Gold reaches its highest level in five weeks, yen follows suit as a defensive safe haven trade, European equities slide, as does the euro

Nov 28 • Morning Roll Call • 1421 Views • Comments Off on Gold reaches its highest level in five weeks, yen follows suit as a defensive safe haven trade, European equities slide, as does the euro

FX and U.S. equity traders need to remain highly vigilant during New York markets’ opening times on Tuesday, as Trump delivers a speech at the Senate regarding his tax plans. This is likely to be followed by a vote amongst both democrats and republicans later in the week, to begin bringing into law his highly publicized and much heralded tax plans. If a yes vote occurs, then markets for the U.S. dollar and equities could react quickly and sharply. Tuesday may also witness market movements, depending on the content and reception of the speech.

Buried in this week’s financial news is the issue regarding U.S. government borrowing and debt, which may also be addressed in his speech; Trump will also meet with Democratic and Republican congressional leaders Tuesday to discuss an extension to the federal spending plan, in order to prevent a government shutdown, thereby keeping the government open, after current funding expires on Dec. 8th.

It must also be noted that we’re only three weeks away from the final 2017 FOMC interest rate setting and monetary policy meeting, taking place during December 12-13th, the culmination of which is predicted to be the announcement of an interest rate rise, taking the key U.S. borrowing rate to 1.5%. Analysts have been of the opinion that the timing of the potential tax rate reduction is no coincidence, as it will negate a potential equity sell off; as rates rise and investors rotate out of stocks, into other assets.

In a quiet economic calendar news day on Monday, the only significant data release from the USA concerned new home sales, a release which surprised the markets coming in at an extremely healthy month on month growth figure; up 6.2% in October and at 685k for the year, printing the largest sales number since 2007. Cynics might suspect a return to subprime lending may have to accompany this boom, in order to continually alleviate builders of their stock.

As a safe haven, risk off, investor attitude and environment emerged throughout global markets on Monday, yen rose versus the U.S. dollar, at one stage USD/JPY crashed through S3. Gold (XAU/USD) breached R2, threatening R3, which was sited at the critical handle of 1300. WTI oil sold off, as investors developed nerves and doubts that the OPEC meeting, scheduled for Thursday in Vienna, will result in sustained production cuts.

In a quiet day in Europe for scheduled economic news releases, the main equity indices sold off sharply, whilst the euro experienced a mixed day versus its peers; EUR/USD closing the day out at circa 1.19, sited near the daily PP.

In an overall extremely tricky day for FX day traders to practice their craft, many of the major pairs and cross currency pairs whipsawed dramatically at various stages during the day. Sterling and the euro both ranged through bullish and bearish conditions at various stages, based on the political issues of Brexit and the German coalition impasse, as opposed to calendar releases.

U.S. DOLLAR

After opening to the upside in the Asian session, USD/JPY then began a steady and sustained fall through the three levels of support, before reversing trend from 17:00 GMT onwards, to close the day out close to the critical handle of 111.0, confirming the recent downward swing resulting in the major currency pair crashing through both the 100 and 200 DMA last week. USD/CHF has also breached the critical 200 DMA as the sell off, which began in the first week of November, pausing temporarily mid week last week, continued with fresh momentum later in the week. However, USD regained some lost ground versus the Swiss franc in the New York session, after falling to S1 shortly after European markets opened. USD/CHF closed the day up circa 0.2% at 0.981.

EURO

EUR/GBP closed out flat on the day, resting near the daily PP at 0.893. EUR/USD also ended the day close to the daily PP at 1.190, EUR/CHF also closed near to the PP, after rising through and staying above the first level of resistance during the London/European trading session. The euro’s largest fall came versus the New Zealand dollar, falling through S1 ending the day down circa 0.4% at 1.718, after initially rising through R1 in the Asian session.

STERLING

GBP/USD engaged in the whipsawing behaviour which appeared to envelope FX markets on Monday, steadily rising as London opened to breach R1, before reversing direction falling through the daily PP to end the day at circa 1.331, down circa 0.2%. GBP/NZD registered sterling’s biggest cross currency fall during the day, closing down circa 0.6% at 1.924, just above S2. GBP/CHF proved to be an incredibly difficult cross currency pair to trade on Monday; initially trading in a tight bearish range, then as London/Europe opened, the currency pair rose through the first two levels of resistance, to then surrender the majority of the day’s gains, closing out at circa 1.307, up circa 0.2% on the day.

GOLD

Gold (XAU/USD) rose sharply as markets opened on Sunday evening/Monday morning, breaching the second level of resistance R2 during the development of the 13:00 hour candle and reaching a daily high of 1298, the highest level seen in five weeks. With the critical psyche handle of 1300 now back in range and with the 100 DMA sited at 1283, the security appears to have finally escaped the gravity of this crucial moving average. The precious metal closed out at circa 1294 per ounce, up circa 0.4% on the day.

EQUITY MARKETS SNAPSHOT FOR NOVEMBER 27th.

• DJIA closed up 0.10%.
• SPX closed down 0.04%.
• FTSE 100 closed down 0.35%.
• DAX closed down 0.46%.
• CAC closed down 0.56%.
• EURO STOXX 50 closed down 0.48%.

KEY ECONOMIC CALENDAR RELEASES FOR NOVEMBER 28th.

• EUR OECD Economic Outlook.

• USD Advance Goods Trade Balance (OCT).

• USD Wholesale Inventories (MoM) (OCT P).

• USD S&P/Case-Shiller Composite-20 (YoY) (SEP).

• USD Consumer Confidence Index (NOV).

• CAD Bank of Canada Gov. Poloz, Sr. Dep. Gov Wilkins Press Conf.

• JPY Retail Trade s.a. (MoM) (OCT).

 

 

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