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Volatility remains low post US holiday

Volatility remains low post US holiday

It was a subdued session yesterday as the US celebrated Thanksgiving and in turn the US stock market was closed. 

Dealers in the rest of the world largely sat on their hands while their US-based counterparts enjoyed the holiday.

It was a quiet day in terms of news flow and there was little appetite for trading on this side of the Atlantic yesterday. The England-wide lockdown will come to an end next month but the vast majority of England will still have reasonably tough restrictions in place. It will be a far cry from the freedoms that people enjoyed during the summer. The hospitality sector will only be permitted to operate in a very limited fashion so that is going to be a major drawback as we approach the festive season – when cafes, pubs and restaurants tend to be very busy. Recently it was announced that Germany’s restrictions will remain in place until 20 December and Frances hospitability industry will remain restricted until 20 January. The services sectors of the countries is set for further pain.

The US stock market reopens today for a half day but volatility is likely to be quiet across the board – it is typically the case following Thanksgiving. The excitement that we saw at the start of the week with respect to the progress made by AstraZeneca-Oxford University on their Covid-19 vaccine and the hopes that President Trump will leave office quietly in January will probably be the main points the week.

On Wednesday the oil market hit its highest level since early March on the back of vaccine hopes and growing chatter that OPEC+ will keep their current output level in place. The group of oil producing nations had originally planned to ease up on the current productions cuts in January but lately there is speculation the body will maintain their current output rate, even though the price has been rising lately. Seeing as several countries are keeping restrictions in place that will probably just give OPEC+ an excuse to not increase supply.

Gold crept higher yesterday as the dust settled from the painful declines it suffered earlier in the week, when it fell to its lowest level since July. The metal has traditionally benefitted from uncertainty in the markets, and in November it has come under pressure because stocks have been boosted by hopes of a vaccine for the coronavirus. Support seems to be in place in the $1,800 region for now.          

Stocks markets in the Far East haven’t moved move as it seems that traders in that part of the world are also content to sit on the fence. Industrial profits in China surged by 28.2% last month on a year on year basis. It was the sixth consecutive month of growth and it was a big improvement on the 10.1% rise posted in the previous report. Indices in Europe are called a little lower.           

The final reading of French GDP for the third quarter is tipped to remain unchanged from the 18.2% posted in the preliminary reading. Keep in mind the economy contracted by 13.7% in the second quarter. France’s preliminary reading of CPI for November is tipped to slip to 0.0% from 0.1% in October. The updates will be posted at 7.45am (UK time).

At 10am (UK time) the final reading of the eurozone’s consumer confidence will be announced, and economists are expecting the level to be the same as the preliminary reading of -17.6. 

EUR/USD – has been in an uptrend since the start of the month and while it holds abve the 50-day moving average at 1.1775, the positive move should continue. 1.2000 might act as resistance. A break below 1.1602 should pave the way for further losses.     

GBP/USD – in the past two months it has been in an uptrend and if the positive move continues, it could target 1.3515. A pullback might find support at 1.3106, and a break through that metric should put 1.3000 on the radar.   

EUR/GBP – the downtrend has been in place for two months and while it holds below the 0.9000 metric, the bearish move should remain intact. A break below 0.8864, should pave the way for 0.8800 to be tested. If 0.9000 is retaken, 0.9039, the 50-day moving average, should be brought into play.

USD/JPY – if it holds above the 103.65 area, it could target 105.52, the 100 day moving average. Should the broader bearish trend continue and if 103.65 is taken out, it might target 102.00

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