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LCG: Into the European open


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Asian stocks opened the week on amixed note, as the US dollar gained against the G10 currencies in the overnight trading session. Hong Kong (+0.21%) and Chinesemainlandstocks (+0.34%) advanced with US equity futures and FTSE futures (+19 points). Metals gained.
Alibaba's single day generated $25 billion, 39% more than a year earlier. Call it an immense marketing success story or an ecological disaster, retailers in China are benefiting from a steady growth in middle classrevenues, giving a decent support to the Chinese recovery theme.
Oil markets were steady on Monday; WTI crude traded near $57/barrel, Brent crude consolidated at $63/barrel. Precious metals were marginally positive. Gold traded between $1274/1278.
Investors continued realizing profit on Nikkei (-1.32%) and Topix (-0.94%) despite strong economic data.Japanese producer prices rose by 3.4% year-on-year in October, rising expectations that higher producer prices could improve the consumerprice inflation and boost economic activity. The USDJPY was better bid in Tokyo. The daily Ichimoku cloud cover should provide support at 113.58/113.38. The US 10-year yield is testing the 2.40% on the upside. Improved US yields are alsosupportive of a stronger US dollar versus the yen.
The pound depreciated versus all its G10 counterparts in Asia and sold off the most against the US dollar (-0.58%) and the Swiss franc (-0.50%). The 10-year gilt yield rose by 8.1 points on Friday. Rising pressures on PM Theresa May and fruitless Brexit talks were the major negative catalyzers. Sunday Times reported that forty Conservative MPs agreed to sign a letter of no confidence in Theresa May, almost enough to trigger a leadership challenge. On top, EUs chief negotiator Michel Barnier hinted that the Brexit talks may not lead to an agreement by the end of the year. Businesses and banks are increasingly impatient and worried. Investors are leaving the pound due to the chaotic political environment inside and outside the UK. Tuesdays inflation figures are important. The UKs headline CPI may have advanced to 3.1% year-on-year in October from 3.0% printed a month earlier. Could a strong inflation read revive the Bank of England (BoE) hawks under these circumstances? We are not so sure. According to Visa,UK shoppers curbed spending by most in more than four years and Wednesdays wages data could confirm stagnant improvement in British households'earnings face to a rising inflation. GBPUSD offers are eyed at 1.3180/1.3200.
Independence protesters marched for their jailed leaders in Barcelona on Saturday. Spanish stocks could open under pressure, but the index will likely suffer gradually softer lossesdue tothe Catalan crisis. 2400 companies have already moved their legal base outside Catalonia to avoid being impacted by political uncertainties and guarantee the future of their businesses within the Spanish and EU framework.
The Eurozone yields recovered on Thursday and Friday, allowing the EURUSD to consolidate above its 200-hour moving average (1.1622). Trend and momentum indicators remain comfortably negative.
Resistance is eyed at 1.1680 (minor 23.6% retrace on September October decline). The key mid-term support stands at 1.1509 (major 38.2% retrace on April September rise). Intermediate supports could be found at 1.1640/20 (200-hour moving average / 50-day moving average) and 1.1550 (last weeks support). Put options at 1.1600 and 1.1550 are due to expire today.

The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.Losses can exceed deposits.


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Ipek Ozkardeskaya is a senior analyst at MBAex with a solid experience in the financial industry. She has strong technical background in economics and quantitative finance. Previously, she worked as a senior market analyst in London Capital Group, FX strategist in Swissquote Bank and as a client sales executive at HSBC Private Bank in Geneva. She also developed quantitative models in automatic trading as part of BCV’s Structured Products team. Ipek has a Master’s degree in Financial Engineering & Risk Management and a Bachelor degree in Economics from University of Lausanne.
 
Contributing  author since 11/09/2017

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