EUR/USD nears YTD low, S&P 500 tags key trendline: European open – 28/09/2023

Asian Indices:

• Australia's ASX 200 index fell by -4.6 points (-0.07%) and currently trades at 7,025.70
• Japan's Nikkei 225 index has fallen by -569.87 points (-1.76%) and currently trades at 31,802.03
• Hong Kong's Hang Seng index has fallen by -165.39 points (-0.94%) and currently trades at 17,446.48
• China's A50 Index has fallen by -44.94 points (-0.36%) and currently trades at 12,425.80

UK and Europe:

• UK's FTSE 100 futures are currently up 30.5 points (0.4%), the cash market is currently estimated to open at 7,623.72
• Euro STOXX 50 futures are currently up 3 points (0.07%), the cash market is currently estimated to open at 4,134.68
• Germany's DAX futures are currently up 41 points (0.27%), the cash market is currently estimated to open at 15,258.45

US Futures:

• DJI futures are currently up 44 points (0.13%)
• S&P 500 futures are currently up 8.75 points (0.2%)
• Nasdaq 100 futures are currently up 34.25 points (0.23%)

Australian retail trade rose just 1.5% y/y in August (or 0.2% m/m), which is its slowest pace of annual sales since August 2021. The economy clearly is slowing, although yesterday’s inflation report has raised some concerns of another hike – and the surge in bond yields has now seen RBA cash rate futures fully prince in one more hike by 2024.

AUD/USD has recouped some of yesterday’s losses whilst the ASX 200 bounced from 7,000, although in both cases I’d prefer to seek areas of resistance to fade into for potential short intraday setups (given current sentiment).

The US dollar has hardly budged from its YTD highs and US yields remain elevated, which has kept EUR/USD stuck around its 1.050 level as it reconsiders its next directional move.

Events in focus (GMT+1):

• 08:00 – Spanish CPI
• 08:00 – ECB Enria speaks
• 08:45 – ECB McCaul speaks
• 09:00 – German state CPIs
• 10:00 – European Economic Sentiment Index (ESI)
• 13:00 – German CPI
• 13:30 – US jobless claims, Q2 GDP (final), PCE prices
• 13:30 – Canada average weekly earnings

With a host of economic data scheduled today including the European Sentiment Index (ESI), German state and national inflation and eurozone CPI, we may have enough juice for EUR/USD to break to a fresh YTD low – a level it is seemingly clinging onto, which opens up a run for 1.04 of broken.  With that said, if the S&P 500 bounces as I suspect then it could helps the likes of EUR/USD also produce a countertrend bonce.

EUR/USD technical analysis ( chart):

Short EUR/USD is not a new idea, and whilst I’m pleased to be one of the few calling for a break of support to hit 1.05 that I could see – I suspect we could now be due another bounce. Prices are showing signs of stability above the YTD low, which is a significant level for bears to simply break without at least a pop higher. The 1-day implied volatility band suggests a potential move to 1.055 / weekly R2 pivot point, but if risk is somehow allowed to bounce due to a short-squeeze, 1.0600 is not impossible. Further out, 1.0400 is the next major level for bears to target.

S&P 500 technical analysis (daily chart):

The fall across global equity markets has been well covered, but we note that the bleeding may be slowing which paves the way for a potential bounce. In particular, the S&P 500 respected trend support yesterday and a small bullish hammer closed bac above the 200-day EMA. The RSI (2) has formed a bullish divergence after reaching oversold, and the RSI (14) is very close to oversold. Given the lack of bullish mean reversion, perhaps it can bounce at least to the August high , with a more powerful move bringing gap resistance around 4400 into focus for bulls. Beyond that, I’d be seeking evidence of a swing high  for a potential break of trend support, should the US dollar and yields continue to melt up.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge