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Intermarket:
- SP Futures 3536 (-0.20%)
- EUSTXX 3369 (-1.10%)
- Crude Oil 40.10 (-0.50%)
- US 10YR 0.96
- EurUsd 1.1831 (+0.15%)
- UsdJpy 105.07 (-0.27%)
- DAX 12963 (-1.16%)
Risk assets are showing a mixed performance into Tuesday as positive developments from Pfizer and Eli Lilly (a treatment received Emergency Use Approval from the FDA) were dampened by the trial of the Chinese vaccine candidate from Sinovac, which was halted in Brazil due to a death. The market wants to discount the end of the crisis, but it is still premature. After reaching record highs yesterday, the SP500 closed with a Shooting Star formation, while the Nasdaq posted a bearish outside day.
USD rallied on higher yields in FX space, especially against JPY and CHF, while NZD, GBP, AUD, CAD held onto gains. Focus will likely remain on vaccine progress but also on fiscal stimulus (which will be delayed and potentially watered down in the US unless the Democrats take Georgia).
Looking ahead: we get UK employment, GER ZEW, FOMC speakers, and then during Asia trade we will get the RBNZ decision. Consensus is for no new policy measures; verbally the RBNZ is likely to continue paving the way for negative rates early next year and releasing details on the impending Funding for Lending Program (FLP).
Matters that Matter:
• Pfizer vaccine trial success signals breakthrough in pandemic battle
• U.S. still faces possible default wave, asset declines due to pandemic -Fed
• Dallas Fed Kaplan - U.S. economy sees downside risk from virus resurgence, trends in wrong direction
• Barr urges probes of vote irregularities as Trump mounts legal assault
• Biden camp considers legal action over agency’s delay in recognizing transition
• Japan PM Suga instructs cabinet to compile new stimulus package
• CN Oct CPI YY, 0.5%, 0.8% f’cast, 1.7% prev; CPI MM, -0.3%, 0.2% f’cast, 0.2% prev
• UK consumer spending wilts even as new lockdowns spur stockpiling
• UK PM Johnson defeated in parliament on treaty-breaking Brexit laws
Majors 1-Day View:
USDJPY
- With gains of over 2 Big Figs on Monday, prices have posted a higher weekly high at 105.55, reversing the bearish weekly forecast. As such, the outlook for today is bullish.
- Buds reported at 105.00 and below.
- Opex today: 935 Mln at 104.75, 3 Bln between 104.40/50 and 1.6Bln between 105.00-05.
- Markets focused on vaccine news, US vote news, US yields.
EURUSD
• Despite posting the 4th higher daily high in a row, prices declined into the close posting a bearish outside day. As such, signals have weakened and the outlook for today is bearish.
• Fundamentals bias still down on ECB easing bias and lockdowns spreading across Europe.
AUDUSD
• Prices posted the 5th higher daily high & low in a row Monday, but prices declined into the close to post a Shooting Star formation, suggesting short-term weakness. However, with the sequence of higher daily lows intact, we prefer to sell rallies.
• Prices caught between risk-on sentiment and stronger USD.
• Resistance at .7340s.
GBPUSD
• Prices posted the 3rd little changed close in a sequence on Monday while maintaining the trend of higher daily lows intact. As such, trend signals are weak but a modest bullish bias remains on balance.
• Prices resilient despite USD strength.
• Markets pricing in a Brexit deal?
FX Relative ATR Grid
Comment: Ranges expanded notably yesterday, passing 300% in some cases. Today a more rangebound day is expected.
FX Relative Strength Grid
Comment: the main signal into Tuesday are JPY and CHF weakness vs. NZD, CAD, USD strength.