The painfully slow crawl to a trade deal

Next 24 hours: Wait and see ahead of Wednesday data dump

Today’s report: The painfully slow crawl to a trade deal

The market has been more upbeat about the US-China trade deal outlook and this has helped to propel US equities to yet another record high. There hasn’t been much of any reaction to comments from the Fed Chair, with the central banker offering up nothing new to chew on.

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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 1.1097 - 21 November high  – Medium
  • S1 1.0989 - 14 November low – Medium
  • S2 1.0941 – 8 October low – Strong

EURUSD – fundamental overview

ECB Lane was on the wires Monday saying the central bank's policies were in good shape for the baseline scenario of improving conditions over the next one to two years, but also said further rate cuts would not be ruled out. Meanwhile, ECB Mersch was on the wires saying he saw no need for additional capital requirements. On the data front, German IFO reads were mostly in line with expectation. Tuesday's calendar features German GfK consumer confidence, speeches from ECB's Coeure, Guindos and Lane, US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech.

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 1.2900 – Figure – Medium
  • S1 1.2800 – Figure – Medium
  • S2 1.2769 – 8 November low – Strong

GBPUSD – fundamental overview

UK CBI retail sales came in much better than forecast and this helped to keep the Pound outperforming against the rest of its peers, with the exception of the US Dollar. Overall, the Pound has held up well as the Brexit outlook is looking a lot brighter these days. A double digit lead for the Conservatives in the polls is having a lot to do with this. Tuesday's calendar features UK mortgage approvals, US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech.

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

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. But with all of this going back and forth and headlines proving unreliable, it's likely we see a move back the other way, which inspires renewed Yen demand. On the domestic front, the IMF lowered its Japan 2019 GDP forecast to 0.8% from 0.9% prior and called for extending sales tax support. The IMF's Georgieva said 'Japan's economic performance is solid' and called the country 'resilient'. Tuesday's calendar features US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech.

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 0.6768 – 25 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 new week, Aussie is finding some support from the improved outlook for a US-China trade deal. No reaction to the release of Aussie consumer confidence data which pulled back from the previous print. Tuesday's calendar features US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech.

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

Not much action in the Canadian Dollar in recent sessions, with the currency caught between demand from the better than expected economic data, and offers in the price of OIL. On Monday, Canada wholesale sales increased 1.0% vs 0.0% forecast. This follows last Friday's better than expected Canada retail sales. Tuesday's calendar features US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech. There is no first tier data on the Canada docket.

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

The New Zealand Dollar has been propped up this week on the better outlook for US-China trade and some solid local data. Early Tuesday, New Zealand retail sales came in above forecast. Tuesday's calendar features US trade data, US new home sales, Richmond Fed manufacturing, and a Fed Brainard speech.

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 3091, 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 3145 – 26 November/Record high – Medium
  • S1 3091 – 20 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 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 6,500 – Psychological – Strong
  • S2 5,755 – Internal support/June 2018 – 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 $6,000.

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 133 – 25 November low – Medium
  • S2 102 – 6 February/2019 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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