News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • CDC: Johnson & Johnson vaccine advantages still outweigh the rare risks $JNJ $USD
  • China's Sinovac shot found to be highly effective in real world study - BBG
  • Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.18% 🇬🇧GBP: 0.17% 🇪🇺EUR: 0.16% 🇳🇿NZD: 0.04% 🇨🇦CAD: 0.02% 🇨🇭CHF: -0.28% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/pG4kJmRk6m
  • AUD/USD slightly higher on Tuesday despite significant chop $AUDUSD https://t.co/yYdbmSO1rs
  • Commodities Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Silver: 1.17% Gold: 0.08% Oil - US Crude: -0.02% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/0ZC9QCz4K1
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 89.36%, while traders in GBP/JPY are at opposite extremes with 68.30%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/gPepAHfIch
  • ZAR pounces on favorable global factors. Local manufacturing production (MAR) at 3.4%. Get your $USDZAR market update from @WVenketas here:https://t.co/2hzqhPFKc2 https://t.co/IcNpRYCJul
  • $DXY slightly lower on the day as a chaotic Wall Street session comes to a close $DXY $USD https://t.co/cWEnWtCEX4
  • Indices Update: As of 20:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 0.39% France 40: 0.27% Germany 30: 0.23% Wall Street: 0.01% US 500: 0.00% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/VW3XrWqAfM
  • Walking back those snap comments of support for Yellen's remarks that rates may need to rise to prevent the economy from overheating. I'm not the conspiracy type, but these corrections seem to occur more frequently when the markets are down... https://t.co/v7xiIH4Bdt
S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

John Kicklighter, Chief Strategist

Dollar, S&P 500, VIX, Tesla Talking Points:

  • US stimulus talks ticked off another day without much needed economic relief that yet another official – the Fed’s Brainard – has warned is essential
  • Market conditions between elections anticipation and discreet event risk lends to breakout risk from SPX but with ultimate congestion hold for the likes of EURUSD
  • Earnings is a top theme with Tesla and CSX ‘favorable’ surprises helping to offset the Netflix disappointment, meanwhile the next debate and October PMIs are ahead
Advertisement

An S&P 500 Break is Coming

Risk assets across the spectrum continue to work their way into tighter congestion, but perhaps the picture is no where as pressurized as with the S&P 500. The US stock index is similar in construction to its Dow and Nasdaq 100 cousins with a terminal triangle, but its own 5-day range has dwindled to levels comparable to August…and February. In both historical references, we saw remarkable tumbles. That said, I don’t believe a significant trend is near at hand. A break is one thing and probable given that we are heading into a terminal congestion pattern. However, follow through is impractical to expect given the anticipation that continues to pull our attention forward.

Chart of S&P 500 with 50, 100-Day Moving Averages and 5-Day Historical Range (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart Created on Tradingview Platform

Perhaps the more immediate loss of traction for markets is the constant headlines around stimulus talks in the United States. Once again, the House Democrats, White House representative Mnuchin and Senate GOP have failed to come to an understanding on follow up stimulus to the fiscal aid to the world’s largest economy that was previously capped at the end of July. Unfortunately, that is the status quo and not at all a surprise. That can keep the likes of the S&P 500 in a holding pattern for now, but the long-term economic toll is building. If this infusion is finally approved or a reliable timeline is set, it could motivate a market charge, but the Presidential election less than two weeks away will remain a backup break on momentum.

Twitter Poll Asking Which Market Was More Exposed to US Stimulus News (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Poll from Twitter.com, @JohnKicklighter

Market Conditions Dictate a Unique Market Course

Between the anticipation of an event with exceptional global impact and reach (the US Presidential election) and a host of interim event risk more than capable of producing significant volatility, we are left with a unique market backdrop. Fundamental swells can trigger volatility but commitment to a serious trend is likely to fall apart before it ever hits a meaningful stride. In this backdrop, an S&P 500 – or FTSE 100, DAX 30, USDJPY, etc – break looks like a fair probability while momentum sems highly unlikely. That tends to align to the natural inclinations of retail FX traders who have leaned heavily against a continue EURUSD rally or AUDUSD tumble. Yet that may be more out of habit than actual attribution to market conditions.

Chart of EURUSD and IG Retail Trader Positioning (8 Hour)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart from DailyFX with Data from IG

As for the glaring sign of volatility just over the horizon, we are starting to see the market ease back on its fear of a post-election explosion. Implied volatility differentials from the likes of the VIX futures contracts show in part the progression of time, but there is also a material reflection of speculative habit to these measures. The October-November VIX futures spread and the put-call spread for example are showing unmistakable relief from severe hedging efforts. That may be a market soothed, but it is far more likely that speculative habit well established among volatility traders that have banked on complacency – as they did before February’s implosion or before the 2018 bouts of extreme volatility – are taking serious risk in a different variant of the familiar ‘buy the dip’ default.

Read more on how the VIX has acted around previous US Presidential elections in our special report analyzing the ‘fear gauge’ during this cycle.

Chart of S&P 500 and Nov-Oct VIX Futures Contract Differential (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart Created on Tradingview Platform

The Catalysts in the Interim

Looking ahead to the Thursday New York trading session, the effect of after-hours earnings will be top of mind for market impact. Netflix shares this past session took a dive following Tuesday evening’s disappointing accounting update. That weighed on the FAANG grouping, but it didn’t scale up to the Nasdaq 100 – much less the broader S&P 500 as a ‘risk benchmark’. Perhaps this past evenings Tesla and CSX numbers will be a different story. The former is a speculative shares trader favorite (it was number 8 on the Robinhood client chart before they stopped sharing the stats last month) and it reported a record profit. The latter is much more closely associated to economic health. And while the railroad company was underwhelming on revenue and profit overall, an announced $5 billion share buy back hits a favorite shares trader note. Ahead, we have airline earnings which are unlikely to ‘impress’ in any way.

Chart of CSX, Tesla and Netflix (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart Created on Tradingview Platform

For fundamental representation, the Dollar is at many crossroads. However, it is the growing recognition that life-giving fiscal stimulus is constantly being pushed off that seems to be a prominent factor. The DXY Dollar Index dropped below 93 which was a range floor this past session. That was seemed to earn a meaningful USDJPY break and falter a AUDUSD trend development effort; but neither seems practical as a momentum candidate. The election fog is a very prominent influence here.

Chart of DXY Dollar Index with 50 and 100-Day Moving Average (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart Created on Tradingview Platform

Elsewhere in FX, the Pound enjoyed a very smart rally this past session. EURGBP and GBPUSD enjoyed their largest Sterling-favorable rally seen since March/April on reports that the UK is nearing some sort of deal with the EU on a future trade relation. It is unclear on exactly what it will entail and that is likely to keep this jolt of volatility from turning into a lasting trend. However, it is a possibility to not be written off – even as we take stock of some fairly straightforward technical boundaries on the GBP crosses.

Chart of EURGBP with 50 and 100-Day Moving Averages with 1-Day Rate of Change (Daily)

S&P 500 Due a Technical Break, Dollar Slides on Stimulus Delay, Pound Rallies

Chart Created on Tradingview Platform

If you want to download my Manic-Crisis calendar, you can find the updated file here.

.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES