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Talking points: Japan tax delay, UK inflation, RBA minutes

Ipek Ozkardeskaya Market Analyst

Market Brief

G10 Advancers and Decliners vs USD
NZD 0.44
SEK 0.43
CAD 0.39
DKK 0.35
EUR 0.35
CHF 0.33
NOK 0.31
AUD 0.24
GBP 0.15
JPY 0.03
Global Indexes Current Level % Change
Nikkei 225 Index 17344.06 2.1814
Hang Seng Index 23516.99 -1.177
Shanghai Index 2456.37 -0.7131
FTSE futures 6665.5 0.3538
DAX futures 9339 0.36
SMI Futures 8942 0.1456
S&P future 2040.1 0.0196
Global Indexes Current Level % Change
Gold 1195.54 0.7577
Silver 16.3 0.9802
Crude wti 75.45 -0.2512
VIX 13.99 5.1089
USD Index 87.74 0.2115

In Japan, USD/JPY and JPY crosses are better bid as discussions on sales tax hike delay occupy the headlines. The PM Advisor Hamada says it would be natural to delay the hike by some year and a half, the BoJ doesn’t need to proceed with additional stimulus. Meanwhile, the Finance Minister Aso highlights that raising taxes will be unavoidable at some point to finance country’s deficit. Lower JPY appetite remains limited before official announcement. Nikkei stocks recover 2.18%, Topix re-tests 1,400. USD/JPY sees resistance pre-107.05 (fresh 7 year high hit yesterday before GDP release).  Stops are eyed above. On the downside, bids should come into play at 115.00/115.56 (optionality / post-GDP reaction low). EUR/JPY and AUD/JPY consolidate gains at 145.15/58 and 101.473/810 respectively.

Overseas, the RBA minutes showed the preference for stable rates continues. The BoJ stimulus and the GPIF shift to foreign, risk assets have been the new talking points that could keep AUD bid. AUD/USD sentiment remains positive. Offers are seen pre-0.88, more resistance is eyed at 0.8870/0.8911 area (Fib 38.2% on Sep-Nov sell-off / Oct 29th high).

In China, the foreign direct investments expanded 1.3% on year to October (vs. 1.1% exp. & 1.9% last). USD/CNY legged down to 6.1185. Trend and momentum indicators remain marginally bullish, sustained by Hong Kong Monetary Authority providing 10 billion yuan liquidity via intraday repo facilities since last week to manage the liquidity risk related to the stock market connection. The key support zone stands at 6.1015/83 (Aug-Nov downtrend channel base / Oct 31st low).

GBP/USD consolidates last week’s post-QIR weakness. The October inflation figures are due today, the CPI y/y is expected to remain stable at 1.2%. Any negative surprise will increase the probabilities for an inflation below 1.0% in line with BoE anticipations and revive BoE-doves. Trend and momentum indicators favor the extension of weakness toward 1.55. Decent option barriers at 1.5740/1.5800 should keep the downside pressures tight. EUR/GBP tests 0.80 offers, if cleared will place 200-dma (currently at 0.80572) at target. Strong resistance is seen at this level as it has been more than a year the EUR/GBP has not traded above its 200-dma.

ECB President Draghi reiterated that the Bank stands “unanimously” ready to take additional unconventional steps to EU officials in Brussels yesterday. Despite the formation of short-term bullish technicals, EUR/USD has hard time moving higher certainly due to solid top selling interest. Strong resistance at 1.2577/78 (Nov 4th & 17th highs). More resistance is placed at 1.2744/96 (Fib 23.6% on May—Nov sell-off / daily Ichimoku cloud base).

Today’s economic calendar: UK October CPI, PPI and RPI m/m & y/y, ZEW Survey for German Current Situation and Expectations in  November, ZEW Survey for Euro-zone Expectations in November, Italian September Current Account Balance, US October PPI m/m & y/y, US November NAHB Housing Market Index, US September Net Long-term TIC Flows and Total Net TIC Flows.


Swissquote Sqore Trade Ideas:


Today's Calendar Estimates Previous Country / GMT
UK Oct CPI MoM 0.10% 0.00% GBP / 09:30
UK Oct CPI YoY 1.20% 1.20% GBP / 09:30
UK Oct CPI Core YoY 1.60% 1.50% GBP / 09:30
UK Oct Retail Price Index 257.8 257.6 GBP / 09:30
UK Oct RPI MoM 0.10% 0.20% GBP / 09:30
UK Oct RPI YoY 2.30% 2.30% GBP / 09:30
UK Oct RPI Ex Mort Int.Payments (YoY) 2.30% 2.30% GBP / 09:30
UK Oct PPI Input NSA MoM -1.50% -0.60% GBP / 09:30
UK Oct PPI Input NSA YoY -8.30% -7.40% GBP / 09:30
UK Oct PPI Output NSA MoM -0.20% -0.10% GBP / 09:30
UK Oct PPI Output NSA YoY -0.20% -0.40% GBP / 09:30
UK Oct PPI Output Core NSA MoM 0.00% -0.10% GBP / 09:30
UK Oct PPI Output Core NSA YoY 0.80% 0.80% GBP / 09:30
GE Nov ZEW Survey Current Situation 1.7 3.2 EUR / 10:00
GE Nov ZEW Survey Expectations 0.5 -3.6 EUR / 10:00
EC Nov ZEW Survey Expectations - 4.1 EUR / 10:00
IT Sep Current Account Balance - 2312M EUR / 10:00
US Oct PPI Final Demand MoM -0.10% -0.10% USD / 13:30
US Oct PPI Ex Food and Energy MoM 0.10% 0.00% USD / 13:30
US Oct PPI Final Demand YoY 1.30% 1.60% USD / 13:30
US Oct PPI Ex Food and Energy YoY 1.50% 1.60% USD / 13:30
US Nov NAHB Housing Market Index 55 54 USD / 15:00
US Sep Net Long-term TIC Flows - $52.1B USD / 21:00
US Sep Total Net TIC Flows - $74.5B USD / 21:00
Currency Tech
R 2: 1.2578
R 1: 1.2509
CURRENT: 1.2491
S 1: 1.2395
S 2: 1.2358

R 2: 1.5835
R 1: 1.5781
CURRENT: 1.5663
S 1: 1.5593
S 2: 1.5575

R 2: 118.00
R 1: 107.05
CURRENT: 116.64
S 1: 115.00
S 2: 113.86

R 2: 0.9751
R 1: 0.9701
CURRENT: 0.9619
S 1: 0.9544
S 2: 0.9442

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