Optimism in Asia Won’t Be Enough

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. Setbacks should now hold up ahead of the 1.2800.

• R2 1.3132 – 18Oct high – Strong
• R1 1.3091 – 22Oct high – Medium
• S1 1.2937 – 23Oct low – Medium
• S2 1.2923 – 4Oct low  – Strong

GBPUSD – fundamental overview

The Pound has shifted back into a role as underperformer over the past week as the Brexit bumps come back into the forefront. There is a growing concern that this could drag on for years to come, in the form of a rolling extension with annual review. This is an unsettling prospect, though one in which the PM has no intention of making so, as she remains committed to the idea that any extension would be temporary. Later today, the PM will present her Brexit strategy to the Tory 1922 committee, and it will be important that she makes it a good showing or risk increased probability that a no-confidence vote. There were some supportive developments on Tuesday however, with the Pound feeling better about the fact that May would not agree to split Northern Ireland from the rest of the UK, and on a report that the EU might offer UK-wide customs arrangement in an effort to break the Irish border deadlock. As far as today's economic calendar goes, there is no first tier data out of the UK, while in the US, we get manufacturing PMIs, new home sales and the Fed Beige book late in the day.

GBPUSD - Technical charts in detail

USDJPY – technical overview

Rallies continue to be very well capped on a medium-term basis, with the outlook still favouring lower tops and lower lows. The latest breakdown back below 113.00 strengthens the outlook, with the door open for a drop towards the next major support around 109.75. Ultimately, only a close back above a previous lower top from the Fall of 2017 at 114.74 would compromise the bearish structure.

• R2 113.40 – 9Oct high  – Very Strong
• R1 112.89 – 22Oct high – Medium
• S1 111.95 – 19Oct low – Strong
• S2 111.63 – 15Oct low – Medium

USDJPY – fundamental overview

Overall, the major pair looks increasingly vulnerable given the state of US equities, which are threatening a major capitulation. 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. There has been some Dollar demand after the risk liquidation that weighed on the major pair in Tuesday trade, with equities trying to bounce again, presumably on reports out of China that the government has plenty in the tank to stimulate the economy. Still, we are skeptical that such measures will be enough to translate to sustainable rallies in the US equity market, which ultimately is going to be dictating direction. Looking at today's calendar, we get US manufacturing PMIs, US new home sales and the Fed Beige book late in the day.

EURCHF – technical overview

The market has been in the process of recovering out from a 2018 low coinciding with critical support in the 1.1200 area. However, at this stage, there is no clear directional bias, with the price action deferring to a neutral state. Back above 1.1560 would get some bullish momentum going for a push to 1.2000, while back below 1.1200 would be quite bearish.

• R2 1.1560– 8Aug high – Strong
• R1 1.1502 – 22Oct 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.

AUDUSD – technical overview

Technical studies are stretched on a medium term basis, and the market has been attempting to recover out from its lowest levels since February 2016. Still, 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 0.7160 – 17Oct high – Strong
• R1 0.7126– 22Oct high – Medium
• S1 0.7056 – 23Oct low – Medium
• S2 0.7042 – 8Oct/2018 low – Strong

AUDUSD – fundamental overview

The Australian Dollar is tracking along with bigger picture macro drivers that have mostly weighed on the currency, resulting in recent setbacks to its lowest levels against the US Dollar since February 2016. These drivers are highlighted by the Fed's more hawkish policy outlook and downside risk associated with US trade policy. Attempts by the Chinese government to bolster sentiment have helped to give Aussie a little prop in recent days, though we remain skeptical that China will have the ability to inspire enough confidence that it will translate to a US equity market that looks like it could have a lot more to drop in the weeks and months ahead. Earlier data out of Australia was mixed, with manufacturing PMIs firming up, while services PMIs dipped. Looking ahead, we get US manufacturing PMIs, US new home sales and the Fed Beige book late in the 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 1.3175 – 11Sep high – Medium
• R1 1.3133 - 19Oct high – Medium
• S1 1.3016 – 18Oct low– Medium
• S2 1.2917 – 16Oct low – Strong

USDCAD – fundamental overview

All eyes will be on today's Bank of Canada decision in which the central bank is widely expected to raise rates another 25 basis points to 1.75%. Market reaction will mostly centre around the accompanying message from the BoC and how it sees the normalisation timeline looking out. We come into the decision with the Canadian economy hitting a rough patch of discouraging economic data and also contending with falling OIL prices, things that don't exactly encourage an overly hawkish tone. As far as the US calendar goes, we get manufacturing PMIs, new home sales and the Fed Beige book late in the day.

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 0.6700 – 21Sep high – Strong
• R1 0.6611 – 22Oct high – Medium
• S1 0.6524 – 19Oct low – Medium
• S2 0.6425 – 8Oct/2018 low – Strong

NZDUSD – fundamental overview

Overall, it appears as though sustained moves to the topside could be a tough go for some time. While we did get a Kiwi supportive hotter CPI reading last week, and while the Chinese government has given its assurances it will continue to be there to support the New Zealand correlated Chinese economy, this doesn't feel like it will be enough as there are too many unresolved issues on the macro front that easily offset any of these Kiwi supportive drivers. The combination of Fed policy normalisation and fallout from US trade policy are some of those big themes that would suggest Kiwi won't be looking for any major rallies in the foreseeable future. Looking ahead, the calendar is light and only Richmond Fed manufacturing and some central bank speak stand out. Looking ahead, we get US manufacturing PMIs, US new home sales and the Fed Beige book late in the 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 (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 2865 – 7Sep low – Strong
• R1 2824 – 17Oct high – Medium
• S1 2700 – Psychological – Medium
• S2 2692 – 28Jun low – Strong

US SPX 500 – fundamental overview

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 to record highs. 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

The market has been showing signs of wanting to turn back up after establishing back above the daily Ichimoku chart. There are also signs that we could be seeing the formation of a more significant medium to longer-term structural shift that would be confirmed if this latest recovery can extend back through big resistance in the form of the 2016 high at 1375. Look for setbacks to be well supported ahead of 1200, with only a close back below 1150 to compromise the constructive outlook.

• R2 1266 – 9Jul high – Strong
• R1 1250 – Psychological – Medium
• S1 1200 – Psychological – 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 July lower top at around 8,500 for confirmation. Until then, a bearish continuation back towards the September 2017 low around 2,975 can not be ruled out.

• R2 7,695 – 14Oct high – Strong
• R1 7,000 – Psychological – Medium
• S1 6,418– 3Oct low –Medium
• S2 6,213 – 12Oct 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 increasing adoption. Still, there has been concern in the shorter-term on account of regulatory challenges in the space and downside pressure in global equities.

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 188 – 12Oct low – Medium
• S2 167 – 12Sep/2018 low  – Strong

ETHUSD – fundamental overview

Overall, we've seen quite a bit of weakness in the price of Ether in 2018 and there's still legitimate risk for deeper setbacks, given technical hurdles within the 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.