Investors underwhelmed by latest China moves

Next 24 hours: New trend of inflation cool down

Today’s report: Investors underwhelmed by latest China moves

Most of the talk has been around disappointment in global markets over China stimulus or lack thereof. Weakness in Chinese equities have rippled over into the rest of the market, even playing a role in dampening the spirits of record high US equities.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1040 – 4 October high – Medium
  • R1 1.0998 - 8 October high – Strong
  • S1 1.0882 - 8 August low – Strong
  • S2 1.0778 – 1 August low – Strong

EURUSD – fundamental overview

The Euro remains under pressure at the moment, as it contends with shifting monetary policy expectations. An ECB that one month ago wasn't thought to be considering a rate cut this month is now expected to cut rates when it meets tomorrow. At the same time, US economic data has made the Fed shift to a slightly less accommodative outlook. On the data front, German wholesale prices fell for a second month. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The door is now open for the next major upside extension towards the 2018 high at 1.4377. Any setbacks should be well supported ahead of 1.2500.

  • R2 1.3282 – 3 October high – Medium
  • R1 1.3175 – 4 October high – Medium
  • S1 1.3022 – 10 October low – Medium
  • S2 1.3002 – 11 September low – Strong

GBPUSD – fundamental overview

The Pound has managed to find some outperformance on the back of Tuesday's better than expected UK employment data highlighted by a dip in the unemployment rate and surge in the employment change. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

USDJPY – technical overview

The market is looking to resume the longer-term uptrend after an intense correction in 2024. A higher low is ideally sought out above 140.00 in favor of a bullish continuation. A weekly close back above 150.00 will hint at the start to longer-term uptrend resumption.

  • R2 150.89 – 1 August high – Strong
  • R1 149.99 – 14 October high – Medium
  • S1 145.91 – 4 October low – Medium
  • S2 142.97 – 1 October low – Medium

USDJPY – fundamental overview

Reserved comments from BOJ Adachi earlier today who said that while the conditions for policy normalization have been met, interest rates need to be raised very slowly amidst significant risks of the economy sliding back into deflation. On the data from Japan core machinery orders fell sharply in August. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6200 would give reason for rethink. A monthly close back above 0.7000 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6943 – 30 September/2024 high – Strong
  • R2 0.6811 – 7 October high – Medium
  • S1 0.6668 – 16 October low– Medium
  • S2 0.6622 – 11 September low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been some weakness brought on by letdown around China stimulus measures and a pullback in US equities. RBA Assistant Governor Hunter said the RBA is currently working on assessing the impact of China's recent swathe of stimulus measures and will be factoring this into forecasts. On the data front, the Westpac Leading Index saw the six month annualized growth rate improve modestly. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

USDCAD – technical overview

A sustained hold above 1.3000 over the past several months signals an end to a period of longer-term bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area, with a break to open a retest of the 2020 high just ahead of 1.4700. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3947 – 5 August/2024 high – Strong
  • R1 1.3839 – 15 October high – Medium
  • S1 1.3689 – 10 October low – Medium
  • S2 1.3648 – 19 September high – Strong

USDCAD – fundamental overview

Odds for a 50-basis point cut from the Bank of Canada have ramped up after Canada inflation data came in softer on Tuesday. The Canadian Dollar is also struggling with the latest slide in the price of oil. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

NZDUSD – technical overview

Overall pressure remains on the downside with the market continuing to stall out on runs up into the 0.6500 area. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6379 – 30 September/2024 high – Strong
  • R1 0.6220 – 4 October high – Medium
  • S1 0.6030 – 10 October low – Medium
  • S2 0.5974 – 15 August low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is taking an added hit today from the softer than expected New Zealand inflation data which will keep the market focused on the possibility for another 50 basis point rate cut at the next meeting. OIS markets actually are pricing 59 basis points of cuts at the next meeting, with a decent chance building for a 75 basis point cut. Key standouts on Wednesday’s calendar come from UK inflation, some ECB speak, Canada housing starts and manufacturing sales, and US import and export prices.

US SPX 500 – technical overview

The longer term uptrend remains intact and dips continue to be exceptionally well supported. Critical support comes in at 5093, with only a break back below this level to compromise the structure and open the door for a more significant corrective decline. Until then, the focus remains on a continued push to fresh record highs.

  • R2 5900 – Psychological– Medium
  • R1 5880 – 14 October/Record high – Medium
  • S1 5740 – 9 October low – Medium
  • S2 5726 – 2 October low – Strong

US SPX 500 – fundamental overview

The US equities market remains exceptionally well supported in 2024 on the back of an ongoing expectation for more rate cuts than less going forward. Investors are feeling better about a soft landing in the US economy and this has also been accompanied by an accommodative adjustment of Fed policy. It will however be important to keep an eye on inflation, bigger picture economic data, US election and geopolitical risk in the weeks and months ahead.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2300 on a monthly close basis.

  • R2 2700 – Psychological– Strong
  • R1 2686 – 26 September/Record high – Medium
  • S1 2547 – 18 September low – Medium
  • S2 2472– 4 September low – Medium

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical risk and a less upbeat global growth outlook. All of this should keep the commodity well supported over the coming months.
 

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

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