Next 24 hours: SPX500 record, currencies sideways
Today’s report: Quiet start to a busy week ahead
We’re off to a quiet start as things get going on Monday. Overall, there continues to be optimism around US-China trade deal prospects, which has been helping to prop up risk sentiment. At the same time, there is plenty of risk in the week ahead.
- Draghi speech
- Distributive trades
- traditional correlations
- tougher battle
- China updates
- OIL recovery
- 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 Euro is a touch firmer as Monday gets going, though there hasn't been a whole lot of activity to start the week. Dealers report some HFT scalping. Looking ahead, we get German import prices, the Chicago Fed national activity index, US trade reads, Dallas Fed manufacturing, and a speech from ECB Draghi.
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 1.2749 – 17 October low – Medium
- S2 1.2657 – 16 October low – Strong
GBPUSD – fundamental overviewThe Pound is a little softer into Monday and all eyes will be on today's UK parliament vote on the government's election motion, and on the EU's extension decision, which is expected between now and tomorrow. Looking ahead, we get UK CBI distributive trades, the Chicago Fed national activity index, US trade reads, and Dallas Fed manufacturing.
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. With that said, the Yen has been trading a little softer in lieu of US-Sino trade optimism. Overall, activity has been rather muted, with market participants also not wanting to do too much ahead of this week's anticipated central bank event risks in the form of the BOJ and Fed policy decisions. As expected, the BOJ left JGB purchases unchanged in today's regular bond purchase operations. Looking ahead, we get the Chicago Fed national activity index, US trade reads, and Dallas Fed manufacturing.
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 overviewSome selling in the Australian Dollar as the week gets going, with traders feeling a little nervous about upcoming risk associated with an RBA Lowe speech, Aussie CPI, central bank decisions from the Fed and BOJ, China PMIs and US NFPs. Deal optimism for US-Sino trade prospects has however helped to keep Aussie supported into dips. At the same time, Fitch has also come out affirming Australia's AAA rating. Looking ahead, we get the Chicago Fed national activity index, US trade reads, and Dallas Fed manufacturing.
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 1.3053 – 24 October low – Medium
- S2 1.3016 – 19 July/2019 low – Strong
USDCAD – fundamental overviewCanada PM Justin Trudeau has announced the government will continue to move ahead with construction of the Trans Mountain Pipeline expansion project, with profits going to fund climate change and green energy projects. This in conjunction with a healthy rally in the price of OIL, has contributed to another run in the Loonie, with the Canadian Dollar closing in on a retest of its yearly high against the Buck. Looking ahead, we get the Chicago Fed national activity index, US trade reads, and Dallas Fed manufacturing. There is no first tier data out of Canada.
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 overviewThinner volumes in the New Zealand Dollar today on account of the New Zealand Labour Day holiday. There hasn't been all that much activity around trade flow, though we have seen Kiwi supported on optimism around US-China trade deal prospects. At the same time, there has also been some nervous selling ahead of risk this week that includes central bank decisions from the Fed and BOJ, China PMIs and US NFPs. Looking ahead, we get the Chicago Fed national activity index, US trade reads, and Dallas Fed manufacturing.
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 consolidate in the aftermath of a major surge in the second quarter of 2019. However, any setbacks should be very well supported ahead of 7,000, with an 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 7,000 would compromise the constructive outlook.
- R2 10,920– 6 September high – Strong
- R1 10,468 – 26 October high – Medium
- S1 8,806 – 11 October high – Medium
- S2 7,326 – 23 October 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 100 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 100 would compromise the outlook.
- R2 225 – 19 September high – Strong
- R1 200 – Psychological – Medium
- S1 153 – 26 September low – Medium
- S2 150 – Psychological – Strong