- It was a lively risk-off session for traders on Tuesday, which saw oil and equities tumble and the USD regain its safe-haven status.
- News that Saudi Arabia had cuts its October selling prices saw WTI and Brent fall -7.6% and -5.3% respectively, amid their worst session since June.
- Tech stocks led equity declines to see the Nasdaq 100 (USTEC) fall nearly 5%, taking its losses from its all-time high to -11.2%. European indices also closed lower but to a lesser degree. The combination of lower oil prices, news that Trump wants to ‘decouple’ from China again and the US presidential race heating up appeared to be the trigger for equity losses.
- Gold initially fell to suggest investors were simply cashing out as opposed to switching to safe-haven assets. Although, support was found above 1900 before eventually closing flat for the session.
- The USD index (DXY) closed to a 1-month high, and the USD gained the most ground against GBP, AUD and NZD. GBP/JPY fell over -1.7% and was the largest mover of the session, with the dual effect of hard-Brexit fears and risk-off sentiment.
China’s inflation data is the main calendar event, although it may not make a meaningful impact on markets given the large moves overnight. We also have ECB and BOC central bank meetings tomorrow which would usually suppress volatility. However, we need to assess how Asian markets react to overnight moves to see if they’ll extend the risk-off tone or switch to a holding pattern.
Nasdaq 100: Bears Pause for Breath
- As the saying goes, “what goes up, must come down”. And the Nasdaq has done both in style, falling over 11% from its record highs in just four trading session.
- However, support has been found around the May 14th trendline which leaves potential for a minor bounce from current levels.
- Given the strength of the decline, new lows are favoured but we’d prefer to see prices consolidate or retrace to allow for a better-timed entry.
- If the trendline breaks, bears could seek bearish setups beneath it.
USD/CAD: The Dollar’s Recovery is Underway
- In our weekly reports we have warned that the USD could gain strength due to it being heavily oversold. Price action is now confirming our suspicions, and we remain dollar bullish over the foreseeable future.
- USD/CAD has broken firmly out of its bearish channel to confirm a change of trend.
- Resistance has been found around 1.3250 (200 day eMA and prior highs) so a retracement lower appears likely.
- Bulls can seek bullish setups at lower prices following a correction lower, and use Fibonacci levels to identify potential support.
EUR/NZD: Waiting for a Pullback
- The break of the correction highlighted yesterday saw prices reach our first target (weekly R1) quite quickly.
- The bias remains bullish although we would prefer to see a retracement before considering new longs.
- Bulls could seek bullish setups around the 1.7750 zone (prior target) or one of the Fibonacci retracement levels.
Gold Reaffirms Support Above 1900
- A bullish engulfing candle pushed priced firmly above the 1900 support area.
- The bias remains bullish within the consolidation area (1900 – 1976/62), which could see range-traders consider longs above the support zone, or short around resistance.
- Our medium-term bias remains neutral despite the longer-term bull trend, as it is not clear whether the higher timeframes have completed their correction.
GBP/CAD: Broke key support and closed beneath 1.7200. Bears could continue to seek bearish setups on intraday timeframes beneath this key level of resistance.
Brent: Yesterday’s rout saw prices crash to the 39.73-40.29 support zone highlighted on Monday. Given the lack of mean reversion (and that markets may have discounted the Saudi Price cut) we would prefer to step aside from here.
NZD/JPY: Prices fell to a 2-week low in line with our bearish bias. Bears could seek bearish setups if a lower-high forms, following a retracement.
GBP/JPY: Prices crashed lower and found support at the 200-day eMA. The bias remains bearish, but we would prefer to see a consolidation or a retracement before reconsidering shorts.
USD/CHF: Prices have risen to 0.9200 in line with our bullish bias. Intraday longs are preferred towards the 0.92300 highs.
AUD/USD: Whilst the trendline broke to the downside, prices remain above 72c so we remain neutral (step aside).
AUD/JPY: Removed from watchlist given the break below 76.86 support.