ActivTrades’ Market Analysts have prepared for LeapRate their daily commentary on traditional markets for November 26, 2019. This is not a trading advice. See details below:
Weekly Global Asset Report 26-Nov 2019
The risk-on trading stance observed since the beginning of October remains well in place on financial markets across the world. Global shares have been boosted by the growing optimism that the US and China are getting closer to a trade deal.
In addition, recent data showed most economies have well absorbed the negative side effects of the global trade dispute, allowing central banks to mark a pause to the monetary dovish turn adopted last summer, which represent another bullish leverage to currencies such as USD and EUR. Most benchmarks are still flirting with record levels despite few corrective moves, and have mostly been driven by profit taking so far.
However, investors had to face mixed signals from both Washington and Beijing recently, a phenomenon that also contributed to the consolidation phase observed on US as well as EU stock markets. There is a real risk that market sentiment will be dented if trade talks keep slowing-down, or if no actual deal (even an interim one) is signed through the following weeks. Many investors who already paid the ‘trade deal rumour’ may want to reduce their exposure or delay further purchases if nothing concrete is registered between the US and China before Christmas.
Rising geopolitical tensions in Hong-Kong have worsened since the US passed legislation (Hong-Kong bill) supporting protesters. Many investors fear this could complicate trade discussions between the two largest economies of the world. Finally, overheating signals have been spotted on P/E ratios of certain large capitalisations in both the US and Europe: another sign of a potential end or pause of the current rally on stocks.
While everybody will be waiting for further development in trade talks, institutional investors’ focus will be dragged back to data in the last week of November. US GDP on Wednesday, EU CPI on Friday and Chinese Manufacturing PMI on Saturday are likely to boost volumes and volatility spikes are to be expected as traders brace for a busy end of year.
In Europe the Stoxx-50 index still trades sideways, over 3,650.0pts but below the 3,705.0pts / 3,730.0pts zone. The consolidation phase will continue as long as these two bounds remain unbroken. A short-term support can be found over 3,680.0pts while break-out of the 3,650.0pts level would drive prices back to 3,630.0pts and 3,590.0pts by extension.
Similar configuration in the US with the S&P500 index flirting above the strong 3,100.0pts level. Prices are stuck between 3,095.0pts and 3,130.0pts while a short-term resistance is located towards 3,150.0pts.
USD : The greenback continues to outperform most of the G7 currencies and is now challenging the level registered at the beginning of August. A rally extension is to be considered this week if US data tops or matches estimates.
EUR : The single currency keeps trading sideways and remains on the lower part of the table as traders struggle to gauge the ECB’s monetary stance following Christine Lagarde’s first public speech. Nothing significantly directional is likely to happen ahead of the EU CPI release on Friday.
GBP : The November consolidation phase continues following the solid acceleration registered in October. We expect the Pound to be traded in a more volatile environment as the December 12 General Election looms.
JPY and CHF : These two currencies are still trading on the upper part of the table. However, a notable event came from the fact that the Japanese Yen outperformed the Swiss Franc this week. This means investors preferred to hedge risky asset exposure with JPY instead of CHF.
NZD and AUD : These are two currencies currently abandoned by most forex traders. However, if the Aussie hasn’t registered any significant move this week, this hasn’t been the case for the Kiwi. The NZD currency kept on registering higher highs and lows this week, maintaining its short-term bullish trend. In the meantime the Australian Dollar continues to trade towards its 2-months lowest points.
Pierre Veyret– Technical analyst, ActivTrades