USD gains, US stock markets drop on new restrictions

The USD enjoyed some safe haven inflows, while US stock markets retreated as news for tighter restrictions tended to overshadow progress made for a vaccine. It was announced yesterday, that New York city would close public schools as the infections in the city have started to surge once again. At the same time the US coronavirus related deaths reached the landmark of 250,000, depressing the morale and creating worries for the markets. Please note that earlier on, Pfizer announced that its vaccine was found to be 95% effective after the test stage and the company plans to apply for emergency authorization as early as Friday, while analysts speculate that a vaccine could be released earlier than year’s end. Should headlines continue to highlight the risks, intensifying the risk off mood of the markets, we could see the USD gaining further ground and vice versa.
Dow Jones dropped yesterday breaking the 29680 (R1) support line now turned to resistance. We see the possibility of the bearish movement extending, should the market sentiment remain cautious, yet we also highlight that the RSI indicator below our 1 hour chart has reached the level of 30, which confirms the presence of the bears on the one hand, yet on the other, may imply that the index may become oversold should the reading drop below 30. Should the bears maintain control we could see the index breaking the 29315 (S1) line and start aiming for the 28990 (S2) hurdle which stopped the index’s retreat on the 12th of November. Should the bulls take over, we could see Dow Jones reversing course, breaking the 29680 (R1), and aim for the 30090 (R2) level.

Lira awaits for CBRT’s interest rate decision

Today during the late European session we get from Turkey CBRT’s interest rate decision and the bank is expected to hike rates considerably from current 10.25%, by 475 basis points to 15.00%, yet the outcome is substantially uncertain as President Erdogan spoke out against high rates just yesterday. The situation in the Turkish economy remains critical while almost two weeks’ ago CBRTs’ Governor Uysal was replaced by Erdogan with the technocrat Naci Agbal, which triggered also the resignation of finance minister Albayrak. Erdogan himself more or less announced a diversion from his rather unorthodox economic views, as he promised a reset with international and local investors and vowed to “swallow a bitter pill” if necessary. Now Erdogan’s intentions are to be put to the test and the markets eagerly await CBRT’s interest rate decision and a serious hike of 400-500 bp could allow the Lira to continue with its strengthening, while should the markets be disappointed with CBRT’s decision, the Lira could tumble.
USD/TRY maintained a sideways motion between the 7.7750 (R1) and the 7.6550 (S1) levels, after breaking the downward trendline characterising its movement from the 6th till the 16th of November. We expect that the sideways motion could be broken depending on the outcome of CBRT’s interest rate decision. Should the pair come under the selling interest of the markets once again, we could see it breaking the 7.6550 (S1) support line and aim for the 7.5300 (S2) level. Should the bulls take over, we could see the pair breaking the 7.7750 (R1) line and aim for the 7.9500 (R2) level.

Other economic highlights today and early tomorrow

Today in the European session, we get Eurozone’s current account balance for September and UK’s CBI orders November. In the American session, we get the US weekly initial jobless claims figure and the Philly Fed business index for November. During tomorrow’s Asian session, we get Japan’s inflation data for October and the Jibun preliminary manufacturing PMI for November as well as UK GfK consumer confidence for November. Please note that Christine Lagarde is scheduled to speak on a number of occasions today while also Cleveland Fed President Mester and ECB’s Schnabel also are to make statements.