Donald Trump had signed the so-called Hong Kong Human Rights and Democracy Act, which is not going well with China. Canadian GDP figures are in the spotlight, together with the Swedish ones.
Today, the US market resumes its trading, after a Thanksgiving-break yesterday. But the US market will have an early start to the weekend, as the closing bell will ring at 13:00 US Eastern Time. Up until today, we saw the US equity market hitting a new high every single day this week, excluding yesterday, of course. All this was thanks to positive headlines that were coming out in relation to the ongoing China-US trade war. The reports that the so-called “phase one” agreement could be signed soon kept the market participants on the positive side, which helped push the stock market higher. But traders are in anticipation to see how Friday’s trading will go through and if China will respond to the fact that Donald Trump signed the new ratification of the Hong Kong Human Rights and Democracy Act yesterday. This looked like it may pass unnoticed, as the US markets were closed. But as we know, the US democratic and republican lawmakers passed the bill, which supports Hong Kong’s pro-democracy protesters. This bill allows the US to re-evaluate every year the status of this special administrative region and if its human rights are suppressed, then the United State may impose sanctions on the “suppressors”. In other words, because Hong Kong is still under Beijing’s rulership, this Act is targeted against China. This bill would allow the United States to find reasons to impose sanctions, or more tariffs, on Chinese exports in future, if such actions would be needed.
So, this is why traders and investors will be on the tips of their toes to see if China retaliates against such American actions. If so, the equity market might not take a liking of that, which could force it to correct lower. That said, until we don’t see negative headlines hitting the wires, we will remain positive on the stock market’s overall outlook, at least for now.
In terms of economic data, during the early hours of the Asian morning today, Japan released its Tokyo core and headline CPI numbers on a YoY basis for the month of November. The core reading came out the same as previous and expected, at +0.6%, but the YoY number was twice as better as the forecast, showing up at +0.8%. Japan also shared its jobs figures for the month of October, where the unemployment appeared to be stable, coming out at the same as previous 2.4%.
During the European morning, Germany and Norway will deliver their unemployment numbers for November. If Germany is not expecting any deviation from the previous reading of 5.0%, Norway’s figure is believed to have increased from +2.1% to +2.2%. This could have a slightly negative effect on the Norwegian krone. The eurozone will also deliver it unemployment number, where it is forecasted that the region had stayed at the same level of 7.5%. The eurozone will not only provide us with an indication of how many unemployed workers are there on its territory, but we will also get the preliminary core and headline inflation readings. Currently, there are no forecasts for the core MoM and YoY CPIs, but the headline YoY number is expected to come out slightly better than previous, possibly rising from +0.7% to +0.9%.
But the big focus will fall on the data set, which is going to get released later on. And that is a batch of GDP figures from Canada. The MoM number is forecasted to show up the same as previous, at +0.1%. There is currently no forecast for the YoY reading, but the annualized QoQ figure is believed to have slid from +3.7% to +1.2%. If eventually the actual numbers will beat the forecasts, we may see traders jumping into CAD, at least for a bit, in order to push it higher against its major counterparts.
Looking at the current technical picture of USD/CAD, it doesn’t seem to be a very clear one. On one hand, the pair is still above its short-term tentative upside support line drawn from the low of October 29th. But on the other hand, the rate continues to balance inside a falling channel pattern from around November 20th. Because of this, we will take a neutral stand for now and wait for a clear break through one of our highlighted areas on the chart.
If USD/CAD continues to respect the aforementioned upside support line, moves higher, breaks the upper side of the falling channel and climbs above the 1.3316 barrier, marked by the high of November 26th, this may attract more bulls into the field. The rate could then get lifted to the 1.3327 obstacle, a break of which might set the stage for a test of the 1.3345 hurdle, which kept the pair down between October 3rd and 9th. USD/CAD may retrace back down slightly, but if it remains above the previously-discussed 1.3316 zone, this might result in another round of buying. If this time the rate manages to overcome the 1.3345 barrier, this could open the door for a further move north, possibly targeting the 1.3382 level, marked by the peak of September 3rd.
On the downside, a break of the aforementioned upside line, a drop below the lower bound of the falling channel and a rate-slide below the 1.3254 hurdle, which marks the low of November 22nd, all this might spook the bulls from the arena in favour of the bears. We will then target the 1.3235 obstacle, a break of which could send the pair further down to the 1.3217 hurdle, marked by the low of November 12th and by an inside swing high of November 19th. USD/CAD might stall there temporarily, but if the selling continues, a further slide could send the pair to the 1.3190 level, which is the low of November 19th.
EUR/NOK seems to be stuck between two lines: above a medium-term upside one drawn from the low July 25th and below a short-term tentative downside resistance line taken from the high of November 22nd. For now, we will remain neutral and wait for a clear break of one of those lines before examining a further short-term directional move.
A break through the above-mentioned downside line and a push above the 10.1180 barrier, which is the high of November 27th and 28th, could attract a few more buyers into the game and the rate might rise higher. This is when we will aim for the 10.1430 obstacle, a break of which could open the door to the 10.1885 level, marked by the peak of November 20th.
Alternatively, if the aforementioned upside line breaks and the rate slides below the 10.0740 hurdle, this could attract more sellers, who may drive the pair lower. Initially, we will aim for the 10.0250 zone, which is the lowest point November. EUR/NOK might rebound back up from there, but if the rate cannot move above the previously-discussed upside line, this could result in another round of selling. If the 10.0250 support fails to withstand the bearish pressure this time, its break could send the pair to the psychological 10.0000 level, marked by the low of October 11th.
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