Trading Conditions to Thin Out

Next 24 hours: US Heads Out for Holiday

Today’s report: Trading Conditions to Thin Out

Global financial markets aren’t looking all that stable at the moment and this could make for an even more volatile period of trade into the end of the week, with US traders heading out for the Thanksgiving holiday later today. Wednesday data features US durable goods, initial jobless claims, existing home sales and Michigan sentiment.

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Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro sits at a critical inflection point right now, trying to figure out whether it wants to hold up into dips for the start to a resumption of that bullish breakout from back in 2017 that led to a +3 year high earlier this year, or if it wants to keep extending this run of declines. A lot of this will hinge on how the market trades in the sessions ahead. If the major pair can hold up into this latest bounce back above 1.1300, it sets the stage for a bigger bullish move ahead. If however the market breaks back down below the 2018 low from the previous week, it will open the door for a more significant decline back towards 1.0800.

  • R2 1.1500 – 7Nov high – Medium
  • R1 1.1473 - 20Nov high – Medium
  • S1 1.1322- 16Nov low – Medium
  • S2 1.1217 – 12Nov/2018 low – Strong

EURUSD – fundamental overview

Conditions have been mostly quiet thus far this week and we come into Wednesday with the Euro having taken in a round of more hawkish leaning ECB comments from the likes of Nowotny and Weidmann. This hasn't factored into trade however, perhaps offset by the ongoing back and forth between Italy and the EU. Overall, the Euro has been better bid since sinking to a fresh 2018 low in the previous week. Last week's less hawkish leaning Fed Chair comments and the prospect of the US administration moving forward with additional tariffs have been behind the demand. But trading conditions will lighten up quite a bit for the remainder of the week, with the US starting to head today for the Thanksgiving holiday. As far as the calendar goes, there is no first tier data out of the Eurozone. US readings include durable goods, initial jobless claims, existing home sales and Michigan sentiment.

EURUSD - Technical charts in detail

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. Shorter-term however, the market is threatening a possible break to another fresh 2018 low. If the market breaks down below the yearly low, it will open possibility for a measured move extension into the 1.2000s. Right now, a break back above the weekly high at 1.3073 would be required to alleviate the downside pressure.

  • R2 1.3073 – 14Nov high – Strong
  • R1 1.2885 – 19Nov high – Medium
  • S1 1.2724 – 15Nov low – Medium
  • S2 1.2662 – 15Aug low  – Strong

GBPUSD – fundamental overview

Those attempts to push a no confidence vote through have stalled out for now and BOE Governor Carney has tried to help Theresa May's cause along through his endorsement of her Brexit deal. Carney added he would welcome an extension of the transition period as well. The DUP haven't been nearly as supportive of May, refusing to vote for her Finance Bill earlier this week. On the data front, UK CBI trends came in stronger than expected, though the market hasn't been focused on economic data and will continue to place priority on the Brexit outcome or any new developments on this front. Looking ahead, we get UK public finance data along with US readings that include US reads that include, durable goods, initial jobless claims, existing home sales and Michigan sentiment. Trading conditions will lighten up quite a bit from today into the end of week on account of the US Thanksgiving holiday.

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. Look for yet another topside failure ahead of 114.00, in favour of the next major downside extension towards key support around 109.75. Ultimately, only a break back above 114.75 would negate the bearish outlook.

  • R2 113.71 – 15Nov high  – Strong
  • R1 113.63 – 16Nov high – Medium
  • S1 112.00 – Figure – Medium
  • S2 111.38 – 26Oct low – Strong

USDJPY – fundamental overview

There has been a renewed round of risk liquidation in markets in recent sessions and this has weighed on the correlated pair. The combination of less hawkish, less upbeat Fed speak and tension around global trade, are the primary drivers behind the flow. Fed Kashkari has followed up last week's Powell comments with some dovishness, after warning about the downside risks in raising rates too quickly. Data out of Japan has not factored into price action. Looking ahead, we get US readings that include US reads that include, durable goods, initial jobless claims, existing home sales and Michigan sentiment. Trading conditions will lighten up quite a bit from today into the end of week on account of the US Thanksgiving holiday.

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 have been turning back up from stretched medium term readings, with the latest break back above 0.7300 suggesting a meaningful base could be in the process of carving out. This puts the shorter-term pressure back on the topside, with the focus on a push to the psychological barrier at 0.7500. Back below 0.7165 would be required to shift the focus back on the downside.

  • R2 0.7500 – Psychological – Strong
  • R1 0.7382 – 21Aug high – Medium
  • S1 0.7203 – 20Nov low – Medium
  • S2 0.7165 – 13Nov low – Strong

AUDUSD – fundamental overview

While the Australian Dollar has received a nice boost in recent days on the back of renewed broad based US Dollar declines and some better data out of Australia, the currency is still tracking lower against the US Dollar over the past week, as downside risk associated with China weighs on the correlated currency. A lot of what happens here will likely hinge on the outlook for global trade and risk sentiment. Falling iron ore prices have also been a drag on the commodity currency. The RBA Minutes were out earlier this week, though no surprises and no reaction to the central bank release. Looking ahead, we get US data that features durable goods, initial jobless claims, existing home sales and Michigan sentiment. Trading conditions will lighten up quite a bit from today into the end of week on account of the US Thanksgiving holiday.

USDCAD – technical overview

The market has been consistently sold into rallies 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, with only a break back below 1.2700 to negate the bigger picture constructive outlook.

  • R2 1.3387 – 27Jun/2018 high – Strong
  • R1 1.3319 - 20Nov high – Medium
  • S1 1.3200 – Figure– Medium
  • S2 1.3128 – 16Nov low – Strong

USDCAD – fundamental overview

The collapse in the price of OIL off the 2018 high has been turning heads, with the commodity down over 30% since topping out in early October. This has resulted in some underperformance in the Canadian Dollar. Still, setbacks in the Canadian Dollar have been contained given some offsetting broad based US Dollar bearish flow on the back of less hawkish Fed speak. Last week's Powell comments have been followed up by warnings from Fed Kashkari about risks associated with raising rates too fast. Looking ahead, absence of first tier data out of Canada will leave the focus on the price of OIL, risk sentiment and some US data that features durable goods, initial jobless claims, existing home sales and Michigan sentiment. Trading conditions will lighten up quite a bit from today into the end of week on account of the US Thanksgiving holiday.

NZDUSD – technical overview

The market has been in the process of recovering out from +2.5 year lows and is looking to extend the correction following the latest break back above consolidation resistance around 0.6725. This sets the stage for a push that could extend back towards the psychological barrier at 0.7000 before the market considers the legitimacy of the recovery and prospect for a more significant bullish structural shift or bearish resumption.

  • R2 0.7000 – Psychological – Medium
  • R1 0.6923 – 25Jun high – Medium
  • S1 0.6782 – 21Nov low – Medium
  • S2 0.6707 – 12Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to hold up relatively well, despite renewed downside pressure in global equities. But after taking in yet another negative GDT auction reading, it will be hard for the currency to make any additional headway, with the greater risk for the start to a round of underperformance. Looking ahead, we get a round of US data that features durable goods, initial jobless claims, existing home sales and Michigan sentiment. Trading conditions will lighten up quite a bit from today into the end of week on account of the US Thanksgiving holiday.

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 – Figure – Medium
  • S1 2603 – 29Oct low – Strong
  • S2 2594 – 3May low – Medium

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 1196 – 13Nov 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

An extended period of range contraction has come to an end, with the market breaking down below the apex of a massive triangle formation in 2018. The decline has resulted in fresh yearly lows and warns of a deeper setbacks that could accelerate to the September 2017 low at 2,975. At this stage, it would take a break back above the October peak around 7,700 to take the pressure off the downside.

  • R2 6,648 – 21Oct high – Strong
  • R1 5,740 – 18Nov high – Medium
  • S1 4,303– 20Nov/2018 low –Medium
  • S2 4,000 – Psychological  – Strong

BTCUSD – fundamental overview

Bitcoin is facing intense headwinds from broader risk liquidation themes and has sunk to fresh 2018 lows. The cryptocurrency has already been struggling to find its place in 2018, with the decentralised technology space still very young and yet to fully prove concept. The current backdrop of global sentiment deterioration only makes things more challenging in the space and we are seeing investors head for the exits as a result. This could open a bigger drop towards $3,000 before the market looks for stability. The Bitcoin Cash hard fork hasn't helped matters in any way, only casting more doubt on where the crypto market should look for that leader, at a time when things are quite shaky.

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. Medium term studies are however stretched, which could warn of the start to a correction. Still, it would take a break back above 255 right now to take the pressure off the downside and suggest that the market could be starting to turn bullish again. The next major downside extension target comes in at the 100 psychological barrier.

  • R2 255 – 22Sep high – Strong
  • R1 183 – 18Nov high – Medium
  • S1 126 – 21Nov/2018 low – Medium
  • S2 100 – Psychological  – 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. At the same time, longer term prospects are looking quite bright and after a drop of well over 70% off the record high, the market is starting to find some stability.

Peformance chart: 5-Day Performance v. US dollar

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