Next 24 hours: Euro runs into resistance, Pound trying to hold up
Today’s report: Back to feeling good about Brexit, global trade
Headlines around the major drivers of global sentiment have been positive of late, with the market feeling better about the significantly reduced prospect for a disorderly Brexit, and more optimistic about a US-China trade deal.
- lending survey
- public finances
- risk sentiment
- SNB policy
- US-China trade
- retail sales
- macro themes
- looking tired
- hard asset
- institutional demand
- traditional markets
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe downtrend off the 2018 high is looking exhausted and the prospect for a meaningful higher low is more compelling. A higher low is now 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 1.1250 – 6 August high – Strong
- R1 1.1180 - 21 October high – Medium
- S1 1.1065 - 17 October low – Medium
- S2 1.0991 – 15 October low – Strong
EURUSD – fundamental overviewThe Bundesbank said a deep recession wasn't on the cards, despite a possible contraction in the third quarter. German producer prices came in above forecast. The Euro held onto its bid tone and was well supported on dips, with these two developments helping the single currency's cause. Looking ahead, Tuesday’s calendar features the ECB bank lending survey, US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market has seen a recovery out from the lowest levels since 2016, with the price recovering back above the daily Ichimoku cloud to take the immediate pressure off the downside. Ultimately, only back below the bottom of the daily Ichimoku cloud would compromise the more constructive outlook for the major pair. Next key resistance comes in the form of the 2019 high from March around 1.3380. Setbacks should ideally be well supported ahead of 1.2400.
- R2 1.3013 – 21 october high – Strong
- R1 1.3000 – Psychological – Medium
- S1 1.2657 – 16 October low – Medium
- S2 1.2516 – 14 October low – Strong
GBPUSD – fundamental overviewThe Pound has held up well despite ongoing uncertainty around the fate of Brexit, with the currency supported mostly on the back of a pricing out of disorderly Brexit risk. At this stage, it looks like the Prime Minister will get a deal by the 31st of October, or we will get another delay. Looking ahead, Tuesday’s calendar features UK public finances and CBI industrial trends, US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
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 in favour of the next major downside extension towards the 2016 low at 99.00.
- R2 109.32 – 1 August high – Strong
- R1 108.95 – 17 October high – Medium
- S1 107.85 – 11 October low – Medium
- S2 106.48 – 3 October low – Strong
USDJPY – fundamental overviewMost of the flow in the major pair continues to be driven off risk themes. These themes have been supportive of the major pair in recent sessions, with the market feeling less worried about a disorderly Brexit and more optimistic about US trade deal prospects with China. Looking ahead, Tuesday’s calendar features US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
EURCHF – technical overviewThe market is attempting to recover out from its lowest levels in two years, with the recent break back above 1.1000 taking the immediate pressure off the downside and opening the door for a larger correction back towards next key resistance at 1.1160. Overall however, the medium-term picture continues to favour the downside, and the market could have a hard time pushing much beyond that solid previous support turned resistance around 1.1160.
- R2 1.1173 – 2 July high – Strong
- R1 1.1060 – 17 October high – Medium
- S1 1.0871 – 9 October low – Medium
- S2 1.0811 – 4 September/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, 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 0.7083 – 19 July high – Strong
- R1 0.6895 – 12 September high – Strong
- S1 0.6800 – Figure – Medium
- S2 0.6710 – 10 October low – Strong
AUDUSD – fundamental overviewRBA Lowe said lower interest rates were working, with the economy gradually improving. The central banker added the housing market was turning around, while Australian Treasurer Frydenberg said the government's plan to return a budget surplus while growth slowed, would not derail the economy. All of this has helped to fuel an impressive Aussie recovery, while optimism around the US-China trade outlook is also contributing to the Aussie run. Looking ahead, Tuesday’s calendar features US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
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 1.3348 – 3 October high – Strong
- R1 1.3240 - 15 October high – Medium
- S1 1.3071 – 22 October low – Medium
- S2 1.3016 – 19 July/2019 low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has extended its recovery run into Tuesday, with the currency perhaps getting an added boost on the removal of uncertainty associated with the Canada election. Prime Minister Trudeau has secured a second term, with a minority government, which was what many had anticipated heading in. Looking ahead, Tuesday’s calendar features Canada retail sales, US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
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 0.6200. As such, look for setbacks to be well supported in the days ahead, in anticipation of a continued recovery. Only a weekly close below 0.6200 would give reason for rethink. Back above 0.6451 will strengthen the outlook and take the immediate pressure off the downside.
- R2 0.6451 – 12 September high – Strong
- R1 0.6436 – 22 October high – Medium
- S1 0.6343 – 18 October low – Medium
- S2 0.6241 – 16 October low – Strong
NZDUSD – fundamental overviewKiwi price action has mostly revolved around updates on the macro front relating to broader risk. The latest headlines have been upbeat with respect to the outlook for a US-China trade deal. Kiwi has also benefited from broad based profit taking on US Dollar longs and has received and added boost from the news that the Bank of New Zealand raised its 2019-20 milk price forecast. Looking ahead, Tuesday’s calendar features US existing home sales and the Richmond Fed manufacturing index. We also get a speech from Fed Kaplan late in the day.
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 2854, with a break below to strengthen the outlook. A monthly close above 3000 would be required to compromise the outlook.
- R2 3100 – Psychological – Strong
- R1 3029 – 26 July/Record high – Medium
- S1 2854 – 3 October 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 despite any signs that would suggest otherwise. 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 2019 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 1558 – 4 September/2019 high – Strong
- R1 1536 – 24 September high – Medium
- S1 1459 – 1 October 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 overviewThe market continues to correct and consolidate in the aftermath of a major surge in the second quarter of 2019. However, any setbacks should be very well supported around 7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 5,750 would compromise the constructive outlook.
- R2 10,972– 20 August high – Strong
- R1 9,825 – 24 September high – Medium
- S1 7,736 – 30 September low – Medium
- S2 7,447 – 6 June low – Strong
BTCUSD – fundamental overviewBitcoin is 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. Plenty of demand is reported on dips down towards $7,000.
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 225 – 19 September high – Strong
- R1 200 – Psychological – Medium
- S1 153 – 26 September low – Medium
- S2 150 – Psychological – Strong