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LCG: Into the European open

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The US core inflation advanced to 1.8% year-on-year in October after having steadied at 1.7% for five months. The headline inflation decelerated from 2.2% to 2.0% as expected. Meanwhile, advance retail sales slowed less than expected in the same month, from 1.6% to 0.2% month-on-month versus 0.0% predicted by analysts. Odds for December Federal Reserve (Fed) rate hike rose to 97% after the core inflation picked up.
The US stocks edged lower as the US tax reforms are now in jeopardy. Republicans decision to add the repeal of Obamacares individual mandate to their legislation could decrease the chances of approval in the Congress. The Dow Jones (-0.59%), the S&P500 (-0.55%) and Nasdaq (-0.47%) traded down. The S&P500 hit the lower daily Bollinger band (2555), the VIX index spiked to 13%, last seen three months ago during low summer volumes.
The USDJPY rebounded past 113.00 in Tokyo after sliding to 112.47 on Wednesday. The pair could stabilize within 112.90/113.20 on improved US yields and better US dollar appetite. Nikkei (+1.43%) and Topix (+1.09%) recovered after five consecutive session losses.
The Aussie trades on mixed sentiment. The AUDUSD extended losses to 0.7569 as Australian economy added only 3700 jobs in October. Yet a closer look at the labour data revealed that the situation was not as bad as it seemed at the first sight. Full-time jobs rose by 24300 and compensated for 20700 part-time job losses. The unemployment improved to 5.4% compared with 5.5% printed a month earlier. The AUDUSDs squeeze below 0.7580 (lower Bollinger band on daily chart) attracted buyers, as iron ore futures traded up by 1.30%. However, carry traders arent willing to play long-AUD with AU/US 2-year yield spread the its lowest level since beginning of 2001. As such, the 75 cents level is still a plausible mid-term target for macro players. Likewise, the AUDJPY, a popular carry pair, slipped below its 200-day moving average (86.03) for the first time in five months.
Gold met resistance by the 50-day moving average ($1288) and consolidated at the tight range of $1275/1280 in Asia.
The EURUSD returned below its 100-day moving average (1.1794) after having advanced to 1.1860 on Wednesday. Stronger US dollar curbed the positive momentum, which is needed to attract EUR-longs into a low yielding currency. The EURUSD could slide toward its 50-day moving average (1.1750). The EURGBP hit 0.9013 and could pause before taking a fresh direction.
The pound appetite remained limited above the 1.32 mark, after the UK wages data showed steady growth in September instead of deterioration predicted by analysts. Due today, October retail sales data may hint at improved activity. Encouraging read could give a quick push to the pound, yet traders are looking for top-selling opportunities at a period of rising political certainty. Offers are eyed at 1.3210/1.3240 (50-day moving average).
The death cross formation on hourly chart keeps WTI under the pressure of technical shorts. WTI crude sees support at $55/barrel. The key support to October November rebound is eyed at $54.66 (major 38.2% retrace). Below this level, a short-term bearish reversal could shift bears target to $53.60 and $52.60 (major 50% and 61.8% retrace). Solid weekly resistance is eyed at $58.50 (50-week moving average).

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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About the author

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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