OVERNIGHT DATA AND HEADLINES
• The USD and global stock markets traded little changed as record highs on Wall Street were offset by caution as traders scrutinized the latest developments in the prolonged U.S.-China trade talks.
• The U.S. goods trade deficit fell sharply in October as both exports and imports declined, pointing to a continued reduction in trade flows that has been blamed on the Trump administration' "America First" policy. The goods trade gap dropped 5.7% percent to $66.5 billion last month. Exports fell 0.7% after decreasing 1.3% in September. Exports were depressed by a drop in shipments of foods and feeds, likely soybeans. Automobile exports also declined and were probably weighed down by a 40-day strike at General Motors.
• Retail inventories increased 0.3% in October after gaining 0.2% in the prior month. Motor vehicle and parts inventories dipped 0.1% after edging up 0.1% in September.
• U.S. consumer confidence fell for a fourth straight month in November amid worries about current business conditions and employment prospects, but remained at levels sufficient to support a steady pace of consumer spending. The consumer confidence index slipped to a reading of 125.5 this month from an upwardly revised 126.1 in October. The index was previously reported at 125.9 in September.
• An unexpected drop in new home sales last month, but data for September was revised higher to show purchases hitting their highest level in over 12 years. New home sales dropped 0.7% to a seasonally adjusted annual rate of 733,000 units last month. September's sales pace was revised higher to 738,000 units, the highest since July 2007, from the previously reported 701,000 units.
• S&P CoreLogic Case-Shiller 20-metro-area house price index increased 2.1% from a year ago in September after rising 2.0 % in August. Firming house price inflation was also corroborated by another report from the Federal Housing Finance Agency showing home prices advancing 5.1% in September from a year ago.
• Fed Governor Brainard said the Fed should move from a strict 2% inflation target to a broad, "flexible" promise that it would average that level over time, a key member of the U.S. central bank's board of governors said on Tuesday in one of the most explicit endorsements yet for changes in its monetary policy framework. She also said that if interest rates ever hit zero again, rather than simply relying on bond purchases as it did in the last crisis to stimulate the economy, the Fed should pledge to cap Treasury bond rates at different levels and intervene as necessary.
• Wall Street's three main indexes hit all-time highs, as comments by President Donald Trump on trade as well as gains for Disney and Best Buy countered weak consumer confidence data. Dow Jones up 43.60 points (0.13%) at 28,102, S&P 500 was up 6 points (0.14%) at 3,137, Nasdaq up 18.50 points (0.21%) at 8,650.
• The U.S. dollar DXY was offered late into the session – DXY falling from 98.36 down towards 98.25.
• CNY strengthened. PBOC set the midpoint rate at 7.0344, opened at 7.0268 and was changing hands at 7.0314 at midday.
• EUR was relatively unchanged, trading within a 15 point range (1.1010 / 1.1025).
• GBP fell from 1.2895 towards 1.2835 but recovered late in the session towards 1.2865.
• AUD stayed on the defensive and was stuck at 0.6775 having come within a whisker of breaching major support at the November low of 0.6770.
• NZD improved slightly overnight, from a 0.6404 low up towards 0.6430.
• AUDNZD remained above 1.0550 support level and traded a 1.0575 high.
• AUDEUR capitalised on EUR weakness jumping up towards 0.6164 but closed just above 0.6150.
• U.S. Treasury yields fell alongside British government debt on Tuesday, while expectations that the Fed will keep rates on hold kept the yield curve near its flattest level in almost a month.
• U.S. 2 year yields improved slightly, last at 1.588%. Benchmark 10-year note yields were last at 1.741%, down from 1.764% late Monday.
• The yield curve between two-year and 10-year notes was 14 basis points, after reaching 13 basis points on Monday, which was the flattest level since Oct. 30.
• Euro zone bond yields eased as U.S. and Chinese officials appeared to make progress in agreeing the first phase of a trade deal. German 10-year bund yields were down 1 basis point to -0.375% from a five-month high at -0.22% reached earlier in November that had been driven by growing trade optimism.
• Gold prices edged higher from a two-week low hit earlier on Tuesday ($1,450), as equities eased from multi-year highs. Spot gold was up 0.43% at $1,461 an ounce
• Steel futures in China dropped as much as 2.2%, snapping two straight sessions of gains, as fears of tight supply eased amid favourable environmental conditions. Prices for spot cargoes of benchmark iron ore with 62%iron content for delivery to China rose to $90 a tonne on Monday.
• LME aluminium gained 1% to close at $1,753 a tonne. LME copper climbed 1% to finish at $5,924 a tonne.
• Oil prices edged higher after news that U.S. and Chinese officials discussed trade on Tuesday, while predictions for a weekly draw on U.S. crude stockpiles lent some support as well. Brent crude futures rose 33 cents to $63.98 a barrel while West Texas Intermediate crude rose 26 cents to $58.27 a barrel.
EVENT RISK TODAY
• Australian Economic data today : Q3 construction work (last -3.8%, mkt f/c -1.0%). Cyclical downturn to continue, housing further weakness.
• New Zealand : RBNZ Financial stability report & October trade balance (meat exports rising strongly on Chinese demand).
• U.S. (tonight) : Q3 GDP (growth to slow further in coming quarters), October durable goods orders, November Chicago PMI, October personal spending & income, October pending home sales.
AUD held onto gains but remained limited under 0.6800, rising towards 0.6790 from 0.6770 lows (as at writing trading at 0.6785).
A decline of the USD against commodity currencies remaining one of the key factors – JPY sales emerging, AUD/JPY nears 74.10; CNH rallies and USD/CNH dipping below 7.0100.
Today we have Australian Q3 construction work & New Zealand Oct trade balance data as risk events.
Expectations for cyclical downturn to continue in the Q3 construction work. A raft of U.S. data will out tonight.
China-US trade deal headlines remain the primary focus for markets and, with the U.S. heading into their Thanksgiving break, expect market liquidity to suffer accordingly with the risk that currencies may break their recent ranges on any substantive news.
In the absence of any major or threatening data / news, AUD should hold its recent tight ranges as it awaits any further developments for guidance on direction.
AUD Key Fibonacci holds for another test. AUD sinks early on USD bid - 61.8% Fib of 0.6670-0.6929 neared.
Daily techs warn shorts, RSI diverges on today's low & Fibonacci level still supports (0.6766).
Immediate resistance comes in at 0.6800 & 0.6810. Longs need above 0.6835/40 resistance in order take some control.