5 Things To Watch Next Week + ChartBook

All Eyes on Trump and Xi at the G20 Meeting

USD/CNH, 4-Hour Chart Analysis

Next week’s all-important summit in Argentina could be a defining event for months, since the re-escalation of the US-Chinese tensions after the APEC summit has been one of the main factors behind this week’s risk selloff.

The meeting between Chinese leader Xi and President Trump could go either way, but despite Mike Pence’s harsh words last week, we give a bit more chance to a positive outcome, given the fact that the risk off shift reached US markets, and Trump will likely be more inclined to reach a deal than before, especially following the midterms.

The Chinese Yuan is trading near its recent lows ahead of the meeting, due in part to the broad Dollar rally, but the fading trade-optimism have also been a negative catalyst, and even the hope of a deal could cause a significant rally in the currency even as the structural problems in the Chinese economy are not going anywhere soon. The credit is likely over in China, and we expect a painful period ahead, and long-term, the Yuan is almost certain to devalue against all of its major peers.

Doomed to Fail Double Bottoms Forming in Stocks?

Nasdaq 100 Futures, 4-Hour Chart Analysis

While the Nasdaq breached its October low this week, the other major US and international indices are holding up above those levels, for now, even after this week’s broad selloff.  Sentiment turned very negative towards risk assets ahead of December, one of the most bullish months of the year, and with European assets being clearly oversold, a rally attempt seems likely in the coming weeks

Despite the possible move, we expect the broad bearish shift to continue, so the double bottoms that a lot of analysts are hoping for will likely fail, and we will see new lows across the board in the coming months.

 In the US, the key benchmarks will likely stay below their November highs, with the 7000 level in the Nasdaq 100 being a plausible target. Before the rally, the index could even test its lows from April and February near 6250, especially should the G20 meeting disappoint bulls.

Super Thursday for Fed-Watchers

EUR/USD, 4-Hour Chart Analysis

While the Fed-induced rally in stocks failed, despite the two-month lows in yields across the curve, a continued dovish shift from the Central Bank could boost a relief rally in risk assets, even if it wouldn’t solve the problems seeded in overvaluation, debt excesses, and declining global liquidity.

Short-term, the core PCE Price Index, which is coming out on Thursday, just hours before the Fed meeting minutes, could help in improving sentiment, should it come in below the expected 0.2%. The Fed minutes are unlikely to cause any big surprises, but should the cautionary voices prove stronger than expected, Treasury yields could head lower again, and stocks might catch a bid one more time.

EUR/GBP in Focus after Loaded EU Economic Summit

EUR/GBP, 4-Hour Chart Analysis

A special economic summit will be held tomorrow in Brussels by the EU, where the members are expected to formally sign the draft Brexit deal that has been under fierce attacks in the UK. Spain, which threw in the issue of Gibraltar just before the summit could cause last-minute troubles for British PM

Theresa May, but even if the members sign the withdrawal agreement and the declaration that supposed to lay out the frameworks for the post-Brexit relations, the real test will come in the British Parliament. Should the agreement be delayed, the Pound would likely get under heavy selling pressure, even against the also affected Euro, and for coming weeks, the short-Pound trade still seems legit, regardless of the summit’s outcome.

Consumer Confidence in Focus as Holiday Season Kicks Off

Besides the Brexit process, the G20 meeting, and the Fed’s meeting minutes, there will be important economic releases coming out as well next week. The German IFO Business Climate index will highlight Monday’s session, while the US CB Consumer Confidence Index will arrive on Tuesday, which will be closely watched in light of the looming holiday season, together with the early Black Friday sales reports.

Wednesday will see the British Bank Stress Test results, and the second reading US GDP print and price index, while besides the US inflation data that we discussed before, the prelim CPI readings from the key Eurozone countries will also be out on Thursday and Friday, with the flash composite European CPI being released on the last day of the week too.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.

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