Risk for Euro Short Squeeze

GBPUSD – technical overview

The latest break below 1.2800 opens the door for the next major downside extension exposing fresh +30 year lows into the 1.1500 to 1.2000 area. At this point, any rallies are classified as corrective, with only a break back above previous support turned resistance at 1.2796 to take the immediate pressure off the downside and delay bearish momentum.

• R2 1.2444 – 10Oct high – Strong
• R1 1.2333 – 19Oct high – Medium
• S1 1.2100 – Figure – Medium
• S2 1.2089 – 11Oct low – Strong

GBPUSD – fundamental overview

BOE Governor Carney was singing a bit of a different tune on Tuesday, with the central banker expressing concern over the depreciation in the Pound after saying “there are limits to the MPC’s willingness to look through an overshoot of inflation.” Carney went on to add the central bank needed to be mindful of how persistent Sterling weakness was likely to be, while also highlighting the limitations of monetary policy. Looking ahead, key standouts on the calendar include UK BBA mortgage approvals and a batch of US data including the advanced goods trade balance, wholesale inventories, services PMIs and new home sales.

USDJPY – technical overview

The broader pressure remains on the downside with market continuing to struggle on rallies towards 105.00. Key support now comes in at 103.17, with a drop below to strengthen the bearish outlook and expose a potential retest of the 2016 low down around 99.00. At this point, a daily close back above 105.00 would be required to signal a bullish shift in the structure.

• R2 105.00 – Psychological – Strong
• R1 104.82 – 25Oct high – Medium
• S1 103.17 – 19Oct low – Medium
• S2 102.81 – 10Oct low – Strong

USDJPY – fundamental overview

On Tuesday, the Yen took an early hit on a Reuters report that a Japanese official said the BOJ would continue to maintain accommodative monetary policy, though Yen weakness could not be sustained after a slide in OIL prices weighed on sentiment and US consumer confidence came in weaker than expected. This leaves the major pair confined to a familiar range in the 104.00 area. Looking ahead, we get a batch of US economic data featuring the advanced goods trade balance, wholesale inventories, services PMIs and new home sales.

EURCHF – technical overview

Not much doing here over the past several days, with the market confined to a range trade, roughly between 1.0800 and 1.1000. At this point, a daily close above 1.1000 or back below 1.0800 will be required for clearer directional insight. Until then, look for dips to be supported and rallies well capped.

• R2 1.1014 – 24Jun high – Strong
• R1 1.0911 – 12Oct high – Medium
• S1 1.0798 – 24Oct low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

The SNB has been a little more on edge of late, with the cross rate coming back down into what has been called the new floor at 1.0800. But a well known European bank has been talking about the effectiveness of current policy which hasn’t really cited a specific level to defend, as opposed to the policy we had seen that isolated the 1.2000 floor. The bank cites a notable pullback in EURCHF trading volume. Meanwhile, there has been a lot of speculation about a less dovish ECB with a lower rate of bond buying, also helping to prop the rate above 1.0800 in recent trade.

AUDUSD – technical overview

The market has struggled on rallies above 0.7700 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835 in favour of the next major downside extension. Look for a break back below 0.7421 to strengthen this outlook and accelerate declines towards 0.7000 in the days ahead. Ultimately, only back above 0.7758 will negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7735 – 20Oct high – Strong
• R1 0.7700 – Figure – Medium
• S1 0.7595 –24Oct low – Medium
• S2 0.7557 – 14Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar is the clear outperformer in Wednesday trade after the currency got a nice boost from the hotter than expected Aussie CPI print. The higher inflation reading confirms the less dovish RBA outlook in which the central bank is now likely to remain on hold going forward. Looking ahead, we get a batch of US economic data featuring the advanced goods trade balance, wholesale inventories, services PMIs and new home sales.

USDCAD – technical overview

This market looks to be in the process of carving out a longer-term base off the 1.2461, 2016 low. Look for any additional weakness to be supported ahead of 1.3000 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2764 would delay the constructive outlook.

• R2 1.3500 – Psychological – Strong
• R1 1.3398 – 24Oct high – Medium
• S1 1.3283 – 25Oct high – Medium
• S2 1.3141 – 19Oct low– Strong

USDCAD – fundamental overview

The Canadian Dollar didn’t get much help from less dovish BoC Poloz comments on Tuesday after the central banker downplayed the possibility for additional policy easing given his concern over this taking the BoC closer to unconventional monetary policy tools. It seems the Poloz comments were more worrying than anything else, while the healthy pullback in the price of OIL certainly did nothing to prop Loonie. Looking ahead, the Canada economic calendar is empty and the key focus will be on a batch of US releases including the advanced goods trade balance, wholesale inventories, services PMIs and new home sales.

NZDUSD – technical overview

Setbacks have stalled out ahead of psychological barriers at 0.7000 for now, though the pressure has shifted back to the downside with the market now expected to be very well capped on rallies. Look for a fresh lower top ahead of 0.7350 in favour of the next major downside extension below 0.7000 and towards medium-term support at 0.6675 further down.

• R2 0.7266 –20Oct high – Strong
• R1 0.7218 – 18Oct high  – Medium
• S1 0.7110 – 24Oct low – Medium
• S2 0.7077 – 14Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was bid up on Tuesday, mostly on the back of a mild bout of broad based US Dollar selling. The round of US Dollar weakness was attributed to softer US consumer confidence readings. Still, with the RBNZ capable of cutting rates in the months ahead and the Fed looking to raise, the policy divergence should continue to weigh on the Kiwi rate. Into Wednesday, Kiwi is already finding renewed offers on cross related selling against Aussie following the hotter Aussie CPI. Looking ahead, we get a batch of US economic data featuring the advanced goods trade balance, wholesale inventories, services PMIs and new home sales.

US SPX 500 – technical overview

Signs of a potential top after the market recently broke below critical support at 2147. This now opens the door for a meaningful period of weakness exposing a more pronounced decline towards the June base at 1990. Look for any rallies to now be well capped ahead of 2180, with only a daily close back above this level to compromise the newly adopted bearish outlook. Below 2108 accelerates.

• R2 2194.00 – 15Aug/Record high – Strong
• R1 2180.00 – 222Sep high – Medium
• S1 2108.00 – 12Sep low – Medium
• S2 2073.00 – 6Jul low– Strong

US SPX 500 – fundamental overview

There is a growing concern for stock market bulls that we have reached the limits of monetary policy accommodation and investors will no longer be able to be able to benefit from government and central bank artificial support. Up until recently, softer US economic data had actually been a prop to equities on the assumption it would keep the Fed in accommodative mode. But there has been a notable shift of late, especially now that it looks like the Fed will be hiking, and we are starting to see signs of a deterioration in stocks even when data comes in soft. Perhaps the added hiccup of a shaky global backdrop is also weighing on sentiment. Right now, the September base at 2108 will be the key level to watch. If that goes, the market could really fall off.

GOLD (SPOT) – technical overview

Despite the latest major setback, the overall structure remains highly constructive with the market in the process of carving out a longer-term base. Look for additional weakness to be very well supported above 1240, with only a close back below this level to delay the bullish outlook and give reason for pause.

• R2 1302.50 – 1Sep low – Strong
• R1 1277.20 – 5Oct high – Medium
• S1 1241.45 – 7Oct low – Medium
• S2 1234.95 – 7Jun low – Strong

GOLD (SPOT) – fundamental overview

Broad based US Dollar demand on hawkish Fed speak and expectations for a Fed hike have been cited as major drivers behind GOLD’s slide over the past several weeks. But overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy, extended global equities, systemic risk and a bet that record low inflation will eventually start to turn up. All of this will almost certainly continue to keep the commodity in demand, even if the Buck is propped, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDMXN is in the process of correcting off fresh record highs from late September. While there is still scope for additional declines in the sessions ahead, ultimately, the uptrend remains intact and a higher lower is now sought out ahead of a bullish resumption and break to another record high through major psychological barriers at 20.0000. At this point, only back below 17.9030 would compromise the highly constructive outlook.

• R2 19.3810 – 7Oct high – Strong
• R1 19.0990 – 13Oct high – Medium
• S1 18.4550 – 20Oct low – Medium
• S2 17.9030 – 16Aug low – Strong

Feature – fundamental overview

The Mexican Peso has been holding up relatively well in recent days, particularly after the currency had sunk to fresh record lows in late September. It seems the Banxico’s efforts to dissuade the market from selling Pesos have been effective, at least in the short term, after the central bank raised rates the other week. Meanwhile, a major bank is calling for more tightening in financial conditions from the Banxico over the coming months so that investors will be increasingly uncomfortable holding more expensive short Peso exposure. The likelihood for a Clinton victory in the US election has also been supporting the Peso. Still, overall, the impact of higher rates on a struggling local economy is not ideal, while risk for liquidation on a fear of higher US rates are things that could easily offset the Peso’s run and once again invite renewed downside pressure on the EM currency.