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A busy week kicks off with stocks, gold, and the dollar all edging lower together as November draws to an end. Fresh Brexit optimism is supporting the pound while oil is struggling with OPEC+ disagreements. Vaccine developments and data releases are eyed.
Gold has been extending its downtrend decline after cracking below $1,800 last week. Cascading stops and optimism about a coronavirus vaccine seem to be pushing the precious metal lower. End-of-month flows may trigger high volatility.
The dollar is on the back foot alongside falling US Treasury yields. EUR/USD is standing out by nearing 1.20 German and Spanish inflation figures are due out during the day. Christine Lagarde, President of the European Central Bank, will speak later in the day.
Brexit: UK Foreign Secretary Dominic Raab expressed optimism about reaching a deal, pending a compromise from Brussels on fisheries. He added that both sides have made progress on other topics such as competition and state aid. GBP/USD is edging up toward 1.3350. Talks continue in London.
US Pending Home Sales are set to show strength in the housing sector. Investors are eyeing November’s Nonfarm Payrolls due on Friday.
WTI Crude Oil has dropped below $45 ahead of the virtual OPEC+ virtual meeting. At the time of writing, there is no agreement on further cuts as some countries want an easing in output restrictions.
CME Group’s preliminary readings for crude oil futures markets noted open interest went up for the fifth consecutive session on Friday, this time by around 10.7K contracts. On the other hand, volume shrunk for the second session in a row, now by around 408.8K contracts.
WTI now re-targets $46.00 and beyond
Friday’s positive price action in the WTI met support in the $44.50 area. The move was amidst rising open interest and leaves the door open for the continuation of the uptrend, at least in the very near-term.
24-hour view: “Last Friday, we highlighted that ‘upward pressure has more or less dissipated’ and we expected GBP to ‘trade within a 1.3315/1.3390 range’. GBP subsequently dropped to a low of 1.3284 before rebounding quickly (high has 1.3381). The rebound has scope to extend higher but any advance is likely limited to a test of 1.3365. The major resistance at 1.3400 is unlikely to come under threat. Support is at 1.3300 followed by 1.3280.”
Next 1-3 weeks: “We have held a positive view in GBP for more than 2 weeks now. Our latest narrative was from last Thursday (26 Nov, spot at 1.3385) wherein ‘a break of 1.3400 would shift the focus to the year-to-date high at 1.3481’. GBP subsequently touched 1.3399 before dropping to a low of 1.3284 last Friday (27 Nov). While our ‘strong support’ level at 1.3280 is still intact, upward momentum has waned and the odds for further GBP strength have diminished. In order to rejuvenate the flagging momentum, GBP has to move and stay above 1.3365 within these 1 to 2 days or a break of 1.3280 would not be surprising and would indicate that the positive phase in GBP has run its course.”
24-hour view: “Our expectation for EUR to ‘trade within a 1.1880/1.1935 range’ was wrong as it soared to a high of 1.1964 before closing on a firm note at 1.1962 (+0.41%). Upward momentum is strong and EUR is likely to continue to advance. A break of 1.1980 would not be surprising even though the year-to-date high at 1.2011 could be out of reach for now. Support is at 1.1940 followed by 1.1920.”
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