4BLN), 104.75 (935M), 105.00-05 (1.5BLN) 106.00 (375M)
  • AUDUSD: 0.7200 (241M), 0.7215 (243M), 0.7370 (271M)

Technical & Trade Views

EURUSD Bias: Bullish above 1.1750 bearish below

EURUSD From a technical and trading perspective, as 1.1750 acts a support look for a retest of cycle highs at 1.20, failure below 1.1750 opens a retest of range support at 1.16

Flow reports suggest topside offers through to the 1.1920 level, even there where you’re likely to see weak stops you will find the same type of congestion continuing to the 1.1950 before weakening a little and increasing for any move to the 1.2000 level. Downside bids light through the 1.1800 area with weak stops on a dip through the 1.1780 area and opens the market for a renewed challenge of the 1.1700 area with light support from there

GBPUSD Bias: Bullish above 1.2861 targeting 1.3266

GBPUSD From a technical and trading perspective, while 1.2950 attracts sufficient bids look for a test of primary equality objective at 1.3264

Flow reports suggest topside offers increasing through to the 1.3200 level with weak stops likely on a move through the level and becoming weaker on a break through to the 1.3260 area with limited offers once through the 1.3300 area, Downside bids light through to the 1.2950 level before stronger bids start to appear and increase through to the 1.2900 level with weak stops likely on a dip into the 1.2880 level again with stronger bids appearing into 1.2850.

USDJPY Bias: Bearish below 104.30 bullish above

USDJPY From a technical and trading perspective, as 104.30 supports look for a test of descending trendline resistance at 105.50 UPDATE as 104.30continues to attract buyers look for a breach of 105.50 to open a test of 106 next

Flow reports suggest downside bids light through the 104.50 level before beginning to thicken on any dip below the 104.00 level increasing on move through the 103.50 level with weak stops likely on a dip through the 103.00 area with the stops likely to increase through 102.80, topside offers likely to increase through to the 106.00 area with weak stops through the 106.20 area and increasing congestion on a push above the 106.50 level and into the 107.00.

AUDUSD Bias: Bearish below .7243 bullish above

AUDUSD From a technical and trading perspective, as .7240/20 now acts as support look for a retest of offers and stops above .7400

Flow reports suggest topside congestion through the 0.7300 area and likely to continue through to the 0.7320 area before a little less resistance through to 0.7350, however a push through this level is likely to see increasing offers into the 0.7380 level and continuing through to the 0.7420 and the highs since September, strong breakout stops likely on a move through the level and opening a larger move higher against the rub of the economics for the moment. Downside bids light through to the 0.7140 level before finding some light congestion with stronger bids into the 71 cents level to some extent however weak stops and then better bids through the 0.7050 area and increasing into the 70 cents level with short term profit taking likely.

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