19th November 2019 - Trade concerns brushed-off, AUD shorts nervous



Good morning


OVERNIGHT DATA AND HEADLINES


• Global equity markets traded little changed, halting a rally that lifted a key index to just under a new high, after a media report cast fresh doubts on reaching phase one of a U.S.-China trade deal.

• CNBC reported that China is pessimistic about reaching a trade deal due to U.S. President Donald Trump’s reluctance to roll back tariffs.

• Wall Street hovered around record levels after Washington's move to grant an extension for U.S. companies to do business with China's Huawei helped ease some concerns around U.S.-China trade relations. Dow Jones rose 33 points (0.12%) to 28,038, S&P 500 gained 3 points (0.10%) to 3,123 and Nasdaq added 15 points (0.18%) to 8,556.


CURRENCIES


• U.S. DXY index dropped from 97.95 towards 97.67.

• JPY gained sharply on the CNBC report, rising to 108.50 from 109.05.

• EUR also increased, jumping up from 1.1055 to reach 1.1090, the highest since Nov. 7.

• GBP was boosted towards 1.2970 by expectations that the Conservative (Tory) Party could win a majority in the Dec. 12 election.

• CNY inched lower as investors remained cautious over a preliminary trade agreement to call a halt their damaging trade war. CNY opened at 7.0150 and traded up towards 7.0250.

• AUD marked time with little in the way of domestic / offshore data – AUD held at 0.6818 dropping to 0.6796 lows.

• NZD traded in and around 0.6400

• AUDNZD remained in a 1.0635 / 1.0665 range

• AUDEUR fell lower from 0.6160 down towards 0.6140

TREASURIES


• U.S. long-dated Treasury yields fell to two-week lows, after a report triggered fresh doubts about a trade deal between the United States and China.

• U.S. two-year yields fell to 1.593% from Friday's 1.612%. U.S. 10-year note yields fell to two-week lows of 1.8% from 1.83% late on Friday.

• Yields on 30-year bonds also slid to two-week troughs of 2.282% and last changed hands at 2.286% from 2.311% on Friday.

• The yield curve continued to flatten amid a standstill on a U.S.-China trade deal, the spread between the U.S. two-year and 10-year note yields compressing to 21.20 basis points.

• Government bond yields in the euro area were a shade higher as stock markets rallied. In Germany, the euro zone's benchmark bond issuer, 10-year yields were up 1.1 bps at -0.32%.


COMMODITIES


• Gold erased losses from earlier in the session - Spot gold was up 0.4% at $1,472 per ounce, reversing course from earlier prices as low as $1,455.

• The most-traded iron ore contract on the Dalian Commodity Exchange trimmed gains to 0.8%. Spot 62% iron ore rebounded to $83.50, after hitting $79.50 on Nov. 11, its lowest since Jan. 29.

• Copper prices ended lower in response to doubts over whether a U.S.-China trade deal can be reached soon. Benchmark LME copper ended 0.3% lower at $5,830 a tonne.

• Oil prices eased, giving up some of last week's gains and edging lower. Brent crude futures fell $1.15 (1.82%) to trade at $62.15 per barrel. WTI crude was at $56.83 a barrel, down 89 cents, or 1.54%.


ECONOMIC CALENDAR TODAY


• Australian Economic data today – RBA minutes will be released. Treasurer Frydenberg CEDA annual dinner address.

• U.S. – September total TIC flows, October housing starts & October building permits.

• Canada – Oct Teranet house prices.


AUD THOUGHTS


Risk-off price action lead AUD to dive under 0.6800 but with US yields heavy & the USD broadly sold, AUD rebounded back towards 0.6825 high. AUD opens this morning around 0.6815.


More ‘trade war’ headline noise sent US Treasury yields lower on reports that pessimism is growing in China about the prospect of a ‘phase 1’ deal. Unsurprisingly, the question of tariff rollback remains the key stumbling block. China apparently believed that a roadmap for tariff reduction had already been agreed in principle, then was taken aback by US President Trump’s public denial of this. Apparently, China’s strategy now is to wait and see how impeachment proceedings develop, while keeping another eye on the US Presidential election. This doesn’t sound like progress is imminent.


Today no Australian Economic data however the RBA minutes are released. Also a panel discussion with RBA's Kent.

Tonight we only have 2nd tier U.S. data released.


TECHNICAL OUTLOOK


AUD is trading in a downtrend below the 50, 100 and 200-day simple moving averages (DMAs) on the daily chart.

AUD slightly above 55 day moving average (0.6815), long lower wick on daily candle; daily techs warn shorts.

Longs need break above 0.6840/65 zone where a cluster of moving averages lurk in order to take greater control. Immediate support zone rests at 0.6766.




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