European stock markets struggled for direction yesterday and while they finished the day lower they did manage to close well above their intraday lows, while the FTSE100 managed to finish higher. The same applied to US markets which saw tech stocks rebound after their recent sharp declines.
A lot has been made of the recent tech sell-off but it also needs to be put into perspective. Despite recent price falls companies like Facebook, Alphabet, Apple, Amazon and Microsoft are still over 40% higher year to date, and yesterday we did see some light buying return.
US markets also struggled for direction yesterday with only the Nasdaq finishing the day slightly higher as investors adopted a “wait and see” approach ahead of tomorrow’s November payrolls number, and a rebound in the tech sector after recent declines.
Markets are also keeping an eye on events in Washington as US lawmakers try and absorb two different versions of the recently passed tax bill into one piece of legislation that both houses can agree on. There is also the small matter of the raising of the debt ceiling, which if delayed could well see a partial government shutdown over the weekend.
Crude oil prices also fell heavily after gasoline and distillate inventories rose sharply suggesting the end user demand for oil based products is slipping back. US production also hit a new record level as the higher prices encouraged more output. With prices just below 2 year highs this would suggest that the market could remain vulnerable to further losses in the short term.
The pound came under moderate pressure yesterday as the impasse between the UK government and the DUP showed no signs of being bridged in the short term.
With the EU summit still just under a week away there still remains plenty of time for that to change as the negotiations go the way of most things in the EU, right up to the deadline, or slightly beyond, just like those “just in time” supply chains that companies are concerned might be at risk if the politicians mess things up.
The data calendar is a fairly light one today with the latest confirmation of EU Q3 GDP which is expected to be confirmed at 0.6%.
US weekly jobless claims are expected to remain unchanged at 238k.
Bitcoin has also continued to set new records moving above $14,000 ahead of the expected launch later this month on the CME and Nasdaq futures exchange. The mania surrounding the cryptocurrency shows no signs of abating with the number of people calling its rise a bubble, also turning into a bubble. As recent history has taught us with respect to recent stock market moves a bubble can keep expanding for much longer than most people think.
EURUSD – gradually drifting lower with the 1.1710 level the next target. Resistance remains back near the 1.1910 area.
GBPUSD – continues to drift lower with a marginal new low and as such we remain susceptible to a move towards the 1.3320 area. We also have trend line support from the lows in March which comes in around the 1.3240 area. While above here the uptrend and prospect for further gains towards 1.3660 remains intact.
EURGBP – currently has a strong base above the November lows at 0.8735/45 but is struggling to get back near to the 50 day MA at 0.8880. We need to take out the November lows at 0.8735 to suggest the possibility of further losses towards 0.8600. A move through the 0.8880 level retargets the 0.8980 area.
USDJPY – having failed up near the 113.25 area earlier this week we remain susceptible to a pullback towards the 111.60 level. We need to push beyond the 113.20 level to open up a move towards the 114.00 area.