Xe Morning Update - Your daily market wrap

Developments in markets for Tuesday 11 November......

• Snapshot: S&P500/Nasdaq?? yields?, crude oil??, gold??US dollar??
• AUD/USD:??consolidates 2-day rebound between 0.6520 and 0.6540
• U.S. Veterans Day Holiday: subdued price action through TUE; Nasdaq struggles
• UK Jobs data weaker-than-expected, lifting expectations for BoE to cut in DEC.
• Day ahead likely to be uneventful; U.S. House to vote on a pass spending bill

Each morning we bring you up to speed with the latest market news, including the events and themes that are impacting currencies and other related asset classes......

It's been a quiet 24-hours of news flow and contained price action, the market awaiting the impending reopening of the U.S. government following the Senate vote to pass a temporary funding bill. The vote now proceeds to the Republican controlled House which will sit on Wednesday. Given President Trump's endorsement, the bill should pass with ease. At some point to follow, likely next week, a revised schedule will be provided to update the release of critical macroeconomic data. It's possible the September jobs report (NFP) could be released late next week.
 
The Veterans Day Holiday in the U.S. has also added to the subdued backdrop, U.S. bond markets closed whilst equity markets traded with lighter volume. The S&P500 consolidated yesterday's sizeable gains whilst the Nasdaq was a notable decliner, dragged lower by Nvidia following news that SoftBank Group had sold its entire stake in order to allocate the near US$6billion position to alternative AI investments.
 
The major currencies have chopped around in tight ranges, contained within a +/- 0.30% intraday range. The Australian dollar is flat following Monday's impressive advance, consolidating gains in a 0.6520 to 0.6540 intraday range. Selling momentum has evaporated following last Wednesday's swing low marked below 0.6460, indicating AUD/USD has based after a near 2.5% pullback from the 29 October swing high marked a couple of pips shy of 0.6620.
 
Key resistance presents at 0.6540, a level that coincides with Monday's high and the widely observed 100-day moving average. Price action ascending beyond with conviction to then reclaim territory north of 66 US cents would provide the impetus to back a call the Aussie will mount a test if the year to date high near 0.6710, as favorable year-end seasonals take effect.

US equity markets as at time of morning update release and may not represent session closing prices  

In data news from Tuesday, the RBNZ's Inflation Expectations survey has largely remained unchanged from the month prior, widely observed 2-year ahead inflation expectations steady at 2.28%. Headline inflation did spike back up to 3% in the September quarter, however this was attributed to volatile food prices and items less responsive to changes in monetary policy. The RBNZ will be cutting the OCR by 25-bps to a year-end 2.25% on 26 November.  
 
Against the Kiwi, the Aussie pulled back from 12-year highs marked at 1.1590, AUD/NZD sliding a few pips below 1.1530 at Tuesday's intraday lows. The Relative Strength Index, a widely observed momentum indicator currently displays a negative divergence – it has failed to make a new high despite Monday's fresh 12-year high. Negative divergence can be a reliable indicator of waning momentum, thereby suggesting the antipodean's impressive rally may be coming to an end, or pausing.
 
In the UK, a soft jobs report has added weight to the case for the Bank of England to resume its easing cycle at the final meeting of the year (18 DEC.). In a tight 5-4 vote count at last week's meeting, the MPC opted to hold the bank rate at 4.00%. Unemployment climbed from 4.8% to 5.0% (vs 4.9%, expected) whilst wages growth continued to soften. Layer in an Autumn budget that will deliver notable tax hikes and reduced spending, the bar has been lowered for a BoE cut.
 
Following last week's mild pullback, AUD/GBP looks to have based around 0.4920, two days of gains lifting the pair back through 0.4950. Successful navigation of 0.5000 resistance is required for a shift to an outright bullish technical tone.
 
The day ahead may prove to be another uneventful affair given the absence of tier 1, market moving data. Risk sentiment may get a boost following confirmation the House has passed the temporary funding bill; however upside is likely to be mild given this outcome is priced in. Expectations are for consolidative price action - the Aussie to range trade between 0.6520 and 0.6550.
 
Have a productive day.
Stuart Talman (stuart.talman@xe.com)
Xe Corporate

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