Risk On Start To The Week On Firmer China PMIs

The week began with an element of risk on thanks for positive Chinese data over the weekend. China’s manufacturing PMI expanded in November to break a 7-months stretch of contraction according to China’s National Bureau of Statistics (NBS). At 50.2, it’s the highest read since March and backed up by new orders expanding to 51.3.

Whilst the government back figured are treated with a little caution, it’s encouraging to see that the privately-run PMI data from IHS Markit also expanded at 51.8, beating expectations of 51.4 and above 51.7 prior. With the sector expanding at its fastest pace in early 3-years, it ticks another box for the potential of a global rebound as we head into 2020.

S&P500 E-mini futures are up +0.28% and just off record highs
Gold is -0.21% lower
US10Y has risen to 1.8%, up 1.77% from Friday’s close
NZD and AUD are the strongest majors, JPY is the weakest

USD/JPY remains within a bullish channel, with last week’s break above 109.50 invalidating the longer-term bearish wedge pattern we were monitoring. Bullish momentum since the 108.24 low is forming a steady trend on the four-hour chart and prices appear set to retest 110 for the first time since May. Given the strength of the last four-hour bar, the swing low appears to be in at 109.37 so the near-term bias remains bullish whilst this level holds as support.

Bulls could seek dips within the tight bullish channel.
A break beneath 109.30 assumes a bearish reversal from the highs.

AUD/JPY is one to watch for a potential break higher, although keep in mind RBA hold their final meeting of the year tomorrow. By Friday’s close, RBA’s rate indicator suggested just an 11% chance of a -25 bps cut, although given that Westpac have now revised for them to cut two times and launch QE by June 2020, we could see some bearish follow-through on AUD pairs if RBA’s statement is perceived to be more dovish than November’s. Conversely, if they maintain their ‘steady as she goes approach’, we could just as easily see these pairs bounce higher.

Technically, prices action is supported by the bullish trendline projected from the flash-crash low. Today’s positive PMI reads has seen it rally into 74.33 resistance, although it appears to break it just yet.

Ultimately, the near-term bias is bullish above 73.90 so traders could seek a break above 74.40 to assume bullish continuation.
Whereas a break below 73.90 invalidates the bullish trendline and assumes further downside.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.