Bill Baruch, president and founder of Blue Line Futures, reviews and previews the euro, Japanese yen, Chinese yuan, Aussie and Canadian and the upcoming economic calendar. Follow his reports Monday-Friday on MoneyShow.com and short Midday Markets video.
Bill Baruch’s Midday Market Minute short video for Nov. 8 here.
Crude continues lower.
Euro (December)
Fundamentals: The euro peaked overnight, trickling lower through U.S. hours after midterm elections. There are two major takeaways from Wednesday as we look to the Federal Reserve’s policy meeting Thursday.
First, Brussels and Italy remain in a budget impasse; the euro turned south after Italian Finance Minister Tria reinforced that Italy will not abandon its spending increase.
Second, the U.S. dollar did weaken after Democrats took control of the House, dividing Congress. Ultimately, this should force gridlock in Washington making it tough or nearly impossible for President Trump to pass his pro-growth agenda.
U.S. equity markets (SPX) rallied sharply now that uncertainties have become certainties, and this also provided a tailwind to the dollar on the day. However, after months of campaigning this may prove to be simply a sigh of relief before the dollar weakens which would align it with historical norms upon a split Congress.
Reuters: Wall Street surges Wednesday after midterms. Tech, healthcare rally.
The Federal Reserve is expected to keep policy steady Thursday, in fact, there is only a 7.2% probability that they hike rates. Tomorrow’s meeting is the last in which they will not hold a press conference or release economic forecasts. Still, their policy statement will look for any clues moving forward. Housing data has been poor, and volatility has certainly increased.
Trade balance data is due from Germany at 2:00 am EDT and France at 2:45 am. The ECB releases its Economic Bulletin at 4:00 am. China’s Trade Balance is also expecting to be released Thursday morning and should influence the perception of the trade conflict and thus risk assets. U.S. weekly Jobless Claims are due at 8:30 am EDT.
Technicals: One week ago, the euro traded to a higher front-month contract low and held a level that we had as a rare major four-star support since before the August test at ...
Yen (December)
Session close: Settled at .8847, up 3.5 ticks.
Fundamentals: The yen jolted higher last night after Congress was split but gains quickly dissipated as the session unfolded with the dollar firming on those aforementioned tailwinds. However, this hurt the yen two-fold with equity markets finishing at the highs diminishing safe-haven demands. The yen, Gold and Treasuries all finished at the lows of the session ahead of Thursday’s FOMC meeting. However, while Gold has shown some recent life, the other two remain unenthusiastic. Tonight, we look to Current Account data, Machinery Orders and Foreign Investment data out of Japan all at 6:50 pm EDT.
Technicals: The yen continues to trek lower with each rally attempt shallower than the last; hence we have characterized it as the most unenthusiastic trade on the board. Price action finished below our pivot level of ....
Aussie (December)
Session close: Settled at .7289, up 71 ticks.
Fundamentals: The Aussie capitalized off U.S. dollar weakness, yuan strength and risk-on sentiment in what was the follow-up session to the RBA voicing a more upbeat tone at their policy meeting Monday night. The Aussie traded to the highest level since September 26 and is poised for further gains if data from China over the next 24 hours is supportive. Trade Balance data from China is due Thursday morning and inflation data is out Thursday night. Providing a further tailwind for the Aussie was a strong jobs report from New Zealand ahead of today’s RBNZ meeting and press conference (currently).
Technicals: Last Thursday, the Aussie ripped through what was a wall of major three-star resistance which will now act as a base for its newfound uptrend upon pullbacks at ....
Canadian (December)
Session close: Settled at .7639, down 23.5.
Fundamentals: The Canadian did not participate in today’s risk-on rally as the energy sector is under immense pressure and political uncertainties in the U.S. bring such to its neighbor to the north. Still, the Canadian notched a strong session due to a tremendous rip back in Ivey PMI data. This strong read on Ivey PMI could be the first signs of data turning a corner after the new NAFTA deal or merely signaling September was an outlier.
Regardless today’s expectations were 50.9 and it came in at 61.8. However, if the Canadian followed the broader atmosphere, the session would have been stronger. Thursday, Housing Starts are due at 8:15 am EDT and New Housing Price Index is at 8:30 am.
Technicals: Technically, the Canadian has held where it has needed to hold in order to remain intermediate to long-term constructive. We continue to watch major three-star support at ...
View a short video: Bill Baruch: Trading Futures. Gold, USD, yuan.
Recorded: TradersExpo Chicago July 24, 2018.
Duration: 4:34.
