CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read full risk warning

Back to Blog

Valutrades November 2018 Market Recap

    

Several significant issues have lingered through November including Brexit, in which the Bank of England (BOE) have recently warned the nation of some significant consequences should the exit be disorderly.  Britain risks suffering an even bigger hit to its economy than during the global financial crisis 10 years ago in a worse-case scenario, according to the BOE.  The U.S. Federal Reserve have also recently changed their tune as Fed Chairman Jerome Powell said he considers the central bank's benchmark interest rate to be near a neutral level, an important distinction from remarks he made less than two months ago.  The markets have generally welcomed this change.

Several significant issues have lingered through November including Brexit, in which the Bank of England (BOE) have recently warned the nation of some significant consequences should the exit be disorderly.  Britain risks suffering an even bigger hit to its economy than during the global financial crisis 10 years ago in a worse-case scenario, according to the BOE.  The U.S. Federal Reserve have also recently changed their tune as Fed Chairman Jerome Powell said he considers the central bank's benchmark interest rate to be near a neutral level, an important distinction from remarks he made less than two months ago.  The markets have generally welcomed this change. 

 

EURUSD

During the month of November, the EURUSD has remained above the key 1.13 level.  Apart from a small excursion below the 1.13 level near the middle of the month, it has remained above.  It has also tested the resistance at 1.15 level a couple of times however it has been turned away both times with aggressive selling.  A few weeks ago the EURUSD did well to rally higher from its lowest levels in 16 months back up towards 1.15 before easing to finish out the month.  Even though it fell through the 1.13 level a few weeks ago, it was quickly pushed higher through strong buying which will provide some confidence that the 1.13 level will provide some support should the EURUSD continue to decline.  Likewise, the 1.15 level has become key of late providing stiff resistance and looming above ready to push prices lower.

The European Central Bank (ECB) President Mario Draghi says that some of the Euro zone slowdown may be "temporary" and that the case to end the ECB's 2.6 trillion euro bond purchase scheme remained unchanged.  At the end of the year the ECB is expected to end its 2.6 trillion euro monetary stimulus scheme and has strongly indicated it will keep interest rates unchanged until later into 2019 to support economic growth.  In Brussels recently, Draghi said, "A gradual slowdown is normal as expansions mature and growth converges towards its long-run potential," to the European Parliament's committee on economic affairs.  "Some of the slowdown may also be temporary," Draghi added. "In fact, the latest data already show some normalizing of production in the car industry which has been impeded by one-off factors." 

 

GBPUSD

Even though it started the month very well, the remainder of November has seen the GBPUSD drop sharply back down to the key 1.27 level.  In the first week of the month, the GBPUSD surged very strongly higher up to above 1.3150 before reversing quickly and easing back.  The 1.27 level has now clearly established itself as a key level as the currency pair has enjoyed considerable support from this level on several occasions in the last few months.  Should the GBPUSD drop through the support at this level, then it could fall considerably further with no obvious support levels nearby.  The other key level presently is 1.3250 which has repeatedly fended off the currency pair’s attempts to move higher, although this remains some distance away.

The BOE has said Britain risks suffering an even bigger hit to its economy than during the global financial crisis 10 years ago if it leaves the European Union in a worst-case Brexit scenario in four months' time.  The BOE published an assessment of different scenarios related to the U.K.'s withdrawal agreement from the EU and made the claim that a "disorderly" exit from the European Union would plunge the U.K. economy into that position.  In the "disorderly" scenario, the U.K. "loses existing trade arrangements that it currently has with non-EU countries through membership of the EU." The central bank added that "the U.K.'s border infrastructure is also assumed to be unable to cope smoothly with customs requirements."  The bank also outlined the impact of a "disruptive" Brexit scenario that would see employment rise to just below 6%. 

 

AUDUSD

The AUDUSD has enjoyed a solid November having made some solid ground over the last few weeks reversing from support at 0.7050 and moving up to a three month high above 0.73 recently.  It has made repeated attempts to break through the resistance at 0.73 and this level has emerged of late starting to play a role as several times now over the last few months there has been selling pressure from around this level repelling prices lower.  Just prior to its recent push higher the AUDUSD had been quite content to take a breather and enjoy solid support from 0.7050 as it has traded along that level for several weeks, although it did drop a little lower reaching a 2½ year low several weeks ago.  The 0.73 level is the present key level. 

The International Monetary Fund's (IMF) believe Australian housing prices are falling at an "orderly" rate and "improving housing affordability", however the US-China trade war could worsen the property downturn.  According to the latest report, Australia is on the final leg of its economic recovery since the end of the mining boom.  The IMF undertook a two week “mission” to Australia during it which it consulted businesses, academics, officials and regulators.  Some of its preliminary findings included that it expects the federal budget to return to balance by the 2019/20 financial year, with surpluses to follow.  The IMF is also suggesting that the next rate rise by the Reserve Bank of Australia (RBA) is still some time away.  Wages growth has been slow but is expected to rise gradually, along with the cost of living, which has been growing at a slower than expected annual rate of 1.9%.  The IMF has suggested that until then, the RBA’s "appropriately accommodative" policy of keeping interest rates at record lows (1.5 per cent) "should remain".  

 

USDJPY

The USDJPY started the month of November moving strongly higher threatening to return to the key level of 114.50 before returning to and trading around the key 113 level.  Since that time it has eased back to the 113 level after displaying some reversal candlesticks at the recent peak.  The last month or so has shown how key the 113 level is presently and how it is likely to continue to play a role.    After falling strongly from the 2018 high above 114.50 down to below 112, it did well to recover to the 113 level.  The 113 level provided stiff resistance to the currency pair back in July and forcing it lower strongly so it is no surprise that it is consolidating around this level for the moment.

The Bank of Japan (BOJ) has moved into unchartered waters becoming only the second central bank and the first within the G7 nations to own assets collectively worth more than the country’s entire economy.  The BOJ’s assets started ballooning when Mr. Haruhiko Kuroda took over the central bank in early 2013, vowing that such steps would boost Japan’s inflation to two per cent in two years, and following a five year spending spree designed to accelerate weak price growth.  To put it into perspective, the 553.6 trillion yen of assets the BOJ holds are worth than the combined GDPs of five emerging markets – Turkey, Argentina, South Africa, India and Indonesia.  It has been argued that the BOJ’s policy is not sustainable, as they would suffer losses if it would have to raise interest rates to two%.  Further, in the event of an emergency, the BOJ may not be able to finance government bonds any longer. 

 

US30

US equities have experienced a rollercoaster ride during November moving up strongly only to return all the gains throughout the rest of the month.  It has however finished the month strongly to return to back above the key 25,000 level.  Earlier in the month the US30 index enjoyed a strong resurgence moving from multi-month lows back up to the key 26,200 level before forming a classic doji candlestick at this level, reversing and falling strongly back to the 25,000 level.  As it approached the four month low it received some solid support which has seen it rally strongly in the last week.  The 25,000 level remains key and the 26,200 level looks poised to offer some resistance should the index to move higher. 

U.S. Federal Reserve Chairman Jerome Powell said he considers the central bank's benchmark interest rate to be near a neutral level, an important distinction from remarks he made less than two months ago.  "Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth," Powell told The Economic Club of New York.  He made it clear that the Federal Open Market Committee (FOMC), which sets interest rates, will be making policy decisions on developing economic and financial conditions, rather than a predetermined idea for where rates should be.  "While FOMC participants' projections are based on our best assessments of the outlook, there is no pre-set policy path," he said. "We will be paying very close attention to what incoming economic and financial data are telling us. As always, our decisions on monetary policy will be designed to keep the economy on track in light of the changing outlook for jobs and inflation."

 

Gold

Gold hasn’t done a lot during the month of November remaining above the key $1200 level.  For the last couple of months gold has made a home in between two key levels of $1200 and $1240, and it was well supported by the former level a few weeks ago when it dropped lower and surged higher again.  Many would be confident that it will be well supported by the $1200 level again should it decline again.  It has also struggled with the resistance level at the $1240 level for several weeks.  Gold has received both support and resistance from the $1200 level in the last few months and doesn’t appear to be in any rush to move too far away.  The $1240 level had also been a steady rock of support in the last 12 months for gold, so it comes as no surprise that it is offering some reasonable resistance when it is approached.

As global equities have struggled a little during November, gold has continued to enjoy its ‘safe haven’ status.  As is often the case, gold has been well supported as investors use bullion as insurance against growing political and economic tensions in the world.  Increased concerns about international affairs is contributing to investor concerns about the overall economy and stock markets.  Another factor has been U.S. Federal Reserve Chair Jerome Powell recent speech in which he said interest rates were "just below" neutral, soothing investor worries over the pace of rate hikes.  Traders believed Powell was signalling there would be fewer rate hikes in 2019 than originally expected, which would theoretically boost the value of gold because it is seen as a hedge against inflation.  Chairman Powell also noted that there is a lag for how long it takes for rates to have an impact.  In his estimation, it is a "year or more". 

 

UKOil

Generally, oil has moved very strongly lower well throughout the month of November continuing from its strong decline in October, at which time it returned all the gains from September.  In these last couple of months, oil has fallen sharply from its multi-year high above $86 down to its lowest levels in 12 months below $60 in the last week.  Earlier in the month it hit the key level of $71 where it did receive some temporary support from, and likewise at $75 which propped up oil for a week.  However, both of those key levels have given way to immense selling pressure pushing it lower.  Due to the significance of the $71 level, this is now likely to offer resistance should oil rally soon.

Several factors have influenced the demand and supply for oil recently with a deteriorating global economic outlook and a surge in U.S. production outweighing expected supply cuts by the Organization of the Petroleum Exporting Countries (OPEC).  OPEC led by Saudi Arabia, is pushing for the producer cartel and its allies to cut 1 million to 1.4 million barrels per day (bpd).  Another issue is the losses in Iranian exports expected because of U.S. sanctions against Tehran and because of risks of disruptions in Libya, Nigeria and Venezuela.  Supply in the United States is surging, with crude oil production up by almost a quarter this year, to a record 11.7 million bpd.  Sentiment amongst traders has turned to being wary of oil markets, seeing further price downside risks from a deteriorating economic outlook and increased U.S. production.  The International Energy Agency (IEA), which represents the interest of oil consumers, has warned OPEC and other producers of the ‘negative implications’ of supply cuts, with many analysts fearing that a spike in crude prices could erode consumption.

 

 Try our MT5 ECN Demo Account

 

Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

Comments