Friday has been quite frantic towards the end of the London session with a slew of data and Fed talk before they go into their blackout period ahead of the next FOMC meeting.
For most, the day would have been a rather frustrating day today. The UK news was rather good, but the pound dropped on news that the EU could terminate the Brexit trade deal if the rift between the two cohorts deepens. Canadian news was good, but the Loonie favored the US dollar. Fed Chair Powell said nothing new, and the Nasdaq dropped a hundred points.
The forex heatmap shows how opposite the end of the London session was compared to the start. As the commodity pairs reversed as the US dollar and yen caught a bid.
The US Markit Composite PMI Flash data for October came in better than the previous month with a resurgent Services Sector as COVID-19 case numbers dropped. Hiring has likewise picked up as firms have been encouraged to expand capacity to meet rising demand. The manufacturing PMI didn’t do as well but is still relatively high and expanding.
During Fed Chair Powell's speech today, the main takeaway was that supply chain bottlenecks are persisting and will last longer than expected. Powell believes that things will improve next year. In light of this, it would be premature to raise rates, but they are on track to taper emergency purchases.
Mary Daly, President of the Federal Reserve Bank of San Francisco, stated in another Fed speech that inflationary levels are higher and lasted longer than expected. Further, she said that some inflation numbers are "eye-popping high," adding that the pandemic is primarily responsible for most of the increase.
The US dollar was red for the day and is trading still within yesterday’s price range. Looking left across the chart the swing high from late August is acting as clear support and a move lower would be met by a rising trend line.
The weaker dollar today did give the energy complex a lift and we now see that Brent is trading back around the important technical level of $84.80. Oil is also supported by news that the US oil rig count has dropped by 2 and the Canadian rig count had dropped by 4. Compared to the same period a year earlier, the number of US oil rigs increased by 232.
Gold also popped higher today but failed to break through the sticky $1800 level. I truly believe that the price of gold will push through the resistance level of $1834/oz where there is obviously a lot of selling pressure and no doubt a lot of stops. However, there is a double bottom at $1680/oz which may have to be traded to first to collect the orders and enough bulls to get through that major resistance.
Even though the GBPUSD was a big red day today, it did find some buyers at the important breakout level and 50-period moving average on the H4 chart. If we can close above here today this may encourage some more buyers to step in and get us back on track for a test of the 1.3880 level.