Asia slows more than expected
The statistics packages from China and Japan - the largest economies in the Asian region - came out below expectations, highlighting weak domestic demand and production.
Japan's economy lost 0.3% in the third quarter while it was expected to grow by the same amount. Meanwhile, real GDP added 1.8% y/y. A jump in imports was responsible for the decrease while private consumption showed a relatively moderate positive contribution.
Industrial production lost 1.9% in September, reversing a sharp turnaround after three months of growth, during which the index increased by 13.4%. A jump in energy prices prevents production from taking full advantage of the weaker yen. China's slowdown will likely constrain Japan's industry by not giving it enough orders.
The statistics packages from China and Japan - the largest economies in the Asian region - came out below expectations, highlighting weak domestic demand and production.
Japan's economy lost 0.3% in the third quarter while it was expected to grow by the same amount. Meanwhile, real GDP added 1.8% y/y. A jump in imports was responsible for the decrease while private consumption showed a relatively moderate positive contribution.
Industrial production lost 1.9% in September, reversing a sharp turnaround after three months of growth, during which the index increased by 13.4%. A jump in energy prices prevents production from taking full advantage of the weaker yen. China's slowdown will likely constrain Japan's industry by not giving it enough orders.
China noted a 0.5% y/y fall in retail sales thanks to 0-covid restrictions. These are gradually easing but remain much more restrained than in other major economies worldwide. Industrial Production growth slowed to 5% y/y last month versus 6.3% in September.
Weighing retail sales and manufacturing numbers would be enough of a signal for the government to step up support to the economy.
Considering the weak data from Japan and China, their currencies have particularly strengthened this month by 6.5% and 4%, respectively. Currency volatility risks hurting exporters for whom exchange rate stability might be a better option after a slump since the start of the year.
Weighing retail sales and manufacturing numbers would be enough of a signal for the government to step up support to the economy.
Considering the weak data from Japan and China, their currencies have particularly strengthened this month by 6.5% and 4%, respectively. Currency volatility risks hurting exporters for whom exchange rate stability might be a better option after a slump since the start of the year.
The British pound is on the offensive, having risen to a three-month high against the dollar thanks to a developing correction in the latter, market stabilisation following the change of government and pro-inflationary news.
Jobless claims rose by 3.3K in October after a 3.9K increase in September. September's data was an impressive revision from the initially reported 25.5K jump. Statistics now point to stabilisation in the number of unemployed near 1.5m - 2009-2013 levels. A month ago, the UK labour market was losing jobs rather briskly.
More positivity comes from the wage dynamics. Taking bonuses into account, they are up 6% in the three months to August, better than the 5.5% a month earlier. In addition, rumours are circulating about the Prime Minister's intention to raise the minimum wage, which could further push wages.
A more substantial than previously estimated labour market and new signs of rising wages create more incentive for the Bank of England to raise interest rates actively.
Jobless claims rose by 3.3K in October after a 3.9K increase in September. September's data was an impressive revision from the initially reported 25.5K jump. Statistics now point to stabilisation in the number of unemployed near 1.5m - 2009-2013 levels. A month ago, the UK labour market was losing jobs rather briskly.
More positivity comes from the wage dynamics. Taking bonuses into account, they are up 6% in the three months to August, better than the 5.5% a month earlier. In addition, rumours are circulating about the Prime Minister's intention to raise the minimum wage, which could further push wages.
A more substantial than previously estimated labour market and new signs of rising wages create more incentive for the Bank of England to raise interest rates actively.
GBPUSD surpassed 1.19 on Tuesday, adding more than 15% to the lows at 1.0330 set on September 26th. The Cable overcame a pullback of more than 38.2% of the amplitude of the decline from the highs of 2021 to the lows of September, a significant Fibonacci retracement level. Breaking this mark indicates that we see more than a corrective bounce in the Pound before a new round of decline.
However, despite the impressive size of the rally of the last almost two months, the Pound still has the potential to rally further due to the extreme previous oversold condition. The nearest local bullish target looks to be the 1.2200 area, where the pair received support on declines in 2016, 2019 and 2020.
There are chances that this area will now turn into an equally significant resistance. This area is also close to the 50% mark of the decline, a move above which could clear the way further up.
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However, despite the impressive size of the rally of the last almost two months, the Pound still has the potential to rally further due to the extreme previous oversold condition. The nearest local bullish target looks to be the 1.2200 area, where the pair received support on declines in 2016, 2019 and 2020.
There are chances that this area will now turn into an equally significant resistance. This area is also close to the 50% mark of the decline, a move above which could clear the way further up.
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US PPI gives more encouraging signals, but markets may have a break
Inflation in the USA continues to slow faster than expected. In October, PPI showed a gain of 0.2% m/m and 8.0% y/y against expectations of 0.4% and 8.3%. Producer prices often leads consumer inflation trends. For example, CPI peaked in June, three months after the PPI.
The core producer price index slowed to 6.7% y/y last month against a peak of 9.7% in June. This is a significant indirect sign that inflation is not spreading as dangerously through the economy as feared.
The slowdown in US inflation caused an impressive boost to risk-sensitive assets as it reassured markets that the Fed would slow the rate hikes in a 50-point move instead of 75 in December.
Inflation in the USA continues to slow faster than expected. In October, PPI showed a gain of 0.2% m/m and 8.0% y/y against expectations of 0.4% and 8.3%. Producer prices often leads consumer inflation trends. For example, CPI peaked in June, three months after the PPI.
The core producer price index slowed to 6.7% y/y last month against a peak of 9.7% in June. This is a significant indirect sign that inflation is not spreading as dangerously through the economy as feared.
The slowdown in US inflation caused an impressive boost to risk-sensitive assets as it reassured markets that the Fed would slow the rate hikes in a 50-point move instead of 75 in December.
The Nasdaq100 index was above 12,000, gaining over 2.5% since the start of the day; EURUSD was a step up from 1.0450. Nevertheless, don't expect a repeat of last week's rally after the CPI release: much of it is already priced in. In addition, the markets are close to sensitive trend levels. The EURUSD and the Dollar Index are testing the 200 SMAs, which are essential trend lines.
Crossing at high rates often proves to be a strong signal of a long-term trend change. The S&P500 tries to get a foothold above the significant round level of 4000 and trades around its 200 SMA. Since the second half of April, its approach has intensified the sell-off in the index, taking 10% off in seven sessions at the end of April and in ten sessions in August.
Short-term traders should be prepared that such significant levels in these global market benchmarks will prove to be a tough nut to crack, and the buoyant growth of the markets will be put on hold for a while.
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Crossing at high rates often proves to be a strong signal of a long-term trend change. The S&P500 tries to get a foothold above the significant round level of 4000 and trades around its 200 SMA. Since the second half of April, its approach has intensified the sell-off in the index, taking 10% off in seven sessions at the end of April and in ten sessions in August.
Short-term traders should be prepared that such significant levels in these global market benchmarks will prove to be a tough nut to crack, and the buoyant growth of the markets will be put on hold for a while.
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#WaveAnalysis
#Moderna broke resistance level 180.00
• Likely to rise to resistance level 197.15
Moderna recently broke the resistance level 180.00 (top of the previous minor correction 2 from the middle of August).
The breakout of the resistance level 180.00 accelerated the active short-term impulse wave C of the ABC correction (2) from the end of September.
Moderna can be expected to rise further toward the next resistance level 197.15 (former monthly high from the start of August).
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#Moderna broke resistance level 180.00
• Likely to rise to resistance level 197.15
Moderna recently broke the resistance level 180.00 (top of the previous minor correction 2 from the middle of August).
The breakout of the resistance level 180.00 accelerated the active short-term impulse wave C of the ABC correction (2) from the end of September.
Moderna can be expected to rise further toward the next resistance level 197.15 (former monthly high from the start of August).
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#WaveAnalysis
#USDCHF reversed up from support level 0.9380
• Likely to rise to resistance level 0.9485
USDCHF recently reversed up from the support level 0.9380 (former multi-month low from the start of August) standing below the lower daily Bollinger Band.
The upward reversal from the support level 0.9380 stopped the earlier short-term impulse wave (iii) of the sharp C-sequence from the middle of October.
Given the oversold daily Stochastic, USDCHF can be expected to rise further toward the next resistance level 0.9485 (former monthly low from September).
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#USDCHF reversed up from support level 0.9380
• Likely to rise to resistance level 0.9485
USDCHF recently reversed up from the support level 0.9380 (former multi-month low from the start of August) standing below the lower daily Bollinger Band.
The upward reversal from the support level 0.9380 stopped the earlier short-term impulse wave (iii) of the sharp C-sequence from the middle of October.
Given the oversold daily Stochastic, USDCHF can be expected to rise further toward the next resistance level 0.9485 (former monthly low from September).
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#Bitcoin is trading at around $16.8K with no significant changes overnight and in the consolidation area of the last five days.
The panic sell-off appears to be over, with key stablecoins regaining their pegs. The market capitalisation stands at $847 billion (+0.2% overnight).
Bitcoin is consolidating near the 23.6% retracement of the 5-10 November collapse. Failure to go higher indicates heavy selling pressure, suggesting a higher chance of losing 1k in value than going up by the same amount.
This pattern suggests that if it fails under $15.6K (the low of the drop), the next target for the bears will be the 12K area. This is also where the 2019 cyclical highs and the August 2020 pivot area are located.
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The panic sell-off appears to be over, with key stablecoins regaining their pegs. The market capitalisation stands at $847 billion (+0.2% overnight).
Bitcoin is consolidating near the 23.6% retracement of the 5-10 November collapse. Failure to go higher indicates heavy selling pressure, suggesting a higher chance of losing 1k in value than going up by the same amount.
This pattern suggests that if it fails under $15.6K (the low of the drop), the next target for the bears will be the 12K area. This is also where the 2019 cyclical highs and the August 2020 pivot area are located.
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The probable peak of UK Inflation
The UK Consumer Price Index delivered another "positive" surprise, adding 2% for October, above the average forecast of 1.7%.
Annual inflation accelerated to 11.1% against 10.1% previously and the forecast 10.7%. Inflationary pressures are much stronger here than in the USA and China, which reported a stronger-than-expected slowdown last month but are in line with continuing escalating price tensions in Europe.
The UK Consumer Price Index delivered another "positive" surprise, adding 2% for October, above the average forecast of 1.7%.
Annual inflation accelerated to 11.1% against 10.1% previously and the forecast 10.7%. Inflationary pressures are much stronger here than in the USA and China, which reported a stronger-than-expected slowdown last month but are in line with continuing escalating price tensions in Europe.
Producer prices are slowing their growth rate. PPI input prices added 0.6% m/m and 19.2% y/y against 20.7% a month earlier and peaked at 24.3% in June. From July to October, this index added 0.66%, suggesting an annulated increase of just under 2% - a decisive cooling, though not a price correction.
The PPI of producer price output slowed to 14.7% from 16.3% in September and a peak of 17.3% in July. For the three months, the index added 0.8%, reaching a trajectory of 3.3% in annulated terms.
Producer price development suggests that the following inflation report in November will show a deceleration of consumer price inflation. So, the current 11.1% y/y CPI could be the peak level for years.
Investors and traders are more concerned about how this will affect Bank of England policy and, thus, the British markets. It may not affect it because the BoE had earlier forecasted inflation beyond 11%, so inflation stays on the trajectory that the BoE envisages.
The PPI of producer price output slowed to 14.7% from 16.3% in September and a peak of 17.3% in July. For the three months, the index added 0.8%, reaching a trajectory of 3.3% in annulated terms.
Producer price development suggests that the following inflation report in November will show a deceleration of consumer price inflation. So, the current 11.1% y/y CPI could be the peak level for years.
Investors and traders are more concerned about how this will affect Bank of England policy and, thus, the British markets. It may not affect it because the BoE had earlier forecasted inflation beyond 11%, so inflation stays on the trajectory that the BoE envisages.
Anyway, the central bank's comments will not be long in coming as there will be a hearing of its members in a special parliamentary committee later today. As these hearings coincide with the release of the new inflation data, the focus will be on this issue.
The Bank of England will likely highlight the work on rate hikes that started in November 2021 and hint at further hikes in the foreseeable future in increased increments of 50-75 points. It also cannot be ruled out that hawkish comments will accelerate the strengthening of GBPUSD into the 1.2200 area, from where we saw the start of the last peak in August. A decisive move higher would signify the markets' belief that the UK is on the road to recovery, having avoided the worst-case scenario.
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The Bank of England will likely highlight the work on rate hikes that started in November 2021 and hint at further hikes in the foreseeable future in increased increments of 50-75 points. It also cannot be ruled out that hawkish comments will accelerate the strengthening of GBPUSD into the 1.2200 area, from where we saw the start of the last peak in August. A decisive move higher would signify the markets' belief that the UK is on the road to recovery, having avoided the worst-case scenario.
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#Silver is testing the $22 per ounce mark today and crossed it briefly yesterday. Although Gold marks the fifth consecutive session of back-to-back gains, Silver may have been one step ahead in this market cycle.
In early November, the price of Silver pushed up from the 50-day moving average, which had worked as a support for a week and a half before, as the metal was bought off intraday on dips under this line.
Further, while the S&P500 and stock markets, in general, were recovering from the not-so-dovish Fed comments, Silver rallied more than 7% on solid NFP data, leaving the other precious metals behind. This was a clear game-changer event for this market.
By rising in the following days, the price has reached its 200-day moving average, which Gold, S&P500 and EURUSD have yet to do. Since late last week, Silver has been gaining support on declines towards this line, confirming a change in the long-term trend.
Silver has already lingered near $22 in May and June, digesting the April collapse.
In early November, the price of Silver pushed up from the 50-day moving average, which had worked as a support for a week and a half before, as the metal was bought off intraday on dips under this line.
Further, while the S&P500 and stock markets, in general, were recovering from the not-so-dovish Fed comments, Silver rallied more than 7% on solid NFP data, leaving the other precious metals behind. This was a clear game-changer event for this market.
By rising in the following days, the price has reached its 200-day moving average, which Gold, S&P500 and EURUSD have yet to do. Since late last week, Silver has been gaining support on declines towards this line, confirming a change in the long-term trend.
Silver has already lingered near $22 in May and June, digesting the April collapse.
There have also been repeated reversals in this area late last year and early this year. There might likely be some shake-out of market participants and partial profit-taking again.
The strong price momentum at the start of November and an even more impressive 9% rise in early October point to a demand, which might turn the market around. This bullish reversal is probably happening in Gold, but it is a more liquid and thus "noisy" instrument.
If we are correct, and after the local shake-out, silver goes further up, it could immediately target levels above $25, near the local peaks of March and April. If the strengthening does not fail again, the price may rise to $30 by August 2023.
It will be premature to talk about the possibility of reaching the highs of 2012 ($35) or 2011 ($50), but targets near $25 by the end of the year and $30 eight months later look achievable.
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The strong price momentum at the start of November and an even more impressive 9% rise in early October point to a demand, which might turn the market around. This bullish reversal is probably happening in Gold, but it is a more liquid and thus "noisy" instrument.
If we are correct, and after the local shake-out, silver goes further up, it could immediately target levels above $25, near the local peaks of March and April. If the strengthening does not fail again, the price may rise to $30 by August 2023.
It will be premature to talk about the possibility of reaching the highs of 2012 ($35) or 2011 ($50), but targets near $25 by the end of the year and $30 eight months later look achievable.
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Strong US retail sales may support USD
According to the latest U.S. Census Bureau estimate, US retail sales rose 1.3% in October. Americans' purchases rose by 8.4% y/y, although an inflation adjustment (7.7% y/y last month) spoils the impression of a sales boom.
On the other hand, the Fed is making the most significant effort in the last 40 years to cool consumer demand, so the current result is hardly satisfactory.
Strong retail sales (or above expectations) boost the dollar and often spur demand in the stock market. This time we can only see the first part of this rule working, as solid retail activity feeds an inflationary spiral.
In response to a strong labour market and retail activity, the Fed may return to a tighter monetary policy line, returning market participants’ focus to a higher final rate - closer to 5.5% versus 5%.
According to the latest U.S. Census Bureau estimate, US retail sales rose 1.3% in October. Americans' purchases rose by 8.4% y/y, although an inflation adjustment (7.7% y/y last month) spoils the impression of a sales boom.
On the other hand, the Fed is making the most significant effort in the last 40 years to cool consumer demand, so the current result is hardly satisfactory.
Strong retail sales (or above expectations) boost the dollar and often spur demand in the stock market. This time we can only see the first part of this rule working, as solid retail activity feeds an inflationary spiral.
In response to a strong labour market and retail activity, the Fed may return to a tighter monetary policy line, returning market participants’ focus to a higher final rate - closer to 5.5% versus 5%.
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#WaveAnalysis
#Tesla reversed from resistance level 200.00
• Likely to fall to support level 180.00
Tesla recently reversed down from the round resistance level 200.00 (previous monthly low from the middle of October), intersecting with the 38.2% Fibonacci correction of the downward impulse from October.
The downward reversal from the resistance level 200.00 continues the active short-term impulse wave 3 of the intermediate impulse wave (3) from September.
Given the clear daily downtrend, Tesla can be expected to fall further toward the next support level 180.00
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#Tesla reversed from resistance level 200.00
• Likely to fall to support level 180.00
Tesla recently reversed down from the round resistance level 200.00 (previous monthly low from the middle of October), intersecting with the 38.2% Fibonacci correction of the downward impulse from October.
The downward reversal from the resistance level 200.00 continues the active short-term impulse wave 3 of the intermediate impulse wave (3) from September.
Given the clear daily downtrend, Tesla can be expected to fall further toward the next support level 180.00
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#WaveAnalysis
#USDCAD reversed from support level 1.3215
• Likely to fall to resistance level 1.3400
USDCAD recently reversed up from the key support level 1.3215 (previous monthly high from the start of July), lower daily Bollinger Band, intersecting with the 38.2% Fibonacci correction of the downward impulse from October.
The upward reversal from the support level 1.3215 stopped the earlier short-term impulse wave (iii) of the higher impulse waves C and (B).
Given the clear daily uptrend and the oversold daily Stochastic, USDCAD can be expected to rise further toward the next resistance level 1.3400 (former low of wave (i) from the start of November).
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#USDCAD reversed from support level 1.3215
• Likely to fall to resistance level 1.3400
USDCAD recently reversed up from the key support level 1.3215 (previous monthly high from the start of July), lower daily Bollinger Band, intersecting with the 38.2% Fibonacci correction of the downward impulse from October.
The upward reversal from the support level 1.3215 stopped the earlier short-term impulse wave (iii) of the higher impulse waves C and (B).
Given the clear daily uptrend and the oversold daily Stochastic, USDCAD can be expected to rise further toward the next resistance level 1.3400 (former low of wave (i) from the start of November).
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