Daily Market Outlook, November 12, 2020

Asian equity markets are mostly lower this morning while European and US futures prices point to soft openings. Numbers on Covid-19 cases are continuing to rise in the US and many European countries. In the UK, the number of Covid-related deaths has topped 50k. The UK government has said that it plans to roll out 200m of rapid result test kits from January. Meanwhile, an EU source said vaccination for Covid-19 could happen in Q1 2021. In New York state, bars, restaurants and gyms were ordered to close by 10pm.

This morning’s UK GDP release showed a smaller-than expected 1.1% monthly increase for September, down from 2.2% in August. Construction, manufacturing and services all had monthly rises in output. The fifth successive monthly gain from April’s low still leaves GDP about 8.2% below its February level. For Q3 as a whole GDP posted a record quarterly rise of 15.5%, led by a strong bounce in consumer spending. In light of the new lockdown in England, the consensus expectation is now that GDP will fall in Q4. A separate data release reported that the RICS house balance for October rose to a 21-year high.

The rest of today’s data calendar is light. In the Eurozone, expect September industrial production to post a 0.4% decline. Already released data for individual countries has been very mixed with rises in Germany and France, but falls in Spain and Italy with the latter dropping by 5.6%. In the US, annual CPI inflation is likely to be unchanged at 1.4% in October and the core rate to edge up to 1.8% from 1.7%. US inflation has moved up from its summer low, but by nowhere near enough to cause the Federal Reserve to consider a change to its monetary policy strategy, particularly as the Fed has said that it will allow inflation to overshoot target to offset past undershoots. The latest US weekly jobless claims data is likely to have fallen modestly. Last week’s October labour market report did provide some reassurance that the unemployment rate is still falling. Nevertheless, the weekly data are suggesting that the pace of improvement is slowing.

The heads of the BoE, ECB and Fed will also take part in a panel session at a conference this afternoon. Of particular interest will be any reaction they have to this week’s news about progress on developing a Covid-19 vaccine and whether that will cause a shift in previous views that the economic risks are skewed to the downside. BoE Governor Bailey will also speak this morning.

Today’s Options Expiries for 10AM New York Cut

  • EURUSD: .1740-45 (550M), 1.1765 (687M), 1.1795-1.1805 (1.3BLN) 1.1825-30 (750M)
  • USDJPY: 105.40-50 (1.4BLN)
  • AUDUSD: 0.7180-85 (375M)
  • GBPUSD: 1.3060 (225M), 1.3100 (277M) , 1.3200 (271M), 1.3260 (265M)

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: Bearish below 1.33 bullish above

GBPUSD From a technical and trading perspective, while 1.2950 attracts sufficient bids, look for a test of primary equality objective at 1.3264 UPDATE target achieved. As 1.3312 caps the current cycle look for a pullback to test support to 1.3050

Flow reports suggest topside offers into the 1.3300 level are likely to be a little light with limited congestion through to the 1.3400 level before stronger offers start to appear with weak stops on a break through the level to open the 1.3500 level for a second test of the year. Downside bids light back through the 1.3200 level with congestion forming around the 1.3150 and stronger to the 1.3100 level, weak stops on a move through the area and nothing special until the 1.3000 one suspects

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 104.30 continues 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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