Weekly outlook: Oil, EURUSD crash, eyes on China

China's inflation, released this weekend, rose by just 0.30%, compared to the expected 0.40%. That follows a disappointing market reaction to Friday's RMB10tn package to clean up local government balance sheets. Markets had hoped that the package would involve more direct fiscal stimulus. China will probably keep its powder dry now until President-elect Trump takes office at the end of January.

Investors will closely monitor today's "Singles Day" online shopping frenzy in China for signals about the health of Chinese domestic consumption, the country's Achilles heel for many.

Elsewhere, the “Trump trade” continues in full swing. Bitcoin rose above $80,000 over the weekend, and Wall Street's leading indices posted 4.50+% weekly gains on lower regulation and tax hopes. Wall Street closed higher on Friday. The S&P 500 rose 0.38%, the Dow Jones gained 0.59%, and the Nasdaq edged just 0.07% higher.

Potential Trump tariffs are the other side of the coin, lifting US bond yields despite the Federal Reserve cutting rates by 0.25% last week. That boosted the dollar index (DXY), rising 0.57% to 105.20, closing above resistance at 104.95. Its next target is the 106.00 region.

Trump's victory is priced as a big loss for Europe, with tariffs looming, a potentially fractured NATO, and increased defence spending and support for Ukraine. It follows the collapse of the ruling coalition in Germany, Europe's largest economy. Markets are rightly pricing in a faster pace of easing from the ECB. Unsurprisingly, markets crushed the Euro last week.

EUR/USD fell by 0.78% to 1.0720 on Friday, just above critical technical support at 1.0700. Failure targets the 1.0600 regions, and the single currency must regain 1.0950 to shift the bearish technical picture.

The prospect of more US oil and gas supply hitting global markets under a Trump administration saw Brent crude and WTI slump by over 2.0% on Friday. WTI’s technical picture looks particularly bearish, falling out of its rising triangle formation, implying deeper losses towards $66.00 a barrel. OPEC's monthly oil report should be interesting on Tuesday.

Today's US holiday may mute activity in Asia, with China’s disappointing weekend inflation data potentially weighing on mainland equities.

US inflation data on Wednesday shapes up as the week's main event. President-elect Trump's policies are priced as inflationary, and Wednesday's inflation data is forecast to be sticky. Expected Core Inflation YoY is 3.30%, and Headline Inflation YoY is 2.40%, unchanged from last month. Higher prints could see a higher US dollar and US yields and might take some wind out of the stock market.

Australian employment data on Thursday is always good for some intraday volatility in the currency.

Friday belongs to China, which releases Fixed Asset Investment, Industrial Output, Retail Sales and Unemployment for October. UK GDP data is expected to disappoint and could weigh on GBP/USD.

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