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by Darius Anucauskas

Investors Take End-Year Profits, China Shows Not A Bad PMI

It’s the last trading day for 2019. Yesterday, the European and US equity market closed in the red, pushing some safe-havens slightly higher. China managed to boost investor morale this morning by keeping the NBS manufacturing PMI the same as previous and some other news.

The European and the US equity markets took a decent dive yesterday, which was a continuation of the Friday’s decline. Investors were seen taking their profits, after the markets had already rallied quite significantly during this month and most targets have already been met. Also, given that there was lack of news in regards to the China-US trade talks progress, this made the markets worry a bit more.

Although US and China continue feeding us with promises that the Phase 1 deal will get signed very soon, the quietness regarding this issue is making investors to start questioning the whole agreement. This is because most of us are already imune to the fact that any good news coming out from the trade talks tends to be followed by totally opposite comments, which sends the market into a sell-off. This time, it looks like investors are trying to be slightly ahead of the game by locking in their profits.

All this uncertainty just helps support the safe-haven assets in their journey higher, as they become more attractive for traders and investors. Gold and silver were seen holding on to their gains yesterday, together with the Japanese yen and Swiss franc, which strengthened against most of their major counterparts.

In regards to yesterday’s economic data, the main ones that were in the spotlight were the US Chicago PMI for December and the US Pending Home Sales for November. The first data set was already expected to come out better than the previous reading. The forecast was sat at 48.0 against the previous 46.3, but the actual number was delivered at 48.9, which is a great result. But as we mentioned yesterday in our Strategic Report (delivered every Monday), even if the actual number beats the forecast, but remains below 50, this means that the sector is still in contraction territory. The Chicago PMI is sometimes used to try and predict the US ISM Manufacturing PMI figure, which will be delivered at the end of this week.

The US pending home sales for November came out as expected, at +1.2%, which is a good result, given that the previous reading was in the negative zone. Before the adjustment, the October figure was sat at -1.7%, but after that it was updated yesterday, it changed to -1.3%.

In terms of today’s economic data, there is not much happening, as it is the last trading day of 2019. China had already released its NBS manufacturing PMI for December. The figure came out as a pleasant surprise, beating the forecast of 50.1 by one tenth of a point. This not only managed to keep the sector in expansionary zone, but also boosted investor morale slightly. Now the focus will fall on the Caixin manufacturing PMI, which is scheduled to be delivered on January 2nd. The forecast there currently sits at 51.8, which is the same as previous.

The other piece of information to watch out for could be the US CB consumer confidence number, which is believed to have improved a bit. The previous number is sat at 125.5, but the market is expecting a bit of a rise to 128.2. If we get that figure, or something above it, this may prove to be a positive for the US currency, which, lately, is struggling to find support against its major counterparts.

 

DJIA – Technical Outlook

After selling off yesterday, the bears have a good chance to continue pushing the Dow Jones Industrial Average cash index further south, at least for a bit more. But let’s not forget that this move lower might be seen as part of a possible larger correction, as the DJIA is still trading above a short-term tentative upside support line drawn from the low of October 3rd, hence why we will stay cautiously-bearish for now.

A drop below yesterday’s low may lead to a further move down, potentially sending the index to test the 28200 hurdle, marked near the highs of November 27th, December 2nd and near an intraday swing low of December 17th. If the selling doesn’t stop there, slightly below runs the aforementioned upside line, which may provide additional support for the price.

Alternatively, if DJIA moves back above the 28610 barrier, this would place the index back above the 21 EMA on the 4-hour chart and the buyers could see an opportunity to step in again. This could increase the chances of a re-test of the all-time high level, at 28732. If this time that level is no match for the bulls, its break would confirm a new all-time high and would place the price in the uncharted territory once again.

DJIA 4hour

AUD/CHF – Technical Outlook

Although AUD/CHF is having random outbursts to the upside, still, it continues to trade below a short-term downside resistance line drawn from the high of November 7th. For now, as long as the rate remains below that downside line, we will class any push higher only as a temporary correction, before another leg of selling. This is why we will take a bearish approach, at least for the near term.

As mentioned above, the pair could push a bit higher, but if it struggles to overcome either the 0.6801 barrier, or the previously-discussed downside line, this could send the rate back down, potentially targeting the 0.6767 zone, which is the low of yesterday. If this time, that area fails to hold AUD/CHF, its break may clear the way to the 0.6747 level, marked near the low of December 13th, near the high of December 19th and near an intraday swing low of December 20th.

On the other hand, if the above-mentioned downside line breaks and the rate climbs above the 0.6820 barrier, marked by the high of December 26th, this could spook the bears from the field and allow more bulls to join in. We will then aim for the highest point of December, at 0.6838, a break of which may drag AUD/CHF to the 0.6858 level, marked by an intraday swing high of November 8th.  

AUDCHF 4hour

Disclaimer:

The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.

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