Next 24 hours: Negative headlines have little impact on these markets
Today’s report: Outlook sours into Wednesday
There have been some hiccups around the phase one trade deal between the US and China, with the news that the US will retain existing tariffs on Chinese goods until after the Presidential election, shaking things up.
- industrial production
- inflation reads
- retain tariffs
- currency watchlist
- liquidity injections
- OIL decline
- risk off
- more sensitive
- 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 1.1239 - 31 December high – Medium
- S1 1.1085 - 10 January low – Medium
- S2 1.1066 – 20 December low – Strong
EURUSD – fundamental overviewThe ECB's Mersch said the EU economy is 'giving good signs of stabilization' and 'other policy areas need to kick in to help the ECB'. Meanwhile, US inflation reads came in softer, which helped to give the Euro an additional prop. We continue to hear of significant demand for the Euro from medium and longer term players. Looking ahead, we get some German growth reads, Eurozone trade and industrial production, US producer prices, NY empire manufacturing, and the Fed Beige Book.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market has seen a recovery out from the lowest levels since 2016, with the price now pushing back above the weekly Ichimoku cloud to signal a bullish structural shift. Ultimately, only back below the 1.2500 handle would compromise the newly established constructive medium and longer-term outlook. Next key resistance comes in the form of the monthly high from September 2017 at 1.3658, with setbacks expected to be well supported ahead of 1.2800.
- R2 1.3300 – Figure – Strong
- R1 1.3285 – 31 December high – Medium
- S1 1.2961 – 13 January low – Medium
- S2 1.2905 – 23 December low – Strong
GBPUSD – fundamental overviewBoris Johnson's expressed confidence in the UK securing a trade deal by the end of 2020, has helped to inspire a fresh round of bids in the Pound, after the currency had taken a hit in recent days. Downbeat comments from outgoing BOE Governor Carney, worry associated with the EU-UK deal and some softer UK data had been weighing on the Pound. Looking ahead, we get UK inflation data, US producer prices, NY empire manufacturing, and the Fed Beige Book.
USDJPY – technical overviewDespite rally attempts, the longer-term downtrend remains firmly intact. Rallies should continue to be well capped below 110.00 on a monthly closes basis, with deeper setbacks anticipated towards a retest of the yearly low, below which exposes critical support in the form of the 2016 low at 99.00 further down. Next major support comes in the form of the October 2018 low at 106.48. Only back above the 112.40, 2019 high would compromise the bearish outlook.
- R2 110.68 – 21 May high – Strong
- R1 110.22 – 14 January high – Strong
- S1 109.01 – 9 January low – Medium
- S2 107.65 – 8 January low – Strong
USDJPY – fundamental overviewWe've seen a mild wave of demand for the Yen, after USDJPY had pushed back through the 110.00 barrier. The latest round of selling in the major pair comes on news the US will retain existing tariffs on Chinese goods until after the 03 Nov US Presidential election. A reuters report that the US Commerce Department is drafting new rules to block sales to Huawei, is also weighing on the major pair into Wednesday. Nothing new from BOJ Kuroda, who rehashed existing views. Looking ahead, we get US producer prices, NY empire manufacturing, and the Fed Beige Book.
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 1.1060 – 17 October high – Strong
- R1 1.0906 – 27 December high – Medium
- S1 1.0759 – 15 January/2019 low – Medium
- S2 1.0700 – Figure – 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, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, 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 0.7032 –31 December high – Strong
- R1 0.6958 – 6 January high – Medium
- S1 0.6850 – 8 January low – Medium
- S2 0.6838 – 17 December low – Strong
AUDUSD – fundamental overviewThe Australian Dollar is holding up well, despite some risk off flow into Wednesday. This comes from news the US will retain existing tariffs on Chinese goods until after the 03 Nov US Presidential elections, and a Reuters report that the US Commerce Department is drafting new rules to block sales to Huawei. The market also got news the PBoC would be stepping up it's liquidity injections Looking ahead, we get US producer prices, NY empire manufacturing, and the Fed Beige Book.
USDCAD – technical overviewThe downturn in late 2019 has resulted in a medium-term shift in the trend, with the pressure back on the downside. The break back below major psychological support at 1.3000 now exposes deeper setbacks towards the 1.2782 low from September 2018. At this stage, the market would need to push back above the November 2019 high at 1.3328 to take the immediate pressure off the downside.
- R2 1.3182 – 20 December high – Strong
- R1 1.3105 - 9 January high – Medium
- S1 1.3000 – Psychological – Strong
- S2 1.2952 – 31 December/2019 low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has been well bid in recent weeks, but hasn't been able to muster much additional positive momentum in recent sessions, despite the well received Canada jobs data in the previous week. A sharp pullback in the price of OIL has unquestionably been an offsetting variable. Looking ahead, we get US producer prices, NY empire manufacturing, and the Fed Beige Book. There is no first tier data on the Canada calendar.
NZDUSD – technical overviewThere'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 0.6800 strengthens the outlook and takes the medium to longer-term pressure off the downside.
- R2 0.6756 – 31 December high – Strong
- R1 0.6700 – Figure – Medium
- S1 0.6600 – Figure – Medium
- S2 0.6554 – 18 December low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar is holding up well, despite some risk off flow into Wednesday. This comes from news the US will retain existing tariffs on Chinese goods until after the 03 Nov US Presidential elections, and a Reuters report that the US Commerce Department is drafting new rules to block sales to Huawei. Looking ahead, we get US producer prices, NY empire manufacturing, and the Fed Beige Book.
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 a major correction targeting an eventual test of the 2018 low at 2339. The initial level of major support comes in at 3070, with a break below to strengthen the outlook. A monthly close above 3300 would be required to compromise the outlook.
- R2 3300 – Psychological – Strong
- R1 3298 – 14 January/Record high – Strong
- S1 3200 – Psychological – Medium
- S2 3070 – 3 December low – Strong
US SPX 500 – fundamental overviewAlthough we've seen the market extending to fresh record highs, 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 and geopolitical risk, should continue to be a drag on investor sentiment into 2020, 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 1650 (measured move extension target), while in the interim, look for any setbacks to be well supported above 1400.
- R2 1650 – Measured move target – Strong
- R1 1612 – 8 January/2019 high – Medium
- S1 1500 – Psychological – Medium
- S2 1445– 12 November low – 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 overviewSetbacks should be very well supported in the 6,000 area, with a 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 5,750 would compromise the constructive outlook. Back above 10,468 further encourages bullish prospect.
- R2 10,468– 26 October high – Strong
- R1 9,000 – Round number – Medium
- S1 7,000 – Psychological – Strong
- S2 6,430 – 18 December low – Strong
BTCUSD – fundamental overviewBitcoin demand is expected to pick up in 2020, with market forces to likely make a stronger argument for the emerging cryptocurrency. In a world where rates are at historic lows and the equity market looks to be inching closer to major capitulation, the idea of owning a decentralised, limited supply currency, becomes increasingly attractive as a store of value. Moreover, there is plenty of development going on in the decentralised technology space, which should only add to the draw.
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 117 – 18 December low – Medium
- S2 102 – 6 February/2019 low – Strong