Will US Equities Finally Roll Over?

GBPUSD – technical overview

The correction off the 2018 low transformed into an uptrend following the September break above the daily Ichimoku cloud. It was the first time the market had traded above the cloud since trading around 1.4000 back in April. This encourages the possibility for a more meaningful recovery ahead, with a break back above 1.3300 to strengthen the outlook. Any setbacks should now hold up ahead of the 1.2800.

• R2 1.3299 – 20Sep high – Strong
• R1 1.3218 – 26Sep high – Medium
• S1 1.3003 – 5Oct low – Medium
• S2 1.2923 – 4Oct low  – Strong

GBPUSD – fundamental overview

No first tier data out of the UK on Monday and US markets will be out for Columbus Day. The Pound has done a nice job holding up of late, in the face of ongoing Brexit uncertainty and ongoing US Dollar demand. Rallying US yields on the back of solid US data and hawkish Fed speak have been accounting for Dollar strength. Still, looking out, adjustments in the Fed’s projections have not reflected a major acceleration in the rate hike process and this coupled with soft Dollar implications from US trade policy, could once again invite demand into the dip. Friday’s US jobs data was impressive on the headline reads but was not Dollar supportive on the hourly earnings side, which continues to be soft. On the UK side, reports of Brexit deal have been more encouraging, though we are still waiting for something official.

GBPUSD – Technical charts in detail

USDJPY – technical overview

The market has been well bid in recent weeks, though rallies have also been very well capped, with the medium-term outlook still favouring lower tops and lower lows. Look for a daily close back below 113.53 to strengthen this outlook and accelerate declines. Only a close 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 114.56 – 4Oct high – Medium
• S1 113.53 – 3Oct low – Strong
• S2 112.57 – 27Sep low – Strong

USDJPY – fundamental overview

Overall, despite a run higher over the past several weeks, the major pair looks vulnerable given the state of record high US equities and we could see a capitulation in the correlated asset class. We’re now living in a world where central bank and government stimulus is no longer there in the way it had been for a decade post 2008 crisis, which increases the probability for Yen demand, as negative shocks to the global economy surface, particularly in light of tension surrounding fallout from US protectionism. Looking ahead, the calendar is exceptionally thin, with US markets out for Columbus Day.

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 1.1500– Psychological – Strong
• R1 1.1455 – 28Aug high – Medium
• S1 1.1313 – 27Sep low– Medium
• S2 1.1224– 18Sep low – Strong

EURCHF – fundamental overview

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. Swiss CPI data is due today.

AUDUSD – technical overview

The downtrend has extended this week, with Aussie extending the 2018 decline, sinking to its lowest levels since February 2016. Technical studies are starting to look a little stretched on a medium term basis, though it would take a break back above the September high at 0.7316 to alleviate immediate downside pressure and encourage the possibility for any possible shift in the trend.

• R2 0.7142 – 17Sep high – Strong
• R1 0.7112– 4Oct high – Medium
• S1 0.7043 – 5Oct/2018 low – Medium
• S2 0.7000 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar is coming off a week which had it extending 2018 declines to another multi-month low. Last week’s solid round of Aussie data wasn’t enough to keep the Australian Dollar from sinking to its lowest levels since February 2016. The combination of solid US data, hawkish Fed speak, surging US treasury yields and deterioration in risk sentiment, has been a nasty combination for the commodity currency. Earlier today, the PBOC announced it was cutting the reserve requirement ratio by 1%, but this didn’t have any meaningful impact on the price action. Looking ahead, the calendar is exceptionally thin, with US markets out for Columbus Day.

USDCAD – technical overview

The market has been under pressure since topping out in June, which could still invite a deeper 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 1.3083 – 27Sep high – Medium
• R1 1.3000 – Psychological – Medium
• S1 1.2858– 4Oct low – Medium
• S2 1.2783 – 1Oct low – Strong

USDCAD – fundamental overview

The Canada jobs report was deceptive and ultimately not nearly as positive as the headline data. Most of the jobs came from the part time sector, while hourly earnings were soft. The US jobs report was a little more upbeat when looking at a revision to NFPs and considering another bigger than expected drop in the unemployment rate to its lowest levels in 50 years. Still, US hourly earnings continues to lag. Elsewhere, OIL has pulled back, yet another drag on the Loonie, after Saudi Crown Prince Mohammed Bin Salman said OPEC and its allies had more than replaced the cut in Iran’s supply. Last week’s news of the trade deal between Canada and the US now feels like a distant memory. Looking ahead, there is no first tier data scheduled out of Canada, while the US will be celebrating the Columbus Day holiday.

NZDUSD – technical overview

Kiwi setbacks have extended to another 2018 low, with the market also back to its lowest levels since January 2016. This leaves the door open for declines down towards massive support just ahead of 0.6100, in the form of the 2015 low. At the same time, technical studies are looking stretched on a medium term basis, which could warn of a meaningful low ahead of such a retest. Still, at this point, it would take a break back above the September high at 0.6700 to take the immediate pressure off the downside.

• R2 0.6594 – 3Oct high – Strong
• R1 0.6520 – 4Oct high – Medium
• S1 0.6433 – 5Oct/2018 low – Medium
• S2 0.6430 – Nov 2013 low – Strong

NZDUSD – fundamental overview

Kiwi is coming off a week which saw the currency extend it’s 2018 run of declines to its lowest levels in over 2.5 years. While most of the risk associated with the direction in the New Zealand Dollar is driven off external factors extending to broader global macro themes, there has been additional downside pressure the currency has not been able to ignore, accounting for relative underperformance. Local economic data was unimpressive last week, with the market getting another let down from the GDT auction, followed by a moderation in house prices and drop in job adverts. This also follows the business confidence drag earlier last week that highlighted distress about weaker earnings. Looking ahead, the calendar is exceptionally thin, with US markets out for Columbus Day.

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 2865 – 7Sep low – Strong
• S2 2803 – 15Aug low – Strong

US SPX 500 – fundamental overview

Stocks continue to track just off fresh record highs from 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. The US jobs report isn’t expected to have much of a stock supportive result and if anything, could open more downside pressure on an hourly earnings release that comes in well above forecast.

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 1181 – 28Sep 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

Considering the intensity of declines already seen this year, if the market does break to the topside, it could be a bullish signal that gets the trend moving up again. But we would need to see a break above the August lower top for confirmation. Until then, a bearish continuation back towards the September 2017 low around 2,975 can not be ruled out.

• R2 7,405 – 4Sep high – Strong
• R1 6,835 – 22Sep high – Medium
• S1 6,417– 3Oct low –Medium
• S2 6,322 – 25Sep 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. Still, there has been concern in the shorter-term, with regulatory constraints discouraging the prospect for an ETF in 2018.

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 200 – 1Psychological – Medium
• S2 167 – 12Sep/2018 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.