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More soft US data sees risk sentiment sour

Vantage Updated Updated Wed, 2023 December 6 11:42

Headlines

* Bank of Canada hold rates, keeps prospect of further hikes on the table

* Dollar touches two-week high, euro weaker as market bets on rate cuts

* US 10-year Treasury slides, hitting fresh September low

* Oil fell for a fifth session to settle at lowest since late June

FX: USDs rebound continued for a third day this week. The DXY climbed back above 104 after revering initial selling. The next upside level is a major Fib level of the summer rally at 104.38. The 10-year Treasury yield fell to a new low around 4.11%. Softer than expected ADP and until labour costs data triggered initial selling. Subdued risk appetite helped the greenback.

EUR fell for a sixth straight day and dropped through the 100-day SMA at 1.0766. The next support level is at 1.0764. Even more hawkish comments from ECB officials didn’t help the euro.

GBP slid down through the 50% retracement of the summer drop at 1.2589. This followed disappointing construction PMI data. A BoE report noted that the full impact of higher rates will take time to come through. The overall risk environment remains challenging it said.  

USD/JPY traded in a narrow range again after paring early gains. The 100-day SMA sits above at 147.46 as resistance.

AUD closed marginally lower after briefly nearing 0.66. Australian GDP unexpectedly slowed to 0.2% in Q3 from 0.4% in Q2. The data allows the RBA time to keep a data dependent wait-and-see stance. The CAD kept rates unchanged as anticipated. But it dropped its October language regarding inflationary risks increasing and repeated the bank is prepared to hike if needed. USD/CAD closed near its high just on a major Fib level at 1.3590.

Stocks: US equities dropped as risk sentiment soured on soft economic data. The S&P 500 lost 0.39% to settle at 4549. The tech-laden Nasdaq 100 finished 0.56% lower at 15,788. The Dow closed 0.19% lower at 36,054. Homebuilders outperformed while food producers were also well supported after earnings. Apple readied for new iPads and MacBook Airs to combat a sales slump. It is also moving away from China to India-made iPhone batteries.

Asian futures are in the red. APAC stocks were mostly higher on Wednesday with the risk mood underpinned by softer yields. The Nikkei 225 climbed back above 33,000.

Gold stabilised above previous October highs just above $2000. Yields fell but the dollar held up relatively well.

Chart of the Day Oil tumbles to multi-month lows

Crude closed lower for a fifth day in a row with WTI falling through the $70 level for the first time since early July. The slide came despite last week’s announcement from OPEC+ members new voluntary supply cuts. There was also a drop in US oil inventories, the first fall since mid-October. However, slowing demand from developing economies plus non-OPEC+ supply is on the rise.

Brent fell though the long-term midpoint of the 2020-2022 rally at $75.24. a minor Fib level of the March to October move is at $75.47. The next major support zone is around $71.50 where the lows form March, May and June reside.