Today’s report: What happens when unlimited support just isn't enough?
All of the tension on the US-China trade front along with elevated geopolitical risk, has deflated the market into the end of the week, with stocks under pressure and the US Dollar back in demand on the flight to quality play. But is there something bigger going on that should have the global economy even more concerned?
- ECB Minutes
- retail sales
- USDJPYRisk sentiment to dictate flow
- EURCHFSNB policy runs into tough times
- US-China tension
- retail sales
- retail sales
- Gloomy backdrop
- hard asset
- Traditional players
- more exposed
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewA higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. Look for the major pair to be well supported into dips ahead of the next big run towards the 2019 high at 1.1570. Ultimately, only a weekly close below 1.0700 would compromise this outlook.
- R2 1.1020 – 1 May high – Strong
- R1 1.0999 - 20 May high – Medium
- S1 1.0767 - 7 May low – Medium
- S2 1.0727 – 24 April low – Strong
EURUSD – fundamental overviewThe Euro hasn't had much time to celebrate solid Thursday data and the news of the Merkel-Macron proposal to support the EU economy, with the single currency feeling the heat of risk off flow into Friday, which is resulting in broad based, flight to safety US Dollar demand. Looking ahead, key standouts on the calendar for the remainder of the day include the ECB Minutes, and an ECB Lane speech.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market has rebounded sharply, after collapsing to a +30 year low below 1.1500. This supports the longer-term constructive outlook, with a major bottom sought out ahead of the start to a big run to the topside back through 1.3000. Look for the major pair to hold up well into setbacks, and ultimately above 1.2000 on a monthly close basis for confirmation.
- R2 1.2648 – 8 May high – Strong
- R1 1.2297– 19 May high – Medium
- S1 1.2075 – 18 May low – Medium
- S2 1.2000 – Psychological – Strong
GBPUSD – fundamental overviewEconomic data out of the UK was solid on Thursday, and arguably better than the batch of data that came out of the US, and yet, the Pound is under pressure into Friday, as risk appetite takes a hit. PM Johnson was out the other say saying he wanted to end UK reliance on Chinese imports. Looking ahead, UK retail sales is the only major standout on the calendar for the remainder of the day.
USDJPY – technical overviewWe're seeing a pickup in volatility in the major pair, with the market swinging wildly through the upper and lower bound of a massive triangle. Still, there is no clear direction in sight, with rallies well capped above 110.00 and dips well supported below 104.00.
- R2 109.38 – 6 April high – Strong
- R1 108.09 – 19 May high – Medium
- S1 106.74 – 13 May low – Medium
- S2 105.99 – 6 May low – Strong
USDJPY – fundamental overviewRenewed tension on the US-China trade front has factored into some of the latest Yen demand. This follows the US Senate passing a bill that could potentially bar Chinese firms from listing on US exchanges, and President Trump's tweet that China's "disinformation and propaganda attack on the United States and Europe is a disgrace." The market hasn't felt any better after White House advisor Kudlow said the trade deal between the US and China was still intact. Looking ahead, there is no first tier data out of the US and the market will look to trade on the bigger picture themes.
EURCHF – technical overviewThe market remains very well capped into offers and the medium-term picture continues to favour the downside. A break back above 1.0710 would be required to take the immediate pressure off the downside. Technicals are however looking extended and the market should be well supported around 1.0500.
- R2 1.0834 – 13 January high – Medium
- R1 1.0710 – 3 March high – Strong
- S1 1.0504 – 18 May/2020 low – Medium
- S2 1.0500 – Psychological – 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 overviewTechnical studies are in the process of unwinding, after the market traded down to its lowest levels since 2003. There is evidence of a longer-term bottom, though the market will need to break back above the December 2019 high at 0.7032 to take the immediate pressure off the downside.
- R2 0.6685 – 9 March high – Strong
- R1 0.6617 – 20 May high – Medium
- S1 0.6373 – 4 May low – Medium
- S2 0.6253 – 21 April low – Strong
AUDUSD – fundamental overviewMost of the latest round of Aussie weakness that we're seeing into the end of the week is coming from renewed trade tension between the US and China. RBA Lowe has been doing his part to help offset some of the weakness, after saying the central bank is still not considering negative interest rate policy. Looking ahead, there is no first tier data out of the US and the market will look to trade on the bigger picture themes.
USDCAD – technical overviewAn intense market rally has stalled out just ahead of the 2016 high. At this stage, there is risk for a more meaningful period of correction, with potential for setbacks to extend back down towards previous resistance turned support, in the form of the 2018 high at 1.3665.
- R2 1.4350 – 31 March high – Strong
- R1 1.4265 – 21 April high – Medium
- S1 1.3850 – 30 April low – Medium
- S2 1.3728 – 16 March low – Strong
USDCAD – fundamental overviewA lot of choppy trade in the Canadian Dollar of late, with the Loonie back under pressure into the end of the week, after recovering on the back of higher OIL prices and risk on flow. BoC chief Poloz was also trying to help things along after saying he believed economic worries were overblown. But into Friday, trade tension between the US and China has heated back up, while OIL has reversed lower. Looking ahead, Canada retail sales is the only notable standout on the calendar for the remainder of the day.
NZDUSD – technical overviewThere's a case to be made for a meaningful bottom, with the market looking quite extended after dipping below major psychological support at 0.5500. As such, look for setbacks to continue to be well supported in the weeks ahead, in anticipation of additional upside. Only a weekly close below 0.5500 would give reason for rethink.
- R2 0.6200 – Figure – Strong
- R1 0.6177 – 30 April high – Medium
- S1 0.5910 – 23 April low – Medium
- S2 0.5843 – 3 April low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar had been better bid earlier this week, with the currency driving higher on the comments from RBNZ Governor Orr that any moves into negative interest rate policy were still a ways off, with the preference for more QE. New Zealand retail sales came out better than expected as well, though Kiwi has come back under pressure into the end of the week, unable to ignore bigger picture risk off flow on account of elevated trade tension between the US and China. Looking ahead, there is no first tier data out of the US and the market will look to trade on the bigger picture themes.
US SPX 500 – technical overviewSetbacks have been intense as the market puts in a longer-term top. The market has collapsed through the 2018 low, with the next major support coming in at the 2016 low around 1800. Extended readings have led to an overdue corrective bounce, but rallies should now be well capped ahead of 3000.
- R2 3000 – Psychological – Strong
- R1 2982 – 19 May high – Medium
- S1 2779 – 4 May low – Medium
- S2 2725 – 21 April low – Strong
US SPX 500 – fundamental overviewAlthough we've seen attempts at recovery in response to unlimited QE from the Fed and massive US stimulus, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with coronavirus fallout, should weigh more heavily on investor sentiment in 2020.
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 towards and through the record high (just ahead of 2000), following a multi-month consolidation. The next major level of resistance comes in around 1800 (measured move extension target, 2012 high), while in the interim, look for any setbacks to be well supported above 1500.
- R2 1796 – 2012 high – Strong
- R1 1765 – 18 May/2020 high – Medium
- S1 1641– 8 April low – Medium
- S2 1568 – 1 April 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, coronavirus fallout, 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 ahead of the 2018 low, 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 5,000 would compromise the constructive outlook. Back above 10,500 further encourages the bullish prospect. Shorter studies are however stretched and warn of a pullback ahead.
- R2 10,477– 9 February/2020 high – Strong
- R1 10,075 – 8 May high – Medium
- S1 8,000 – Psychological – Medium
- S2 7,704 – 29 April low – Strong
BTCUSD – fundamental overviewBitcoin has enjoyed a nice recovery since bottoming in March, with the runup in stocks and hype around the halving event contributing to a lot of the momentum. Interest from well known traditional market participants is helping to generate plenty of buzz as well. At the same time, given the extended nature of technical readings into important resistance, we see this as timing well for a sell the fact with the halving event now officially behind us and global equities once again looking vulnerable.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above the 2018 low, in favour of another big bounce, eventually back towards and through the 2019 high up at 363.
- R2 289 – 15 February/2020 high – Strong
- R1 227 – 30 April high – Medium
- S1 176 – 11 May low – Medium
- S2 148 – 16 April low – Strong