A fairly big data day today for the UK and the US economy in what is likely to be fairly thin trading ahead of tomorrow's US Thanksgiving break. While the Dow was able to make a new record close, the S&P500 lagged behind, dragged down by yesterday's weaker than expected consumer confidence number for November, though it did still finish marginally higher.
Given yesterday's sell-off in Europe, the subsequent reaction in Asia has been mixed and somewhat tempered against a backdrop of rising concerns about rising military tension between China and Japan.
In Europe the two main German parties look set to move closer
to the long awaited goal of some form of coalition with some form of an agreement on minimum wage and pensions.
The main focus of attention in the European session this morning is the latest UK Q3 GDP numbers which aren't expected to contain too many surprises with quarterly growth of 0.8%
expected to be confirmed. Of particular interest will be the proportion of the quarter's growth that is driven by exports, as well as private consumption. More importantly for the recovery to be sustainable into subsequent quarters is that government spending needs to stay low, while the amount of business investment needs to improve from the previous number with a revision up to 2% from -2.7% expected.
The problems in Europe are expected to weigh on exports
though with that number expected to be revised lower from 3% to -1%.
Europe will no doubt continue to be a headwind, a fact that we will no doubt be reminded of later this week when we get the latest unemployment data from the wider euro area and Italy.
In another positive for the UK CBI reported retail sales for November
are expected to rise from 2 in October to 10.
Over in the US we are set to get a whole host of data
including weekly jobless claims due to tomorrow's holiday.
US economic data continues to be patchy in nature as yesterday's confidence data will testify and the release of October durable goods numbers
is expected to be a weak number with a fall of 1.9%, down from September's 3.7% rise.
Weekly jobless claims
are set to rise slightly to 330k from 323k, while the latest Chicago purchasing managers index
is set to cool down somewhat after October's blow out number.
Last month saw the market get stunned by a number of 65.9, well above expectations of 55.1 and the highest level since March 2011, as it appeared that Chicago defied the slowdown
from the government shutdown posting its largest monthly increase in 30 years, with new orders particularly strong. The November number is expected to be slightly more subdued with a slight decline to 60.6.
A good or bad number is unlikely to be enough in itself to steer expectations surrounding a possible December taper, but that won't stop the market from trying to second guess next months Fed meeting.
The fact remains anything other than an extraordinary blow out number from next week's payrolls is unlikely to prompt the Fed into action, and even then given that the budget and debt ceiling have yet to be agreed, we still haven't heard sufficient detail from the Fed as to how they intend to anchor rate expectations when they do eventually start to pull back.
The hope is that we get some movement on it sooner rather than later because you do get the sense the market is getting a little weary of it, because I know I am.
- a new high above 1.3560 yesterday suggests we could well see a move towards the 1.3620 area as long as the previous resistance at 1.3480 continues to act as support. Only a break below the 1.3480 level would then argue for a move to the lows last week at 1.3400, and then below that 1.3300. Long term trend line from the all-time highs at 1.6040 comes in at 1.3950.
- while below channel line resistance at 1.6255 the risk remains for a test back towards 1.6110. The 1.6250 level remains the first obstacle to a move higher, but the larger one remains at 1.6305 which is trend line resistance from the 2009 highs at 1.7045.
Pivot support remains at 1.6110, a break of which argues for a move back to the multi week support at 1.5880/90. It's going to take something substantial to break the pound out of its recent range, with the bias remaining to the downside. Only a sustained break below 1.5900 has the potential to target a move towards 1.5750.
- despite a move towards the 0.8400 level yesterday only a move beyond the 0.8420 level suggests the risk of a larger squeeze higher. The main support lies at the recent lows at 0.8305, but the ultimate target remains for a move below the 0.8320 level towards 0.8280, 50% retracement of the entire up move from the 2012 lows and the high this year.
- last week's break higher beyond the September highs at 100.60, now targets the highs this year at 103.75 which is the next obstacle to a move to 105.00. Any pullbacks could well find support at the 100.60 level, and if we were to break below the 99.20 level we could see a deeper fall towards 98.50.
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