Eurozone Inflation, US ADP, End of Month Flows

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 1.5129 – 29Sep low  – Medium
• S2 1.5090 – 4May low  – Strong

GBPUSD – fundamental overview

While the Pound was somewhat supported on the back of solid UK mortgage lending data, which surged by 71k, the most since 2008, the UK currency could still not avoid extending declines against the Buck on Tuesday. It seems the ongoing expectation for a 2015 rate hike coupled with the well received US consumer confidence report, coming in at an impressive 103.0 versus the 96.1 forecast, was enough to offset any positives from earlier UK data. looking ahead, Q2 UK GDP revisions will get attention along with the later release of US ADP employment.

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

Not a great round of data out of Japan earlier today, with retail sales and industrial production both coming in a good deal softer than forecast. This of course will help fuel speculation the BOJ will need to do more with its monetary policy to help stimulate the economy. This speculation has been backed up by PM Abe comments the government will do whatever it takes to get the economy back on track. Abe’s advisor Honda was even more specific on the issue, commenting in an FT interview that more economic stimulus was needed. Interestingly enough, even with the deluge of negative Yen headlines, the Yen is still finding solid demand on dips, with risk sentiment shaky and participants not yet ready to give up on the safe haven flow.

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 and softer Eurozone inflation, instead choosing to continue to prioritize 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 0.6936 – 29Sep low – Medium
• S2 0.6908 – 4Sep/2015 low – Strong

AUDUSD – fundamental overview

The latest round of Aussie data has come in mixed, with credit growth firmer than expected and building approvals a good deal softer than forecast. Overall, this won’t do much to change the outlook for the Australian Dollar which trades just off recent multi-year lows heading into next week’s RBA decision. While the market expects the RBA will leave policy on hold this time round, it is still pricing additional accommodation in 2016 given the stress in global equities and softer commodities in light of uncertainty surrounding China and the emerging markets. Looking ahead, US ADP employment will be the key focus on the economic calendar.

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 1.3457 – 29Sep/2015 high – Strong
• S1 1.3372 – 29Sep low – Medium
• S2 1.3317 – 28Sep low– Strong

USDCAD – fundamental overview

Price action in the Canadian Dollar has been a bit of a head scratcher in recent trade, with the Loonie extending declines to fresh 11-year lows against the Buck despite more stable equity and commodity prices and better than expected Canada industrial product and raw material prices. It seems this trade is now driving on pure momentum, with the market targeting psychological barriers in USDCAD at 1.3500. Looking ahead, the market is expected to see some increased volatility, with Canada GDP due along with US ADP employment. Later in the day, Fed Chair Yellen is also scheduled to speak.

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

A mild improvement in global sentiment and some stability in commodities markets has contributed to a bit of a recovery in the New Zealand Dollar in early Wednesday trade. Local data is also helping Kiwi’s cause on improvements in ANZ business confidence and the activity outlook. Overall however, the market won’t get too ahead of itself, with macro dynamics still not supportive of meaningful Kiwi rallies. Dealers cite plenty of offers and the market will now look ahead to US ADP employment report and a Yellen speech late in the day. Also not to be overlooked are end of month flows.

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. 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. We are seeing a bit of a relief rally into Wednesday on some end of month flows, though fresh offers are expected to emerge into rallies. Later today we get US ADP employment and a Yellen speech.

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

GOLD 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 of these flows. Dealers cite plenty of demand on dips, with no stops seen until below $1100.

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 14.1590 –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. But the currency weakness isn’t all bad, with Old Mutual out welcoming the Rand depreciation, calling it South Africa’s saving grace given the positive impact on exports. Looking ahead, performance in stocks, US ADP employment and a Yellen speech will get most of the attention on Wednesday.