Futures Commentary and Analysis


LCG: Into the European open
Ipek Ozkardeskaya - IF - Thu Nov 23, 12:21AM CST
The US dollar fell after the Federal Reserve (Fed) minutes showed that some members were less sure about the speed of the US rate tightening due to tepid inflation. This being said, a December rate hike is still highly likely (92.3%) to happen, what will the Fed do after December is uncertain. On a side note, it is important to mention that the US core inflation advanced to 1.8% last month after having stagnated for five months. This means that the macro economic data should determine how fast the Fed will be tightening its policy moving forward.
The USDJPY pulled out the major 38.2% Fibonacci support and plunged below its 200-day moving average (111.47). Provided that the knee-jerk reaction has mostly been absorbed by now, it could be time for an upside correction. Support is eyed at 111.02/110.70 (50% retracement on September November rise / daily Ichimoku cloud base). Yet the short-term bearish reversal should limit the recovery by 111.91 (major 38.2% retrace, former support).
Softer US dollar and the positive breakout in iron ore futures (+2.84%) gave a boost to the Aussie, however the absence of carry traders will likely spoil the recent rebound. Solid offers are eyed into the 200-day moving average (0.7706) against the US dollar.
The USD sell-off helped the EURUSD gaining momentum above the 1.18 level (200-day moving average). If the momentum remains strong there is no reason why the pair could not rise more. Resistance is eyed at 1.1860/1.1885 (November high / major 61.8% retracement on September-November decline). The Eurozone flash manufacturing and services PMI data is due today. Solid data could underpin the buy side, despite low yields.
The GBPUSD advanced past 1.3327, the highest level since October 12. The positive trend has been the GBP-long positions friend this week. Next natural target for the GBPUSD stands at 1.3336/1.3342 (October 12 peak / 50% retrace on September October decline). Yet the upside potential could be limited as the official UK growth figures are revised lower. The UKs third quarter second GDP estimate is due today. The expectations for the headline read are flat: 0.4% growth quarter-on-quarter and 1.5% year-on-year. However, the exports may have contracted by 0.7% compared with +0.7% printed earlier, the gross fixed capital formation may have slowed to 0.4% from 0.7% and the government spending may have declined to 0.3% from 0.6%. Altogether, the GDP components that drive growth in the long-term could be somewhat discouraging for the buy-side. On a side note, UK Chancellor Philip Howard promised funding including an extra 3 billion for Brexit preparations.
WTI crude consolidated near the $58 level as the EIA data confirmed that the US stockpiles fell by 1.86 million barrels last week, compared with -1.4 million expected by analysts. Tighter supply triggered the upside move, along with expectations that the OPEC will remain committed to reduce its output as well. This being said, next weeks OPEC meeting may leave those who wish for a positive surprise disappointed. An extension of the output cut agreement beyond March 2018 is already widely priced in. There is little potential left to explore on the upside. Offers could come in play above $58/60 area.

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