European markets fell for the third day in succession yesterday, weighed down by concerns over weak economic data, and a stickier inflation outlook, while US markets also continued their own run of losses, with the S&P 500 closing lower for the fifth day in succession.
There appears to be little in the way of significant direction in markets at the moment, hardly surprising given next week’s looming central bank decisions, and we will probably continue to see further scratchiness in the upcoming days.
Crude oil prices hit their lowest levels this year for the same reasons, as rising recession risks outweighed any optimism over a reopening of the Chinese economy. Yesterday’s November trade numbers served to reinforce the idea that while Chinese authorities are going to be more pragmatic about their current Covid-19 policy, the Chinese economy faces a long road back to a more stable growth trajectory. Any downside on US oil prices could well find itself limited to the US topping up the SPR on any significant further weakness.
US 10-year yields also continued to slide back, hitting their lowest levels since mid-September at 3.41%, on a combination of recession concerns, and uncertainty over the effects that further aggressive tightening might have, as we look ahead to next week’s November CPI numbers.
The US dollar, on the other hand, reversed the gains made on Tuesday as currencies continued to chop around ahead of next week’s big central bank decisions, and key economic announcements.
Today the only data of note is US weekly jobless claims which are expected to edge higher from 225k to 230k, with continuing claims coming in at 1.6m. European markets look set to open mixed.
EUR/USD – currently ranging between support at the 1.0400 area and 200-day SMA and the recent highs at the 1.0610 area. Below 1.0400 targets the 1.0340 area.
GBP/USD – still has resistance just above the 1.2300 area, with the next key support at 1.2050 area. A move through the 1.2040 area could see further weakness towards the 1.1985 area on a move below the 200-day SMA.
EUR/GBP – the 0.8675 area remains a key resistance, falling short yesterday. We also have short term support at the just above the 200-day SMA and the 0.8540 area. Below 0.8530 targets 0.8480.
USD/JPY – pushed briefly above the 137.50 area before slipping back. Currently has support at the 136.00 area, with main support at the 200-day SMA at 134.50.