Less Than Ideal Backdrop for Risk Assets

GBPUSD – technical overview

Deeper setbacks are favoured over the coming sessions, with the major pair seen gravitating back towards recent key support at 1.5090, which guards against the 1.5000 psychological barrier further down. Ultimately, only a close back above 1.5700 (78.6% of recent high-low move) would negate the bearish outlook.

• R2 1.5340 – 22Sep low – Strong
• R1 1.5289 – 24Sep high – Medium
• S1 1.5135 – 24Sep low  – Medium
• S2 1.5090 – 4May low  – Strong

GBPUSD – fundamental overview

Buying from a UK clearer and spec accounts has been more than offset in the early week, with the UK currency remaining weighed down. The latest round of downside pressure has come on the back of hawkish Monday comments from Fed Dudley who said rates needed to go up at some point this year. Looking ahead, the economic calendar for Tuesday is quite light, with nothing of note out of the UK and the only real focus on US consumer confidence. Otherwise, the market will key in on Bank of England Governor Mark Carney who is slated to speak.

USDJPY – technical overview

The latest rally has been well capped ahead of 122.00 and a lower top is now sought out in favour of a resumption of declines back towards the recent extreme low at 116.12. The market has been showing range contraction over the past several days, which warns of a near-term pickup in volatility. At this point, only a daily close back above 122.00 would negate the short-term bearish outlook and put the pressure back on the topside.

• R2 121.23 – 25Sep high – Strong
• R1 120.59 – 28Sep high – Medium
• S1 119.23 – 24Sep low – Medium
• S2 119.05 – 18Sep low – Strong

USDJPY – fundamental overview

Hawkish comments from Fed Dudley and Williams were offset by Fed Evans, while US economic data came in mixed, with solid personal spending and softer pending home sales. The lack of directional insight from these developments left this market trading off broader risk themes, with the pullback in equities and global sentiment weighing more heavily on the correlated major pair. It seems more signs of China economic troubles has fueled this latest round of global growth concern. Looking ahead, US Case Shiller and consumer confidence are the only notable standouts on the economic calendar.

EURCHF – technical overview

The recovery outlook remains intact, with the price recently piercing through key resistance at 1.0962, confirming a medium-term higher low at 1.0714 and opening the next major upside extension towards a measured move objective in the 1.1200 area. Only back below 1.0714 would negate the constructive outlook.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0983 – 25Sep high – Medium
• S1 1.0824 – 22Sep low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

Setbacks in this cross rate continue to be very well supported, with the market shrugging off a wave of risk off flow, instead choosing to focus on Swiss Franc rhetoric from the SNB. Last week, Swiss economy minister Schneider-Ammann said the strong Franc endangered price stability, while adding that purchasing power parity in EURCHF was well above 1.20. Finally, he reminded the market the SNB was on the same page, working towards a weaker local currency.

AUDUSD – technical overview

The correction out from recent multi-year lows sub-0.7000 has stalled out, with the market now looking for the next lower top at 0.7280 ahead of a bearish continuation and fresh downside extension. Ultimately, only back above 0.7440 would compromise the bearish outlook.

• R2 0.7090 – 23Sep high – Strong
• R1 0.7043 – 24Sep high – Medium
• S1 0.6938 – 24Sep low – Medium
• S2 0.6908 – 4Sep/2015 low – Strong

AUDUSD – fundamental overview

Although Fed Evans came out on the dovish side on Monday, not looking for rate hikes until well into 2016, hawkish comments from Fed Bullard and Williams, both calling for liftoff this year, were more than offsetting. Meanwhile, Aussie was weighed down on a pullback in commodities prices and fresh round of risk liquidation after stocks came back under pressure. Renewed concerns over the China outlook have been contributing to the risk off price action and concurrent downside pressure in the Australian Dollar. Looking ahead, equity market performance will be watched closely for further directional insight, while on the economic calendar, the focus will be on US Case Shiller and consumer confidence readings.

USDCAD – technical overview

The market is locked within a well defined uptrend, pushing to fresh 11-year highs and closing in on next major psychological barriers at 1.3500. Ultimately, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of bullish continuation.

• R2 1.3500 – Measured Move – Medium
• R1 1.3417 – 24Sep/2015 high – Strong
• S1 1.3292 – 24Sep low – Medium
• S2 1.3233 – 23Sep low– Strong

USDCAD – fundamental overview

Risk sentiment is back under pressure and this in conjunction with weakness in commodities and some hawkish Fed speak have been fueling this latest round of Canadian Dollar weakness to 11-year lows. Mixed US economic data on Monday didn’t factor into price action and the focus for today shifts to some Canada industrial product prices, US Case Shiller and US consumer confidence readings. Otherwise, participants will continue to keep and eye on the price of OIL and the direction in equities.

NZDUSD – technical overview

The market remains under pressure, just off fresh multi-year lows, locked within a well defined downtrend. Deeper setbacks are favoured below 0.6130, with the break to open the next major downside extension through psychological barriers at 0.6000. Any rallies are viewed as corrective and ultimately, only a break back above 0.6740 would compromise the bearish structure.

• R2 0.6458 – 18Sep high– Strong
• R1 0.6402 – 28Sep high– Medium
• S1 0.6288 – 29Sep low – Medium
• S2 0.6236 – 23Sep low – Strong

NZDUSD – fundamental overview

Sinking global equities, declining commodities and hawkish Fed speak have all resulted in the latest round of downside pressure in the New Zealand Dollar. Lack of any first-tier data out of New Zealand has left the market also focusing on more concerns over the outlook for the China economy, which has further contributed to Kiwi weakness. Looking ahead, all of the above themes will continue to dictate direction, while on the economic calendar, the focus will be on US Case Shiller and consumer confidence.

US SPX 500 – technical overview

The market has been locked in some choppy consolidation following the sharp pullback from record high territory several days back. The breakdown reflects a major structural shift in the works, with deeper setbacks now favoured over the coming days and weeks. The recent rebound out from the 1830 area low has been well capped above 2000 and a fresh lower top is now sought out ahead of a bearish continuation below 1830. Only a daily close back above 2022 would delay the bearish outlook.

• R2 1962.00 – 25Sep high – Strong
• R1 1940.00 – 28Sep high – Medium
• S1 1854.00 – 26Aug low – Medium
• S2 1833.00 – 24Aug low – Strong

US SPX 500 – fundamental overview

The combination of an expectation for a Fed rate hike in 2015 along with an ongoing concern over the outlook for the global economy, is not a combination that lends itself to equity market strength, with stocks coming under intensified pressure on Monday. The primary source of this latest slide has come on the back of hawkish commentary from Fed Bullard and Williams and renewed uncertainty over the outlook for the Chinese economy.

GOLD (SPOT) – technical overview

The latest impressive recovery out from the 1100 area suggests the market is in the process of carving a meaningful higher low ahead of the next major upside extension through 1170. Look for a break above 1170 to confirm and open an acceleration back towards medium-term resistance at 1233. Only a close below 1100 negates. 

• R2 1200.00 – Psychological – Medium
• R1 1170.00 – 24Aug high – Strong
• S1 1121.00 – 22Sep low – Medium
• S2 1099.00 – 11Sep low – Strong

GOLD (SPOT) – fundamental overview

The GOLD market has been very well supported on dips in recent trade, with the market finding demand even as the US Dollar recovers. Broad based risk liquidation and downside pressure in equity markets have inspired safe haven buying, with the yellow metal standing out as a primary candidate for these flows.

Feature – technical overview

USDZAR uptrend remains firmly intact with the market pushing to yet another record high. A higher low is now sought out above 13.0000 ahead of the next major upside extension and bullish continuation towards 15.0000. Ultimately, only a daily close below 13.0000 would delay the highly constructive outlook.

• R2 14.2000 – Figure – Medium
• R1 14.1340 –29Sep/Record – Strong
• S1 13.7230 – 25Sep low – Medium
• S2 13.1650 – 17Sep low – Strong

Feature – fundamental overview

This is not a global market environment that favours the Rand, with the emerging market currency feeling the pressure of sliding global equities, weakness in commodity markets and an expectation the Fed will move forward with a rate hike this year. This in conjunction with a SARB that left policy on hold last week while downgrading growth forecasts has resulted in another slide in the Rand to fresh record lows against the Buck. Looking ahead, performance in stocks and US consumer confidence readings will get most of the attention on Tuesday.