Next 24 hours: One step closer to trade deal, Bitcoin extends decline
Today’s report: Weekend news gives risk assets an early prop
Investor sentiment is looking up as the week gets going, with the market feeling good about US-China trade deal prospects as China says it will raise penalties on intellectual property violations, which should be a comfort to the US.
- Lagarde comments
- weekend news
- risk assets
- tougher battle
- IP violations
- Retail sales
- bigger picture
- Trade tension
- 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 1.1180 – 21 October high – Strong
- R1 1.1097 - 21 November high – Medium
- S1 1.0989 - 14 November low – Medium
- S2 1.0941 – 8 October low – Strong
EURUSD – fundamental overviewMixed readings out of the Eurozone on the data front in the previous week, which ultimately offset market reaction. Most of the attention has been around the latest wave of official speak. ECB President Lagarde said the central bank 'will continuously monitor the side effects of policies,' and monetary policy would 'undergo a strategic review in the near future.' Lagarde added the central bank's review 'offered a chance to reflect on the climate aspect.' ECB Weidmann said he supports Lagarde's plan for an ECB strategy review, and the ECB's Kazimir said he's 'not worried about the outlook for the Euro-area economy.' German Finance Minister Olaf Scholz said Europe's banking union 'urgently needs deepening' and his country expects to see progress by December. Monday's calendar features German IFO reads, and US releases in the form of the Chicago Fed national activity index and Dallas Fed manufacturing. We also get ECB speak from Lane and Mersch.
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 1.2900 – Figure – Medium
- S1 1.2800 – Figure – Medium
- S2 1.2769 – 8 November low – Strong
GBPUSD – fundamental overviewThe Pound has held up well into the latest dip, following the UK Conservative Party's weekend 'sensible manifesto' reveal. The Pound had taken some hits in the previous week on pre-election jitters and softer UK PMI reads. Monday's calendar features UK CBI distributive trades, and US releases in the form of the Chicago Fed national activity index 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 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 overviewVery little reaction to the BOJ's outright bond purchases earlier today, which was understandable given how the central bank's bond purchase amounts were unchanged. Most of the price action in the Yen has been around an uptick in investor sentiment, with markets feeling better about the US-China trade outlook. Monday's calendar features US releases in the form of the Chicago Fed national activity index and Dallas Fed manufacturing.
EURCHF – technical overviewThe 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 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 0.6930 – 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 overviewAussie price action is being dictated by bigger picture macro themes. Into the new week, Aussie is finding some support from the weekend news out of China, that it will raise penalties on intellectual property violations. Monday's calendar features US releases in the form of the Chicago Fed national activity index 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 1.3328 - 20 November high – Medium
- S1 1.3190 – 19 November low – Medium
- S2 1.3160 – 7 November low – Strong
USDCAD – fundamental overviewNot much action in the Canadian Dollar in recent sessions, with the currency caught between demand from the better than expected Canada retail sales print, and offers from the Friday setback in the price of OIL. Monday's calendar features Canada wholesale sales, and US releases in the form of the Chicago Fed national activity index and Dallas Fed manufacturing.
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 0.6466 – 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 overviewKiwi data has taken a backseat to bigger picture macro themes, with the currency finding some support into the new week on the news out of China, that it will raise penalties on intellectual property violations. Monday's calendar features US releases in the form of the Chicago Fed national activity index 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 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 overviewAlthough 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 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 1445 – 12 November 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 in the aftermath of a major surge in the second quarter of 2019. However, any setbacks should be very well supported in the 6,000 area, 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 6,000 would compromise the constructive outlook.
- R2 10,468– 26 October high – Strong
- R1 8,806 – 11 October high – Medium
- S1 6,000 – Psychological – Strong
- S2 5,755 – Internal support/June 2018 – 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 $6,000.
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 126 – 4 March low – Medium
- S2 102 – 6 February/2019 low – Strong