Market Quick Take - November 17, 2021 Market Quick Take - November 17, 2021 Market Quick Take - November 17, 2021

Market Quick Take - November 17, 2021

Macro 6 minutes to read
Saxo Strategy Team

Summary:  US equities remain poised near all-time highs after a mixed session yesterday, while Asian equities were in a cautious mood on a weak session for the Chinese markets. In FX, focus centers on the very weak Euro as the single currency has dropped across the board on bets that the ECB will lag its peers in normalizing monetary policy next year. Elsewhere, crude oil has slumped to a six-week low while the Turkish lira has devalued sharply this week ahead of a Turkish central bank meeting as the market fears further rate cuts.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities are slowly regaining the lost territory from earlier this month with Nasdaq 100 futures trading around the 16,360 level in early European trading. With the VIX Index still below 20 and no major upward move in US interest rates, and the earnings season showing robust results, equities remain bid. The key risk to US equities remains the battle over the inflation narrative and to what extent it suddenly causes a big move higher in interest rates; that’s the main catalyst for risk-off in equities.

EURUSD and EURGBP – the euro is broadly weak, as the market predicts that the ECB will lag nearly all of its peers in normalizing monetary policy from here. EURUSD has tumbled particularly aggressively after its recent break below 1.1500, but has been joined by other euro crosses like EURJPY and EURGBP and others this week in dropping to local lows, with EURGBP trading at its lowest levels since early 2020 after UK CPI data yesterday and the latest jobs data, in addition to fresh hawkish comments on inflation concerns from the BoE. It is difficult to understand what might change sentiment toward the euro, save for a massive reversal lower of natural gas and power prices that are plaguing the outlook, and even then, less dovish ECB signals would likely be required as well.

USDJPY – the price action yesterday suggests that the 115.00 barrier in USDJPY is being defended, possibly on options-related flow, although a dip in long US treasury yields helped the reversal in the pair away from that level. The 10-year Treasury yield in the US is an important coincident indicator for USDJPY developments from here, with any fresh break above the cycle highs of 1.75% likely to see USDJPY following suite and exploring the chart area toward 120.00. For now, this 114.50+ area is a massive resistance line that stretches back to early 2017.

Gold’s (XAUUSD) impressive ability to hold onto its post-CPI gains continue, and so far it has led to the creation of an extra layer of support at $1850 ahead of the key $1830-35 area. Inflation worries are the main source of support at this stage where the metal has managed to rally despite seeing the dollar hit a 15-month high while crude oil has slipped to a six-week low has. The highest read on UK inflation in a decade helped support the market yesterday with traders also eyeing the weakness in cryptos this week. President Biden’s choice of the next Fed chair also receiving some attention

Copper (COPPERUSMAR22) has fallen to a five-week low with technical selling emerging after both contracts in London and Ny slipped below their 200-DMA, in high grade at $4.30/lb. Rangebound since March, the market has been grappling with falling investor participation, concerns that China’s economy is slowing and mixed signals from the spot market where recent tightness has started to ease. The long-term prospect in our opinion remains supportive given the global push to mitigate climate change, among others through copper-intensive electrification. Key support at $4

Crude oil (OILUKJAN22 & OILUSDEC21) trades near a six-week low as the market continue to speculate about a potential release of US Strategic Petroleum Reserves and after China said it was working on a release. A bullish weekly US stock report was ignored as the market also took stock of recent updates from EIA and IEA, in which they both forecast current tight market conditions could start to ease early next year as supply catches up with softening demand, the latter driven by slowing growth and renewed Covid-related reductions in mobility. Having given back most of the October gas-to-oil switching gains, the first major level of support in Brent is $78.25

US Treasuries (IEF, TLT). Yesterday’s 20-year US Treasury auction was not as bad as expected. It tailed 1.4bps versus 2.5bps in the previous auction. The bid-to-cover ratio was 2.34 in line with the past six auctions average. Indirect fell to 60% slightly below the previous six auction average. There might be two reasons why we didn’t see a repeat of last week’s ugly 30-year auction. First, the Treasury cut bond issuance, but the Fed kept purchases between 10-22.5 years unchanged. The 10s20s30s Butterfly cheapened to summer’s levels after last week selloff, thus the modest tail made it even more interesting to investors. Ten-year yields fell back below 1.60%, however, their uptrend remains intact. Despite yields adjusted slightly lower yesterday, the move index remains elevated indicating that the bond market remains on hedge.

UK Gilts (IGLT). The UK RPI rose to the highest in 30 years and jobs remain strong despite the end of the furlough scheme. It’s a clear bearish sign for bonds. However, after a quiet trading session yesterday, ten-year Gilt yields fell again below their 50 days MA. Despite the macro backdrop pointing to higher yields, we cannot forget that the market is pricing four interest rate hikes for 2022 in the UK, and any setback from the rate-hiking narrative could compress the rise in yields.

German Bunds (IS0L). Yesterday’s 30-year Bund auction ended up being a technical failure. The German DMO had to cut the issue size, initially planned to be EU1bn, by more than 30% to increase oversubscription. Regardless, the bid-to-cover ratio fell to 1.1x, the lowest since February 2020. Once, again it is a sign that investors are reluctant to add duration to their portfolio amid a strong inflationary environment and less aggressive central banks’ monetary policies.

What is going on?

UK October CPI hits new cycle highs. The headline October CPI released yesterday morning reached 4.2% year-on-year, the highest level since 2011, while the core reading was 3.4%, likewise the highest since a spike in 2011 on rising oil prices of the time. This was versus expectations of 3.9% and 3.1%, respectively.

Canada October CPI lower than expected at the core - Although the headline October CPI reading was out at 4.7% year-on-year as expected, the “Trim” core CPI reading was out at 3.3% vs. 3.4% expected. Given the inflation levels coming hot nearly everywhere else, this was a bit of a surprise, and CAD was a bit weaker in response, also held down by oil prices falling sharply yesterday on concerns that both the US and China are set to release strategic reserves.

Visa dropped sharply on Amazon move to stop accepting card in the UK – and Amazon threatened to move its branded credit card to Mastercard as it argues with Visa over its processing fees. Visa shares were down nearly 5% in yesterday’s session, while Mastercard shares dropped more than 2.5% as well, possibly as this is a signal from one of the largest retailers that it sees card fees as unacceptably high. Amazon has started assessing small additional fees for using credit cards in Singapore and Australia and announced last week that US customers can pay with Venmo.

October passenger car registrations in Europe fell 30% from last year to 665k units for the month on the ongoing shortage of semiconductors, although cumulative sales for January to October rose 2.2% from 2020 levels to a total of 8.2 million.

Earnings recap - Baidu and Bilibili were disappointing investors impacting sentiment today in China with Hang Seng futures down 1.5%. Nvidia earnings in Q3 were stronger than expected and the guidance for Q4 was above expectations driven by strong demand in the datacenter business, which includes chips sold for crypto mining.

What are we watching next?

Central Bank of Turkey meeting today as TRY devalues in fear of further cuts. Turkish president Erdogan was out speaking yesterday and weighed in once again on the need to cut rates, even invoking religious principles against usury in his comments. “I will continue fighting against interest as long as I continue serving.” The market fears another 100 basis point rate cut today, to take the rate to 15% after 300 basis points of prior cuts carried out by the central bank chief Kavcioglu, who was appointed in March after speaking in favour of Erdogan’s desire to cut rates. Since then, USDTRY has risen from 7.20 to nearly 11.00 overnight, after trading below 10.00 to start this week.

Who will US President Biden nominate to head the Fed next February? Note: yesterday we indicated that oddsmakers favour Biden nominating Lael Brainard over renominating Jerome Powell - this is not correct, as we should have written that odds are rising of a Brainard nomination, but Powell is still seen as more likely to get the nod. The Fed nomination is an issue hanging over the markets, as the current Fed chair term ends in early February and from comments made earlier this week, an announcement could be made any day now. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell).

Earnings Watch – today’s focus is Alibaba and as these two Chinese giants in e-commerce are important for sentiment in Chinese equities. The cyber security industry has done very well this year and the industry has raised its general revenue growth rate and in that light the Palo Alto Networks is an interesting earnings release to watch.

Thursday: National Grid, Alibaba, Intuit, Applied Materials,, Workday, Palo Alto Networks, Ross Stores, Farfetch

Economic calendar highlights for today (times GMT)

0830 – Sweden Oct. Unemployment Rate
0900 – Norway Norges Bank Q4 Expectations
1100 – Turkey Central Bank Rate Announcement
South Africa Rate Announcement
1300 – US Fed’s Bostic (voter) to speak
1330 – US Weekly Initial Jobless Claims
1330 – US Philadelphia Fed Survey
1530 – US Weekly Natural Gas Storage Change
1900 – US Fed’s Evans (voter) to speak
2030 – US Fed’s Daly (voter) at event
2330 – Japan Oct. National CPI

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992