Daily Market Outlook, September 24, 2019

Main Market Themes

US stocks finished little changed overnight amidst quiet trading as traders assessed mixed economic data and awaited development in USChina trade negotiations. 

The Dow Jones, S&P 500 and NASDAQ ended on flattish notes after Markit PMIs indicated a modest gain in the US economy. Earlier, Germany manufacturing PMI unexpectedly dipped further below the 50 neutral threshold, adding to signs of a potential recession. The Eurozone as a whole also saw its manufacturing downturn deepened this month. 

Treasury yields barely moved along the curve – benchmark 10Y UST yield picked up 1bp to 1.73%. 

Oil prices rose over lingering Saudi supply concerns as Brent crude increased by 0.8% to $64.77/barrel and WTI gained nearly 1% to $58.64/barrel.

On other fronts, recent Brexit-related optimism continued to fade and dragged the GBPUSD lower while USDJPY was pressured slightly lower by a whiff of market caution and a NYT report that the US and Japan may fail to secure a trade deal this week.

Expect a degree of headline risks for the GBP, with the UK Supreme Court ruling on Prime Minister Johnson’s suspension of Parliament scheduled. 

Elsewhere, watch also for German Ifo survey (0800 GMT), and scheduled comments from ECB’s de Guindos (1200, 1430 GMT), BOJ’s Kuroda (0530 GMT) and RBA’s Lowe (1005 GMT).

Technical & Trade Views

EURUSD (Intraday bias: Neutral, bullish above 1.10 supports, bearish below 1.0960)

EURUSD From a technical and trading perspective EURUSD has potentially posted a major double bottom at the yearly S1 pivot. Price action is setting the stage for a more meaningful recovery to the upside, however, a sustained failure below 1.10 opens 1.0965 as intraday support ahead of 1.0930. A move back through 1.1050 is needed to suggest downside risk has been eliminated and reset focus on offers above 1.11. Note Huge option strike at 1.1000 rolls of this week totaling more than EUR7.6bn. EURUSD…UPDATE we have tested the weekly S1 and have found some initial support the weight of option strikes and the likely gamma positioning should stem a rapid descent from current levels we likely continue to rotate in and around the 1.10 strike at least until the 26th when the major expiries occur.

GBPUSD (Intraday bias: Bearish below 1.2480 targeting 1.2310)

GBPUSD From a technical and trading perspective I now see the potential for a pullback to test bids towards 1.2385, where I will be watching for intraday bullish reversal patterns to set long positions targeting a test of 1.2650 a failure below 1.23 would suggest a more meaningful correction is underway to retest support at 1.22.

USDJPY (intraday bias: Bullish above 107.50 targeting 109)

USDJPY From a technical and trading perspective 1.08 objective achieved, as 107.50 contains the correction there is scope for the current grind higher to test offers above 109 where I will be watching for momentum and sentiment divergence to complete the current sequence and present an opportunity to initiate short exposure targeting a move back through 108 and a retest of bids below 107. Note decent option strikes roll off this week; strikes from 107.00 to 109.00 USDJPY…UPDATE talk of bids gathering 107.40-50 and same sell orders 107.80-108.00. Option strikes at 108.00 due at today’s NY cut worth about $1.2bn.

AUDUSD (Intraday bias: Bullish above .6760 targeting .7000)

AUDUSD From a technical and trading perspective the anticipated correction from the .6900 resistance zone has played out and extended to .6760 as this level supports .6840 becomes the immediate upside hurdle, however, a failure below .6760 would concern the bullish view and expose stops below .6700

Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.

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