Amazon & Google
The North American trading session was off to a great start yesterday, until the two tech giants released their reports just before the closing bell. The results of both companies shocked and disappointed the markets. In Amazon’s case the main concern was them lowering their earnings forecast for the fourth quarter. The Christmas period is crucial for retail busineses so analysts expected an income of 73 billion dollars, however, Amazon’s own prediction put the number 10 billion dollars lower and investors didn’t hesitate to start selling their stocks. Their price fell from 1782 dollars to 1648 before closing and other stocks fared similarly. By the time European markets opened the Nasdaq was 2.5% in the negative.
USA GDP
Market participants are eagerly awaiting key economic figures that could heavily play into the pricing of the USD and possibly determine the outlook of the US economy. The preliminary GDP growth data to be published later today combined with the GDP price index can paint a comprehensive picture of how the the tariffs and strengthening dollar affected the world’s largest economy. According to expectations, GDP growth will slow from 4.2% to 3% and GDP price index to decelerate in a similar fashion. The significance of the data may greatly increase trading volatility today. Meanwhile the Asian session withstood Friday’s trading with only minor losses. Europe on the other hand declined by approximately 1.5-2%, following the trend of US index futures. Just for comparison, China dropped by 0.19% and Japan by 0.4%.
GBPUSD
The show known as Brexit is nearing its finale, however, much to the joy of economic- and political journalists everywhere, it may end up having a second season. In the wake of the difficulties surrounding the exit negotiations, the possibility of a second referendum is becoming increasingly popular among London politicians. Doing so could be a stroke of genius or madness, especially after a number of major corporations moved their headquarters out of London into other European cities under the presumption that the UK would no longer be part of the EU, only to find out afterwards that it was all for nothing. The very rumor of a potential second referendum is enough to seriously damage the credibility of the British political elite. In such a delicate situation the country’s economic performance may become secondary in it’s evaluation, as the loss of trust is potentially be more damning than mere statistical fact.
What does this mean for the Cable? The base assumption is that a new referendum would be insufficient by itself to strengthen the pound, especially since the USD continues to strengthen even against currencies with promising fundamentals. Looking at the chart, the pair seems intent on waiting it out until the release of the US GDP figures while hovering near its two month low. Over the past two months the chart formed a perfect ‘M’ also known as a double top pattern. Conventional wisdom suggests this is an indicator of a continued decline.
WTI
According to Saudi Arabia’s Minister of Petroleum, the world will face a major crisis in oil production within the next quarter. Due to US pressure, both the OPEC countries and Russia have taken measures to increase production in an attempt to comply with the Iran sanctions. Washington seems to have relaxed its stance on Iran over the past few weeks, especially in the wake of the recent scandal with Saudi Arabia. At this point the market’s impression seems to be that while Iranian oil exports won’t cease in November, however demand may decline as a result of global economic outlook worsening. At the very least China’s slowing growth is a good enough reason to consider the possibility of a declining demand.
This may be the third consecutive week when oil prices closed in the negative, forming a clear downwards trend and a matching trend channel. Its current movement has entered the third phase of its three stage cycle. After decline comes exhaustion and finally a sideways ranging movement. The support line of this particular stage can be found approximately between 65.90 and 66 USD. Since the formation of the trend, the ranging stage always lasted until reaching the upper limit and from there it would start declining. In theory three price waves would be followed by a correction in the opposite direction, however, this rule doesn’t always hold true. That said, price is still rapidly closing in on the upper limit of the trend channel ,meaning the sideways ranging stage that’s been in effect since October 23rd may end today. If the trend stays its course, then the next stage will form and open up the possibility of price going below 63 USD.
Sincerely,
Laszlo | Market Analyst
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