- The US dollar index retraced from its 9-week highs and now rests around key support ear 93.70. This could be a pivotal week for the dollar around Trump’s update with Covid-19.
- Global indices rose on a weekly basis, despite Friday’s sell-off on news of President Trump testing positive for Covid-19. Yet they also closed lower from their weekly open price. We expect indices to remain sensitive to updates on the health of Trump – where a swift recovery could indeed be very bullish for markets in general.
- Gold closed a fraction below 1900 resistance, although early trade in Asia now sees it above this key level.
- WTI fell back towards September’s lows and bears now need to decide whether to break key support at 36.40.
Trader FX Positioning (COT Report):
As of Tuesday 29th September:
- Large speculators flipped to net-short exposure on GBP futures. It was also the largest weekly change of -15.7k contract trimmed off net-long exposure to take it to -12.7k net-short. Gross shorts were increased by 11.4k contracts.
- Traders of Euro futures remain heavily net-long, although both gross short and gross long positions were trimmed by -5k and -2.4k respectively.
- Gold speculators were their most bullish in 10-weeks.
Calendar Events This Week:
Trump vs Covid-19:
President Trump is currently in hospital after catching the infamous Covid-19 disease. Stocks initially sold off on the break of the news on Friday and are likely to remain sensitive to headlines surrounding his health this week. Being so close to the election, it hampers his ability to campaign in key states. But, knowing “Teflon Trump”, do not write off his ability for him to shake it off and resume business as usual, which could then become a bullish scenario for stocks.
RBA Cash Rate Decision:
Markets have reduced their expectations of a 25bps cut tomorrow and pushed it back to their November meeting as this will give the RBA time to digest budget measures. Still, the RBA can use this meeting to all but confirm a rate cut is coming, which leaves AUD crosses and ASX 200 vulnerable to volatility.
Josh Fryberg will deliver the government budget for 2020/2021. The Morrison government is expected to bring forward tax cuts and go on a spending spree to pay their way out of a recession. If they spend enough in the right places, it could be bullish for the ASX200 and the Australian dollar.
Service and composite PMI’s are released for Europe, US and Canada and China releases their service PMI data. If we all see them pointing one way then it will make a larger impact on global sentiment; rising (expanding) PMI’s tend to benefit equities, copper and commodity FX (AUD, CAD, NZD) whilst falling (contracting) PMI’s tend to send those markets the other way.
USD/JPY: Bullish Hammer below Bearish Trendline
- Friday’s initial sell-off broke beneath 105 but then recovered to form a bullish hammer just below the bearish trendline.
- Today’s price action is trying to form a bullish engulfing candle, so we are now waiting to see if it can break above the bearish trendline.
- Bulls could wait for a break above the bullish trendline to assume the bullish breakout. However a more conservative approach is to see if prices can break above the 105.80 swing high.
USD/CAD: Carving Out a Swing Low?
- Prices headed lower in line with out bearish bias towards 1.3250 yet stalled just above this key level. Given Friday’s bullish candle we now suspect a swing low is being carved out.
- The bias is bullish above the rising trendline, and bulls could consider longs above Friday’s high for a potential swing trade long. The initial target is the highs around 1.3400.
- A break beneath the trendline / 1.3250 support level would place USD/CAD back onto our short watchlist.
EUR/USD: A Fine Line Between Bullish and Bearish
- Price action remains contained between the 1.1700/70 region, so we are monitoring the potential for a bullish or bearish breakout.
- A bearish trendline could be of interest to bearish swing traders. Therefore, a break below 1.1700 assumes bearish continuation.
- However a break above the trendline / 1.1770 high would paint a bullish picture and bring the 1.1860 high into focus.
AUD/USD: Rally Pauses below 72c
- Prices rebounded from 70c, although momentum has hesitated beneath 72c.
- As AUD/USD shares a very strong correlation with the S&p500, then traders would be wise to keep a close eye on USD indices if trading AUD/USD.
- A clear break above 72c assumes bullish continuation and brings the 74c highs into focus.
- A break beneath Friday’s low could appeal to bearish swing traders and brings the 70c low back into focus.
AUD/NZD: Bearish Channel Remain Intact
- The bearish bias whilst prices remain with the channel remain in place, although bearish momentum has yet to gain pace.
- The bullish candle on Friday is a slight concern, although a break beneath Thursday’s low (1.0769) would negate this concern and be of interest to bearish swing traders.
- A break above the upper channel trendline would invalidate the bearish bias and a break above 1.085 would suggest a change in trend direction.
Nasdaq 100 (USTEC): Bearish Outside Day on Friday
- The news of Trump catching Covid-19 saw equities plunge on Friday and is close to invalidating our bullish bias above the 11,183 swing low.
- We expect equities to remain sensitive to headlines surrounding Trump’s health this week and keeping a close eye on the 11,183 – 11,600 range.
- A clear break of Wednesday’s doji low would also see prices beneath the 50day eMA and bring the 10,637.70 low into focus.
- A break above 11,600 assumes bullish continuation.