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*Tomorrow, with the US away for Thanksgiving, liquidity will be reduced and markets will likely remain rangebound. As such, there will be no Morning Call.
Intermarket:
- SP Futures 3634 (+0.03%)
- EUSTXX 3505 (+0.03%)
- Crude Oil 45.13 (+0.50%)
- US 10YR 0.88 (+0.25%)
- EurUsd 1.1900 (+0.08%)
- UsdJpy 104.49 (+0.06%)
- DAX 13278 (-0.06%)
Risk sentiment remained strong on Tuesday with the Dow exceeding 30,000 while the S&P 500 also gained 1.62% and Crude Oil briefly topped $45 per barrel. However, things appear more muted today ahead of US Thanksgiving holiday. Volatility has been increasing this week, after a contraction last week, and prices may remain volatile today as month-end approaches. Profit taking and some end of month flows may start going through today, and relative equity market performance would suggest strong necessity to sell USD.
RBNZ Governor Orr spoke overnight also, saying the Bank is ‘operationally’ prepared for negative rates (but will not yet be going negative) and that the macroprudential toolkit is under review, might add debt to income ratios. NZD got a tiny boost, but nothing substantial.
Looking ahead: we get US data dump and then FOMC minutes should provide insight into the threshold for additional easing from the Fed. Germany will announce a plan for continued COVID-19 restrictions into December but with an amnesty period over the Christmas holiday.
Matters that Matter:
• Rejecting Trump’s foreign policy approach, Biden says ‘America is back’
• “Deficit dove” Yellen drives USD down, yield curve steeper
• RBNZ Gov Orr – Low rates ensure NZD remains competitive, bank operationally ready to implement negative OCR, already eyeing housing policy decisions
• RBNZ FSR - High leverage in housing market poses risks, to resume LVR restrictions from March
Majors 1-Day View:
USDJPY
- After the bounce from close to November lows, prices posted a higher daily high & low on Tuesday, but closed little changed. As such, signals are weak and only a slight upwards bias remains.
- Yields supportive but risk appetite weaker today.
- Opex today helps contain price: 1.5 Bln between 104.15-104.80.
EURUSD
• Tuesday saw buyers return to the market, prices rallying over 1/2 Big Fig and closing near Monday’s highs and November highs. As such, signals have improved but until the November highs are broken, caution is still advised.
• Offers still reported ahead of 1.1920
• Risk sentiment key for direction.
AUDUSD
• Prices posted gains of over ¾ Big Fig on Tuesday reaching .7370s, coming close to this years’ top at .7410s. However, sellers returned to the market in Asia trade, prices declining by almost ½ Big Fig. As such, the call for today is to sell a rally towards .7350.
• AUD gains given up in Asia, profit taking likely.
• Trend and bias remain positive on equity prices, commodities and vaccine hopes.
GBPUSD
• Tuesday posted modest gains while remining within Monday’s range. As such, signals remain just modestly positive for Wednesday and the outlook is to buy a dip towards 1.3300.
• Prices still discounting Brexit deal despite lack of positive news.
• Brexit headlines the key focus for Pound.
FX Relative ATR Grid
Comment: Coming into the week we were expecting a volatility expansion and ranges have continued to expand on Tuesday. Conditions may become even more volatile as Wednesday could see anticipated end of month flows get done ahead of the US Thanksgiving holiday.
FX Relative Strength Grid
Comment: The strongest signals going into Wednesday remain USD, JPY weakness vs. NZD strength