Looking for quiet Tuesday ahead of central bank event risk

Next 24 hours: Record high after record high

Today’s report: Looking for quiet Tuesday ahead of central bank event risk

Solid US corporate earnings and some progress on President Biden’s economic agenda helped to keep risk assets supported on Monday, with US equities extending their record run.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported above 1.1500 on a weekly close basis in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up. Only a weekly close below 1.1500 would force a rethink.

  • R2 1.1691 – 29 September high– Strong
  • R1 1.1670 - 19 October high – Medium
  • S1 1.1529 - 6 October/2021 low – Medium
  • S2 1.1500 – Psychological – Strong

EURUSD – fundamental overview

The Euro rolled over on Monday after German Ifo reads came in softer than expected. German business confidence declined for the fourth consecutive month and was the lowest read in six months. The expectations component was also discouraging, the lowest since February. Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a consolidation phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3200 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

  • R2 1.3913 – 14 September high – Strong
  • R1 1.3835 – 20 October high – Medium
  • S1 1.3709 – 18 October low – Medium
  • S2 1.3653 – 14 October low – Strong

GBPUSD – fundamental overview

The Pound managed to outperform on Monday as Gilt yields outpaced Bunds. Meanwhile, BOE Tenreyro was on the wires saying inflation was likely to rise in the months ahead. Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 114.55 to negate the outlook.

  • R2 115.00 – Psychological– Strong
  • R1 114.70 – 20 October/2021 high – Medium
  • S1 113.41 – 22 October low – Medium
  • S2 113.00 – 12 October low – Strong

USDJPY – fundamental overview

Monday economic data out of Japan was softer than expected, and US equities extended to fresh record highs. All of this factored into this latest wave of renewed Yen selling. Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy consolidation following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there are signs of the market wanting to turn back up and any setbacks should be well supported down into the 0.7200 area. Look for a weekly close above 0.7500 to strengthen the outlook and force a shift in the structure.

  • R2 0.7599 – 6 July high – Strong
  • R1 0.7547 – 21 October high – Medium
  • S1 0.7378 – 18 October low – Medium
  • S2 0.7323 – 13 October low – Strong

AUDUSD – fundamental overview

The Australian Dollar has firmed on the back of a rally in iron ore futures and gains in US equities. At the same time, the market has been a little more cautious ahead of tomorrow's Aussie inflation data.  Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

  • R2 1.2563 – 8 October high – Strong
  • R1 1.2499 – 12 October high – Medium
  • S1 1.2288 – 21 October low – Medium
  • S2 1.2252 – 23 June low – Strong

USDCAD – fundamental overview

We've been seeing some profit taking on Canadian Dollar long positions in recent sessions. This price action has been mostly chalked up to positioning ahead of tomorrow's Bank of Canada decision. But overall, there continues to be quite a bit of demand for the Loonie on surging oil, solid risk appetite and broad based US Dollar selling. Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. Back above the April high at 0.7317 would be required to force a shift in the structure.

  • R2 0.7300 – Figure – Strong
  • R1 0.7219 – 21 October high – Medium
  • S1 0.7049 – 18 October low – Medium
  • S2 0.7000 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been trading with a mixed tone, edging higher against the US Dollar and Yen, but weakening against Aussie. New Zealand reported 79 new virus infections, down from yesterday's 109. Still, this has to be taken in the context that fewer tests were conducted over the long weekend. Key standouts on today’s calendar include UK CBI distributive trades, US housing data, US consumer confidence, and the Richmond Fed index.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4600, with a break back below 4353 to strengthen the outlook.

  • R2 4600 – Psychological – Strong
  • R1 4585 – 25 October/Record high – Medium
  • S1 4436 – 15 October low – Medium
  • S2 4272 – 1 October low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment in Q4 2021.

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 an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

  • R2 1917 – 1 June high – Strong
  • R1 1835 – 15 July high – Medium
  • S1 1700 – Round number – Medium
  • S2 1677 – 8 March/2021 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, and coronavirus fallout. 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.

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

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