Market Overview

Although a Brexit deal has finally been agreed between the EU and UK, market sentiment is cautious today. The overnight disappointment in Chinese GDP is certainly playing a role here. Economic growth for Q3 slipped to a 27 year low at +6.0% and below the consensus of +6.1%. Although there was a glimmer of light coming from better than expected September Industrial Production (Retail Sales and Fixed Asset Investment were as expected), the Chinese economy is slowing more than expected. This of course raises the prospect of additional stimulus to manage the slowdown, but the immediate impact is to leave markets a tad cautious. This is likely to continue through today as good news regarding the newly agreed Brexit deal is likely to be in short supply as focus turns from Brussels (although the EU-27 still needs to rubber stamp the deal) to a rather more toxic Westminster. Prime Minister Johnson’s political opponents (and even some more friendly) have been quick to denounce his deal. Parliament is set to debate the Brexit deal and likely vote tomorrow, but the chances of the deal passing are looking shaky after the DUP (Northern Irish unionists) came out in opposition. There are still a raft of permutations on how this will play out, but there will likely be a significant reaction across sterling markets for Monday’s trading. Sterling is slipping back initially today, although not decisively so yet. Positive newsflow is unlikely to feature today either, so this is adding to a tentative look across major markets today.

Wall Street closed a shade higher with the S&P 500 +03% at 2998, however, US futures are giving this all back initially today. Asian markets were mixed, with the Nikkei +0.3%, but the Shanghai Composite was -1.3% in the wake of the Chinese GDP disappointment. European equities look under pressure in early moves, with the FTSE futures -0.5% and DAX futures -0.4%. In forex, there is a continuation of the slippage on USD, whilst the underperformance of GBP is the main mover. NZD is the main outperformer. In commodities, there is a mixed outlook on gold and silver trading around the flat line, whilst oil is giving back some of yesterday’s rebound and again lacks sustained direction.

It is a light economic calendar to finish the week. The EU Current Account for August is at 0900BST and is expected to once more see the surplus increase to +€21.3bn (from €20.6bn in July).

The final batch of Fed speakers for the week comes with Esther George (voter, major hawk) at 1500BST and FOMC vice chair Richard Clarida (voter, mild dove) at 1630BST. There will also be a speech by the Bank of England Governor Carney at 1845BST.

 

Chart of the Day – GBP/JPY

The pair of the biggest major outperformer (GBP) and underperformer (JPY) has added a huge rally since the middle of last week. At this week’s 141.48 high, the market has added over 1100 pips since the key low at 130.40 and the volatility is not likely to end there. Political wrangling now in Westminster (especially on Saturday) will be a key factor and the market will move on the newsflow today too. Taking yesterday’s spike high at 141.48 and yesterday’s rather uncertain candle could means that the 23.6% Fibonacci retracement at 138.85 becomes a support to note. The 38.2% Fib level at 137.25 but more importantly the 50% Fib at 135.95 become key retracements on any signs of disappointment over the Brexit deal. Give the importance of the breakout at 135.50 (medium term pivot) which also caught Monday’s higher low (hit almost to the tick) this is a key confluence area of support now. The hourly chart today shows a five day uptrend and the 55 hour moving average as a near term basis of support to watch today. A breach of 138.60 (yesterday’s low) would be a corrective signal, but the real action will be on Monday where gaps are highly likely. A market to trade not for the feint hearted.

GBP/JPY

 

WTI Oil

Although WTI ticked higher to leave a bull candle yesterday, there is still little real direction of any conviction in the market right now. There is a mild improvement in the Stochastics, but this is a market still throwing off a range of signals. It means that it is very difficult to take yesterday’s positive candle on trust. This is a market trading between the key support starting at $51.00 and up towards last week’s high of $54.95. The hourly chart shows that yesterday’s run higher has been dragged back overnight to leave initial resistance at $54.15. Hourly momentum also reflects ongoing ranging conditions. Support is forming at $52.80 but the bulls have a lot of work to convince about any sustainable recovery.

WTI Oil

 

Dow Jones Industrial Average

The Dow is just looking a little bit cautious suddenly as the rally has stalled over the past couple of sessions. The resistance band 27,045/27,120 has held up the market for the past week now, but this is still for now just a consolidation within the developing two week uptrend. Momentum indicators are still progressing in a positive configuration with MACD lines rising above neutral (just) and Stochastics above 80. However the RSI is getting a little stuck in the high 50s and the market now needs to push through this resistance band 27,045/27,120 otherwise this rally will become a little stale. Futures are again a shade lighter today, so there is no imminent breakout, however, we remain positive on the Dow whilst the market trades above the 26,655/26,695 multi-week pivot. A close above 27,120 opens the all-time highs again at 27,399. The near term uptrend comes in to support the market at 26,940 today. The hourly chart suggests that this is just a pause in the run higher and the bulls are still in control to buy into weakness.

Dow Jones Industrial Average

Risk Warning for Financial Promotions

Hantec Markets' various market reports and commentary are issued by Hantec Markets Limited, who is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, No. 502635. The reports are prepared and distributed for information purposes only.

Trading in Foreign Exchange (FX), Bullion and Contracts for Differences (CFDs) is not be suitable for all investors due to the high risk nature of these products. Forex, Bullion and CFDs are leveraged products that can result in losses greater than your initial deposit. The value of an FX, Bullion or CFD position may be affected by a variety of factors, including but not limited to, price volatility, market volume, foreign exchange rates and liquidity. You may lose your entire initial stake and you may be required to make additional payments. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions. Before deciding to enter into FX, Bullion and/or CFD trading, you should carefully consider your investment objectives, level of experience, and risk appetite. You should only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess funds should be placed at risk and anyone who does not have such excess funds should completely refrain from engaging in FX and/or CFD trading. Do not rely on past performance figures. If you are in any doubt, please seek further independent advice.

The reports do not constitute personal investment advice, nor do they take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such. All of the views or suggestions within the reports are those solely and exclusively of the authors, and accurately reflect their personal views about any and all of the subject instruments and are presented to the best of the authors' knowledge. Any person relying on these reports to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability.

© 2014 Hantec Markets Limited

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD holding onto range, amid trade tensions, ahead of FOMC minutes

EUR/USD is trading around 1.1050. The US Senate's support of Hong Kong protesters has aggravated tensions with China. The Federal Reserve's meeting minutes are eyed.

EUR/USD News

GBP/USD remains pressured after the Johnson-Corbyn debate

GBP/USD is trading around 1.29, after Labour leader Corbyn beat expectations in his debate with PM Johnson. Further opinion polls are awaited. 

GBP/USD News

USD/JPY trades in red below 108.50 as 10-year US T-bond yield erases more than 2%

Dismal market mood helps JPY find demand on Wednesday. 10-year US Treasury bond yield erases more than 2%. US Dollar Index recovers to 98 area ahead of FOMC minutes.

USD/JPY News

US Dollar Index stays close to 98.00 ahead of FOMC

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, keeps the positive note albeit below earlier tops beyond the 98.00 mark.

US Dollar Index News

Cryptocurrencies: Flashing lights trying to misdirect anxious buyers

Bitcoin and Ripple look far from turning upwards in the short term. Ethereum can give the surprise of the year and take the bullish leadership.

Read more

Forex Majors

Cryptocurrencies

Signatures