Harder and harder to shake off the downside risk

Next 24 hours: Euro sinks to 15 month low

Today’s report: Harder and harder to shake off the downside risk

US disruptions around the debt ceiling, ongoing worry around rising inflation, nerves ahead of this Friday’s US jobs report, uncertainty surrounding the prospects for Fed Chair Powell’s second term, and rocketing gas prices are all stories that are weighing on investor sentiment into Wednesday.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported above 1.1600 on a weekly close basis in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up. Only a weekly close below 1.1600 would force a rethink.

  • R2 1.1756 – 22 September high– Strong
  • R1 1.1691 - 29 September high – Medium
  • S1 1.1562 - 30 September/2021 low – Medium
  • S2 1.1500 – Psychological – Strong

EURUSD – fundamental overview

The Euro is trading with a heavy tone again into Wednesday as Euro bond yields underperform relative to the US. Eurozone data has also come in softer of late, while ECB Holzmann hopes the CPI spike is transitory. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a consolidation phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3200 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

  • R2 1.3751 – 23 September high – Strong
  • R1 1.3648 – 5 October high – Medium
  • S1 1.3412 – 29 September/2021 low – Medium
  • S2 1.3400 – Figure – Strong

GBPUSD – fundamental overview

Rising rate expectations in the UK have helped to prop up the Pound despite ongoing broad based demand for the US Dollar. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 113.00 to negate the outlook.

  • R2 113.00 – Figure– Strong
  • R1 112.08 – 30 September/2021 high – Medium
  • S1 110.82 – 4 October low – Medium
  • S2 110.45 – 8 September high – Medium

USDJPY – fundamental overview

We've seen some Yen weakness of late and the recent Tokyo CPI miss is definitely factoring into some of the price action. Japan's service sector has also shrunk for the 20th consecutive month. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there is risk for additional declines, though setbacks are expected to be well supported down into the 0.7000 area. Look for a weekly close above 0.7500 to force a shift in the structure.

  • R2 0.7410 – 10 September high – Strong
  • R1 0.7317 – 24 September high – Medium
  • S1 0.7170 – 29 September low – Medium
  • S2 0.7106 – 20 August/2021 low – Strong

AUDUSD – fundamental overview

The Australian Dollar is heading south again on Wednesday, mostly on the back of broad based risk off flow. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

  • R2 1.2949 – 20 August/2021 high – Strong
  • R1 1.2896 – 20 September high – Medium
  • S1 1.2546– 5 October low – Medium
  • S2 1.2494 – 3 September low – Strong

USDCAD – fundamental overview

The Canadian Dollar has rallied for four consecutive days into Wednesday and this comes on the back of the big moves we're seeing in the price of oil and natural gas. On Tuesday, the Canada trade balance widened out. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, rallies should be well capped and there is still room for deeper setbacks into the 0.6500-0.6800 area before we see an attempt at a higher low and resumption of upside pressure. Back above the April high at 0.7317 would be required to force a shift in the structure.

  • R2 0.7094 – 23 September high – Medium
  • R1 0.6982 – 4 October high – Medium
  • S1 0.6860 – 29 September low – Medium
  • S2 0.6809 – 19 August/2021 low – Strong

NZDUSD – fundamental overview

A case of sell the fact for the New Zealand Dollar on Wednesday, this after the RBNZ raised rates as expected. The RBNZ signaled further rate increases will likely be needed to tame inflation, but all of this was anticipated by the market. Risk off flow is also adding to Kiwi downside pressure. Key standouts on today’s calendar come in the form of German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, and US ADP employment.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4600, with a break back below 4353 to strengthen the outlook.

  • R2 4552 – 3 September/Record high – Strong
  • R1 4485 – 27 September high – Medium
  • S1 4272 – 1 October low – Medium
  • S2 4233 – 19 July low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment into Q4 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

  • R2 1917 – 1 June high – Strong
  • R1 1835 – 15 July high – Medium
  • S1 1700 – Round number – Medium
  • S2 1677 – 8 March/2021 low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2021/09/15seplmaxaudio.mp3"][/audio]

Peformance chart: 30 Day Performance vs. US dollar (%)

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