Today’s report: Investors refuse to be bothered
Monday price action saw US equities continue to extend their run, and all of this during a thinner Monday holiday session in the US. On the currency side, things have been tamer, and it’s been more about consolidation than anything else.
- tipping point
- Boris Johnson
- Kuroda predicts
- SNB policy
- export halt
- Government stimulus
- card spending
- Stocks vulnerable
- hard asset
- risk off
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewA higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. The major pair is currently in the process of a consolidation and correction following an impressive run in 2020. Setbacks should now be well supported ahead of 1.1400.
- R2 1.1918 – 10 September high – Medium
- R1 1.1831 - 9 October high – Medium
- S1 1.1685 - 30 September low – Medium
- S2 1.1612 – 25 September low – Strong
EURUSD – fundamental overviewThe Euro caught some offers in a thinner Monday session, with the currency weighed down on comments from ECB Lane and warnings from Germany's Merkel. Lane said the inflation outlook was not satisfactory, while Merkel warned of a coronavirus tipping point. Tuesday’s calendar features German inflation, Eurozone and German sentiment, and US inflation.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe market recovery out from the March low has stalled out ahead of the 2019 high. Nevertheless, at this stage, setbacks are viewed as corrective, with the price seen very well supported on dips into the 1.2500 area. Look for a higher low ahead of the next major upside extension back through 1.3500 and towards 1.4000 further up.
- R2 1.3100 – Figure – Medium
- R1 1.3083 – 12 October high – Medium
- S1 1.2845 – 7 October low – Medium
- S2 1.2675 – 23 September low – Strong
GBPUSD – fundamental overviewThe fact that BOE Bailey said the central bank was still working with banks on operational considerations for negative rates, and the fact that coronavirus upticks have forced renewed UK restrictions, have not been things that have bothered the Pound. Instead, the currency has been more supported on the view that the UK won't be walking away from the negotiating table if a Brexit deal isn't reached this week. Tuesday’s calendar features UK employment and US inflation.
USDJPY – technical overviewWe're seeing signs of a pickup in volatility in the major pair, with the market chopping around quite a bit. Still, there is no clear directional insight, with the price confined to a larger triangle formation. Overall, rallies have been well capped above 110.00 and dips well supported below 104.00.
- R2 106.56 – 3 September high – Strong
- R1 106.11 – 7 October high – Medium
- S1 104.95 – 2 October low – Medium
- S2 104.00 – 21 September low – Strong
EURCHF – technical overviewThe market remains very well capped into offers and the medium-term picture continues to favour the downside. A weekly close back above 1.1000 would be required to take the immediate pressure off the downside.
- R2 1.0916 – 5 June/2020 high – Strong
- R1 1.0878 – 1 September high – Medium
- S1 1.0600 – Figure – Medium
- S2 1.0577 – 25 May low – Strong
EURCHF – fundamental overviewThe 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 renewed risk liquidation in 2020, 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 overviewTechnical studies have turned up in 2020, after the market traded down to its lowest levels since 2003 earlier this year. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a pullback to allow for shorter term studies to unwind. Next big resistance comes in at 0.7500. Setbacks should now be well supported ahead of 0.6800.
- R2 0.7300 – Figure – Medium
- R1 0.7244 – 9 October high – Medium
- S1 0.7095 – 7 October low – Medium
- S2 0.7006 – 25 September low – Strong
AUDUSD – fundamental overviewAussie could be feeling pressure into Tuesday on reports of the halt of coal exports to China. It also could be feeling downside pressure from the softer trade data out of China. The commodity currency will also continue to focus on bigger picture flows around risk appetite. Looking ahead, US inflation data is the only notable standout.
USDCAD – technical overviewHas been in the process of correcting since topping out earlier this year above 1.4600. At this stage, with the correction well extended, the market is likely to find solid support in the 1.3000 area, ahead of a resumption of gains. Ultimately, only a weekly close below 1.3000 would suggest otherwise.
- R2 1.3341 – 7 October high – Strong
- R1 1.3200 – 9 October high – Medium
- S1 1.3101– 12 October low – Medium
- S2 1.2994 – 1 September low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has been boosted in recent sessions on the recovery in global sentiment, rebound in the price of oil, the Canadian government's massive fiscal stimulus plan, and solid economic data, most recently reflected through last Friday's strong employment report. Looking ahead, US inflation data is the only notable standout.
NZDUSD – technical overviewThere's a case to be made for a meaningful bottom, after the market collapsed below massive psychological support at 0.5500 earlier this year. The latest break back above the 0.6600 area further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud. Any setbacks are expected to be well supported ahead of 0.6200.
- R2 0.6798 – 18 September/2020 high – Strong
- R1 0.6674 – 9 October high – Medium
- S1 0.6511 – 24 September low – Medium
- S2 0.6489 – 20 August low – Strong
NZDUSD – fundamental overviewOverall, Kiwi has been well bid on the back of the ongoing demand for global equities. We've also seen the market somewhat supported after an improvement to Kiwi retail credit card spending. Looking ahead, US inflation data is the only notable standout.
US SPX 500 – technical overviewLonger-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high in early September. The September break below the August low set up a bearish outside month formation, which adds to the case for deeper setbacks ahead. Look for rallies to be well capped ahead of the September record high.
- R2 3590 – 2 September/Record high – Strong
- R1 3551 – 12 October high – Medium
- S1 3341 – 6 October low – Medium
- S2 3208 – 24 September low – Strong
US SPX 500 – fundamental overviewAlthough we've seen a September push to fresh record highs in response to unlimited QE from the Fed and massive US stimulus, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with recovery post coronavirus, should weigh more heavily on investor sentiment in 2020.
GOLD (SPOT) – technical overviewThe 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 1700. Longer-term technical studies are however in the process of unwinding from overbought readings, with the market in search of a higher low ahead of a bullish continuation.
- R2 2016 – 18 August high – Strong
- R1 1974 – 16 September high – Medium
- S1 1848 – 28 September low – Medium
- S2 1800 – Round number – Strong
GOLD (SPOT) – fundamental overviewThe 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, coronavirus fallout, 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 overviewAt the moment, any bullish price action has been well contained ahead of the 2019 high up around 13,800. Until there is a clear break above this level, expect rallies to be well capped in favour of more consolidation, with potential setbacks still seen into the 6,000s.
- R2 12,475– 17 August/2020 high – Strong
- R1 12,000 – Round number – Medium
- S1 9,807 – 8 September low – Medium
- S2 8,900 – June low – Strong
BTCUSD – fundamental overviewBitcoin has enjoyed a nice recovery since bottoming in March, with the run-up in stocks and ongoing increased adoption and progress in the space contributing to the strong demand. At the same time, the market has also stalled out into important resistance, and we see this as timing well for another period of weakness, especially with global equities once again looking vulnerable.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewWe're into a period of correction and consolidation since the market rallied up to a yearly high in early September. Setbacks should be very well supported into the 200s, though only a clear break back above the 2020 high would suggest the market is ready for a bullish continuation.
- R2 500 – Psychological – Strong
- R1 488 – 1 September/2020 high – Medium
- S1 312 – 23 September low – Medium
- S2 306 – 28 July low – Strong
ETHUSD – fundamental overviewWhile there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a weighing influence into rallies, with Ether expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes. We've also seen the defi space getting a little overcrowded of late, further contributing to some downside pressure.
Peformance chart: 30 Day Performance vs. US dollar (%)