Currencies Build on Post NFP Gains, RBA Less Dovish

GBPUSD – technical overview

Deeper setbacks are favoured over the coming sessions, with the major pair seen gravitating below recent key support at 1.5090 and towards the 1.5000 psychological barrier further down. Any rallies are now expected to be well capped below 1.5400, while ultimately, only a close back above 1.5700 (78.6% of recent high-low move) would negate the bearish outlook.

• R2 1.5289 – 24Sep low – Strong
• R1 1.5245 - 5Oct high – Medium
• S1 1.5128 – 2Oct low – Medium
• S2 1.5090 – 4May low – Strong

GBPUSD – fundamental overview

Monday's lackluster UK services PMIs gave a knock to the already struggling UK currency, after the data came in a good deal lower than previous and well below expectation. The deterioration within the reading suggests the slowdown in the manufacturing sector is spreading to the services sector and has resulted in a further scaling back of the BOE interest rate hike timeline. Looking ahead, lack of first tier data out of the UK on Tuesday will leave the currency focused on broader macro flows and US trade data.

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 119.87 – 5Oct low – Medium
• S2 119.25 – 29Sep low – Strong

USDJPY – fundamental overview

The Yen has come back under some pressure over the past few sessions, with the currency selling off on a resurgence in risk appetite and accompanying rally in equities prices. Tuesday's less than stellar US services PMI print hasn't done anything to factor into price action, with softer Japanese data perhaps offsetting. The recent price action has been a function of the market interpreting the latest fallout in US employment data as risk positive given that it scales back Fed liftoff bets. Looking ahead, US trade data and ongoing sentiment will be the clear drivers in Tuesday trade, though with the BOJ also kicking off its two day policy meeting, the market will be looking to this event as well. There have been calls for additional BOJ QQE expansion with the central bank expected to slash growth and inflation forecasts, though the consensus is for no additional action this time round.

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 softer Eurozone data and calls for additional ECB stimulus, instead choosing to prioritize a mild recovery in stock markets and ongoing SNB Franc rhetoric. The SNB continues to remind investors of its readiness to step in and intervene on behalf of the Franc should the currency attempt to mount any meaningful recoveries, with additional negative interest rate policy not to be ruled out. The SNB still views the Franc as highly overvalued and remains committed to additional Franc weakness going forward.

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. Look for rallies to be well capped below 0.7200 on a daily close basis, while ultimately, only back above 0.7440 would compromise the bearish outlook.

• R2 0.7197 – 21Sep high – Strong
• R1 0.7159 - 22Sep high – Medium
• S1 0.7067 – 6Oct low – Medium
• S2 0.6998 – 1Oct low – Strong

AUDUSD – fundamental overview

Not much change to the previous policy statement, with the RBA leaving policy on hold at 2.00% for the 5th consecutive time. While the central bank conceded policy needed to remain accommodative, the overall tone of the statement was clearly less dovish than expected, after the central bank failed to offer any explicit easing guidance, while dismissing stock market volatility and downplaying China risk. On the domestic front, the RBA was also somewhat upbeat after highlighting the improvement in the employment sector. Aussie has since build on recovery gains post last week's horrid US employment report, though dealers cite plenty of solid offers towards 0.7200. Looking ahead, US trade data is the key focus for the remainder of the day.

USDCAD – technical overview

The market is locked within a well defined uptrend, recently pushing to fresh 11-year highs and closing in on the next major psychological barrier at 1.3500. Ultimately, current corrective declines should be well supported with a higher low sought out ideally above 1.3000 in favour of bullish continuation.

• R2 1.3219 – 1Oct low – Strong
• R1 1.3175 - 5Oct high – Medium
• S1 1.3065 – 5Oct low – Medium
• S2 1.3012 – 18Sep low– Strong

USDCAD – fundamental overview

Last week's shockingly weak US employment report continues to factor into trade, with the Canadian Dollar extending its impressive recovery off 11-year lows on scaled back Fed rate hike bets and accompanying rally in equity markets. The Loonie has managed to build on gains this week with the softer US ISM services print and 2% rally in OIL prices further contributing to the price action. Looking ahead, Canada and US trade data are due along with Canada Ivey PMIs.

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. The current rally is viewed as corrective and ultimately, only a break back above 0.6740 would compromise the bearish structure.

• R2 0.6562 – 25Aug high– Strong
• R1 0.6531 - 5Oct high– Medium
• S1 0.6437 – 5Oct low – Medium
• S2 0.6384 – 2Oct low – Strong

NZDUSD – fundamental overview

A downbeat NZIER business confidence number which came in at -14% versus +5% previous has failed to have any meaningful influence on price action in early Tuesday trade, with Kiwi holding on to recent recovery gains on the back of the broader tick up in sentiment post the disappointing US jobs report last Friday. Still, today's softer business confidence reading is something the RBNZ should be concerned about and should keep participants leaning towards another easing from the central bank this year. Looking ahead, US trade data is the key standout in Tuesday trade.

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 2022.00 – 17Sep high – Strong
• R1 1996.00 – 28Aug high – Medium
• S1 1946.00 – 5Oct low – Medium
• S2 1892.00 – 2Oct low – Strong

US SPX 500 – fundamental overview

The stock market continues to build on momentum from last Friday's horrid US employment report, with the gains fueled off speculation this will keep the Fed from moving on rates. While the data was definitely discouraging, the market still seems to be more comforted with the fact that lower for longer monetary policy will keep asset prices elevated. However, with the Fed having little left in the tank as far as what it can do to help stimulate the economy, there is risk another downturn in sentiment will open an intensified liquidation in stocks, even with the Fed keeping policy at current levels.

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 1099.00 – 11Sep low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

Last Friday's much weaker than expected US employment report has been a welcome relief for the GOLD market, with the metal finding a fresh wave of demand on the news. The combination of concern over the implications of the softer data on US and global recovery prospects and some broad based selling in the US Dollar post event, have been the primary drivers of trade these past few sessions. Looking ahead, US trade data will be watched closely on Tuesday.

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 13.5270 – 5Oct low – Medium
• S2 13.1650 - 17Sep low – Strong

Feature – fundamental overview

A lot of attention in South Africa on the AMCU right now, with everyone waiting to see if the association will strike next week after rejecting a recent wage offer. For the moment though, this isn't factoring into Rand price action, with the local currency enjoying a recovery off record lows following last week's discouraging employment report out of the US. The Rand has benefitted from the more favourable yield differentials post US employment, with the weakness scaling back Fed liftoff bets. Still overall, the fact that the data also compromises global recovery prospects should not be discounted and could once again weigh on the emerging market currency going forward.