Market Sentiment Remains Fragile As NYC Shut Public Schools Again

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at AmplifyTrading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin. Okay, very good morning, hope everyone is doing well. If It is Thursday, the 19th of November. Going to have a quick review of what happened last night at the close of Wall Street. Obviously, we did have a bit of selling pressure come in, particularly on the back of the fact that New York City have said they're going to lock down once again the nation's largest public school system in the city. We've also seen hospitalizations continuing to move up in the majority of US states and subsequently the death toll continues to rise at this point. Point in time requiring further restrictions. So that was one of the main news stories from late yesterday. We're looking at the charts here this morning. So in the center charts here, you can see reflected then I've got the Dow, the NASDAQ, and the S&P in the center charts going left to right. And just having a look at some of these here in a bit more detail, and I've kind of annotated them to, to really go over the the movement that's happened in markets over the last week or so. And let me just remove my camera for one moment so you can see the full chart. And this is again the S&P 500 and recent price patterns, which does give us, give us a few technical levels of interest to be monitoring as we go further forward. Uh, here then, the, the kind of framework provided by the Pfizer peak on the initial news that came out Then you've got the Moderna pop that came out, which is the weekly high. We've had a retest and fail to break above that prior high and area of resistance that we were seeing. This was in yesterday's session and around that same location of the descending kind of trend line that we've had in play here. And then the New York shutdown on the school system came out late into the close on Wall Street, exacerbated by the breakthrough of the kind of weekly range low, and that just saw some increased selling pressure momentum into the closing bell. We have reversed course a little bit, but as you can see here, we're finding a bit of resistance on the pullback at around a technically relevant level, which was the resistance that we were seeing in the middle part of the prior week's price activity around 3574.25. So that for the moment remains an upside obstacle. Any further recovery through that then you've got the pivot level at 80, and then you've got that previous weekly range low that would come in up around here at 85.75 to keep an eye on. Conversely, if we move back down on the downside, then we'd be looking at that overnight Asia-Pacific low, which is around 53.75, and then really not anything too much too interesting until we get further down toward the, the S1 and then the S2, which then starts to bring in the low end of last week's range. So definitely some key areas there to keep an eye on, on the, the S&P. And also just looking at the Dow, uh, kind of similar in a way, but almost even more technically sound in terms of the response on the Pfizer-Moderna double top, if you want to call it that. I thought it was quite interesting how over the course of the last week and a half or 2 weeks now almost of price activity. When we had that initial kind of much more aggressive spike on that first Pfizer news, that was pretty much to the tick in the Dow at the same level and of course at 30,000 if you're looking at around the futures price. Since that point then, a couple of nice trendline breaks, first on the upward move and then just capping some of the— well, on the break here that we had on Tuesday, and then capping some of the price recoveries that we've seen. And so quite a nice area there yesterday at the high, which was coming just ahead of the US entrance, respecting the trend line on the daily pivots. It's R1 and the prior high, and then we just grinded back down toward the lower end of that range, which was looking where we were going to close the day out at the bottom of that range. But then that NYC headline hit And similarly, the Dow just came under some fairly aggressive selling pressure. We have now formed a kind of base though for price movement, and that's what I'd be looking at on any retreat further in US equities if we do see that when the cash opens later. So the more nearer term range now, looking at the price activity as it stands for the moment early in the European open, is kind of defined by around 29300 and 449 on the upside, which was also that low that we had on Tuesday session. And we've, we've just seen a bit of resistance this morning already. So breaches either way again on the Dow, then looking for a push back up to pivot and then probably targeting up at around that level, which would bring back in, uh, this price activity from the high on the 11th, and then respecting of that from the initial weekly range, uh, before last night's price movement. And on push on the downside, uh, probably quite a nice area at around that S1 starts to bring in close proximity to the lows that we were seeing. Probably about 25 points below would be the low on the, um, the pullback that we had in the afternoon on last Friday's session. So yeah, um, I don't really feel too much in a way of a bias either way for these US equity markets. So kind of similar drill to what we were looking at yesterday, where I prefer kind of just marking out either side and just letting the market kind of flow and, and just following and trading what you see rather than trying to overthink it. Because it has been a little bit tricky, and we're going to talk about the dollar a little bit in this briefing, and that's been a fairly awkward one because this morning— we can talk about it now— the dollar is firmer. It firmed up overnight and it's trading up about 0.2%. So seemingly then, um, it's caused— or the dollar strength has been a byproduct of a little bit of the kind of apprehensiveness over what's materializing still with COVID cases, irrespective of the vaccine, and therefore a little bit of flight-to-quality bid perhaps. And that has weighed on some of these major currency pairs. You can see in the top left here EURUSD and Cable are both down. Cable, if anything, underperforming a little bit more, trading down about 50 pips here in the futures this morning. Now, therein lies quite an interesting thing, and what I'm going to do is I'm going to run through an update on the COVID situation, and then that will lead us nicely into the discussion about the, the dollar and vaccines. And there's some interesting articles I want to share with the Amplify Live community today. So first off then, looking at this situation in America as it stands at the moment, this is an update. They have like a page on Bloomberg which gives you the kind of state-by-state trajectory of different curves of hospitalizations, so you can track the numbers here, for example. So here you can see the actual figure, the percentage in terms of occupied beds, because things like reaching full capacity causes certain concerns in certain areas and so on. But hospitalizations, as you can see here, due to COVID-19 are rising in 51 states or territories in the US, including 28 reaching their highest number since the pandemic begun. And if we switch that over and start looking at the new reported deaths— so not, not cases, deaths by day in the United States— you can see here I know it's quite small and quite faded, but this right on the right-hand side is the November 18th print. And yesterday we had nearly 2,000 deaths. So this is what we were talking about a week, two weeks ago, about the fact that the case 7-day average now is well in excess of 150,000, that this number inevitably was going to get way above that kind of Sunbelt outbreak that we saw in the summer. The peak of then was substantially lower than the number we printed yesterday. And as you can see then, that has dragged up then the 7-day average to the highest now since May when we were kind of coming off that initial tri-state outbreak. So definitely this trend will likely continue for some time. As we have kind of said over the last week or two, our expectation is that this figure in fact does, it does top the initial outbreak over 2,000. So we are starting to see a bit of an acceleration of this at this point in time. Overnight, on a global level, we did also have Tokyo just getting a few headlines because they're raising their virus alert status to the highest level following record number of new daily cases in the city. And also overnight, just to be aware of, just covering that region. Australian employers unexpectedly added tens of thousands of jobs in October. Their Australian employment number for October came in overnight at 178,800. Expectations were for -30,000. I'm not sure how analysts could have got that so wildly wrong, but as you know, supreme number. But if you look at the Aussie, that hasn't really moved, and I think a lot of that is because if you actually scratch beneath the actual numbers and ask yourself, why is that number so strong? Victoria's tough COVID restrictions began to be lifted, of which that data covers, essentially. So state workers returned to the labor force. So I wouldn't say it's so much of an underlying renewed employment situation rather than people coming back to work, which has just inflated that number, hence the reason the lack of real follow-through. So for the Aussie, still at the moment, I'd say you want to be looking at the dollar not so much the Aussie dynamics, but that's the same case really if you're looking at the euro and other dollar-based pairs at this point in time. Um, on the COVID side for vaccines, the latest we've had this morning, breaking news coming out, um, the, the Oxford vaccine. So this is AstraZeneca Oxford University. The vaccine has produced strong immune response among elderly adults, citing data published in the full Lancet today. However, as you've probably seen, reaction is pretty small. Remember, their first efficacy data from Phase 3 trials— this isn't what this is, that's still to come out in the coming weeks. So this is talking about Phase 2 trials, so it's much earlier in the pipeline, hence the reason there's no real reaction. Secondly, there was a partial publication of this data back in October, so that's why even though it's it's breaking news and main headline in the media. It's not really moving financial markets this morning. This does then lead talking of vaccines into this conversation. And this was a good article in the FT because a lot of people have been left kind of scratching their heads a little bit. And a few things to discuss. Now, overall, we were talking a lot about the dollar yesterday. Undoubtedly, it's at a very key technical level. On the longer time frames over the multi-year perspective. We have seen though a very strong bounce from around those lower levels. The dollar recovered as we went through the late US session yesterday and it's gapped up again in terms of in the overnight session. However, that doesn't detract from the point that the dollar relative to the pandemic is down about 11%. Now a lot of that is coming of course because of an extension of unprecedented and large commitment of monetary policy easing in various different forms. And the idea being, generally speaking, it has been pressuring the dollar even further recently. Again, X-ing out the last 12 hours of movement, uh, is the fact that if COVID is getting much worse and activity mobility in the US is going to decrease as restrictions kick in, then economically their economy is going to deteriorate and the Fed are going to have to do more in some shape or form whether verbal or physical. So therefore, the dollar continues to weaken in this extent. The other thing that I thought was quite interesting, I was having a discussion with Tim in the Amplify Live room yesterday, and I was looking at generally the eurozone. Now, France reported some 28,383 new cases yesterday. So still quite a large number, but the weekly pace of infections uh, is continuing to head lower at this point in time. Hospitalizations and a number of severely ill patients in intensive care units fell for a second day in France, and ICU occupation rates are now falling at their most since May of earlier this year, so a couple of months ago. Um, Italy registered 753 deaths related to COVID yesterday. That is the biggest daily increase in over 7 months. However, the region around Milan, infections are actually slowing. If you remember, that was the region— new cases in Lombardy— where the original, original ex-China outbreak that happened when the epidemic was first taking hold. New cases in Lombardy fell about 10% yesterday versus Tuesday. Geneva as well, just to name another place, began relaxing its COVID restrictions beginning November 21st. So 2 days' time following a plateau in cases. And this is something which was kind of slowly emerging last week, which is this idea that Europe is, is front-running America because of the fact that they've generally taken more quicker and proactive action in order to offset then the rising case numbers that they've been seeing. And so the fact that those were implemented a couple of weeks ago, we're now starting to see the effects of that, which is a plateauing of case numbers. So although deaths are still rising, plateauing is quite a positive thing that the markets will be looking at, that ultimately then deaths, hospitalizations should follow suit. This is quite contradictory to what we're seeing in America at the moment, where they are chasing their tail somewhat. They're slow to react, and therefore the measures that have been taken in NYC last night or in other areas that we've seen since really this week on a state level started to kick in, that's not really going to happen in terms of the real success of that or not to, to try to mitigate this surge of virus cases. We're not going to know that in the next 2 to 3 to 4 weeks. So until then, numbers are going to continue to go, to go up. And this, this creates quite an interesting divergence then if you're looking at the virus being the main catalyst for generally dollar movement, is that then do you start to see a divergence between more favorable economic kind of expectations around the eurozone as it gradually reopens against negative US as it goes into lockdown— complete opposites of one another. And does that then put further downside pressure on the dollar, but equally so helps provide some under— underpin support for euro appreciation? Throw in the mix in the coming weeks a Brexit deal whether that comes now, next week, or at the end of the year, into what would be a very challenging situation in America that might require more monetary easing. With that Brexit kind of lift, if they— if we do get an agreement, which is the base case scenario, is that trigger point then to break those long-standing key levels in the dollar, of which if broken, we could see a substantial move lower. So A lot of this is— I'm not saying intraday. I mean, look, remember the golden rule, day trading, you know, you trade what you see. And at the moment, the dollar's rallying, so I wouldn't, I wouldn't want to go against that trend for now. But ultimately, the top-level view over the medium term is that I think the dollar's got room to weaken. And there's a couple of other banks with a few other added points here that I think I just want to cover. That add a few more kind of ideas around this, this thinking. And so one of these is then a Bloomberg analyst kind of survey that they've done. Investors anticipate the dollar index will slip roughly 3% from its current level by the end of the year. So don't forget then that that's going to put the euro, for example, up at some pretty interesting levels as we get back up to around that 120, an area of concern central bankers have said before. So this could, could have interesting repercussions if that were to happen. But remember, that's a consensus forecast over a number of financial institutions at this point. So most the market is expecting the dollar to weaken from this point out, and probably accelerated by that technical break that we we were looking at. Now, Citigroup have come out and they expect that the US Federal Reserve will continue providing stimulus to the economy and err on the side of caution before considering interest rate increases, even as the global economic recovery speeds up. That could encourage investors to find a home for their money elsewhere, as rising inflation expectations in the US reduce the dollar's relative attractiveness and investors target faster-growing countries that may tighten monetary policy sooner. So really, we can look at history as a precedent, although the Fed perhaps a slightly different composition to what was steered under Janet Yellen's tenant position as Fed chair. But the idea being is that the Fed are going to be highly reluctant to tighten anytime soon and to give any hints that that would be done anytime quickly. Uh, so therefore those other places in the world might be quicker to respond, and therefore you could get more favorable, favorable currency exposure, which by the net result then could be a weakening factor for the dollar. Um, separately, buying into US markets has been almost unavoidable over the past decade according to analysts at Goldman Sachs, as corporate profits boomed and Fed raised rates while other central banks stayed closer to zero. Remember, the Fed raised rates almost 9 times in the post-financial crisis era normalization, whereas pretty much everyone else didn't even raise rates at all. This has made their currency expensive, setting up for large falls ahead. According to the co-head of Goldman's FX research team, Goldman's expect the dollar to slide 6% on a trade-weighted basis over the next 12 months. They've added that vaccine developments are sufficiently positive that most investors should be positioning for dollar weakness. And they're looking at that in respect to the fact that if then a vaccine comes forward, there's no need for any of this kind of flight to quality premium kind of status that the dollar might hold, and therefore consequently it should weaken. Allied to the fact as well that they were talking about in regard to the currency being generally expensive looking at a longer timeframe. So yeah, a couple things definitely to think about there. I'll share this article so you can have a read yourself, but definitely worth checking out. Moving on though and getting through the rest of the headlines, this came out last night. I'm not sure if I shared it on my Twitter, so, you know, feel free to follow me. I'm generally tweeting throughout the night as well. But England will need 5 days of lockdown for for each day relaxed at Christmas. Now, the, the— this is coming from senior government health advisors, and they warned last night that England would need 5 extra days of lockdown measures to stop infections spreading for each day they are relaxed around the Christmas period in order to allow people to see their families. So applying the kind of math, it kind of works out. Pretty much perfectly, given that the end deadline is the 2nd of September for the current state of national lockdown in the UK, that if you were to roll over exactly 3 weeks, that would land you pretty much then at Christmas Eve. And then if you had Christmas Eve, Christmas Day, Boxing Day, which is obviously in the UK the main kind of, uh, point of Christmas where people would probably congregate as a family and friends, that would mean we'd need to be locked down between pretty much a rollover from the 2nd of DEC out to Christmas Eve, uh, effectively, or the eve of Christmas Eve. So just saying that now, uh, it probably means that we've got another couple of weeks added to this 2nd of DEC deadline. Uh, again, it's not surprising, uh, to be honest. But one thing it does mean is that obviously this does have repercussions in terms of the economic implications for the UK economy. And so that, compounded by the fact that as much as most people think there will be a Brexit deal, until there is one, no-deal risk is ever present and actually would probably be— start to be priced in a little bit more as we get closer towards the end of the year. So the two things in combination could be quite interesting. At the moment, I guess the reprieve for the pound is coming from the weakness in the dollar. On a more broader context, but something to be mindful of. Um, all right, let's have a look at the calendar for today. Um, so in terms of UK, European scheduled events, it's very quiet from a data perspective. There's nothing really worth me commenting on. We get into the afternoon, we get the weekly jobless claims for the Fed, existing home sales. As I've said, every day this week normally these data points would be perhaps interesting. The one thing that I think would be quite interesting going forward, if I just go on to Trading Economics and quickly bring it up, so just bear with me one moment, but is the initial jobless claims. Now I don't think they're particularly important for today, but if we were to look at them in the context of how they've performed over the last 12 readings, which takes us back to that kind of Sunbelt outbreak where they were tracking around a million, we've continued to decelerate, which is a positive thing. However, given now the lockdowns that are being implemented and the situation unfolding with COVID in the US, my expectation is that this number will start to go up in the coming weeks, and that will likely continue into, into the year end. The question of how markets more and the Fed in communication might respond is how aggressively does this number start to go up, you know, it's re-accelerate in that sense. So yeah, as far as the, the data is concerned, I'm not, you know, Philly Fed, again, existing home sales, they are naturally macroeconomic-wise important, but in context, I think markets are more concerned about the present and the current, and more again high-frequency data as to obtain then the implications of what's happening at the moment overall. From a speaker's perspective, yeah, a couple things. You've got Fed's Mester, ECB's Christine Lagarde, and Schnabel speaking as well. Again, Lagarde, I think this is her third outing of the four trading sessions we've had this week, so I'm not anticipating anything really out of her. There's no need really to say anything new on policy, but nonetheless, when the president speaks, it's worth just keeping an ear out when that speech begins. And that's it. So gonna leave it at that, let you guys get on with the day. The guys will go through in Amplify Live the full technical and trade setups to accompany my kind of fundamental analysis. But yeah, As I said, have a look at those, those equity charts. There's a couple of, uh, quite key levels I think to keep an eye on, both on the down and upside. Not having too much bias at the moment, but looking at the general setup of things, the dollar strength, equities a little bit softer, would be indicative then of markets being a little bit apprehensive at this European open, and that dollar strength is weighing on the likes of the major currency dollar pairs. But also, just to finish, it is weighing on gold as well. And as you can see here, gold is having a retest of the low we printed in the late Asia Pacific session, which is quite interesting because if you look at the dollar movement and gold, it generally has been inverse. Rather than gold acting as a safe haven. And here you can see this is when gold got absolutely crushed on the back of the initial Pfizer news, on dollar strength and the kind of silver bullet that people were initially in a knee-jerk reaction looking at that Pfizer news. We know that's not the case, but here then we're coming back down in close proximity, only around $10 of testing that then low that we saw on the same days, uh, on that price action. That is also the low that we were printing here that you can see in around mid to late September. So key levels here for gold that are in sight on the intraday that if broken, things could get heavy very quickly if we see a continuation of this dollar bounce that's materialized in the last 12 hours. Target there would be around $1,820 which is around the top of the price action we were seeing, uh, when, uh, this area here is when we were seeing the US surge in cases in the likes of Texas, Florida, California. And that was when we broke at the time that double top that was holding the tri-state outbreak. So again, you can see how kind of COVID-related it's all been, um, in terms of this cross-asset class mix. All right guys, I'm gonna leave it at that, let you get on. Uh, have a good day, stay safe, and I'll see you tomorrow.