This Week In Markets: 9th - 13th November 2020

Hi there, my name is Anthony Cheung. I'm the head of market analysis here at Amplify Trading. If you'd like to access our private chat room to exchange trade ideas with professional traders from around the world, then check out Amplify Live by following the link below. Okay, very good morning to you. Hope you had a great weekend. It's Monday the 9th of November, just coming up to 7 AM here in London. And going to have a quick rundown of the weekend news and summary and look at the key events to be aware of for this trading week ahead. Also going to cycle through a couple of the charts because some quite interesting levels that we're trading at the moment, including the fact that US equities in regards to NASDAQ 100, the S&P 500, are in striking distance again of record all-time highs. This of course comes after— you're seeing here on the screen— Joe Biden has been announced more formally now as winner of the US election. So we can have a look at that and what that means going forward. So let's get straight into the charts, starting off with— I just locate my mouse. There we go. So yeah, very much a trend-wise similar theme to last week post the election. So equity index futures generally higher, just coming off the peak now, but overnight in Asia, uh, that Far East, kind of Asia-Pac region following suit. Uh, US futures, the NASDAQ's already up over 250 points. The DAX up, uh, well, the Dow future up 330 points. Uh, consequently the DAX up about 224 after gapping higher this morning and finding a little bit of resistance around its R2, uh, in the overnight Asia-Pac session. Uh, dollar a touch softer, so the pairs in the dollar-based market slightly supported by that. Euro-dollar and cable up around 10 and 25 pips each respectively. Oil price is also up just shy of $1 as well in the general theme that's been ongoing, which is still the Biden victory, just overall some positivity on the back of that. And T-notes pretty flat for the moment. So going through a couple of these charts then, a few things I wanted to have a look at, and going to start with generally the equity market, because that really was quite the driving force of price activity and sentiment last week. And as you can see here, the NASDAQ 100, pretty much as soon as it reopened trade on Globex, just shot higher through the first couple of hours of Asia-Pacific trade. And I've just marked up here on an intraday chart a couple of key kind of technical levels to keep an eye on. One being the more near-term area of support, of which the market has found a bit of a floor and a bounce as Europe has come in. And that was the initial kind of support level after the surge higher that was seen, a recommencement of trade. So I think that would be quite a key area to keep an eye on. A break of that, markets could be quite heavy back down. Probably the next target would be around that S— or what would be R2 here, then turning support around that previous um, spike high as well we had just before midnight London time. So kind of a pretty break there, looking for support there. And if not, then we might see further price response at around those initial lows seen around these candles to some of the overnight activity. And then really not a great deal much until a much stronger level which was down towards the peak of price activity on Friday's session, which was tested on multiple occasions. Around 12,119.5. Uh, consequently then, the daily high now seen up at around 12,409 to keep an eye on. But if we change this to a daily continuation, there's a few other things we can have a look at here as well, one being that how close we are now to retesting the all-time highs. Here it is, right up at this level here. and we are within striking distance. And could we hit that within this session? Well, you've got about another 110 to go till we get there, so definitely could well be the case. But you can see the acceleration we've had since the night of the election. It's been quite incredible really. And the overall main factor driving the push higher, of course, has been these mega-cap tech names once again. As you can see here, the FT talking about the kind of FANG trade back on after the election. You can see across the board Apple, Microsoft, Amazon, Alphabet, and Facebook have all taken quite a distinct V recovery from what was a little bit of selling pressure in the week prior to the election to fully retrace and some on that move, uh, given the fact that obviously a split Senate, although we've had a Biden victory, does tie his hands somewhat in being able to aggressively change legislation. Inflation, which is seen short-term as a good positive catalyst for those, those stocks. In addition to many other things, such as things like COVID-19 still progressively worsening at this point in time, which tends to play more favorable to these mega-cap firms who are better positioned from a business structure point of view under those types of circumstances. So mega-cap tech continues to push on. So yeah, that's kind of the intraday and more Longer-term picture, definitely going to be keeping an eye on that all-time high. Would not be a surprise at all whether today or this week to see that getting retested at some point. I definitely think, you know, people talking about how stretched now valuation— valuations are becoming again, it's kind of like, well, we've been here many times before where valuations have been stretched and we've continued to push higher. So I don't really think that's too much of a, an obstacle looking at the market from that particular point of view. Um, here in the S&P 500, again, just put a rectangle box here, very close to retaking those all-time highs that were seen around the beginning of September. Just zoom in a little bit here. We'd have to get up to around 3586.5, and we're trading only around 40 points away from that at the moment. So again, given we're this close, it would seem unusual not to at least have a little knock on the door at around these all-time highs. Given how quickly the market's come up, I still don't see any reason for an aggressive pullback without first at least having a bit more of a proper test up and around those levels. The currency markets, as I said, the dollar is a little bit weak. And one thing I wanted to have a look at here was, I mean, this is EURUSD on a much more focused 30-minute candlestick. And you can see here we're just breaking up to fresh highs actually as Europe come in early doors. Just breaking above the Asia-Pacific range high here. But looking on the daily chart for the euro, it's quite a key area. This was the high that we had back on the 21st, and you can see here, I'm just going to mark this up from previous highs that we've seen. So this was September, uh, kind of a zone really here between, um, what was about 1.119 kind of handle to 1.124, which was the highs you can see here and here. And so EURUSD at risk now of, of technically breaking out of this kind of near-term range that had capped the price activity really throughout the last almost 2 months or so. So any further upside definitely would be of interest to then monitor ECB commentary, despite the growing expectation of them to deliver more monetary stimulus coming the end of the year. That doesn't at the moment counteract what has been an upward-moving EURUSD pair on the back of dollar weakness that was so predominant last week. So worth keeping an eye there as well. Key levels in the euro, also the pound. I'm going to talk about some Brexit articles and get you up to speed on a few things. But again, cable, the benefactor of, of just a weakening dollar at this point in time. As you can see here, similar type of setup, just retesting the overnight Asia-Pac high. And looking on a daily continuation here for, for sterling currency, uh, it is quite a key level actually. You can see here there was that high that we printed going back to, uh, 21st of October. That was when we shot higher on the resumption of Brexit talks after Boris had been threatening to walk away from the deal. We also had other periods as well where the government imposed new restrictions within the country. So we're just having a test and, and perhaps a look above there. Now you can see these were previous highs that we were trading, uh, back pre-pandemic and also on the recovery highs that we were seeing in early August. So any break here, uh, again does look quite favorable for a continuation of a decent move higher in cable from here on out. Now we can break out of this particular range capped by 3182 in the futures to So again, across these charts, equities and the major currency pairs, some, some relatively interesting levels. Then gold has come off a little bit here just in the last 20 minutes or so, really, as, as the UK European traders have come in, just getting rejected off a high around 1966. On a longer time frame chart though, to add a bit of perspective, Obviously, the weakening dollar has been the main assisting factor for helping support gold appreciate fairly sharply last week post the US election. And really, these are key levels I'm looking at. I mean, gold trades such a, such a big range at the moment. I think it's worth just isolating these, these more significant levels further out. And on that point, I would say that the October, mid-October high and the retest we had on the 21st, and the area which, when broke, we saw an acceleration of a good $20 for a pullback to the same kind of spot last week and around the 6th. And so that's a pretty good area of support downside, I think, to, to kind of act as a framework for the price going forward in the coming sessions. And consequently, on the upside, you've got to go really all the way back to where we were trading back on the 16th of September which is when we were up around 1983. So medium term, over the coming days, kind of looking at a range of around the 36-38 zone of support up to around 83 on the upside. But that's going to be price direction chiefly dictated by movement in the US dollar. All right, quick look then at a few different things. First of all, in the overnight session, just to get up to speed, we did have some trade data coming out of China at the weekend. Their trade balance coming in higher than expected, 58.44 billion against expected 46. Exports topped estimates, 11.4% year-on-year against 9.3% expected, but imports disappointed, 4.7 against 9.5. Overall, I wouldn't really say, other than me just saying this for you to be aware of, it doesn't need to be factored in beyond that point. Um, Chinese data at this point in time is kind of being superseded by just other factors at play, which is the general market direction derived from the post-election kind of atmosphere at the moment. Um, having a look then at, at Joe Biden, uh, just going back here to, to what we can expect. So Biden plans to name a 12-member coronavirus task force on Monday. He'll also reach out to Republicans and Democrats in Congress to discuss a new relief package, with one Biden ally calling on Trump to support one before Biden is sworn in on January 20th. Yeah, all I can say is good luck with that, trying to get Trump to agree with you on a new relief package at this point in time. Obviously, any ongoing legal disputes coming of the way of President Trump are of little significance I think, to either the outcome of the election. I just saw a tweet this morning that betting markets are still putting around a 6 to 9% probability of Trump winning. This is irrespective of the fact that it's already been formally announced that Biden has won. Uh, I guess the betting market giving some opportunity for a punt that perhaps then these legal disputes, uh, tantamount to something more credible. But I would say that there's very little chance of that happening, if none. Overall then, I think market sensitivity to Trump making all of these noises is pretty, pretty much insignificant for what you should be looking at from a day-to-day perspective. Um, a few other things then, looking at this, what we can expect then going forward is a little bit more commentary perhaps on the COVID situation in America. And as I said, Biden today is going to plan to roll out a 12-member coronavirus task force as soon as today. And this is very important because this is looking at new reported cases in the US, and the US has reported some 131,420 COVID new cases as of Saturday, has reported over 100,000 infections 5 times in the past week. Florida reported the most daily cases since since August, just over 6,500. However, it's worth noting that that Sunbelt region was hit before, if you remember, in the midst of the summer, and the current number, just shy of 7,000, is still much lower than the 15,000 peak that we saw back then a few months ago. US deaths, so this is this graphic here, they remained at more than 1,000 for a 5th day, a streak that hasn't been seen since last August. August, which is around that Sunbelt breakout that we had. So overall, obviously the, the death count at 1,000 and consistently remaining at that point is definitely not a good thing. However, where we were, we were north of 2,000 in the peak of the initial first wave. So when it comes to really the most impactful things for markets, definitely Goldman Sachs were talking about this as well in the research note of the weekend. Probably vaccine news, now the election's out of the way, will start to gain a little bit more, um, kind of focus overall, just given we're coming in towards timing towards the end of the year and people hopeful of timings around Q1, Q2 and what the state of play is on that side of things. So continue to monitor anything with regards to headline vaccine news. And then the other thing is, is about any impending lockdown of what Biden might look to to kind of enforce going forward. Now, he has said before, if you remember, that he will kind of lean on scientific advice to be the guide, and many people thought that was a sign then that he would lock the entire country down. Whether that is or is not the case, I'd say this death count, in step as well with hospitalization rates across some of the key areas, particularly in the Midwest at the moment, is going to be quite key to monitor about how close that we might get in order to seeing more statewide lockdowns taking place. At the moment, on a national level, as you can see here, that if you remember, there were some reversing of the current reopening that was happening during May-June time when we hit that Sunbelt peak, but there was not a full national lockdown like what we saw in April-May. And of course, this is important because this will impede— obviously, the more restrictive the measures the inability for the— or the ability for the US economy to continue to kind of progressively recover. And so definitely that's a key narrative to keep an eye on going forward for sure. Quick look elsewhere. Brexit, a fairly big week for Brexit in fact, because Britain and European Union have until basically Sunday of this week to try yet again to hammer out a Brexit trade deal. Michel Barnier, the European negotiator, has said at the weekend, has warned of very serious divergences. This has led to Dominic Raab, as per the headlines here, he's been commenting that Boris Johnson's government has reassured Biden's team that the UK has no intention of imperiling Ireland's peace process and Good Friday Agreement. And he said, hopeful of a trade agreement could be struck with the EU this week, though he reiterated key differences remain on those sticking points of regulations and fisheries. So why is RAB commenting on Biden? Well, this was something that was talked about in things like the FT last week, is that a Biden presidency puts a slightly different complexion on things because it's very important for the UK to be able to cut a deal with the US. And obviously Boris has gone out of his way to try and form a fairly close relationship with President Trump. However, completely different kettle of fish when it comes to Joe Biden, who tends to be more sympathetic with the Irish and therefore, as a net consequence, jeopardizing the Good Friday Agreement or installing any type of form of physical barrier on the border between the Republic and Northern Ireland would be a no-no in terms of the US then entertaining a trade deal with the UK. Separately as well, Biden has said that, according to sources close to his team, that really striking a trade deal with the UK is really low on the agenda overall, and probably understandably so for the US in the form of just tackling things like coronavirus and a stimulus bill at this point in time. So they're probably not the most favorable for the UK situation overall, but that doesn't mean that I'd necessarily have a bearish opinion about cable this week because at the moment it's still being overridden by the fact that dollar weakness is helping elevate the pair more than anything, irrespective of the growing risk perhaps of a no-deal type price scenario increasing over time. The other thing to be aware of with Brexit and headlines this week is the internal market bill. It is set to be overturned in a series of votes in the Upper House of Lords today. The government is expected to keep— fight to keep the provisions when the legislation returns then to the lower House of Commons. So the way it kind of works is the Commons make a decision on the Internal Market Bill, they pass it, it goes up to the Lords, they then make amendments, it goes back to the Commons, so on and so forth. So quite interesting because this particular piece of legislation, of course, is what really got the backs up of European officials, and we just so happen to be going into these crucial talks while all of this is happening domestically. So definitely Brexit headlines will probably be back in the forefront again of the national press. In summary, overall, there is this deadline looming on Sunday the 15th, and a lot of that is to do with giving enough time to be ratified in both UK Parliament but also in Brussels for the end of transition on December 31st. But personally, I think, will they strike a trade deal this week? I think on the balance, no. Do I think they will get a deal done to avoid a no deal at the end of the year? Yes. I just think that there's still a little bit of time on the clock to play with as far as negotiation is concerned, despite the kind of deadline nature of being ratified. I think at the end of the day, if they can cut a deal closer towards the end of the year, there's always time for it to be ratified with a kind of grace period, if you want to call it that. So yeah, I'm not too hopeful about that, the breaking the deadlock, if you like, on some of these key issues. But I'm sure there'll be some headway made towards a compromise. I guess the thing to look out for from a trading point of view is if they don't and we start getting towards Friday's session, you might see a little bit of weight come in from a sterling fundamental. It's probably going to increase from a certain point of view. And the other thing to look out for is perhaps we get kind of this breakthrough type source commentary, the market rallies, sterling positive, but also in the context of weaker dollar. Then it gets refuted and we come back down. So these are the sorts of things that you could anticipate throughout the week in regards to Brexit. One final thing I just quickly want to mention was the RBNZ, Reserve Bank of New Zealand. The only reason for this is we do have an interest rate meeting coming up and their governor is expected to lay out plans on Wednesday. I believe it is happening to provide cheap loans to banks, giving them scope for further or to further reduce lending rates. The Funding for Lending program, otherwise going to be called the FLP, could begin within weeks and is seen as a key step toward the Reserve Bank cutting their official cash rate to negative territory next year, according to several analysts. Their interest rate currently stands at 0.25% and their QE program at $100 billion Aussie— um, Kiwi dollars. The actual policies themselves on rates and QE is expected to be unchanged, but the rolling out of FLP then is seen as the next progressive step towards, if required, then negative rates coming in the future into 2021. So worth keeping an eye on that in the overnight session midweek. Taking a look then at the calendar, what have we got? Well, the week starts off fairly quiet from a, from a data point of view. A couple of speakers though to be mindful of, and in fact the Bank of England Governor Andrew Bailey speaks several times this week, but himself and Chief Economist Andy Haldane are talking today. And it's always quite interesting when these chaps talk. 10:35 for Bailey, 2 o'clock in the afternoon for Haldane, just given a lot of the focus on the BoE of late. Of negative rates. I would say sensitivity to that discussion may be lessened a touch, just given the close proximity of the latest BoE meeting, where of course they expanded their QE program by something more than expected, £150 billion. I'd say the rate— negative rate talk then is kind of on the table, but a little further down the road, just seeing how this plays out with this current lockdown that we're experiencing, COVID case rises apparent in the UK at the moment. So not expecting a great deal, but again, worth keeping an eye out or an ear open for, for those speeches. But otherwise, pretty quiet today. Tuesday then, we do get quite a few UK data pieces actually coming out. So Labour data comes out in the UK on Tuesday, as you can see here. And then we then get preliminary Q3 GDP numbers in the UK on Thursday. In terms of the, the jobs data, uh, there has seen a methodology change to the Labour Force Survey by the ONS to correct for lower response rates of renting households during the pandemic, which has resulted in more of an uptrend, um, in unemployment this year. Um, so that's something to be aware of. We do see quite high numbers, but overall not something that I think generally is going to move the market a great deal. GDP, it is expected to mark the biggest rebound on record. But again, I don't really think that GDP data looking back to a previous period, I think, pales in significance to what we're— what investors are looking at, which is what does Q4 look like, particularly given the fact of the COVID case rising resulting in the current lockdown that we're in now, which is taking us all the way through December as well. So I don't really think the GDP the GDP data in particular is that important for the UK, albeit it will probably make some headlines in the press. And I don't think the jobs data either particularly carries too much weight. So that's really the, the main factors coming out on Tuesday. You also get the German ZEW survey, which is always something that people look at, kind of secondary to IFO, because rather than companies, this is economists and analysts forward-looking expectations. But anything forward-looking is obviously quite interesting, just given also Germany is experiencing its own COVID surge at the moment and restrictions. Wednesday, the, the RBNZ, as I said. Otherwise, not a great deal going on. And then Thursday, we get the GDP number out of the UK, but we also get US CPI. Uh, again, US CPI, uh, obviously an important number in more traditional terms, but largely uninteresting with little wage pressure at the moment, with unemployment still very high, generally speaking, in the US. And so I don't really think that really changes the narrative at all for the Fed, having heard from them just last week. And then Friday, you get the eurozone GDP preliminary for the third quarter, kind of similar case, I guess, to what we've just described in the UK. And you get the Bank of England governor speaking again. From a speaker's point of view, Christine Lagarde will give an introductory speech a speech on Wednesday at a 2-day ECB forum on central banking. She'll also take part on a policy panel Thursday with US Fed Chair Powell and Bank of England Governor Bailey. So perhaps of all of them, given we've already heard from Bailey and Powell a lot last week, perhaps Christine Lagarde could be an interesting one to watch given the context of how high we are and technically the prospect of potentially more euro strength on the cards if we breach those levels in tandem with the continuation of the weaker dollar should be one to look out for in terms of trying to counteract that strength, which we've seen before with their concern about a particularly strong euro. So my overall summary here is the calendar is pretty quiet this week. There's not really a great deal of major releases. If there are, like the GDP numbers or ZEW or the the labor market data come out of the UK, they're kind of shadowed just by other macro issues that are ongoing. So overall, um, the continuation of the theme at the market open over the Biden victory, uh, so still keeping an eye on those tech names to probably drive markets. Some all-time highs in close proximity in those US indices. Oil's kind of supported by a similar type of mentality in that way from overall demand perspective. Similar with the dollar today. So quite interested when the US come in, we're at some key downside support levels. Does that propel those currency pairs higher once again? Brexit back in the spotlight. I don't think a great deal is going to come out, but some risk of some headline noise as the week progresses and we close in on that more soft deadline at the end of the week. And then COVID-19, we continue to track, particularly in the US and any response from this coronavirus team about the subsequent plans that might materialize when Biden does come into power, about how he tends to deal with that and the implications for the US economy. All right, that is it. Um, any questions at all, feel free to get in touch, just leave a comment, uh, and have a great week ahead. All right, I'll see you tomorrow.