FX market observations in a dull week

Next 24 hours: US-China Yo-Yo Fest Keeps on Truckin

Today’s report: FX market observations in a dull week

We’re into the latter portion of the week and price action in the FX market hasn’t been anything to write home about. Currencies remain confined to familiar ranges, waiting for that next big volatility catalyst, whenever it does decide to reveal itself.

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Wake-up call

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The 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 1.1180 – 21 October high – Strong
  • R1 1.1093 - 6 November high  – Medium
  • S1 1.0989 - 14 November low – Medium
  • S2 1.0941 – 8 October low – Strong

EURUSD – fundamental overview

An interesting report out from the ECB on Wednesday, with the central bank highlighting the fact that while the current low interest-rate environment 'supported the overall economy,' it also had the effect of encouraging an uptick in risk taking that would create challenges for financial stability. ECB officials were also on the wires. ECB Guindos said the central bank 'wasn't close to the reversal rate, and bond purchases wouldn't hit limits over the short term.' ECB's Lane said the central bank 'wasn't at the limit of monetary policy,' 'there had been a sustained slowdown, but in the Euro area was still not showing signs of recession, and the central bank would begin a policy review 'fairly soon.' Thursday's calendar features speeches from ECB's Mersch and Guindos, the ECB Minutes, and US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The 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 1.2985 – 18 November high – Medium
  • S1 1.2867 – 15 November low – Medium
  • S2 1.2769 – 8 November low – Strong

GBPUSD – fundamental overview

We've seen a minor round of profit taking kick in as the election nears, though whatever we have seen thus far, hasn't been much. Thursday's calendar features UK public sector net borrowing, and US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari.

USDJPY – technical overview

The 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 110.00 – Psychological – Strong
  • R1 109.49 – 7 November high – Strong
  • S1 108.24 – 14 November low – Medium
  • S2 107.89 – 1 November low  – Strong

USDJPY – fundamental overview

No updates to note out of Japan and most of the price action has revolved around developments from the US-China trade front. There had been some major setbacks in the outlook this week, with the US Senate bill in support of Hong Kong exacerbating the situation. This invited Yen demand, though into Thursday, there has been some optimism inspiring Yen selling, after China Vice Premier Liu He commented he is "cautiously optimistic" about a US-China trade deal. Thursday's calendar features US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari. .

EURCHF – technical overview

The market remains very well capped into offers and the medium-term picture continues to favour the downside. A break back above 1.1060 would be required to take the immediate pressure off the downside. Below 1.0800 exposes the 1.0600 area.
  • R2 1.1173 – 2 July high – Strong
  • R1 1.1060 – 17 October high – Medium
  • S1 1.0864 – 14 November low – Medium
  • S2 1.0811 – 4 September/2019 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, 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

The 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 0.6930 – 31 October high – Strong
  • R1 0.6842 – 14 November high – Strong
  • S1 0.6770 – 14 November low – Medium
  • S2 0.6710 – 10 October low – Strong

AUDUSD – fundamental overview

Aussie price action is being dictated by bigger picture macro themes into the latter portion of the week. The news of the U.S. Senate's unanimous passing of a bill backing protesters in HK and China's subsequent threat to retaliate had shaken investor sentiment, weighing on Aussie in Wednesday trade, though the latest comment from China Vice Premier Liu He, that he was "cautiously optimistic" about a U.S.-China trade deal, has inspired some Aussie demand. There was no reaction to the release of second tier Aussie data. Thursday's calendar features US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari.

USDCAD – technical overview

The 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 1.3328 - 20 November high – Medium
  • S1 1.3190 – 19 November low – Medium
  • S2 1.3160 – 7 November low – Strong

USDCAD – fundamental overview

The Canadian Dollar hasn't been helped all that much by Wednesday's OIL rebound. It seems the Loonie is still bothered by the Bank of Canada Wilkins speak earlier in the week. The central banker said the BoC 'still had room to maneuver with interest rates' at 1.75%, trade policy uncertainty 'remained high,' and lower oil prices 'continued to weigh on energy-producing provinces.' Thursday's calendar features Canada ADP employment, and US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari.

NZDUSD – technical overview

Despite 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 0.6466 – 4 November high – Strong
  • R1 0.6437 –  19 November high – Medium
  • S1 0.6322 – 8 November low – Medium
  • S2 0.6241 – 16 October low – Strong

NZDUSD – fundamental overview

Kiwi data has taken a backseat to bigger picture macro themes, with the currency finding some support into Thursday on the more reassuring comment from China Vice Premier Liu He, that he is "cautiously optimistic" about a U.S.-China trade deal. The news of the U.S. Senate's unanimous passing of a bill backing protesters in HK and China's subsequent threat to retaliate had weighed on Kiwi ahead of the Vice Premier comment. Thursday's calendar features US reads in the form of the Philly Fed, initial jobless claims and existing home sales. We also get Fed speak from Mester and Kashkari.

US SPX 500 – technical overview

There 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 3100 would be required to compromise the outlook.

  • R2 3150 – Psychological – Strong
  • R1 3133 – 19 November/Record high – Medium
  • S1 3064 – 6 November low – Medium
  • S2 3000 – Psychological – Strong

US SPX 500 – fundamental overview

Although we've seen the market extending to fresh record highs in 2019, with so little room for additional central bank accommodation, 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 overview

The 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 1445 – 12 November low – Medium
  • S2 1400 – Psychological – 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

The 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 10,468– 26 October high – Strong
  • R1 9,612 – 4 November high – Medium
  • S1 8,000 – Psychological – Medium
  • S2 7,326 – 23 October low – Strong

BTCUSD – fundamental overview

Bitcoin 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 overview

The 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 168 – 18 October low – Medium
  • S2 153 – 23 October low  – Strong

ETHUSD – fundamental overview

Profit taking in the aftermath of the rapid Q2 appreciation has triggered a healthy period of correction and consolidation, while critique of the space from the likes of President Trump and Fed Chair Powell, along with worry associated with fallout in the global economy, are stories that could continue to keep the more risk correlated crypto asset weighed down into the end of the year. Risk off in the global economy is expected to result in ETH underperformance relative to Bitcoin.

Peformance chart: 5 Day Performance vs. US dollar

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