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Market Wrap
In the minutes of its October meeting published today, the ECB Governing Council notes that the medium-term inflation outlook has improved as expectations “remain solidly anchored and generally below 2%.” The Council also notes there is “elevated uncertainty” surrounding medium-term prospects. The ECB stated on October 27-28 those net purchases under PEPP “could be expected to end” by March 2022. According to the Council members, “the recent upward pressure on prices may possibly be due to base effects, not stagflation,” and that “movements in prices and output should not be confused with stagflation.”
The forex heatmap indicates that the euro has been relatively strong for the entire London session, with the minutes of the ECB meeting playing a role in moving the markets. We will hear from the Bank of England Governor in a few minutes, which may move the needle for the pound should he come out all Hawkish, but with trading volumes very thin due to the US Thanksgiving holiday, there is little chance for a sustained move.
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Against a strong euro and a weak New Zealand dollar, the EURNZD made some decent progress into the supply zone between 1.645 and 1.6335 before losing momentum. We’re likely to see the price close around the 1.6350 level, which has been a key level several times this year. As of this morning, the EURUSD had made some gains as the 1.1200 level was looking like a decent level of support. Thus far, the trading has occurred within yesterday’s price range, and without further news from the USA, this is likely to be the closing price. An inside bar pattern will be set up in which traders anticipate a move lower in the daily breakout.
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USDJPY has paused below 114.50 for the day but is likely to trade higher as yesterday’s high is acting as a support. The measured move of the previous trading range pushes the near-term price up to 115.65 before heading towards 119.50 with a measured move of the daily bull flag.
The ActivTrader sentiment indicator is showing that 85% of traders are long the Brent contract which would indicate a very possible move lower. There has been no news to suggest that there would be a tightening or even a change in the OPEC+ policy on production increases but the December meeting will be a live event, with some surprises to come, that I am sure. The consensus has been that the release of SPR and reserves from other nations will do little to dent the supply side, let alone ease inflationary pressures.
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There is a lot of structure above which could be overhead supply and with a retail bias towards the long side I am watching to see if we get a spike through any swing highs that fail to the downside.
