Global FX Weekly 13th Nov 2015. Weak US Retail Sales.

Forex Market Commentary  

The US retail market is clearly in trouble.

The Dow didn't like it at all as investors ran for cover losing some 200 points in the process. In fact from Asia to Europe to US it's been a red day all round. As feared US retail sales in October scratched a mere increment of 0.1% compared to a forecast of 0.3%. Not even cheaper crude oil in October lifted the market. Yes, there is clearly something wrong now.  people just don't want to buy a new shirt or go for a big ticket item like a new fridge or automobile. The signs are for a soft economy in 2016 and with all these flags starting to show how could the US Fed initiate a 25 basis official hike now? November FOMC is going to be the decisive pivot point and at the rate information is coming out, considering dynamic time lags, the probability of a US rate hike is receding fast.

EUR/ USD has been falling for 5 weeks in a row now but held it's ground today as short traders became unwilling to place short sales on the pair in the light of this weak retail report.  This is more to do with growing weakness in the US economy as a far faster pace than a general slowing down on the US economy.

Over in the US, Nordstrom, the US retailer, saw their shares drop 15% in Friday's session. The message is loud and clear; consumers are not willing to spend their money. US monetary policy-makers now have a problem: 10 years of next to zero interest and still the US consumer doesn't feel good at all. What does it take? Even weak Euro zone growth and the threat of further ECB QE expansion above the current 60 billion Euros expenditure per month, didn't really shake the EUR/ USD down. Germany is not happy its Bund yields have been dropping in recent weeks and is at loggerheads with the ECB with the fear of yields turning negative. That prospect will surely send the EUR/ USD to within touching distance of 1.05 even if the US economy is starting to show signs of a slow down. Commercial banks will show strong buying at 1.05-1.06.

Gold bullion has had a miserable week and is fast sinking towards the 1050 mark in the face of a strong US Dollar. With little chance of commodity inflation gold really has no reason as a holding for safety. Crude oil at 42 may buck the trend since the perceived weakness in the US and global economy may have already been factored into the price together with current logistics to give WTI crude a soft landing at the $40 region.

On an interesting note IMF Managing Director Christine Lagarde says that the Chinese Yuan should become a reserve currency. Currently the PBOc of China
is making strong progress in overhauling and modernizing it's financial market
after a troublesome year which saw a run on it's stock markets. Should the Yuan join the Dollar, Euro and Yen as the elite reserve currency it would be an incredible success story for China and although China has gone through a recent painful moment, the modernization plans of the PBOC are going well
to meet this goal by next year and calming the markets for international investors to return.


Important data:

Equities: 
Asia:
Nikkei 225   19,596.91 - 100.86 (0.51%)
SSE Composite 3,580.84 - 52.06 (1.43%)   
Hang Seng 22,396.14 - 492.78 (2.15%)

Europe: 
DAX 10,708.40 - 74.23 (0.69%)
CAC 40 4,807.95 - 48.70 (1.00%)   

USA:
Dow 17,245.24 - 202.83 (1.16%)

Fixed Income Markets:
US Federal Reserve -  +0.25%    
ECB Base rate 0.050 % 
Chinese interest rate PBC     China     4.60 % 
Japanese interest rate (BoJ)    0.10 % 

Important moving averages:

USDX  above the 50 day m.at 96.5
EUR/ USD below the 50  day m.a at 1.12
Crude Oil WTI below the 50 day m.a. at 46.
Gold low the 50 day m.a. at 1130
US - 30 DAY FED FUND above 50 day m.a. at 99.84
US - 10 YEAR T-NOTES above 50 day m.a at 128.00
    

In speaking of moving averages; markets are not rational and daily price action volatile, but in the longer run trader expectation and negative sentiment can be collectively summed up through the 50 day moving average. Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.

USDX

US Dollar 
98.837     +0.277 +0.36%  
Support 98.227     Resistance 99.959
Forward 1 year - 99.735.

EUR/ USD
1.076950     -0.002350 -0.22%
Support   1.06637        Resistance 1.08695
Forward 1 year - 1.0880s.  

Crude Oil  WTI

42.00     -1.03 -2.40%

Support 40.68 Resistance 44.58
Forward 1 year - 48.23s.

Gold

1083.800     +0.655 +0.06%

Support  1,075.29    Resistance 1092.37
Forward 1 year  - 1,0858s.

Pieter Bergli - DeLoren Trust Holdings

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