Today’s report: Thin conditions, busy calendar, month end flow
Friday’s calendar won’t be short on economic data, even with the US market out for the long holiday weekend. Friday’s docket includes German retail sales, German unemployment, Eurozone inflation, Eurozone unemployment, a speech from ECB Guindos, BOE consumer credit, lending and mortgage approvals, and Canada GDP and producer prices.
- Eurozone unemployment
- GBP outlook
- BOJ Kuroda
- tougher battle
- Month-end flow
- first-tier data
- NZDUSD Mixed data reads out of New Zealand
- 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 overviewThe Euro continues to trade mostly sideways, with setbacks to this point, nothing more than setbacks within a consolidation. On Friday, the market will take in German retail sales, German unemployment, Eurozone inflation, Eurozone unemployment, and a speech from ECB Guindos. US markets are out for the Thanksgiving long holiday weekend.
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 1.2985 – 18 November – Medium
- S1 1.2824 – 22 November low – Medium
- S2 1.2769 – 8 November low – Strong
GBPUSD – fundamental overviewThe Pound continues to hold up well as the worst of Brexit is priced out and the UK election polls show a double digit lead for the ruling Conservatives. On Friday, the market will take in BOE consumer credit, lending and mortgage approvals. US markets are out for the Thanksgiving long holiday weekend.
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 109.61 – 27 November high – Strong
- S1 109.00 – Figure – Medium
- S2 108.24 – 14 November low – Strong
USDJPY – fundamental overviewMost of the Yen selling of late has come from the upbeat sentiment around US-China trade and ongoing easy money policy around the globe, which have been helping to bolster investor confidence. Interestingly, there hasn't been any significant renewed demand for Yen, despite China's warnings against President Trump signing the bill backing Hong Kong protestors. On the data side, Japanese results were mixed and haven't factored into price action. Comments from BOJ Kuroda were also mixed and didn't factor into price action. Trading conditions will be thin into the weekend on account of the US Thanksgiving long holiday weekend.
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 0.6750 – Mid-Figure – Medium
- S2 0.6710 – 10 October low – Strong
AUDUSD – fundamental overviewAussie hasn't suffered all that much from the drag on China equities as trade deal updates sour between the US and China. Aussie has also shrugged off softer private sector credit reads. It seems month end demand has been more of a factor in the thinner conditions. Trading conditions will be thin into the weekend on account of the US Thanksgiving long holiday weekend.
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 1.3254 – 22 November low – Medium
- S2 1.3190 – 19 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 economic data, and offers in the price of OIL. But Friday could be a market moving day, with all of the spotlight in the North American session on first tier data out of Canada. With US markets shut down for Thanksgiving, traders will be watching Canada GDP, producer prices and the budget balance.
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 overviewThe New Zealand Dollar has held up well this week and there hasn't been any major fallout around China's expressed displeasure with US support for Hong Kong protestors. On the data side, things have been mixed, with Kiwi consumer sentiment better than expected, but building permits coming in softer. Trading conditions will be thin into the weekend on account of the US Thanksgiving long holiday weekend.
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 3091, with a break below to strengthen the outlook. A monthly close above 3100 would be required to compromise the outlook.
- R2 3200 – Psychological – Strong
- R1 3156 – 28 November/Record high – Medium
- S1 3091 – 20 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 6,500 – 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 133 – 25 November low – Medium
- S2 102 – 6 February/2019 low – Strong
ETHUSD – fundamental overviewProfit 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.
- The Easiest, Most Unenviable Job in Central Banking, D. Moss, Bloomberg (November 29, 2019)
- Why the US has a Subprime Car Loan Problem, R. Armstrong, FT (November 28, 2019)