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Intermarket:
- SP Futures 3429 (-0.66%)
- EUSTXX 3156 (-0.89%)
- Crude Oil 38.98 (-2.25%)
- US 10YR 0.84
- EurUsd 1.1834 (-0.19%)
- UsdJpy 104.88 (+0.19%)
- DAX 12450 (-1.33%)
Markets are trading with a risk-off tone into the week as Europe continues to tighten restrictions while US officials continue to squabble over a stimulus package. Meanwhile, Vice President Pence tested positive for Covid.
However, the other cause for the downwards pressure on equities may come from Switzerland. Swiss nationals will go to the polls on Nov 29 to ban the SNB from investing in defence companies. A poll by gfs.bern on Friday showed 54% of voters in favour of the proposal. If the public votes in support, SNB would be forced to sell chunk of its more than $100bn stock portfolio.
Brexit: EU’s Barnier is extending talks for further 3. However, former US trade rep Weisel warned talks between London and Washington will be off the table if talks with Brussels break down. GBP does not seem positioned for a no-deal scenario.
Looking Ahead: the main release today is the German IFO. The expectation index may weaken. Also, markets will be looking out for Brexit headlines and US fiscal talks progress.
Review our Weekly Call for a full overview of events this week and drivers.
Matters that Matter:
• U.S. fiscal talks continue, Pelosi says
• U.S. sees highest number of new COVID-19 cases in past two days
• UK minister Lewis says good chance we can get a deal with EU
• France tallies record daily COVID infections as cases surge in Europe
• Australia’s COVID-19 epicentre reports zero daily cases for first time in 4 months
• Victoria’s lockdown is costing the state AUD100mio and 1200 jobs a day
• Commercial Times: Apple will use TSMC’s 5NM tech in A15 chip
Majors Weekly View:
USDJPY
- With sellers returning between the 50 and 100 DMA, signals for the past 2 weeks have been pointing lower. With losses of over 1 Big Fig last week, the outlook for this week remains bearish.
- Covid spread, uncertainty regarding fiscal relief and US elections eyed.
- Opex a factor today: almost 1Bln at 105.00. Option-related bids reported below 104.50.
EURUSD
• Prices posted a bullish engulfing last week with gains of over 1 ½ Big Figs. This keeps signals positive going into the week but with caution as this positive momentum comes within the context of a rangebound market.
• Risk off mood giving a boost to USD.
• Eur negatives remain: dovish ECB, Covid-19 cases, lockdowns.
AUDUSD
• Prices posted modest gains last week, but the rally remained contained within the 50% mark of the prior week’s bearish engulfing. As such, the rally is seen as corrective and signals still favour selling rallies or selling on a break of .7100.
• Prices trading with a heavy tone into the week.
GBPUSD
• Despite initial gains of over 2 ½ Big Figs, sellers returned to market from close to 1.3200. As such, rangebound conditions continue and the call is to sell on rallies towards 1.3120s.
• Markets trading on Brexit headlines as brinkmanship continues.
• Ireland’s Varadkar believes there will be a deal.
FX Relative ATR Grid
Comment: Ranges contracted slightly last week with the exception of some NZD, Aud and USD pairs, which favour continuation. AudJpy, AudNzd, UsdCad are due for a range expansion this week.