Oct 26, 2017 - Market Update (ECB day today but should they do anything?, Turkish CB in the spotlight too, EURUSD range 1.1660-1.1860/1.1900+, Airbus-Bombardier deal a China story?, Brazil yields up on elections risk, VIX to loo for too long - recall the Aug 2015 China blow...)

Short recap

Asia flat

Europe opening flat

China going for USD denominated bonds again (first issue from 2004)

ECB day today - lots of uncertainties around QE cut back (low inflation, strong EUR vs growing economy)

Still not clear whether ECB should do it today or not

A Turkish Central Bank announcement important today

As there are speculations about Germany (EU) to cut funding for Turkey

Equities

GaxoSmithKline likely to boost their consumer health business via acquisitions

Airbus deal with Bombardier might have had more to do

With technology and production shift to China than with Boeing

As some Chinese investors were looking at Bombardier as well

Earnings

Microsoft – expecting higher revenue on cloud business

Alphabet – expecting higher revenue on mobile, YouTube, Play Store and cloud

Intel – to benefit from stable PC market and very good growth from data centers

Amazon.com – retail and cloud should help while new markets and acquisitions weight

Ford – question is how the weak sales in Europe and Chine effect the results

Planning to cut USD 14 bln and focus more trucks and electric/hybrid cars

Newmont Mining – market is looking at higher revenue on more effective production of gold

Teck Resources – expecting a nice surprise on higher prices of coal, zinc and cooper

Bonds

10-yr Trys yield at 2.43%, above technical 2.40% level

10-yr Bund yield at 0.48%

Brazil – the yields highlight upcoming volatility before next year’s presidential elections

Stocks at records highs, BRL is stable but investors are getting nervous whether new president

Will keep up with reform process

VIX

What a nice ride for all of those who bet on falling risk

But…things may change, be aware of that

As the Chinese blow out from Aug 2015 shows

What about VIX spiking again 96% ?

Source: Saxo Bank

EURUSD

Easy hawkish surprise but difficult to sell the market dovish view

Draghi to have a hard time to talk down EUR based on ongoing price action despite higher US yields

Saw some short covering going to ECB & because of new question marks appeared around US tax reform

Markets expect dovish taper

See range of 1.1660-1.1860/1.1900+

Resistance at 1.1850 (50 DMA), 1.1862 (23.6% Fibo)

Support at 1.1793 (10 DMA), 1.1783 (200 HMA), 1.1750/60, 1.1720 (38.2% Fibo)

USDJPY

Selling interest above 114.00

Huge expiring options with strikes 113.50-80 and 114.50/115.00

Bids a 113.50, more towards 113.00 with stops below

Support at 112.99 (10 DMA)

Trading around descending trendline after getting close to recent high at 114.50 from July

Gold

Taylor or Powell ? Taylor can make a hit on gold

As he favours quicker rate hikes and return back to normal

Resistance at 1281 (50.0% Fibo), 1285 (10 DMA)

Support at 1275 (100 DMA)

Data/events

ECB (1145 & 1230 GMT)

Fed’s Kashkari (1430 GMT)

Fri

ECB’s Praet (0715 GMT)

Trump announcing a new Fed chair

Nov 1 – FOMC

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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