Will it be an ugly October?

Today’s report: Will it be an ugly October?

October is setting up to be an ugly month. Stocks are already under intense pressure as we get going, though there has been some slowdown in US Dollar demand. One of the most interesting developments this week has been the relative outperformance in the more risk correlated commodity currencies.

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 1.1600 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 1.1600 would force a rethink.

  • R2 1.1756 – 22 September high– Strong
  • R1 1.1691 - 29 September high – Medium
  • S1 1.1562 - 30 September/2021 low – Medium
  • S2 1.1500 – Psychological – Strong

EURUSD – fundamental overview

The rise in energy prices is severely weighing on the growth outlook, which has added downside pressure to the Euro. The market has shrugged off higher inflation reads out of Germany. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

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 1.3751 – 23 September high – Strong
  • R1 1.3555 – 29 September high – Medium
  • S1 1.3412 – 29 September/2021 low – Medium
  • S2 1.3400 – Figure – Strong

GBPUSD – fundamental overview

UK GDP data was revised significantly higher on Thursday, which has helped to give the ailing Pound a boost into Friday. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

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 113.00 to negate the outlook.

  • R2 113.00 – Figure– Strong
  • R1 112.08 – 30 September/2021 high – Medium
  • S1 111.21 – 29 September low – Medium
  • S2 110.45 – 8 September high – Medium

USDJPY – fundamental overview

The Yen finally responded to safe haven bid pressure, with the currency reversing course and rallying sharply out from yearly lows against the Buck. Economic data out of Japan has also come in soft into the end of the week, highlighted by industrial production and retail sales. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there is risk for additional declines, though setbacks are expected to be well supported down into the 0.7000 area. Look for a weekly close above 0.7500 to force a shift in the structure.

  • R2 0.7410 – 10 September high – Strong
  • R1 0.7317 – 24 September high – Medium
  • S1 0.7170 – 29 September low – Medium
  • S2 0.7106 – 20 August/2021 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been doing a great job holding up of late despite all of the risk off flow. It seems the currency has been getting a lot of help from this week's round of solid Aussie data including retail sales, building approvals and private sector credit. Into Friday however, we are seeing renewed selling as risk off persists and iron ore futures sink. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

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 1.2949 – 20 August/2021 high – Strong
  • R1 1.2896 – 20 September high – Medium
  • S1 1.2594– 28 September low – Medium
  • S2 1.2494 – 3 September low – Strong

USDCAD – fundamental overview

The Canadian Dollar remains well offered into rallies, this on the back of broad based US Dollar demand and some softer Canada data. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, rallies should be well capped and there is still room for deeper setbacks into the 0.6500-0.6800 area before we see an attempt at a higher low and resumption of upside pressure. Back above the April high at 0.7317 would be required to force a shift in the structure.

  • R2 0.7094 – 23 September high – Medium
  • R1 0.6964 – 29 September high – Medium
  • S1 0.6860 – 29 September low – Medium
  • S2 0.6809 – 19 August/2021 low – Strong

NZDUSD – fundamental overview

On top of all of the broad based US Dollar demand post last week's Fed decision, we're also seeing Kiwi under pressure on this week's news of the spread of new coronavirus cases in Auckland. Key standouts on today’s calendar come in the form of German retail sales, German and Eurozone manufacturing PMIs, Eurozone inflation, Canada GDP, US core PCE, US construction spending, Michigan sentiment, and ISM manufacturing.

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 4552 – 3 September/Record high – Strong
  • R1 4485 – 27 September high – Medium
  • S1 4280 – 1 October low – Medium
  • S2 4233 – 19 July 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 into 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. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2021/09/15seplmaxaudio.mp3"][/audio]

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

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