A Tale of Two Trend Reversals

GBPUSD – technical overview

On a medium to longer term basis, the outlook is still looking constructive off the +30 year low from 2016, with a higher low sought ahead of the next major upside extension back towards and through the current 2018 high. Right now, the major pair will need to show it can hold up above 1.3000. If it can, this will open the door for a retest of critical resistance at 1.3300, above which will reverse the trend.

• R2 1.3105 – 19Oct high – Medium
• R1 1.3045 – 23Oct high – Strong
• S1 1.2900 – Figure– Medium
• S2 1.2854 – 29Oct high  – Strong

GBPUSD – fundamental overview

After several days of very clear underperformance, the Pound has been trying to work its way back up, as optimism around a Brexit deal returns. This was felt already earlier in the week when the UK budget was released and the better vibes continued throughout, eventually leading to reports of a deal close at hand, with talk of an agreement for the UK financial services sector, in which companies in the space would still be given access to European markets after Brexit. Thursday's Bank of England decision was as expected, with the central bank holding on policy, warning against the terrible risks associated with a no deal and giving off a confident take on the economic outlook ex-Brexit, with the BOE in position to be looking to increase rates at a more aggressive clip and likely to do so once the Brexit deal is achieved.

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 111.60 strengthens the outlook, with a fresh lower top in place at 112.90, ahead of the next major downside extension towards next key support around 109.75. Rallies should now be well capped ahead of 112.90, while a break back above 114.75 would be required to negate the bearish outlook.

• R2 114.00 – Figure  – Strong
• R1 113.40 – 9Oct high – Medium
• S1 112.31 – 30Oct low – Medium
• S2 111.38 – 26Oct low – Strong

USDJPY – fundamental overview

No surprises from the Bank of Japan earlier this week, with the central bank delivering as expected, leaving policy on hold while rehashing the previous monetary policy statement. The Yen has been sold this week on recovery attempts in the equity market, though overall, there is risk the Yen reverses courses and gets back into appreciation mode on account of ongoing downside risks in the global economy, specifically relating to fallout from US trade policy, at a time where central bank accommodation and government stimulus can no longer support the market as it once did. We remain skeptical that stimulus measures out of China will be enough to translate to sustainable rallies in the US equity market, which ultimately is going to be dictating direction in the correlated major pair. Looking at the calendar for the remainder of the day, the US jobs report and US trade data are the only notable standouts.

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, though the market has been unable to make any meaningful recoveries out from its lowest levels since February 2016. At this stage, the market will need to break back above 0.7316 to take the immediate pressure off the downside. Until then, risk remains for fresh downside below the 0.7000 psychological barrier, which defends against a retest of the 2016 low down at 0.6830.

• R2 0.7316 – 26Sep high – Strong
• R1 0.7300– Figure – Medium
• S1 0.7160 – 17Oct high – Medium
• S2 0.7100 – Figure – Medium

AUDUSD – fundamental overview

Although Aussie retail sales came in a little softer, things have been looking up, with Thursday's impressive surplus showing followed up Friday with a much hotter Aussie producer prices. We've also been seeing some broad based profit taking on US Dollar longs, which has helped to give the commodity currency an additional prop. Overall, it will be interesting to see if Aussie can continue to recover on any US Dollar weakness that comes from US trade policy promoting the softer US Dollar, as the other implication here is that this policy will bring greater probability for a a more intensified risk liquidation event, something that could weigh on the risk correlated Australian Dollar. Meanwhile, attempts by the Chinese government to bolster sentiment haven't helped to give Aussie any meaningful lift in recent days, with the global sentiment gauge coming from a US equity market that looks like it could have a lot more to drop in the weeks and months ahead. Looking at the calendar for the remainder of the day, the US jobs report and US trade data are the only notable standouts.

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 1.3227 – 6Sep high – Medium
• R1 1.3171 - 31Oct high – Medium
• S1 1.3050 – Mid-Figure– Medium
• S2 1.3016 – 25Oct low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been benefitting from this latest broad based round of profit taking on US Dollar longs, with the Loonie reversing from multi-sessions lows after taking hits on softer data and a major pullback in OIL prices. The recovery in stocks has also been a help to the more risk correlated commodity currency. Still, the Loonie is lagging its two commodity currency cousins, who don't need to be worried as much about falling OIL. Bank of Canada Governor Poloz was on the wires this week talking about the need to move rates back to neutral, though this sentiment was largely ignored given that it had been reflected in the recent BoC decision. Looking ahead, it will be a busy one for the Loonie, taking in a double dose of double doses in the form of the monthly jobs reports and trade data out of Canada and the US.

NZDUSD – technical overview

Technical studies have been looking stretched on a medium term basis, warning of the potential for a sizable corrective rally out from a 2.5 year low. Still, at this point, it would take a break back above 0.6728 to officially take the pressure off the downside.

• R2 0.6728 – 28Aug high – Strong
• R1 0.6700 – Figure – Medium
• S1 0.6611 – 22Oct high – Medium
• S2 0.6514 – 31Oct low – Strong

NZDUSD – fundamental overview

Broad based profit taking on US Dollar long exposure and a decent recovery in the equity markets, have been helping to inspire some Kiwi demand off the 2.5 year low. But overall, it appears as though sustained moves to the topside could be a tough go for some time. 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 at the calendar for the remainder of the day, the US jobs report and US trade data are the only notable standouts.

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 2824 – 17Oct high – Strong
• R1 2800 – Round number – Medium
• S1 2603 – 29Oct low – Medium
• S2 2594 – 3May 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 even 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 the fourth quarter.

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. A daily close above 1250 will strengthen the outlook.

• R2 1266 – 9Jul high – Strong
• R1 1244 – 26Oct high – 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 7,000 – Psychological – Strong
• R1 6,648 – 21Oct high – Medium
• S1 6,213– 12Oct low –Medium
• S2 6,000 – Psychological  – 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

Eth has managed to find its footing and stabilise after taking a bit of hit earlier this week on the news of the Canadian exchange hack. 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.