- It was a mixed picture for equities, with the Nasdaq 100 (USTEC) closing the week 1.1% higher, the S&P 500 (US500) and DJIA (US30) finishing flat whilst European shares closed lower. However, that is on a weekly basis. If we look at the Nasdaq weekly candle it produced a bearish hammer after gapping higher, so there is a bearish undertone.
- It was a similar case for FX majors with most pairs trading within the prior week’s range. The markets clearly need a new catalyst but it is possible that breakouts may be few and far between as we approach the presidential election in two weeks time. The US dollar index (DXY) closed higher yet remains below the 94 handle.
- Gold (XAU/USD) and Silver (XAG/USD) failed to break key resistance levels and continued to trade in a corrective manor.
Trader FX Positioning (COT Report):
As of Tuesday 13th October:
- Large speculators were net-long NZD futures near a 2.5 year high, despite RBNZ’s repeated warnings that they could switch to NIRP (negative interest rate policy) by Q2 next year. Traders are increasing their gross-long exposure whilst also decreasing their gross-short exposure, which makes the positioning appear all the more bullish.
- Traders were close to switching to net-short exposure on AUD futures ahead of RBA’s governor Lowe’s speech. Bearish price action since the report was compiled suggests traders are now likely to be net short.
- Weekly adjustments to net exposure among FX majors were relatively minor, and all under 10k change for the week.
Calendar Events This Week (Time are GMT+10 Sydney)
PMI’s (Purchase Managers Index):
Flash PMI’s are released for US, Europe and UK which provide traders with a forward look on growth potential. Given the rise in coronavirus cases there is some expectation for weaker data, particularly from the service sectors.
A slew of economic data for China is released at 12:00pm Sydney on Monday, including GDP, industrial, retail sales and fixed asset investment. With US, Europe and China accounting for around 1/3rd of global GDP, traders take notice of such data sets.
NZIER business confidence is released on Tuesday and is one of RBNZ’s favoured reports. September’s report noted “large degrees of uncertainty over the growth outlook” which no doubt feeds into RBNZ’s warnings of negative interest rates. Whilst a positive outlook is unlikely, a less bearish-than-expected report would likely produce the more volatile (and bullish) reaction. Quarterly CPI data on Friday at 07:45 is another important data point for NZD traders, given it fell -0.5% QoQ and may well produce another negative print this week.
RBA release their minutes on Tuesday, although RBA’s Assistant Governor Christopher Kent speaks one-hour prior. Whilst traders expect further support from RBA, it remains unknown how they intend to do so, which is why traders will pay close attention to Kent’s speech in hope that he clarifies the situation. Retail sales on Wednesday will show how confident the consumer is with their purchases. Guy Debelle also speaks at 08:30 on Thursday.
AUD/CHF: Bearish Bias Below 0.6500
- Last week saw a bearish close beneath 0.6488 support and prices are now consolidating just above last week’s lows in a potential bearish flag pattern.
- If successful, the flag projects a target around 0.6375 although our initial target is near the 0.6425 low.
- The bias is bearish below 0.6500 so traders can consider fading into this level or waiting for a break beneath last week’s low to assume bearish continuation.
EUR/AUD: 1.6600 Remains a Pivotal Level
- Prices rallied back towards 1.6600 last week and retreated lower today. Given higher lows around 1.6350, the bias is for an eventual bullish breakout above 1.6600.
- A break above 1.6600 projects an approximate target around 1.7100, although 1.7000 makes a likely interim target.
- If prices retreat lower, we would be on the lookout for higher low to form above the 1.6330/50 zone to consider a bullish Swing trade.
CAD/JPY: Back Above 80 Yen
- Bulls have managed to take CAD/JPY back above 80Y in early Asian trade.
- A bullish doji on Friday closed above the monthly pivot point and the 200-day eMA to suggest a swing low has formed.
- The bias is bullish above 79.43 with the initial targets being the 80.60 swing high and monthly R1.
USD/NOK: Potential Bullish Flag
- A potential bullish flag is forming on H4 which, if successful, targets the 9.6170 highs.
- A break above 9.4055 confirms the bullish flag whilst a break beneath 9.9177 warns of a deeper correction.
- Given the strength of bullish momentum since breaking out of the bearish channel, we would seek a higher low to form if prices initially break beneath 9.3177.
ASX 200 (AUS200): Bulls Flirt With A Break Above 6,200
- We have been waiting for a break above 6,200 resistance, although it currently lacks any follow through.
- Given the strong bullish trend leading towards 6,200 resistance, the bias is for a breakout from the current consolidation zone. The next major resistance level is the 6,500/20 zone.
- However, if bulls cannot regain control and prices break below 6,147 it warns of a correction towards 6,000. We would then be on the lookout for a higher low to form in line with dominant momentum.
Ethereum (ETHUSD): Trapped Within a Bearish Channel
- Ethereum trades within a bearish channel on the H4 chart and the current candle is on track to form a bearish engulfing and bearish outside bar.
- A break beneath the weekly pivot assumes a retest of the 360.54 low.
- To turn bullish we would want to see a break above the 386.44 high as this also breaks the monthly pivot and weekly R1 levels.
Bitcoin (BTCUSD): The bias remains bullish above the 11,180 swing low although prices continue to trade in a corrective manor. 12,000 is the next target with a break above 11,703.
CHF/JPY: Removed from watchlist. A bullish engulfing candle on H4 saw a break both sides of the 115.00 – 115.40 zone.