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The US Dollar took a bit of a shot on Tuesday, after initially rallying to fresh multi-month highs against many currencies. This included Dollar highs against the Euro, Aussie and Kiwi, before a discouraging round of US economic data encouraged profit taking on the long US Dollar exposure.
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Technical highlights
- EURUSD Additional downside limited
- GBPUSD Looking to establish major base
- USDJPY Should be well capped into rallies
- EURCHF Plenty of room for deeper drop
- AUDUSD Bounces from longer-term support
- USDCAD Setbacks seen supported into dips
- NZDUSD Signs of recovery after big sell-off
- US SPX 500 Upside limited from current levels
- GOLD (spot) Room for run towards 2k
- BTCUSD Setbacks viewed as corrective
- ETHUSD Additional downside limited
Fundamental highlights
- EURUSD Draghi comments fuel Euro
- GBPUS UK PM to unveil detailed Brexit plan
- USDJPY Wave of risk off invites Yen demand
- EURCHF SNB policy falls on tougher times
- AUDUSD Aussie gets boost from soft US data
- USDCAD Canadian Dollar tracking OIL movement
- NZDUSD Kiwi focused on macro themes
- US SPX 500 Investors worry about exhausted policyÂ
- GOLD (spot) Pick up in hard asset demand
- BTCUSD More institutional demand expected
- ETHUSD Ether exposed to traditional markets
5 Day Performance vs. US dollar
Further reading
- Want to Know Where Rates Headed? Don’t Ask the Fed, D. Moss, Bloomberg (October 2, 2019)
- Brexit on the Fringes of Conservative Conference, S. Payne, Financial Times (October 1, 2019)
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EURUSD technical overview
The major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month low. But with the downtrend looking exhausted, the prospect for a meaningful higher low is more compelling, with a higher low 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.
EURUSD fundamental overview
The Euro’s slide extended below 1.0900 on Tuesday, with the major pair putting in a fresh multi-month low. However, plenty of demand emerged below the figure, with the market initially supported on comments from ECB Draghi that a fiscal boost could allow the ECB to raise rates sooner than later. ECB Wiedmann followed this up with hawkish remarks that the central bank should be open to different points of view. Later in the day, the Euro got another boost on the back of the softer US data, highlighted by the US ISM manufacturing disappointment. Looking ahead, key standouts on today’s calendar come in the form of US ADP employment, and speeches from Fed Harker and Williams.
EURUSD – Technical charts in detail
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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 1.2000 would compromise the more constructive outlook for the major pair. Next key resistance comes in the form of the recent recovery high up around 1.2580.
GBPUSD fundamental overview
News the was ready to consider a time limit on the the Irish backstop, helped to fuel a recovery in the Pound out from multi-session lows in the 1.2200s. Still, denials of such a consideration from the EU prevented the Pound from extending its run, and the market is now waiting for Prime Minister Johnson to unveil his final detailed Brexit plan. On the data front, UK manufacturing PMIs came in above forecast, while US ISM manufacturing was a disappointment, which offered added support to the Pound. Looking ahead, as far as the economic calendar goes, absence of first tier reads out of the UK, leaves only an update from US ADP employment, along with speeches from Fed’s Harker and Williams.
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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.
USDJPY fundamental overview
The Yen is regaining a bid tone, with USDJPY under pressure on the back of the risk off flow in the market into the middle of the week. Concerns over US and global growth have been behind the move, with Tuesday’s softer US ISM read playing a part in the sentiment shift. Geopolitical strain is also factoring on the headlines North Korea has fired at least two ballistic missiles off its coast. Looking ahead, key standouts on today’s calendar come in the form of US ADP employment, and speeches from Fed Harker and Williams.
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EURCHF technical overview
The market is attempting to recover out from its lowest levels in two years, and at this point, it would take a daily close back above 1.1173 to take the immediate pressure off the downside. The recent breakdown below 1.1000 opens the door for the next major downside extension towards 1.0600. Look for rallies to be well capped ahead of 1.1100.
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.
AUDUSD fundamental overview
The Australian Dollar is trying to work its way out from multi-month lows against the Buck despite a wave of risk off flow in markets. It seems Aussie gains have come from the broad based US Dollar outflow from the discouraging round of US ISM manufacturing in Tuesday trade. Meanwhile, ongoing soft Dollar trade policy efforts from the US administration are also playing a part in propping Aussie. Looking ahead, key standouts on today’s calendar come in the form of US ADP employment, and speeches from Fed Harker and Williams.
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.
USDCAD fundamental overview
The Canadian Dollar has been relatively quiet in recent sessions, with a lot of this having to do with a light calendar and consolidation in the price of OIL. We have however seen some demand for the Loonie works its way back in, with the currency supported on the back of this latest discouraging economic data out of the US, in the form of US ISM manufacturing. Looking ahead, key standouts on today’s calendar come in the form of US ADP employment, and speeches from Fed Harker and Williams. 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 take the immediate pressure off the downside.
NZDUSD fundamental overview
Kiwi short covering from leveraged accounts has kicked in, to help prop the currency out from fresh multi-month lows against the Buck. There was no reaction to the 2.4% increase in New Zealand house price data. Meanwhile, the RBNZ has released a consultation paper proposing that it take a stewardship role in the cash system to provide system wide oversight and coordination. It seems Kiwi has also received some support from broad based US Dollar selling, in the aftermath of Tuesday’s softer than expected US ISM manufacturing read. Looking ahead, key standouts on today’s calendar come in the form of US ADP employment, and speeches from Fed Harker and Williams.
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 2777, with a break below to strengthen the outlook. A monthly close above 3000 would be required to compromise the outlook calling for a top.
US SPX 500 fundamental overview
Although we’ve seen the market extending to fresh record highs in 2019, on the back of the Fed policy reversal, with so little room for additional easing, 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 recent 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.
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
Overall, look for additional upside to be limited for now, as the market continues to correct and consolidate, in the aftermath of a major surge in the second quarter of 2019. Any setbacks should be very well supported ahead of 7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high at 13,748. Only a weekly close below 7,000 would compromise the constructive outlook.
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 $7,000.
BTCUSD – Technical charts in detail
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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 150 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 150 would compromise the outlook.
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 in the second half of the year. Risk off in the global economy is expected to result in ETH underperformance relative to Bitcoin.