Market Brief

The USD begins another week on the back foot as momentum from Friday’s post-U.Mich sell-off continues and Asian equities have started the session off with strong gains. The buoyant sentiment across Asian markets has been fuelled by Japan’s Q3 GDP figures which revealed the economy grew by an annualized pace of 4.8%, considerably higher than the 2.9% anticipated, and indeed the fastest pace of growth since Q1 2007. USDJPY has so far touched lows of 89.39, but for now further JPY strength is being constrained by buying interesting around 89.00, coupled with the fact the pair has been notably detached from participation in broader USD sell-offs as a general rule. Meanwhile, gold headlines continue to simmer as the price surges to dizzying heights above $1132; making startling month-to-date gains in November of 8.5%. The rally has pulled silver back from the brink of breaking downside support at $17.00 on Friday, and allowed the metal to surge in unison back to 17.70 levels at the time of writing. The sheer pace of the rally in precious metals makes for precarious long entry, however we still strongly discourage shorting gold just yet given the lack of any protective upside technical levels.

Looking ahead to today’s session we await European CPI figures for October where markets are anticipating a 0.3% gain MoM after last month’s flat reading. With the ECB governing council exclusively concerned with maintaining price stability, this reading will be significant; especially if there is an upside surprise that could nudge the YoY reading out of negative territory (-0.1% expected, -0.3% prior). Recent rhetoric from members has included González-Páramo’s predictions that Eurozone CPI could rise around 1% next year, and that rate hikes were still possible even with some member states still in recession.

This afternoon’s key event will be US Retail Sales, where consensus estimates look for a 0.9% gain in October after last month’s -1.5% reading (reflecting the expiry of the cash-for-clunkers stimulus plan). The behavior of FX markets to Friday’s disappointing U.Mich suggests that poor US data is now a catalyst to further USD selling; a reversal of the pattern we have grown accustomed to where poor US data is supportive of USD. We continue to feel that from here, the balance of risks are supportive of further EURUSD gains on the back of a weakening USD, and expect the pair to regain 1.5000 levels and re-test 1.5060 resistance in due course.

G10 Advancers and Decliners vs USD
 Global Indexes Current Level % Change
Nikkei 225 Index9'791.18+ 0.21
Hang Seng Index22'955.11+ 1.78
Shanghai Index3'275.05+ 2.74
FTSE 100 Index5'296.38+ 0.38
DAX Index5'686.83+ 0.40
SMI Index6'351.08- 0.07
S&P future1'101.30+ 0.91
 World Markets Current Level % Change
Gold1'133.07+ 1.28
Silver17.83+ 2.24
VIX23.36- 3.63
Crude wti77.33+ 1.28
USD Index74.93- 0.54
 Todays Calender Estimates Previous Country / GMT
HICP, % m/m (y/y) Oct0.3 (-0.1)0.0 (-0.3)EUR/10:00
Retail sales, % m/m Oct0.9-1.5USD/13:30
Empire State manufacturing index Nov30.0034.57USD/13:30
Business inventories, % m/m Sep-0.7-1.5USD/15:00
Currency Tech

R 2: 0.9475
R 1: 0.9370
CURRENT: 0.9345
S 1: 0.9210
S 2: 0.9195

R 2: 1.0780
R 1: 1.0603
CURRENT: 1.0465
S 1: 1.0415
S 2: 1.0375

R 2: 135.39
R 1: 135.03
CURRENT: 134.25
S 1: 133.60
S 2: 133.20

R 2: 13.195
R 1: 13.100
CURRENT: 13.017
S 1: 12.985
S 2: 12.925