Asian Stocks Talking Points:
- The US Midterm vote held most of market attention through Wednesday
- Stock investors seem to like what they see so far, with most indexes higher
- The US Dollar inched down however, in a quite subdued session
Find out what retail foreign exchange investors make of your favorite currency’s chances right now at the DailyFX Sentiment Page
Asian stocks traded higher almost across the board on Wednesday as US Midterm election results filtered in.
News channels have called the House of Representatives for the Democrats, with the Republicans still expected to hold on in the Senate. Such a result would presumably increase the chance of legislative pitfalls for the Trump administration, but stock markets gained nevertheless, as their Wall Street counterparts had on Friday.
Such an electoral outcome is not expected to undo tax cuts or curb efforts to reduce business regulation- things stock investors have broadly praised. However, it probably won’t do much for the current trade impasse with China either, and a stronger Democratic showing in Congress is likely to mean more pressure for investigations into the various controversial aspects of the current White House.
Still, stocks seemed to take the result in their stride. The Nikkei 225 had added 0.4% by the middle of the Tokyo afternoon. Shanghai was up by 0.3% with the Hang Seng up 0.7%. Sydney’s ASX 200 climbed 0.4% with Seoul’s Kospi the standout loser. It was off by a similar amount.
The Nikkei remains just about in the daily-chart uptrend that began in late October. However it has so far failed to top its previous significant high, and appears to be losing a little steam.
A daily close below that channel base will put all recent progress in doubt and may return focus to the October low of 20,740.
The US Dollar was a little twitchy against major traded rivals but didn’t move far either way in Asian hours as the Midterm results came out. It seems set to end the local session a little lower, but not by much. Against both the Euro and the Japanese Yen the Dollar is more or less where it started on Monday, despite some whipsaw action through the Asian morning.
The Federal Reserve will give its November monetary policy verdict on Thursday but no move is likely so close to major elections, even were the Fed minded to make one. December is still seen as the most apposite time for another rate rise.
Still to come on Wednesday’s economic data calendar are German industrial production figures, Eurozone retail sales, US mortgage application levels and crude oil inventory data from the major transport hub of Cushing in Oklahoma.
Resources for Traders
Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.
— Written by David Cottle, DailyFX Research
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Crude Oil Weekly Technical Outlook– WTI Plunges to Fresh Yearly Lows
In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. Oil prices have continued to plummet with crude attempting its sixth consecutive weekly decline into a critical support confluence at the yearly lows. Here are the key targets & invalidation levels that matter on the Crude Oil (WTI) weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
New to Oil Trading? Get started with this Free How to Trade Crude Oil Beginners Guide
Crude Oil Weekly Price Chart (WTI)
Notes: In last month’s Crude Oil Weekly Technical Perspective we highlighted a critical support confluence at the lower bounds of a multi-year formation in price around 67.83. A break lower in late-October has fueled a decline of more than 23% from the yearly highs with price now targeting the next major support hurdle at 57.45–58.10 – a region defined by the 38.2% retracement of the 2016 advance, the 2018 opening-range low and the lower parallel of the descending pitchfork extending off the yearly highs.
The focus is on this critical range with the immediate short-bias at risk near-term while above 57.45. Initial resistance stands at the yearly open at 60.06 backed by the median-line / August low at 64.40 (near-term bearish invalidation). A break / close lower from here risks accelerated losses in crude prices with such a scenario targeting the 55-handle backed by the 200-week moving average around ~52.25.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line:Crude Oil is approaching the first major support confluence at 57.45–58.10. We’re looking for a reaction here with a break / close below targeting subsequent objectives towards the 200-day moving average. From a trading standpoint, a good spot to reduce short exposure / lower protective stop – be on the lookout for a possible near-term exhaustion low. That said, this is a make-or-break level for crude at downtrend support; watch the weekly close for guidance. I’ll publish an updated Crude Oil Scalp Report once we get further clarity on near-term price action.
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Crude Oil Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long Crude Oil – the ratio stands at +5.21 (83.9% of traders are long) – bearish reading
- Traders have remained net-long since October 11th; price has moved 20.2% lower since then
- Long positions are3.5% higher than yesterday and 18.1% higher from last week
- Short positions are 14.0% higher than yesterday and 19.6% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Crude Oilprices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current Crude Oil price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in Crude Oil retail positioning are impacting trend- Learn more about sentiment!
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at email@example.com
EURGBP Price Breaks Lower, Further Falls Possible
EURGBP price, news and analysis:
- EURGBP has dropped to its lowest level since April and further losses seem plausible.
- The April 17 low at 0.8620 is a reasonable first target.
EURGBP price under pressure
EURGBP has fallen steeply over the past three sessions, closing a gap on the daily chart and dropping to its lowest level for seven months. With a downward trend now firmly established, losses could extend further – with the April 17 low at 0.8620 a possible first target.
EURGBP Price Chart, Daily Timeframe (January 30 – November 13, 2018)
If that level is broken, there is little support for the pair before a long-term trendline just under 0.85 and then the Spring 2017 lows of 0.8384 touched on May 10 and 0.8313 reached on April 18. Meanwhile, there is resistance at 0.8798 from the 20-day moving average, at 0.8828 from the 50-day dma and 0.8889 from the 100-day dma, as well as from a trendline that checks in at 0.8906.
This technical weakness is backed by fundamental factors, with the Euro under pressure from the row between Italy and the European Union over the Italian Budget while the Pound is benefiting from rising hopes of a Brexit deal between the EU and the UK.
Note too that retail traders remain net-long the pair and a contrarian view of crowd sentiment also suggests that further losses are possible.
Resources to help you trade the forex markets
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— Written by Martin Essex, Analyst and Editor
Bearish Streak Persists as Trump Jawboning Negates OPEC U-Turn
Oil Price Analysis and News
- Record Crude Oil Losing Streak
- OPEC U-Turn
- Trump Jawboning
- Brent Crude Futures Moves Deeper into Contango
For a more in-depth analysis on Oil Prices, check out the Q4 Forecast for Oil
Record Crude Oil Losing Streak
Yesterday saw oil prices drop for the 11th consecutive session, marking a record run of losses for crude oil, which looks set to continue with Brent slipping some 2% this morning. Consequently, Brent crude has fallen over $18/bbl (-21%) since the October peak, while WTI crude is eying its lowest close of the year.
Ahead of US sanctions on Iran, investor angst over potential supply shocks had risen, which in turn saw oil prices reach 4yr highs. Much to the displeasure of President Trump, the President had increased his calls for the likes of OPEC to boost production to stem further price rises. In response to this, Saudi Arabia had complied to this, with the OPEC kingpin, alongside Russia both agreeing to boost production ahead of the imposition of Iranian sanctions, while US oil production also surged to record levels.
However, at the beginning of November, the US had announced that they would provide waivers to 8 nations, allowing them to continue buying Iranian oil at a reduced rate. As such, this had reduced the potential impact that Iranian sanctions would have on oil market supply, prompting a sell- off in prices as investors priced out risks of higher oil prices.
Consequently, this has led to a U-TURN from OPEC, who at the most recent JMMC meeting and OPEC monthly report expect supply growth to outstrip demand growth, implying that the bearish sentiment is set to continue in their short-term outlook. This in turn, has seen Saudi Arabia now pledge to reduce exports by 500kbpd and call on OPEC to reduce production by 1mbpd.
Initial optimism from potential oil cuts from 2019, quickly receded after further jawboning from President Trump, stating that he “hopes, Saudi Arabia and OPEC will not be cutting production. Oil prices should be much lower based on supply”. While it is unlikely that OPEC will listen to Trump’s jawboning given that the cartel is warning of a supply glut, it is likely that Trump will continue to enforce the view that oil need to be lower.
Brent Crude Futures Moves Deeper into Contango
Structurally oil prices are looking increasingly bearish as the Brent curve moves deeper into contango (Spot price lower than forward price) with the front month spread now -$0.28. In turn, this raises risks of lower oil prices for longer as contango markets typically signal a negative roll yield, prompting speculators to exit bullish bets.
Source: Refinitiv, Managed Money Positioning of ICE Brent crude futures.
HOW TO TRADE OIL MARKETS
OIL PRICE CHART: Daily Time-Frame (Mar-Nov 2018)
Brent crude oil prices remains on the backfoot to test lower levels. However, with the RSI moving back into oversold territory, this may provide a slight reprieve, which will allow for bears to reload shorts and test April lows situated at $66.60
— Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.firstname.lastname@example.org
Follow Justin on Twitter @JMcQueenFX
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