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S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

2020-05-21 03:00:00
John Kicklighter, Chief Strategist
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S&P 500, EURUSD, USDMXN, AUDUSD Talking Points:

  • The S&P 500 pushed to a fresh multi-month high on a robust gap Wednesday, but follow through was immediately hemmed in by a confluence of resistance
  • Risk trends seem to be truly reticent to commit to sporadic developments, but there nevertheless seems to be appetite for developments like those for USDMXN
  • Perhaps the top fundamental and technical focal point for the next 24 hours is the AUDUSD after its resistance break and with PMIs and China’s Two Sessions ahead

Risk Trends Earn Isolated Progress, But Its Milestones Punch Above Their Weight

I would describe this past session’s market backdrop as being particularly inspiring from a risk appetite perspective. While there were a few standard bearers that managed to leverage substantial gaps on the open, there was little follow through to be found through active sessions or build from session to session. In addition to the lack of conviction building traction over time, it seemed to lack breadth across the range of asset classes. That said, were there was progress, it seemed to have an inordinate weight. US indices range from the Dow’s inability to clear its past month’s range while the Nasdaq 100 hit a late three month high. It was the S&P 500 that stood out to me however with a full clearance of a range high and 61.8 percent Fib around 2,940. Yet, still above are the 100-day moving average and then the 200-day moving average and psychological level combo at 3,000.

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Chart of S&P 500 with 100 and 200-Day Moving Average (Daily)

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Chart Created on Tradingview Platform

At the end of my poll posed initially on Tuesday, the skeptics have won out that there is a commanding bullish interest at work behind the S&P 500. Of the over 200 people that responded to my survey, 77 percent believed this speculative benchmark would not clear 3,000 this week. A greater proportion of respondents expected the market to level out while the heavy majority (52 percent) anticipated a reversal before all is said and done before the weekend.

Twitter Poll on S&P 500 Ability to Overtake 3,000

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Poll from Twitter.com, @JohnKicklighter

Breakouts from the Dollar: From Core Fundamentals to the More Speculative Exposed

The benchmark US equity index draws some serious scrutiny for those tracking either risk appetite trends or technical milestones. Yet, the SPX isn’t the only representative of a key asset class that was attempting to stir convictions. The Dollar itself seemed to be positioning for its own breakdown – though whether that be as a safe haven or a key growth region is ambiguous. The benchmark EURUSD closed above the confluence of its range resistance, 38.2 percent Fib from March’s enormous range and the 100-day moving average all around 1.0960. That could readily be re-read as a range test without the key spark, but interpretation is in the eye of the collective beholder. I remain of the disposition that trends are few and very far between.

EUR/USD MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 25% 13% 17%
Weekly 18% 35% 28%
What does it mean for price action?
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Chart of EURUSD with 100-Day Moving Average (Daily)

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Chart Created on Tradingview Platform

If we wanted to look at the Greenback with something closer to an amplified risk perspective, there is perhaps no better place than with regard to emerging market cross. The USDZAR and USDRUB were pairs I’ve tracked, but the most liquid of the technically-inclined bunch was USDMXN. This pair dropped 23.50 and has moved onto the next level of support in a 38.2 percent Fib and wedge extension combo. This downturn could coast under its own power, but a feint in risk trends could quickly undermine progress here.

Chart of USDMXN with 50-Day Moving Average (Daily)

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Chart Created on Tradingview Platform

Concentrated Event Risk for Thursday’s Session

As we look out over Thursday’s session, risk trends remains my principal concern. Ultimately, most fundamental events and technical milestones are merely steps towards an ultimate expression of speculative appetite in one form or another. That said, those catalysts are still important as capable movers with a convenient time frame attached. For sheer potential, there may be no more opportunistic – or troubled, depending on your view – pair than AUDUSD. The cross clear its 100-day moving average and wedge top this past session, but it is facing heavy event risk in global PMIs (which will stand as a global speculative lever and offer direct US/Australian updates) and the start of China’s Two Sessions summit.

AUD/USD BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 7% 9% 9%
Weekly 3% 16% 11%
What does it mean for price action?
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Chart of AUDUSD with 100-Day and 200-Day ATR (Daily)

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Chart Created on Tradingview Platform

While the run of Australian, Japanese, UK and US flash PMIs for May (proxies for timely GDP) are the most straightforward event risk on tap; I think it worth while to consider the uncertainty around China’s political gathering. Decisions on growth targeting, foreign relations and other critical aspects of the economy’s health will be decided over the two-day event. Therefore, the often discounted USDCNH can be an informative measure as would be a ratio of the S&P 500 to the Shanghai Composite.

Chart of USDCNH with 50-Day Moving Average Overlaid with SPX/SHCOMP Ratio ( Daily)

S&P 500, EURUSD, USDMXN, AUDUSD: Which - If Any - Breakout Turns Trend?

Chart Created on Tradingview Platform

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