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14-NOV-2018, WEDNESDAY

1) Asian Stocks Mostly Down On Trade Growth Fears
2) Gold Prices May Fall on US CPI Uptick, Hawkish Powell Comments
3) Crude Oil Prices Suffer Largest Drop in Almost Three Years on OPEC Outlook
4) Australian Dollar Steady On Mixed China Data, Employment Up Next

1) Asian Stocks Mostly Down On Trade Growth Fears

Asia Pacific stocks were mostly lower Wednesday as investors fretted about lower global growth in the face of plunging oil prices. US crude futures endured their worst one-day loss in more than three years on Tuesday, falling by around 7% in spite of Saudi Arabian pledges to reduce supply this year. Markets are clearly still worried that the market will remain oversupplied even with this cut. Chinese shares had been down for much of the day but the Shanghai Composite was flat in the middle of its afternoon session, with the Hang Seng down 0.4%. Australia’s ASX 200 had shed 1.7%, with the Kospi off by 0.2%. The Nikkei 225 stood out in the green, if not very far, rising 0.1%.

However the Tokyo benchmark remains below its most recently dominant uptrend line and, while it does, the lows of late October look more likely to be seen again than this year’s peak, made earlier last month. The day’s regional data came mainly from China where October retail sales underwhelmed market expectations while industrial production topped them by a whisker. Beijing’s historically modest 6.5% growth target still looks eminently achievable but much of course hangs on the outcome of trade talks with the US.

2) Gold Prices May Fall on US CPI Uptick, Hawkish Powell Comments

Gold prices struggled for meaningful upside progress despite a weaker US Dollar, which typically boosts anti-fiat demand for the yellow metal. That might reflect traders’ unwillingness to commit ahead of key event risk on the horizon. US CPI is expected to rebound to 2.5 percent in October after hitting a seven-month low of 2.3 percent in the prior month, and an upside surprise seems plausible. That may boost Fed rate hike bets, a shift that may be reinforced by scheduled comments from dependably hawkish Fed Chair Jerome Powell.

Gold prices continue to hover at upward-sloping counter-trend support, now at 1199.27. Breaking below this barrier targets the 1180.86-87.83 area next. Alternatively, a daily close back above support-turned-resistance in the 1211.05-14.30 region paves the way for a retest of the 1260.80-66.44 zone.

3) Crude Oil Prices Suffer Largest Drop in Almost Three Years on OPEC Outlook

Crude Oil prices suffered the largest one-day loss since February 2016 as OPEC downgraded its demand outlook for next year. Meanwhile, the EIA drilling productivity report said output will rise by a further 113k barrels per day in December. Looking ahead, API inventory flow statistics are in focus. The outcome will be sized up against forecasts calling for official EIA statistics to reveal a 2.89 million barrel increase. Prices may fall further if API calls for a larger inflow, whereas a more modest increase or even a surprise draw may inspire a bounce.

Crude Oil prices plunged through support guiding the uptrend from February 2016, ratifying long-term topping cues and opening the door deeper losses. For now, a daily close below support in the 54.48-55.21 area opens the door for a test of the 52.34-83 zone. Immediate support-turned-resistance is at 58.11, with a reversal back above that and the underside of trend line support at 58.67 exposes the $60/bbl figure anew.

4) Australian Dollar Steady On Mixed China Data, Employment Up Next

The Australian Dollar initially wilted just a little on Wednesday following a welter of official Chinese economic data that was actually by no means weak. However, investors may have initially focused on retail sales, which were more feeble than expected, only to return to market when they saw the tone of the data overall.

Sales rose by an annualized 8.6% in October. This was a quite robust showing, but some way below the 9.2% level forecast, which had also been September’s rise. Industrial production did better, rising 5.9% on the year. This was only just above the 5.8% expected. Still, in an atmosphere dominated by trade tension with the United States, the data suggests as have other numbers that China’s manufacturing economy is at least holding up. Fixed asset investment rose 5.7%, above the 5.5% expected. These numbers won’t do anything to the thesis that China has already seen its best monthly growth levels for 2018, but they do probably keep in on course for the admittedly modest 6.5% overall growth targeted by Beijing.

The Australian Dollar can often act as the foreign exchange market’s favorite liquid China proxy thanks to Australia’s wide trading links to the world’ second largest economy. It did not obviously do so on Wednesday however, with AUD/USD slipping a little after the numbers but recovering quickly enough. On its broader, daily chart the Aussie has come under some renewed pressure this week against its US cousin, mostly thanks to trade-related swings in global risk appetite. The Australian Dollar usually acts as a ‘risk currency’ – bought when investors are sanguine about growth prospects. These units have tended to lose out in recent sessions to perceived havens such as the US Dollar and Japanese Yen. Still, AUD/USD has risen in the past two weeks above 2018’s dominant downtrend line, although its tenure there will remain highly dependent on that hair-trigger risk appetite.

In the end the Australian Dollar is still very short of domestic interest rate support. The Reserve Bank of Australia’s Official Cash Rate still languishes at its record low of 1.50%. That has endured since August 2016 and according to futures market pricing is set to remain unchanged all through 2019. If so the contrast between RBA policy and that of a US Federal Reserve still committed to raising rates will make it hard to see AUD/USD making sustainable gains. The next major hurdle for the Australian currency will be its own domestic employment data release, due Thursday. Job creation has been impressive for years, but one or two voices are now starting to wonder how much longer it can hold up.