The market is licking its wounds after US equities were hammered lower at the end of yesterday’s session. The move came as traders followed the game plan from last week by selling the good news released on Monday concerning vaccine developments. The dynamic speaks to the uncertainty in markets as the future concerning the economy remains clouded in mystery. The narratives have not changed in 24 hours. The worry of rising Covid-19 cases, a crumbling health system, lack of fiscal support and the threat of new severe lockdowns is countered by vaccine developments and monetary policy action. In the US the Senate is preparing to go on recess, meaning that there is no chance of fiscal support in the immediate future. The Covid-19 death count in the US surpassed 250,000 yesterday, sending a shiver through markets ahead of what is likely to be a bleak winter. Markets also reacted to the announcement that New York City schools would close. New York City Mayor de Blasio tweeted that “New York City has reached the 3% testing positivity 7-day average threshold. Unfortunately, this means public school buildings will be closed as of tomorrow, Thursday Nov. 19, out of an abundance of caution.” Elsewhere in the US, Senate Majority Leader McConnell said that the Democrat’s aid package has no chance of becoming law. Fed Member Williams said yesterday that the loss of fiscal support could slow the economy in the coming months. His colleague, Fed Member Bullard said that the economy as a whole has adapted very well and monetary policy has been exceptionally effective. Fed Member Barkin said that spending is coming back faster than jobs and a divided government looks highly likely. Geopolitically the EU is advancing its preparations for a no-deal brexit. “We must now come up with contingency measures. January 1, 2021 is getting close; we need a safety net,” a senior EU diplomat said. The Japanese 225 closed lower by 0.36%, with the Shanghai Composite Index trading higher by 0.3%. The Hang Seng Index is trading lower by -0.5%. European Futures are pointing to a fall of -0.6%. USDJPY is trading at 103.870. Gold has traded to 1863.00.
On the calendar today, UK CBI Industrial Order Expectations are expected to fall to -39 from -34. US Unemployment Claims are expected to come in at 707K from 709K. Philly FED Manufacturing Index is expected to decline to 22.0 from 32.3. ECB President Lagarde is scheduled to speak at an online event hosted by the Women's Forum.
The USDJPY has sold off again after it found resistance at the 105.678 level last week with a move that took price down to 103.660 area. Support may be seen around the 103.850 area followed by 103.500. A loss of this area opens the way to 103.300, with further support at the 103.150 level, which is followed by 103.180 and the 103.000 area. The 102.800 level may also provide some support on a break of 102.750 followed by the 102.500. This is in turn followed by potential support at 102.275. The 102.000 level may be used in price break these potential support with a view to testing down into 110.000.
In the short term the 104.000 area is providing resistance followed by 104.500 and 105.000. The 105.500 area is acting as resistance followed by 106.000, 106.500 and the former support levels at 106.680/106.630. Above the 107.000 round number, the 107.680/107.600 area, may be used as resistance, followed by 108.000 and 108.480, with the 109.500 area above. A rally above the 109.500 level may seek to take price up to engage the 109.700 area of resistance from December which is followed by the 109.850/110.000 area. This area has acted on price in the past and was retested as resistance in February, with a breakout to the high at 112.227. The lower high at 111.700 may also act as resistance. A break above this area may open the path to the pair potentially attempting to gain a foothold above this resistance and establish a base to engage the 113.000 area. A break above this level may seek to test the 114.000 level followed by the potential resistance at 115.000.
The EURGBP chart is showing that the pair has broken down from the March high, 0.9500 level and is currently trading around 0.8950 after finding support at 0.8865. The pair tested 0.9292 early last month but has been continually pushed back down since then creating a series of lower lows and lower highs. The pair is now trading below the 0.9000 round number, consolidating its position and it is still probing the wider 0.9000 area. Support has been re-established at the 0.8865 area as the key support as the June low. Support at 0.8813 is followed by the 0.8750 area and the 0.8700 level. A loss of this level may push price down to 0.8660 level. Support may be seen at 0.8645 followed by 0.8620/0.8600. Below this level, the 0.8500 area may be supportive again, followed by the 0.8412 area. The low at 0.8276, from December 2019, and then the 0.8250 level may also be used as potential support for the pair.
Resistance may be used at 0.8975 followed by 0.9000 area, with a lower high at 0.9068. The area above 0.9100 may continue to offer resistance, with a focus on 0.9150 followed by 0.9177. The 0.9200 round number may provide further resistance followed by the 0.9235 area. A move back higher from there, targets the 0.9250 area, followed by the higher high at 0.9275. Above this area the 0.9290/0.9300 area comes into play followed by the August high around 0.9323. The current high at 0.9500 remains the level to beat for buyers. A break higher may seek to test the 0.9550/0.9560. Beyond this the potential resistance area at 0.9620 might be used ahead of the 0.9700 level. The next area of interest may be found at 0.9720, followed by 0.9750 which may also be used as resistance to any potential move higher, while above the area the 0.9800 area may further resist attempts to push price up to the 0.9900 level. The round number level may also come into play at 1.0000.