Technical Analysis
1. NASDAQ 100 WEEKLY OUTLOOK
REVIEW
During the second half of last week, Nasdaq 100 index made a strong run to the upside, ending up breaking and staying sightly above a short-term downside resistance line taken from the high of September 8th. If the price continues to trade above that line, we will stay positive, at least with the near-term outlook.
OUTLOOK (SCENARIO A / B)
A push above last week’s high, at 15174, could bring the index closer to its next possible resistance area, between the 15357 and 15411 levels, marked by the highs of September 23rd and 27th respectively, where a temporary hold-up might occur. Nasdaq 100 could retrace back down a bit from there, however, if the decline is short-lived, the bulls may take advantage of the lower price and push it up again. If this time the index pops above the 15411 barrier, the next target might be seen at 15540, marked near the highs of September 16th and 17th.
Alternatively, if Nasdaq 100 drops back below the aforementioned downside line and also falls below the 15010 hurdle, marked by the highs of October 7th and 8th, that may temporarily spook the bulls from the field. The bears could drag the price to the 14795 obstacle, or even to the 14598 level, marked by the low of last week. Around there Nasdaq 100 may find additional support from the medium-term upside support line taken from the low of March 5th.
2. NIKKEI 225 WEEKLY OUTLOOK
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From around mid-February this year, Nikkei 225 is seen moving sideways in wide range. The lower bound of that range is roughly between the 26853 and 26981 levels and the upper side of it is between the 30716 and 30802 levels. This week, the index managed to move higher and above the mid-point of the given range, which is roughly around the 28777 level, marked by the inside swing high of October 11th.
OUTLOOK (SCENARIO A / B)
A further push north could bring Nikkei 225 to the 29429 obstacle, or to the 29839 zone, marked by the high of September 29th. If the buying doesn’t stop there, the price might get lifted to the 30404 area, which is the high of September 27th, or to the upper side of the aforementioned range, where the upmove may get halted for a while.
On the downside, if the index falls back below the 28777 hurdle, marked by the inside swing high of October 11th, this would also place the price below all the EMAs on our daily chart, possibly signalling further declines. Nikkei 225 may travel to the 27889 obstacle, or to the 27452 territory, marked by the low of October 5th. If that area doesn’t stop the slide, the index might fall to the previously mentioned lower side of the range.
3. XAU/USD WEEKLY OUTLOOK
REVIEW
Last week, gold moved higher, but found strong resistance near the psychological 1800 zone and near a medium-term downside resistance line drawn from the high of June 1st. At the same time, the price remains above short-term tentative upside line drawn from the low of September 30th. As long as the commodity stays in between the two trendlines, we will take a neutral stance.
OUTLOOK (SCENARIO A / B)
A break of the previously mentioned upside line could lead to further declines, as more sellers may join in. Gold might fall to the 1745 obstacle, a break of which may set the stage for a move to the 1721 zone, marked by the lowest point of September.
On the other hand, in order to aim higher, we would prefer to wait for a break above the aforementioned downside line and the high of last week, which is near the psychological 1800 mark. If such a break happens, gold may travel to the 1809 hurdle, which is the high of September 14th. A further push north might set the stage for a test of the 1834 level, which is marked near the highest points of July and September.
4. ETH/USD WEEKLY OUTLOOK
REVIEW
ETH/USD is currently trading between two tentative trendlines, a medium-term downside one drawn from the high of May 12th and a short-term upside one taken from the low of July 20th. At the time of writing, the crypto is closer to the downside one and if it can overcome that line, we will aim higher. That said, as long as the rate remains in between the two given trendlines, we will take a neutral stance.
OUTLOOK (SCENARIO A / B)
A break of the aforementioned downside line and a push above the highest point of September, at 4021, may attract more buyers into the game, possibly leading to some higher areas. That’s when we will aim for the 4367 barrier, marked by the highest point of May. If the buying doesn’t stop there, a break of that barrier would place the crypto into uncharted territory, potentially opening the door towards the 4500 level.
Alternatively, a rate-drop back below the 3663 hurdle, marked by the high of October 8th, could bring more bears back into the field. ETH/USD might drift to the 3360 zone, a break of which could set the stage for a push to the 3168 level, marked by the inside swing high of September 23rd. Around there the crypto may also test the aforementioned upside line, which could provide additional support.
5. EUR/USD WEEKLY OUTLOOK
REVIEW
Overall, EUR/USD is still trading below a medium-term tentative downside resistance line drawn from the high of June 1st. Last week, the pair found strong support near the 1.1524 hurdle and then moved higher. However, if the rate makes a move further north, but finds strong resistance near that downside line, we could class this move as a temporary correction before another possible slide. We will take a cautiously-bearish approach for now.
OUTLOOK (SCENARIO A / B)
If EUR/USD drifts a bit higher, overcomes the 1.1640 obstacle, together with the 1.1684 hurdle, but finds resistance near the aforementioned downside line, this could result in another slide. If the rate moves back below the 1.1640 area, marked by the high of October 4th, this might open the path towards the 1.1524 level, which is the current lowest point of October.
Alternatively, a break of the aforementioned downside line and a push above the 1.1755 barrier, marked by the high of September 22nd, that might invite more buyers into the game, as a change in the direction of the current trend could occur. EUR/USD may travel to the 1.1797 obstacle, or to the 1.1846 hurdle, marked by the high of September 14th. If the buying doesn’t stop there, the next potential target might be at 1.1909 zone, which is marked near the highest points of July and September.
6. GBP/JPY WEEKLY OUTLOOK
REVIEW
GBP/JPY was seen moving strongly to the upside last week, while trading above a short-term tentative upside support line taken from the low of October 1st. For now, it seems that the uptrend remains strong and as long as the rate stays above that upside line, we will aim higher.
OUTLOOK (SCENARIO A / B)
A further move north could bring the rate closer to the 157.83 territory, marked by the high of June 24th, 2016, where a temporary hold-up may occur. GBP/JPY could even retrace back down a bit, pushing closer to the aforementioned upside line. If it provides support once again, the buyers might take advantage of the lower rate and lift it up again. The rebound could result in a break of the 157.83 obstacle, where the next possible target may be at 160.10, which is the highest point of June 2016.
A break of the previously discussed upside line might bring more sellers into the game, especially if the rate also falls somewhere below the 154.82 hurdle, marked by the high of October 12th. GBP/JPY could then drop to the 153.44 zone, marked by the high of July 29th. If the slide continues, the pair may end up testing the low of last week, at 152.80, or the 152.15 level, which is the inside swing high of October 6th.
7. IBM Common Stock WEEKLY OUTLOOK
REVIEW
The technical picture of the IBM Common Stock (NYSE:IBM) shows that the share price is currently running above a short-term tentative upside support line taken from the low of September 21st. Although there is a good possibility that that the stock could continue with its journey north, we would still prefer to wait for a pop above the current highest point of October first, which is at 145.96.
OUTLOOK (SCENARIO A / B)
If, eventually, that breakout happens, this would confirm a forthcoming higher high, possibly opening the door to some higher areas. IBM might rise to the 147.50 obstacle, or to the 149.75 hurdle, marked by the highest point of July and the inside swing low of June 10th. If the buyers are still interested in the stock at the later level, this may help push the stock to the 152.80 zone, which is the highest point of June.
Alternatively, if the aforementioned upside line gets broken and the share price falls below the 141.39 hurdle, marked by the inside swing high of October 13th, that could move the buyers away from entering the field for a bit. IBM might travel to the 139.65 obstacle, a break of which could clear the path to the 136.44 area, which is the low of September 29th.
FX Weekly Market Preview
Weekly Outlook: Oct 18 – Oct 22: PMIs, UK and CAN CPIs Under the Radar
Market participants got busy straight from the opening of the week, with China’s GDP data coming out worse than expected, forcing a reduction in risk exposure. Later in the week, inflation is likely to return to the spotlight, with the UK and Canada reporting their September numbers. With the latest supply shortages around the globe, the preliminary PMIs from the Eurozone, the UK, and the US, may also attract special attention.
On Monday, the most important data are already out and those are New Zealand’s CPI for Q3 and China’s GDP for that quarter.
Getting the ball rolling with New Zealand’s CPI, the qoq rate jumped to +2.2% from +1.3%, pushing the yoy one up to +4.9% from +3.3%. At its latest meeting, the RBNZ raised interest rates by 25bps as was widely expected, while in the accompanying statement, officials appeared optimistic, noting that further removal of monetary policy stimulus is expected over time. Therefore, accelerating inflation may have increased the chances for another rate hike by this Bank very soon, and that’s why the Kiwi was found as the second in line gainer among the major currencies this morning. However, more aggressive tightening by central banks around the globe could weigh on the broader market sentiment, and thereby keep gains of the risk-linked Kiwi limited.
Speaking about the broader investor morale, overnight, as indicated by the performance in Asian equities, market participants may have decided to reduce their risk exposure, and the reason may have been the more-than-expected slowdown in China’s GDP for Q3. In quarterly terms, the world’s second largest economy slowed to +0.2% from +1.2%, something that pushed the yoy rate down to +4.9% from 7.9%. Fixed asset investment and industrial production for September also slowed. Only retail sales accelerated. China has been facing several problems recently, form potential property defaults due to Evergrande’s failure to pay interest to its bond holders, to power outages, and from stricter government regulation on tech firms, to fresh lockdown measures due to the spreading of the Delta coronavirus variant. Therefore, the more-than-expected slowdown in Q3 may have raised concerns over how the economy could fare in the last three months of the year, and what could be the spillover effect to the rest of the world.
Later in the day, we get the US industrial production for September and BoC’s Business Outlook Survey. The US industrial production is expected to have slowed to +0.2% mom from +0.4%, while we will scan the BoC’s Business Outlook Survey to see how well Canadian firms performed. An optimistic report could, combined with accelerating inflation on Wednesday, could add more credence to the case of further tapering by the BoC at its upcoming monetary policy meeting, scheduled for October 27th.
On Tuesday, during the Asian session, the RBA releases the minutes from its latest gathering, while later in the day, the US building permits and housing starts for September are coming out. With regards to the RBA minutes, we don’t expect any fireworks. At that meeting, the Bank kept all its policy settings untouched, with officials noting that they will continue to purchase government securities at the current pace until at least mid-February and maintaining the view that interest rates are unlikely to rise before 2024. They also appeared relatively optimistic, saying that the setback to the economic expansion is expected to be only temporary and that, as vaccination rates increase further and restrictions are eased, the economy is expected to bounce back. So, we expect the minutes to reflect that.
As for the US data, building permits are expected to have declined somewhat, while housing starts are forecast to have fractionally increased.
On Wednesday, inflation will take center stage again, with the UK and Canadian CPIs for September entering the spotlight. Eurozone’s final CPIs for September are also coming out, but as it is always the case, they are expected to confirm their preliminary estimates, and thus, we expect them to pass unnoticed.
With regards to the UK data, the headline CPI rate is expected to have held steady at +3.2% yoy, while the core one is anticipated to have ticked down to +3.0% yoy from +3.1%. Despite the potential slowdown in underlying inflation, both rates are expected to stay well above the BoE’s objective of 2%. Thus, if the forecasts are met, we doubt that they could alter market expectations around the BoE’s future policy plans. With BoE Governor Andrew Bailey and MPC member Michael Saunders expressing willingness to push the hike button soon, market participants have been anticipating a 15bps hike to be delivered before year end.
However, despite the latest rally in the British currency, which was the main gainer against the other majors on Friday and today in Asia, we are a bit more cautious with regards to further advances. This is because we don’t see much room for hike expectations to come forward, and due to concerning headlines surrounding the UK economy. We will get a clearer idea on that from the preliminary PMIs for October, due out on Friday. Yes, the technical outlook of the pound has turned positive against most of its peers, but we are reluctant to call for a long-lasting recovery. We prefer to take things step by step. For now, we will continue aiming higher, but with the first sign of weakness, we will re-evaluate the outlook.
As for the Canadian numbers, the headline CPI rate is expected to have inched up to +4.3% yoy from +4.1%, while no forecast is available for the core one. As we already noted, accelerating inflation could add to the case for further tapering by the BoC at next week’s gathering, and may prove supportive for the Canadian dollar, which has been performing very well recently, aided by the rally in oil prices. Let’s not forget that Canada is the world’s fifth largest oil producing nation, while it holds the fourth place in terms of exports.
On Thursday, the only release worth mentioning is the US existing home sales for September, with expectations pointing to a small increase.
Finally, on Friday, the spotlight is likely to fall to the preliminary PMIs for October from the Eurozone, the UK, and the US. In the Euro area, both the manufacturing and services indices are expected to have declined somewhat, something that will take the composite one down to 55.4 from 56.4. This could confirm that the latest energy shortages have left their mark on the Euro-area economy, and may weigh somewhat on the euro. No forecasts are available for the UK prints, while in the US, expectations are for only fractional changes, which if materialize, we don’t expect to have a major impact on the greenback, as they may barely alter expectations around the Fed’s course of action. As of now, market participants remain convinced that the Committee will begin its tapering process in November, while, according to the Fed funds futures, they expect a 25bps hike to be delivered in November 2022.
As for the rest of Friday’s releases, during the Asian session, Japan’s National CPIs for September, while later, during the early EU session, the UK retail sales for the same month are coming out. In Japan, no forecast is available for the headline print, while the core one is expected to have rebounded to +0.1% yoy from -0.2%. However, this will still be well below the BoJ’s target of 2%, and it is unlikely to tempt policymakers to start thinking withdrawing support anytime soon. Both the headline and core UK retail sales are expected to have rebounded in September after sliding in August.
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