Plenty of stress into the end of the week

Today’s report: Plenty of stress into the end of the week

We come into Friday with financial markets continuing to struggle. The main takeaway this week is that things have become a lot more stressful for the global economy as geopolitical risk ramps up. Investors will be hoping that things calm down in the Middle East, but are also well aware of the potential for this to spill over into a much bigger conflict.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

Any additional setbacks should be well supported on dips below 1.0500 in favor of the start to the next major upside extension. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Back above 1.0618 will take the immediate pressure off the downside.

  • R2 1.0737 – 20 September high – Strong
  • R1 1.0640 - 12 October high – Medium
  • S1 1.0495 - 13 October low– Medium
  • S2 1.0448 – 3 October/2023 low –Strong

EURUSD – fundamental overview

The Euro managed to hold up well on Thursday, despite some mildly softer confidence reads. It seems most of the demand came from cross related interest against currencies that were getting hit harder and some technical demand. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.3143.

  • R2 1.2425 – 19 September high – Strong
  • R1 1.2338 – 11 October high – Medium
  • S1 1.2090 – 19 October low – Medium
  • S2 1.2037 – 4 October low – Strong

GBPUSD – fundamental overview

The Pound remains under pressure into Friday following the latest surprise plunge in UK consumer confidence. The reading suggests respondents have become more pessimistic about the future outlook and may reduce discretionary spending ahead of the holiday season. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

USDJPY – technical overview

At this stage, it looks like the market is wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported on dips.

  • R2 150.17 – 3 October/2023 high – Strong
  • R1 149.97 –  19 October high – Medium
  • S1 148.53 – 29 September low – Medium
  • S2 147.31 – 3 October low – Strong

USDJPY – fundamental overview

Japan's top currency diplomat Kanda said the BOJ will take appropriate steps if excessive moves are seen in FX markets. Meanwhile, Japan inflation data softened a bit, but was in line with expectation. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

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 0.6300 would give reason for rethink. Back above 0.6523 will take the immediate pressure off the downside and strengthen case for a bottom.

  • R1 0.6501– 29 September high – Strong
  • R2 0.6445 – 11 October high – Medium
  • S1 0.6300 – Figure – Medium
  • S2 0.6285 – 3 October/2023 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been struggling in the latter portion of the week, taking its hits from broad US Dollar demand, risk off flow, and softer than expected Aussie employment data. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

USDCAD – technical overview

Above 1.3000 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. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3786 – 5 October high – Strong
  • R1 1.3741 – 19 October high – Medium
  • S1 1.3569 – 10 October low – Medium
  • S2 1.3552 – 2 October low – Medium

USDCAD – fundamental overview

The Canadian Dollar is still feeling a repricing of Bank of Canada rate expectations after Canada inflation data came in softer earlier this week. We've also seen added downside pressure on the Loonie as risk off flow persists in global markets. Higher oil prices have perhaps slowed the pace of Canadian Dollar declines somewhat. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

NZDUSD – technical overview

Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6049 would be required to take the immediate pressure off the downside. A monthly close below 0.5800 would intensify bearish price action.

  • R2 0.6049 – 29 September high – Strong
  • R1 0.6056 – 11 October high – Medium
  • S1 0.5815 – 19 October/2023 low – Medium
  • S2 0.5800 – Figure – Strong

NZDUSD – fundamental overview

It hasn't been a good week for the New Zealand Dollar, which has extended declines to fresh yearly lows. The currency has been contending with uncertainty in the aftermath of the latest election, softer inflation data, a wave of risk off flow in global markets, and this latest widening of the New Zealand trade deficit as exports fell more than imports. Key standouts on Friday’s calendar come from German producer prices, UK retail sales and public borrowing, Canada retail sales, and a round of Fed speak.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4600 will be required to take the immediate pressure off the downside. Next key support comes in at 4200.

  • R2 4467 – 18 September high – Medium
  • R1 4398 – 12 October high – Medium
  • S1 4267 – 9 October low – Medium
  • S2 4201 – 4 October low – Strong

US SPX 500 – fundamental overview

Investors continue to struggle with the reality of a higher for longer Fed policy track in the face of ongoing worry around inflation, while also contending with an escalation in geopolitical risk. Overall, we expect inflation to continue to be a problem in 2023 that results in downside pressure into rallies despite market expectations that would argue otherwise.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension. Next major resistance comes in at 2100, above which opens the next extension towards 2500.

  • R2 1988 – 20 July high – Strong
  • R1 1983 – 20 October high – Medium
  • S1 1868 – 12 October low – Medium
  • S2 1810 – 6 October 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 inflation risk and a less stable and upbeat global growth outlook. 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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