President Trump Shakes Up Markets

Next 24 hours: Early Dose of Month End Dollar Demand

Today’s report: President Trump Shakes Up Markets

The market is getting a nice dose of early Tuesday Trump soundbites, with the President weighing in on big ticket macro themes. President Trump has been talking expectations to move ahead with the next round of tariffs on China. The President then went on to tackle Brexit, expressing his critique of the deal from the UK side.

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Wake-up call

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 and push through 1.1500, it sets the stage for a bigger bullish move ahead. If however the market breaks back down below 1.1300, it will open the door for a retest of the 2018 low, below which exposes the possibility for an extension all the way down to 1.0800.

  • R2 1.1473 – 20Nov high – Strong
  • R1 1.1435 - 22Nov high – Medium
  • S1 1.1327- 26Nov low – Medium
  • S2 1.1217 – 12Nov/2018 low – Strong

EURUSD – fundamental overview

Overall, the Euro has been better bid into dips since sinking to a fresh 2018 low earlier this month. The prospect of the Fed scaling back on its rate hike timeline and the possibility that the US administration pushes forward with more soft Dollar protectionist measures, are behind a lot of this demand while news out of Italy is looking more encouraging on chatter that has Italy discussing a reduction of next year’s budget deficit to as low as 2% of GDP. This would be a welcome adjustment for the EU after a draft that had Italy targeting a  much more uncomfortable deficit of 2.4% of GDP.  Looking ahead, there is no first tier risk in the Eurozone, with only US data standing out in the form of the house price index, Case Shiller and consumer confidence. We also get some scattered central bank speak, with ECB's Nouy, Costa and Mersch due along with Fed's Clarida, George, Bostic and Evans.

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 1.3000 would be required to alleviate immediate downside pressure.

  • R2 1.3073 – 14Nov high – Strong
  • R1 1.2928 – 22Nov high – Medium
  • S1 1.2724 – 15Nov low – Medium
  • S2 1.2662 – 15Aug low  – Strong

GBPUSD – fundamental overview

Theresa May will need to get her deal pushed through Parliament now and it will be a tough go. There has been talk of the Brexiteer camp giving May what she needs to pass the deal on the condition that she return the favour with a promise to step down after the Brexit date on March 29th. We've also been hearing from senior UK lawmaker Fallon, who says the UK might be able to extend the Brexit date to negotiate a better deal. President Trump could however be the source of early Tuesday weakness after saying the Brexit deal with the EU could damage prospects for a trade deal with the US. As far as the calendar goes, UK CBI trades data is due ahead of US releases in the form of the house price index, Case Shiller and consumer confidence. We also get some Fed speak, with Fed Clarida, George, Bostic and Evans on the wires later 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. 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 113.36 – 26Nov high – Medium
  • S1 112.31 – 20Nov low – Medium
  • S2 111.38 – 26Oct low – Strong

USDJPY – fundamental overview

Overall, there has been a renewed round of risk liquidation as we head towards year end, and this has weighed on the correlated pair into rallies. The combination of less hawkish, less upbeat Fed speak and tension around global trade, are the primary drivers behind the flow. Into Tuesday, President Trump has been on the wires talking an increase on $200 billion of Chinese imports from 10% to 25%. All of this comes ahead of the G20 meet. As far as today's calendar goes, we get US releases that feature the house price index, Case Shiller and consumer confidence. We also get some scattered central bank speak, with Fed's Clarida, George, Bostic and Evans all due.

EURCHF – technical overview

The market has been in the process of consolidating off the 2018 low, which coincided 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 1.1500 would get some bullish momentum going for a push to 1.2000, while back below 1.1200 would be quite bearish.
  • R2 1.1435– 16Nov high – Strong
  • R1 1.1359 – 22Nov high – Medium
  • S1 1.1282 – 28Sep 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. A drop below 0.7165 would be required to shift the focus back on the downside.

  • R2 0.7382 – 21Nov high – Strong
  • R1 0.7339 – 16Nov high – Medium
  • S1 0.7203 – 20Nov low – Medium
  • S2 0.7165 – 13Nov low – Strong

AUDUSD – fundamental overview

Aussie has done a good job holding up into Tuesday, despite more fire around global trade, after President Trump talked about the next round of tariffs on China. Overall, while the Australian Dollar has received a nice boost off multi-month lows on the back of renewed broad based US Dollar declines and some better data out of Australia, the currency is still finding offers into rallies, as this downside risk associated with China is expected to weigh on the correlated currency. As far as the calendar goes for the remainder of the day, we get US releases that feature the house price index, Case Shiller and consumer confidence. We also get some scattered central bank speak, with Fed's Clarida, George, Bostic and Evans all due.

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 price of OIL has fallen some 35% after rallying to its highest levels since 2014 back in October. This has weighed on the Loonie quite a bit, though the Canadian Dollar did get some relief from Friday's hotter Canada inflation readings and solid Canada retail sales showing. This has resulted in some underperformance in the Canadian Dollar. Setbacks in the Loonie have also been contained given offsetting broad based US Dollar bearish flow in the market, on the back of less hawkish Fed speak and reports the Fed may be considering a pause. Looking ahead, there is no data on the Canada docket on Monday. US releases feature the house price index, Case Shiller and consumer confidence. We also get some scattered central bank speak, with Fed's Clarida, George, Bostic and Evans all due.

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 0.6884 – 16Nov high – Strong
  • R1 0.6821 – 23Nov high – Medium
  • S1 0.6752 – 14Nov low – Medium
  • S2 0.6707 – 12Nov low – Strong

NZDUSD – fundamental overview

Not a great start to the week for the New Zealand Dollar on the economic calendar. On Monday it was soft retail sales and today it was disappointing trade data. And yet, Kiwi continues to be supported into dips, with the market comfortable buying on a modest recovery in US equities and some broad based US Dollar selling into month end on the back of expectations the Fed will now be forced to ease up on its policy normalisation timeline. Still, with the US administration looking fully prepared to march ahead with additional tariffs on China, the risk of deterioration in global sentiment runs high, which should weigh on the correlated Kiwi into rallies. As far as the calendar goes for the remainder of the day, we get US releases that feature the house price index, Case Shiller and consumer confidence. We also get some scattered central bank speak, with Fed's Clarida, George, Bostic and Evans all due.

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 2700 – 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. However, daily studies are violently extended and a period of correction or consolidation is expected before the market extends lower towards that September 2017 low. Rallies should be well capped below 6,000.

  • R2 5,740 – 18Nov high – Strong
  • R1 4,780 – 21Nov high – Medium
  • S1 3,655– 25Nov/2018 low –Medium
  • S2 3,500 – 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 below $3,000 before the market looks for stability. Still, overall, the cryptocurrency and the technology it rests on continue to show a lot of potential looking out and we expect the market will regain composure once this sell-off plays out.

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 into the 100 area. Medium term studies are however stretched, which could warn of the start to a correction. Still, it would take a break back above 200 right now to take the pressure off the downside. The next major downside extension target comes in at a 75, a measured move extension target following a recent $90 consolidation between 165 and 255.

  • R2 155 – 20Nov high – Strong
  • R1 142 – 21Nov high – Medium
  • S1 103 – 25Nov/2018 low – Medium
  • S2 75 – Measured Move  – 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 below $100, 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 we expect significant demand will emerge well ahead of $50.

Peformance chart: 5-Day Performance v. US dollar

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