Plenty of anxiety into Friday

Today’s report: Plenty of anxiety into Friday

Risk off is the name of the game into Friday. Investors are heading for the exit doors in the aftermath of Thursday’s discouraging US initial jobless claims and amidst the ongoing escalation in tension between the US and China.

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Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

A higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. The recent push back above 1.1500 strengthens the outlook, opening the door for a push towards the 1.1800 area. Setbacks should now be well supported ahead of 1.1000.

  • R2 1.1700 – Figure – Strong
  • R1 1.1627 - 23 July/2020 high – Medium
  • S1 1.1507 - 22 July low – Medium
  • S2 1.1423 – 21 July low – Medium

EURUSD – fundamental overview

The Euro has enjoyed impressive gains this week, but dealers are now reporting some selling pressure from shorter term speculative accounts. ECB President Lagarde said 'the recovery is about transforming the economy,' 'Europe has shown it can act quickly and adapt institutions,' and 'the reallocation of jobs and industry will take time.' The ECB's de Cos said 'inflation expectations are very low,' and the economic recovery in the Euro-area is 'gradual and uneven across sectors and countries.' The ECB said banks are 'unprepared' for interest rate benchmark reforms. The Italian government approved a proposal for EUR25 billion in extra spending to deal with the economic impact of the coronavirus. Looking ahead, key standouts on the calendar come in the form of German and Eurozone manufacturing PMIs, US manufacturing PMI reads and new home sales.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The 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 1.2813 – 10 June high – Strong
  • R1 1.2774 – 24 July high – Medium
  • S1 1.2650 – 21 July low – Medium
  • S2 1.2480 – 14 July low – Medium

GBPUSD – fundamental overview

There continues to be concerns about the distance between the EU and UK when it comes to negotiations, though we've also been hearing optimistic talk from various officials, who believe genuine progress is being made. Looking ahead, key standouts on the calendar come in the form of UK retail sales, UK manufacturing PMIs, US manufacturing PMI reads and new home sales.

USDJPY – technical overview

We're seeing signs of a pickup in volatility in the major pair, with the market chopping around quite a bit. Still, there is no clear directional insight, with the price confined to a larger triangle formation. Overall, rallies have been well capped above 110.00 and dips well supported below 104.00.

  • R2 108.55 – 9 June high – Medium
  • R1 108.17 – 1 July high – Medium
  • S1 106.07 – 23 June low – Medium
  • S2 105.99 – 6 May low  – Strong
The Yen is still caught up in two way flow, with the major currency not really going anywhere at all. Japanese markets are now closed for the long holiday weekend. Looking ahead, key standouts on the calendar come in the form of US manufacturing PMI reads and new home sales.

EURCHF – technical overview

The market remains very well capped into offers and the medium-term picture continues to favour the downside. A weekly close back above 1.1000 would be required to take the immediate pressure off the downside.
  • R2 1.0916 – 5 June/2020 high – Strong
  • R1 1.0798 – 16 July high – Medium
  • S1 1.0600 – Figure – Medium
  • S2 1.0577 – 25 May 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 renewed 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 overview

Technical studies have turned up in 2020, after the market traded down to its lowest levels since 2003 earlier this year. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.6500.

  • R2 0.7206 – 17 April high, 2019  – Strong
  • R1 0.7183 – 22 July/2020 high – Medium
  • S1 0.7013 – 21 July low – Medium
  • S2 0.6921 – 14 July low – Strong

AUDUSD – fundamental overview

Aussie PMI reads advanced further into expansionary territory, though the currency wasn't too focused on this, instead coming under pressure on the back of broad based risk liquidation. Thursday's discouraging US initial jobless claims print and escalating tension between the US and China have been the primary drivers of this latest round of Aussie weakness. The RBA injected AUD2.98 billion of liquidity in today's operations. Looking ahead, key standouts on the calendar come in the form of US manufacturing PMI reads and new home sales.

USDCAD – technical overview

Has been in the process of correcting since topping out earlier this year above 1.4600. At this stage, with the correction well extended, the market is likely to find solid support in the 1.3200-1.3400 area, ahead of a resumption of gains. Ultimately, only a weekly close below 1.3300 would suggest otherwise.

  • R2 1.3647 – 14 July high – Strong
  • R1 1.3601 – 20 July high – Medium
  • S1 1.3351 – 23 July low – Medium
  • S2 1.3315 – 10 June low – Strong

USDCAD – fundamental overview

The Canadian Dollar had been in demand this week, mostly on the back of the pickup in global risk appetite and concurrent round of broad based US Dollar selling. But we're seeing a reversal of this flow into Friday, with risk appetite souring. Thursday's discouraging US initial jobless claims print and escalating tension between the US and China are contributing. Looking ahead, key standouts on the calendar come in the form of US manufacturing PMI reads and new home sales.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom, after the market collapsed below massive psychological support at 0.5500 earlier this year. The latest break back above the 0.6600 area further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud. Any setbacks are expected to be well supported ahead of 0.6200.

  • R2 0.6740 – 2 January/2020 high – Strong
  • R1 0.6690 –  23 July high – Medium
  • S1 0.6559 – 21 July low – Medium
  • S2 0.6503 – 14 July low – Strong

NZDUSD – fundamental overview

New Zealand trade data came in as expected, while the RBNZ was out buying NZD230 million of government bonds in today's operations. The RBNZ will maintain the size of bond purchases next week. Overall, Kiwi has been more concerned with the latest round of risk liquidation on the back of softer US initial jobless claims and escalating tension between the US and China. Looking ahead, key standouts on the calendar come in the form of US manufacturing PMI reads and new home sales.

US SPX 500 – technical overview

The market has been in recovery mode since bottoming out in March. Still, the recovery is classified as corrective, with a lower top sought out below the record high from February, ahead of the next major downside extension, eventually back below the March low.

  • R2 3398 –  20 February/Record high – Strong
  • R1 3294 – 23 July high – Medium
  • S1 3114 – 9 July low – Medium
  • S2 2936 – 15 May low – Strong

US SPX 500 – fundamental overview

Although 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 recovery post coronavirus, should weigh more heavily on investor sentiment in 2020.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for an acceleration towards a retest of the 2011 record high at 1920. Setbacks should now be well supported above 1700.

  • R2 1920 – 2011 record high – Strong
  • R1 1899 – 23 July/2020 high – Medium
  • S1 1790– 14 July low – Medium
  • S2 1747 – 26 June low – 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, 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 overview

Setbacks 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 10,360 – 2 June high – Medium
  • S1 8,000 – Psychological – Medium
  • S2 7,704 – 29 April low – Strong

BTCUSD – fundamental overview

Bitcoin 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 2020 halving event now officially behind us and global equities once again looking vulnerable.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The 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 280 – 23 July high – Medium
  • S1 176 – 11 May low – Medium
  • S2 148 – 16 April low  – Strong

ETHUSD – fundamental overview

While there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a negative role in 2020, with Ether expected to underperform in a mostly risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.

Peformance chart: 30 Day Performance vs. US dollar (%)

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