Global macro overview for 01/11/2018

Wednesday brought a surprising improvement in sentiment on the stock market, although the data coming from Asia are far from positive. On the other hand, one positive day will not cover up the gloomy speech of trading throughout October, so it's important to remain cautious.

Apart from the fact that the Asian stock market has taken directions for the upward trend on Wall Street, there are no other reasons for positive sentiment. The government version of the PMI index for the Chinese industry indicated a fall to 50.2 in October from 50.8 in September and clearly below the forecast of 50.6. This is just a small step away from falling below 50 and signaling a recession in the sector. The service sector also slowed to 53.9 from 54.9 and the forecast 54.6. In the commentary, the statistical office stated that the impact had a long holiday period and an external environment. Although it is not specified whether there is a deterioration of trade relations with the US under the external environment, you do not have to be a great analyst to combine one with the other. However, most companies expect that the current production pace will be sustained, rather soon with the hope of reviving domestic consumption than improving trade conditions. Surveys were completed before information from the USA about the planned extension of customs duties on other goods from China, and I wonder what entrepreneurs' responses would look like now? The positive side of today's data is the evidence for the authorities in Beijing that a reaction on their part is necessary. China is facing an economic slowdown, but not a collapse, and the market seems to discount in current prices a worse scenario than it actually is.

Let's now take a look at the SP500 technical picture at the H4 time frame. The market has hit the 61% Fibo at the level of 272.95 and reversed towards the 50% Fibo at the level of 270.44. Just below this level, there is an unfilled gap down to the level of 268.15, so it might be a good time to fill this zone. The market conditions are now slightly overbought and the momentum is pointing down, albeit is still positive. The key technical support zone is seen between the level of 268.15 - 267.04.

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