Dollar and Yen Stay Weak in Quiet Pre-Holiday Trading

Market overviews

Markets are generally rather quiet in Asian session today, with Thanksgiving holiday in the US in sight. Risk markets are taking a breather after the earlier rally, so do the selloffs in Dollar, Yen and Swiss Franc. Nevertheless the trio remain the weakest ones for the week. On the other hand, New Zealand and Australian Dollar are the strongest. Sterling is indeed following closely, as traders seem to be betting on some goods news of Brexit trade negotiations.

Technically, break of 0.9076 minor support in USD/CHF is a sign of return of Dollar weakness. Though, the greenback is still staying above key near term support levels in general. The levels include 1.2011 resistance in EUR/USD, 1.3483 resistance in GBP/USD, 0.7413 resistance in AUD/USD, 0.8982 support in USD/JPY and 1.2928 support in USD/CAD. Reactions to these levels warrant close attentions.

In Asia, currently, Nikkei is up 0.69%. Hong Kong HSI is up 0.12%. China Shanghai SSE is up 0.13%. Singapore Strait Times is down -0.68%. Japan 10-year JGB yield is up 0.0042 at 0.022. Overnight, DOW dropped -0.58%. S&P 500 dropped -0.16%. NASDAQ rose 0.48%. 10-year year dropped -0.004 to 0.878.

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Fed discussed updating guidance on asset purchases

Minutes of November FOMC minutes noted that the asset purchases will continue “over coming months”. At the same time, “most participants judged that the Committee should update this guidance at some point and implement qualitative outcome-based guidance that links the horizon over which the Committee anticipates it would be conducting asset purchases to economic conditions. ”

However, “a few participants were hesitant to make changes in the near term to the guidance for asset purchases and pointed to considerable uncertainty about the economic outlook and the appropriate use of balance sheet policies given that uncertainty.”

On adjusting the asset purchases to provide more accommodation if needed, it could be done by increasing the pace of purchases or by shifting its Treasury purchases to those with a longer maturity without increasing the size of its purchases.” Or alternative, more accommodation could be done “by conducting purchases of the same pace and composition over a longer horizon.”

New Zealand trade deficit at NZD 501m as imports and exports plunged

New Zealand goods exports dropped -4.4% yoy to NZD 4.8B in October. Exports to China, Australian Japan declined, and rose to US and EU. Imports dropped -13.0% yoy to NZD 503B. Imports from all major partners declined, including China, EU, Australia, USA and Japan. Monthly trade deficit came in at NZD -501m, in line with expectations.

Annual trade surplus reached a 28-year high of NZD 2.2B in the year ended October. “This is the largest annual surplus since the July 1992 year, driven mainly by much lower imports after the global COVID-19 pandemic hit, while New Zealand’s exports have held up,” international trade manager Alasdair Allen said.

Australia total private capital expenditure dropped -3% in Q3

Australia total new capital expenditure dropped -3.0% in Q3 to AUD 25.85B, hitting the lowest level since 2007. Buildings and structures expenditure dropped -3.7% to AUD 13.76B. Equipment, plant and machinery expenditure dropped -2.2% to AUD 12.09B.

Looking ahead

Germany will release Gfk consumer confidence while Eurozone will release M3 money supply. ECB will release monetary policy meeting accounts.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2984; (P) 1.3007; (R1) 1.3027; More….

Intraday bias in USD/CAD remains on the downside for 1.2928 low. Break there will resume resume larger down trend from 1.4667. Next near term targets will be 61.8% projection of 1.3389 to 1.2928 from 1.3172 at 1.2887, and then 100% projection at 1.2711. On the upside, break of 1.3112 minor resistance will turn bias back to the upside to resume the rebound from 1.2928 instead.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). Rejection by 55 week EMA is keeping outlook bearish. Sustained break of 61.8% retracement of 1.2061 to 1.4667 at 1.3056 will target a test on 1.2061 (2017 low). But we’d expect loss of downside momentum as it approaches this key support. On the upside, firm break of 1.3389 resistance is needed to indicate medium term bottoming. Otherwise, outlook will remain bearish in case of rebound.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Trade Balance (NZD) Oct -501M -500M -1017M -1025M
0:30 AUD Private Capital Expenditure Q3 -3.00% -1.50% -5.90% -6.40%
7:00 EUR Germany Gfk Consumer Confidence Dec -4.9 -3.1
9:00 EUR Eurozone M3 Money Supply Y/Y Oct 10.50% 10.40%
12:30 EUR ECB Monetary Policy Meeting Accounts