Today’s report: Where things stand as we get set to close out the week
Into Friday, it’s the Swiss Franc that’s up most against the Buck since the weekly open, while the Yen and GOLD are right behind, to round out a story of clear risk off. Key standouts on today's calendar come from UK retail sales and US durable goods.
- durable goods
- PM May
- anti-subsidy tariffs
- SNB's job
- Bill Evans
- OIL sink
- Fonterra forecasts
- risk appetite
- Macro players
- Mainstream adoption
- web 3.0
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month low in April. But with the downtrend looking exhausted, the prospect for a meaningful higher low is more compelling, with a higher low sought out above the multi-year low from 2017, ahead of the next major upside extension. Only a weekly close back below the psychological barrier at 1.1000 would compromise this outlook. Back above 1.1450 will strengthen the view.
- R2 1.1324 – 12 April high – Strong
- R1 1.1264 - 13 May high – Medium
- S1 1.1108 - 23 May/2019 low – Medium
- S2 1.1000 – Psychological – Strong
EURUSD – fundamental overviewWorries about the state of the Eurozone economy were overshadowed by Friday's round of distressing US data. This put the brakes on the latest decline to a fresh two year low, with the extended major pair reversing course sharply back to the topside after just squeaking below what had been the yearly low from April. News of the US Commerce Department proposing anti-subsidy tariffs on goods from nations found to be pursuing competitive currency devaluations was also factoring into price action given the soft Dollar implication. The market will take in US durable goods later today, before lightening up into a long holiday weekend.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe major pair has put in an impressive recovery off the multi-month low in early January, helping to support the case for a longer-term developing uptrend off the 2016 low. Pullbacks are now viewed as corrective on the daily chart, with dips expected to be supported well ahead of the yearly low in the 1.2400s. Look for a weekly close back above 1.3000 to strengthen the outlook.
- R2 1.2814 – 21 May high – Strong
- R1 1.2720 – 22 May high – Medium
- S1 1.2605 – 23 May low – Strong
- S2 1.2581 – 2 January low – Strong
GBPUSD – fundamental overviewThe Pound suffered down to a multiday low this week, mostly on the back of UK political uncertainty and Brexit fears. Theresa May's latest failed attempt to push through a deal could very well be her last, with the market now looking for a resignation in June. The main focus right now will be on developments out from PM meetings with the Tory 1922 Committee, though we also get some UK retail sales and US durable goods, before the market heads out for the long holiday weekend.
USDJPY – technical overviewAnother topside failure has led to a sharp pullback, with the market unable to establish above a formidable resistance zone in the 112s. Last week's drop below 109.70 strengthens the bearish case, exposing the next major downside extension towards a retest of the January flash crash low in the 104s. Any rallies should now be well capped below 112.00, with only a break back above the yearly high at 112.40 to delay the bearish outlook.
- R2 110.96 – 6 May high – Strong
- R1 110.00 – Psychological – Medium
- S1 109.34 – 16 May low – Medium
- S2 109.02 – 13 May low – Strong
USDJPY – fundamental overviewMost of the movement in the major pair is being directed by investor appetite, with the Yen still tracking with traditional correlations. Risk sentiment has been trending lower of late and this is keeping the major pair under pressure into rallies. News of the US Commerce Department proposing anti-subsidy tariffs on goods from nations found to be pursuing competitive currency devaluations was also factoring into price action given the risk off, soft Dollar implication. The market will take in US durable goods later today, before lightening up into a long holiday weekend.
EURCHF – technical overviewThe market continues to do a good job adhering to a medium-term range, with rallies well capped towards 1.1500 and dips well supported into the 1.1200 area. At this stage, there is no clear trend, and it will take a sustained break back above 1.1500 or below 1.1200 for directional insight.
- R2 1.1477 – 23 April/2019 high – Strong
- R1 1.1330 – 14 May high – Medium
- S1 1.1206 – 23 May low – Medium
- S2 1.1163 – 29 March/2019 low – Strong
EURCHF – fundamental overviewThe 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 in 2019, 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 overviewThe market has been very well supported on dips since breaking down in early January to multi-year lows. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7070 to strengthen this outlook. In the interim, look for setbacks to continue to be well supported ahead of 0.6800.
- R2 0.6960 – 14 May high – Strong
- R1 0.6933 – 16 May high – Medium
- S1 0.6865 – 17 May low – Medium
- S2 0.6800 – Figure – Strong
AUDUSD – fundamental overviewWeakness this week in the Australian Dollar came from the more dovish leaning RBA, broad based demand for the US Dollar on flight to safety flow and calls from Bill Evans for 3 RBA rate cuts this year. But Thursday's round of distressing US data has helped to inspire an Aussie recovery, which has taken some of the pressure off the downside. News of the US Commerce Department proposing anti-subsidy tariffs on goods from nations found to be pursuing competitive currency devaluations could also factor into price action going forward, though it will be interesting to see how Aussie reacts, given the soft Dollar implication on one side, and risk off implication on the other. The market will take in US durable goods later today, before lightening up into a long holiday weekend.
USDCAD – technical overviewDespite breaking to a fresh yearly high in recent days, overall, the market has entered a period of choppy consolidation in 2019. However, the longer-term structure remains constructive, with dips expected to be well supported for fresh upside back above the 2018/multi-month high at 1.3665. Back below the psychological barrier at 1.3000 would be required to delay the outlook.
- R2 1.3522 – 24 April/2019 high – Strong
- R1 1.3500 - Psychological – Medium
- S1 1.3377 – 1 May low – Medium
- S2 1.3336 – 18 April low – Strong
USDCAD – fundamental overviewThe price of OIL tumbled on Thursday, which didn’t do any favors for the Canadian Dollar. This week’s huge inventory builds numbers contradicted earlier expectations of a drawdown heading into the summer, that had been responsible for a run up that preceded this big drop. Still, ongoing upbeat outlook sentiment from BoC Poloz has been supportive of the Loonie. Meanwhile, the possibility that the US Dollar is pressured lower on US administration trade policy, should also not be discounted. There is no first tier Canada data scheduled Friday and the market will look to US durable goods as the main release, before heading off into a long holiday weekend.
NZDUSD – technical overviewDespite recent weakness, there's a case to be made for a meaningful low in place at 0.6425 (2018 low). As such, look for setbacks to be well supported above the latter, in anticipation of renewed upside, with only a close below to compromise the outlook. At the same time, a push back above 0.6700 will be required to take pressure off the downside.
- R2 0.6615 – 10 May high – Strong
- R1 0.6547 – 20 May high – Medium
- S1 0.6482 – 23 May/2019 low – Medium
- S2 0.6465 – 26 October low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar has suffered its way down to yearly lows this week, on the back of softer local data, a recent RBNZ rate cut, and downturn in global sentiment. Tuesday's GDT auction disappointment was been followed up with news of a downward revision to Fonterra's milk price forecasts. But into Friday, there has been some support for the currency, with a better Kiwi trade data showing and broad based profit taking on US Dollar longs, driving the recovery. The market will take in US durable goods later today, before lightening up into a long holiday weekend.
US SPX 500 – technical overviewThere have been signs of a major longer term top, after an exceptional run over the past decade. Any rallies from here, are expected to be very well capped, in favour of renewed weakness targeting an eventual retest of strong longer-term previous resistance turned support in the form of the 2015 high at 2140. The initial level of major support comes in around 2786, with a break below to strengthen the outlook. A sustained move above 3000 would be required to delay the outlook.
- R2 2961 – 1 May/Record high – Very Strong
- R1 2892 – 16 May high – Medium
- S1 2798 – 14 May low – Medium
- S2 2786 – 25 March low – Strong
US SPX 500 – fundamental overviewAlthough we've seen the market extend to another record high in recent days, mostly on the back of the Fed's dovish shift in 2019, exhausted monetary policy tools post 2008 crisis suggest the prospect for a meaningful extension of this record run at this point in the cycle is not realistic. Meanwhile, ramped up tension on the global trade front, should continue to be a drag on investor sentiment. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that could be a major stress to the financial markets looking out.
GOLD (SPOT) – technical overviewThere are signs that we could be seeing the formation of a more significant medium to longer-term structural shift that would be confirmed if a recovery out from sub-1200 levels can extend back through big resistance in the form of the 2016 high at 1375. In the interim, look for setbacks to be well supported, with only a close back below 1250 to compromise the constructive outlook.
- R2 1325 – 25 March high – Strong
- R1 1311 – 10 APril high – Medium
- S1 1266 – 23 April/2019 low – Medium
- S2 1233 – 14 December low – Strong
GOLD (SPOT) – fundamental overviewThe 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 overviewThe market has enjoyed a nice run since breaking out above a consolidation between Q4 2018 and Q1 2019. But the rally has now resulted in extended technical readings after overshooting a previous support zone in the 6k area. As such, look for additional upside to be limited, to allow for these technical readings to unwind from stretched readings. Setbacks should ideally be supported ahead of 5,000, in favour of the next push through the July 2018 high at 8,500.
- R2 8,491 – July 2018 high – Strong
- R1 8,329 – 16 May/2019 high – Medium
- S1 7,000 – 17 May low – Medium
- S2 5,669 – 24 April high – Strong
BTCUSD – fundamental overviewBitcoin has enjoyed a stellar rally over the past few weeks, with demand increasing along the way. This month's resiliency in the face of the hack at a major exchange has given the crypto asset a huge credibility boost, while reports of mainstream adoption haven't hurt the cause either. Household names like Starbucks, Microsoft, TD Ameritrade and Whole Foods are all making moves in the space, while governments have been more receptive to working with the crypto asset.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe recovery has recently accelerated to a fresh 2019 high, surging through medium-term resistance at 255. The upside break suggests the market is now looking to establish a meaningful base, in favour of continued upside in the weeks and months ahead. Still, shorter-term, the run is looking stretched and a period of consolidation is expected, to allow for extended readings to unwind.
- R2 300 – Psychological – Strong
- R1 279 – 16 May/2019 high – Medium
- S1 227 – 17 May low – Medium
- S2 200 – Psychological – Strong
ETHUSD – fundamental overviewThere has been a lot more buzz around adoption as the price of Bitcoin surges, with many mainstream names coming out in support of blockchain integration. Demand for web 3.0 applications is on the rise, and the blockchain with the biggest front end application potential is Ethereum. We've started to see some catch up as well, with ETH finding relative strength off cycle lows versus its older cousin. At the same time, worry associated with fallout in the global economy, is worry that should weigh more heavily on risk correlated crypto assets like ETH. And considering the possibility an overextended Bitcoin runs into profit taking, there is risk we soon see a healthy adjustment back to the downside.
- China’s Brightest Are the Trade War’s Latest Casualties, A. Minter, Bloomberg (May 24, 2019)
- UK Wealth Managers and Marker Turbulence, J. Pickford, Financial Times (May 23, 2019)