How Legitimate is this Latest Run in the Buck?

GBPUSD – technical overview

The correction off the 2018 low has transformed into an uptrend following the recent break back above the daily Ichimoku cloud. It’s the first time the market has traded above the cloud since it was trading around 1.4000 back in April, and encourages the possibility for a more meaningful recovery ahead. Any setbacks should now hold up ahead of the 1.2800 area.

• R2 1.3299 – 20 Sep high – Strong
• R1 1.3218 – 26Sep high – Medium
• S1 1.3056 – 21Sep low – Medium
• S2 1.3000 – Psychological  – Strong

GBPUSD – fundamental overview

The Pound has given back gains made this week, on account of renewed demand for the US Dollar and ongoing Brexit uncertainty. However, into Friday, the UK currency is the strongest of the bunch relative to the Buck. Most of the setbacks are US Dollar related, with broad Dollar demand coming from a hawkishly perceived Fed decision, solid US economic data and month end, quarter end flow. Looking ahead, we get UK GDP data, US core PCE and Michigan confidence. Earlier today, some UK consumer confidence data came in a little softer than expected.

GBPUSD – Technical charts in detail

USDJPY – technical overview

Rallies continue to be very well capped, with the medium-term outlook still favouring lower tops and lower lows. Look for a daily close back below 109.78 to strengthen the bearish outlook, opening the door for the start to a move back down towards 108.00 which guards against the 104.60 area 2018 low. Only back above a previous lower top from the Fall of 2017 at 114.74 would compromise the bearish structure.

• R2 114.74 – Nov 2017 high  – Very Strong
• R1 114.00 – Figure – Medium
• S1 112.57 – 27Sep low – Medium
• S2 112.05 – 20Sep low – Strong

USDJPY – fundamental overview

Solid Japanese data has been ignored, while the BOJ summary of opinions hasn’t produced any fresh insights. The Yen has continued with its slide, predominantly driven off ongoing demand for US equities and renewed broad based demand for the US Dollar. The Buck has enjoyed a run this week on the back of a hawkishly perceived Fed decision, solid economic data out of the US and month end, quarter end flow. Still, overall, US equities continue to look highly exposed at elevated levels in a world where central bank and government stimulus is no longer there in the way it had been for a decade, and there continues to be risk for a capitulation that results in a sharp reversal lower in correlated USDJPY. Looking at the calendar, the focus will be on US core PCE and Michigan confidence.

EURCHF – technical overview

Signs of recovery after the market had sunk to a fresh 2018 low in August. If the market can establish back above 1.1500 it will encourage the bullish prospect and set the stage for a rally back towards the yearly high, all the way up just over 1.2000. However, inability to establish above 1.1500, could invite another move to the downside.

• R2 1.1455– 28Aug high – Strong
• R1 1.1416 – 27Sep high – Medium
• S1 1.1313 – 27Sep low– Medium
• S2 1.1224– 18Sep low – Strong

EURCHF – fundamental overview

Overall, the SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation between now and year end, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was given where we’re at in the monetary policy cycle.

AUDUSD – technical overview

The market has entered a period of correction after sinking to fresh multi-month lows. There is room for the correction to extend to the topside, though ultimately, the downtrend remains firmly intact, with only a break back above the 0.7500 handle forcing a reconsideration.

• R2 0.7382 – 21Aug high – Strong
• R1 0.7316– 26Sep high – Medium
• S1 0.7206 – 19Sep low – Medium
• S2 0.7142 – 17Sep low – Strong

AUDUSD – fundamental overview

Not much of a reaction to a better than expected Aussie private sector net credit read.At the moment, Aussie has come under some pressure from recent recovery highs, on the back of broad based US Dollar demand on the back of a hawkishly perceived Fed decision, solid economic data out of the US and month end, quarter end flow. Aussie is also highly sensitive to stress associated with global trade wars and the impact on China. Looking at the calendar, the focus will be on US core PCE and Michigan confidence.

USDCAD – technical overview

The uptrend has entered a corrective phase since topping out in June, which could still invite a deeper corrective decline before the next upside extension gets underway. Still, look for any weakness to be well supported ahead of 1.2500 with only a break back below this psychological barrier to negate the bigger picture constructive outlook.

• R2 1.3100 –  Figure – Medium
• R1 1.3083 – 27Sep high – Medium
• S1 1.3000– Psychological – Medium
• S2 1.2885 – 20Sep low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been looking forward to a NAFTA deal getting done sooner than later, though talks continue to drag on and the latest trade war tension between the US and China has done nothing to help the process. Still, the Loonie remains bid at the moment, with the currency benefiting from OIL demand and hawkish comments from Bank of Canada Governor Poloz, which have offset a post Fed decision US Dollar run. Looking at the calendar, the focus will be on risk sentiment and US releases in the form of GDP, durable goods and pending home sales. Looking at the calendar, the focus will be on Canada GDP, US core PCE and Michigan confidence.

NZDUSD – technical overview

The market has entered a period of correction after sinking to a 2.5 year low. There is room for the correction to extend some more to the topside, though ultimately, the downtrend remains firmly intact, with only a clear break back above 0.6800 to force a reconsideration.

• R2 0.6728 – 28Aug high – Strong
• R1 0.6700 – 21Sep high – Medium
• S1 0.6602 – 20Sep low – Medium
• S2 0.6539 – 17Sep low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come under pressure in the latter half of the week, with the move largely driven off a renewed wave of broad based US Dollar demand post Wednesday’s more hawkishly perceived FOMC decision. Month end, quarter end flow has also been USD supportive, while Thursday’s impressive US data reads have only added further to the Buck’s demand. Looking at the calendar, the focus will be on US core PCE and Michigan confidence.

US SPX 500 – technical overview

A market that has been extended on the monthly chart is at risk for a major correction, with the possibility for a massive topping formation. Any rallies should now continue to be very well capped ahead of 3000, in favour of renewed weakness back below the 2530 area yearly low (double top neckline) and towards a retest of strong longer-term resistance turned support in the form of the 2015 high at 2140. Only a weekly close above 3000 would negate the outlook.

• R2 2950 – Psychological – Strong
• R1 2943 – 21Sep/Record – Medium
• S1 2901 – 19Sep low – Medium
• S2 2865 – 7Sep low – Strong

US SPX 500 – fundamental overview

Stocks have been bid right back to record highs in September, though investor immunity to downside risk is not as strong these days. The combination of Fed policy normalisation, US protectionism, ongoing White House drama and geopolitical tension are all warning of capitulation ahead, despite this latest run. The Fed has also finally acknowledged inflation no longer running below target in 2018, something that could very well result in less attractive equity market valuations given the implication on rates. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as this could be something that inspires a more aggressive decline in this second half of 2018.

GOLD (SPOT) – technical overview

Despite a recent run of of declines, the overall outlook remains constructive, with the market in the process of carving out a longer term base off the 2015 low. Look for any additional weakness to be well supported above 1150 on a daily close basis, in favour of the next major upside extension back towards critical resistance in the form of the 2016 high at 1375. Key resistance comes in at 1236, with a push back above to strengthen the outlook.

• R2 1236 – 26Jul high – Strong
• R1 1215 – 28Aug high – Strong
• S1 1182 – 27Sep low – Medium
• S2 1160 – 16Aug/2018 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, political uncertainty, systemic risk and trade war threats. 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.

BTCUSD – technical overview

The downtrend remains firmly intact, with the next lower top now sought out around $7,000 ahead of a retest and break below the current yearly low. Only a push back above $8,500 would ultimately negate and force a bullish structural shift, while below the yearly low could open a more intensified decline towards the September 2017 low around $2,975.

• R2 7,405 – 4Sep high – Strong
• R1 6,985 – 6Sep high – Medium
• S1 6,110– 8Sep low –Medium
• S2 5,860 – 14Aug low  – Strong

BTCUSD – fundamental overview

Overall, Bitcoin is doing its best to try and hold up above $6,000 in 2018 after undergoing a massive decline off the record high from December 2017. At the moment, the market has found some stability around the $6,000 barrier, with buyers stepping in on the view that the regulatory challenges will eventually work themselves out, leaving a very bullish picture for a technology with tremendous potential and increased adoption. The latest positive headlines are more cultural than anything else, but important nonetheless, with Bitcoin added to the Merriam-Webster Scrabble dictionary. Still there has been concern in the shorter-term, as hopes for an ETF in 2018 are soured on account of the regulatory hangup.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

The market remains under pressure in 2018, extending its run of intense declines to fresh 2018 lows. The next level of major support comes in around $160, which goes back to the low from July 2017. Daily studies are however oversold, which could warn of a bigger corrective bounce before the next downside extension and bearish continuation. It would take a break back above $321 to officially take the pressure off the downside.

• R2 321 – 18Aug high – Strong
• R1 255 – 22Sep high – Medium
• S1 167 – 12Sep/2018 low – Medium
• S2 158 – July 2017 low  – Strong

ETHUSD – fundamental overview

We’ve been seeing quite a bit of weakness in the price of Ether in 2018 and there is still legitimate risk for deeper setbacks, given technical hurdles within the Ethereum protocol, ongoing regulatory challenges and a global macro backdrop exposing risk correlated projects on the Ethereum blockchain. Monetary policy normalisations around the globe and an anticipated reduction in global risk appetite are placing a tremendous strain on ERC20 projects that have yet to even produce proper use cases and proof of concept.