Next 24 hours: Euro takes a hit on German growth downgrade
Today’s report: Subdued trade into September 11
We’re into the mid-week and price action has been rather subdued, perhaps fitting on September 11th, as we remember the tragedy of 2001. Today’s economic calendar is thin, with only US producer prices standing out.
- Pre-ECB positioning
- UK parliament
- Reuters report
- SNB policy
- consumer confidence
- Canada data
- visitor arrivals
- less encouraged
- hard asset
- institutional demand
- traditional markets
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. 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 1.0800 would compromise this outlook. Back above 1.1412 will strengthen the view.
- R2 1.1116 – 27 August high – Strong
- R1 1.1085 - 5 September high – Medium
- S1 1.0968 - 4 September low – Medium
- S2 1.0925 – 3 September/2019 low – Strong
EURUSD – fundamental overviewThe Euro continues with the subdued trade this week after closing out the previous week on a positive note. It seems the market is more focused on pre-event risk positioning, ahead of tomorrow's anticipated ECB decision. Overall, US administration soft Dollar policy and scaled back dovishness around ECB expectations have been helping to prop the single currency. Looking ahead, the calendar is light, with no first tier data out of the Eurozone and only producer prices standing out in the US.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market has seen an impressive bounce out from the lowest levels since 2016, with the price recovering back above critical resistance at 1.2310, to take the immediate pressure off the downside. This has set up a double bottom possibility, with a measured move extension target coming in at 1.2660. Ultimately, only back below 1.2000 would compromise the more constructive outlook for the major pair.
- R2 1.2400 – Ichimoku Cloud top – Strong
- R1 1.2385 – 9 September high – Medium
- S1 1.2210 – 5 September low – Medium
- S2 1.2106 – 3 September high – Strong
GBPUSD – fundamental overviewUK parliament is now into a five-week recess after pushing through the bill that would prevent a no deal Brexit and compel the Prime Minister to request a three-month extension. The PM’s attempts to force a general election have failed and we now wait to see what comes next. Goldman Sachs was out with a report earlier this week, reducing odds of a no deal Brexit to 20%. This was followed up with a reduction in October 31st no-deal odds over a Julius baer to just 10%. On the economic data front, Monday’s solid UK GDP read was followed up on Tuesday with another rise in average earnings, something that has further contributed to Pound demand. BOE Governor Carney was on the wires Tuesday reiterating he didn't see negative interest rates as a tool for the UK. Looking ahead, the calendar is light, with no first tier data out of the UK and only producer prices standing out in the US.
USDJPY – technical overviewThe longer-term downtrend remains firmly intact, with the major pair recently taking out major support in the form of the 2018 and 2019 lows respectively. Rallies should continue to be well capped below 110.00. Below the 2018 low now opens the door for the next major downside extension towards the 2016 low at 99.00.
- R2 109.32 – 1 August high – Strong
- R1 108.00 – Figure – Medium
- S1 107.18 – 10 September low – Medium
- S2 106.32 – 5 September low – Strong
USDJPY – fundamental overviewThere hasn't been a lot going on that would be influencing price action in the major pair all that much, which leaves us downplaying recent weakness in the Japanese currency. It's possible some of the weakness in the Yen (USDJPY demand) comes from a recent Reuters report the BOJ may consider taking rates deeper into negative territory. Overall, we continue to expect the Yen to track with bigger picture correlations including risk sentiment and US Dollar yield differentials. Looking ahead, the calendar is exceptionally light for the remainder of the day, with only US producer prices standing out.
EURCHF – technical overviewThe market is trading at its lowest levels in two years, and at this point, it would take a daily close back above 1.1173 to take the immediate pressure off the downside. The latest breakdown below 1.1000 opens the door for the next major downside extension towards 1.0600.
- R2 1.1064 – 26 July high – Strong
- R1 1.1000 – Psychological – Medium
- S1 1.0811 – 4 September/2019 low – Medium
- S2 1.0800 – Figure – 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, 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 under pressure over the past several months, but has also been well supported on dips. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7100 to strengthen this outlook. In the interim, look for setbacks to continue to be well supported above 0.6700 on a weekly close basis.
- R2 0.6910 – 10 July low – Strong
- R1 0.6876– 9 September high – Medium
- S1 0.6754 – 4 September low – Medium
- S2 0.6677 – 7 August/2019 low – Strong
AUDUSD – fundamental overviewAussie has been better bid of late, getting a boost from the better outlook on US-China trade, a recent China RRR cut and some better than expected Aussie data. On Wednesday, Westpac consumer confidence readings came in a little above forecast. Looking ahead, the calendar is exceptionally light for the remainder of the day, with only US producer prices standing out.
USDCAD – technical overviewThe longer-term structure remains constructive, with dips expected to be well supported for renewed upside, eventually back above the 2018/multi-month high at 1.3665. At this point, only a weekly close below the psychological barrier at 1.3000 would compromise this outlook.
- R2 1.3300 – Figure – Medium
- R1 1.3247 - 5 September high – Medium
- S1 1.3133 – 10 September low – Medium
- S2 1.3105 – 31 July low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has been better bid in recent sessions, with last week's solid Canada employment report and Ivey PMI print followed up this week with better than expected Canada building permits and housing starts. Meanwhile, OIL has been better bid, another source of CAD strength. Looking ahead, absence of first tier data out of Canada will leave the focus on US producer prices.
NZDUSD – technical overviewDespite recent weakness, there's a case to be made for a meaningful bottom, with the market rallying out from longer-term cycle low area around 0.6300. As such, look for setbacks to be well supported in the days ahead, in anticipation of a continued recovery. Only a weekly close below 0.6300 would give reason for rethink. Back above 0.6600 will take the immediate pressure off the downside.
- R2 0.6499 – 8 August high – Strong
- R1 0.6445 – 9 September high – Medium
- S1 0.6353 – 5 September low – Medium
- S2 0.6325 – 4 September low – Medium
NZDUSD – fundamental overviewA rebound n Kiwi retail credit card spending and jump in visitor arrivals are helping to keep the New Zealand Dollar in recovery mode into Wednesday. Overall, the commodity currency has been better bid in recent days, on the back of broad based profit taking on US Dollar longs, and improved risk appetite, with Brexit less of a stress and China coming back to the negotiating table with the US. Looking ahead, the calendar is exceptionally light for the remainder of the day, with only US producer prices standing out.
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 at 2729, with a break below to strengthen the outlook. A monthly close above 3000 would be required to compromise the outlook calling for a top.
- R2 3029 – 26 July/Record high – Strong
- R1 3000 – Psychological – Strong
- S1 2889 – 2 September low – Medium
- S2 2777 – 6 August low – Strong
US SPX 500 – fundamental overviewAlthough we've seen the market extending to fresh record highs in 2019, on the back of the Fed policy reversal, with so little room for additional easing, given an already depressed interest rate environment, the prospect for a meaningful extension of this record run, on easy money policy incentives, should no longer be as enticing to investors as it once was. Meanwhile, 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 overviewThe recent breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1600, while in the interim, look for any setbacks to be well supported above 1400.
- R2 1600 – Round number – Strong
- R1 1558 – 4 September/2019 high – Strong
- S1 1480 – 13 August low – Medium
- S2 1400 – Psychological – 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 overviewOverall, look for additional upside to be limited for now, as the market continues to correct and consolidate, in the aftermath of a major surge in the second quarter of 2019. Any setbacks should be very well supported ahead of 7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high at 13,748. Only a weekly close below 7,000 would compromise the constructive outlook.
- R2 13,748– 26 June/2019 high – Strong
- R1 12,310 – 6 August high – Medium
- S1 9,348 – 29 August low – Medium
- S2 9,075 – 17 July low – Strong
BTCUSD – fundamental overviewBitcoin enjoyed a spectacular run in the second quarter of 2019, racing to fresh yearly highs, surging towards 14k, on the back of increased adoption and more openness from the traditional investor community. The news of tech giants now turning towards the world of crypto has invited a higher profile that should be a net positive in the long run. Future ECB President Lagarde has just come out in support of cryptocurrencies as well. At the same time, it also exposes the ethos to fresh critique from higher ups at the central bank and government levels. The market is also going through a period of technical adjustment after the fierce Q2 run up, though we anticipate continued demand from institutional players starved for yield in a world where global equities are increasingly vulnerable.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe market is in the process of a major correction after a surge in the second quarter of 2019. Look for setbacks to be well supported above of previous resistance turned support at 150 on a weekly close basis, in favour of the next major higher low and bullish resumption back towards and through the 2019 high up at 363. Ultimately, only a weekly close below 150 would compromise the outlook.
- R2 240 – 6 August high – Strong
- R1 204 – 20 August high – Medium
- S1 164 – 29 August low – Medium
- S2 150 – Psychological – Strong