Can the rally be trusted?

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September. A break above the September high at 1.1739 will solidify the recovery. Until then, look for setbacks to be well supported ahead of 1.0800.

• R2 1.1739– 13 September high – Strong
• R1 1.1646 – 27 October high – Medium
• S1 1.1431 – 26 October low – Medium
• S2 1.1258 – 24 October low – Medium

GBPUSD – fundamental overview

The market clearly sees Sunak with more credibility than the previous administration, as reflected in price action. Meanwhile, broad based US Dollar selling and risk on flow has also inspired demand. The UK budget policy announcement has been extended to November 17th from October 31st. Key standouts on today’s calendar come from German consumer confidence reads, the ECB policy decision, US GDP, durable goods, and initial jobless claims.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped on rallies above 150.00. Next key support comes in at 145.43.

• R2 152.00 – Round Number – Strong
• R1 151.95 – 21 October/2022 high – Strong
• S1 145.43– 24 October low – Strong
• S2 143.52 –5 October low – Medium

USDJPY – fundamental overview

The Yen has finally found a way to a rally a bit, getting help from Japan intervention efforts and this latest wave of broad based US Dollar selling. Overall however, monetary policy divergence should continue to welcome renewed Yen selling into rallies. Key standouts on today’s calendar come from German consumer confidence reads, the ECB policy decision, US GDP, durable goods, and initial jobless claims.

AUDUSD – technical overview

Overall pressure remains on the downside with the market confined to a well defined downtrend. A break back above 0.6682 would be required to take the pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6000.

• R1 0.6548 – 4 October high – Strong
• R2 0.6512 –26 October high – Medium
• S1 0.6372 –26 October low – Medium
• S2 0.6272 – 24 October low – Strong

AUDUSD – fundamental overview

The market has been impressed with the Aussie budget update and the latest Aussie inflation data has come in above forecast. This along with broad based US Dollar outflows and renewed risk appetite are helping to drive the Australian Dollar higher. Key standouts on today’s calendar come from German consumer confidence reads, the ECB policy decision, US GDP, durable goods, and initial jobless claims.

USDCAD – technical overview

A recent surge back above 1.3000 signals an end to a period of bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

• R2 1.3978 – 13 October/2022 high – Strong
• R1 1.3855 – 21 October high – Medium
• S1 1.3508 – 26 October low – Medium
• S2 1.3503 – 4 October low – Strong

USDCAD – fundamental overview

The Canadian Dollar managed to rally on Wednesday, despite the surprise of a smaller than expected rate hike and more cautious outlook from the Bank of Canada. A lot of the demand for the Loonie came from risk on flow and broad based US Dollar selling. Key standouts on today’s calendar come from German consumer confidence reads, the ECB policy decision, US GDP, durable goods, and initial jobless claims.

NZDUSD – technical overview

Overall pressure remains on the downside with the focus on a retest of the critical low from 2020 at 0.5469. A break back above 0.6162 would be required to take the immediate pressure off the downside.

• R2 0.6026 – 15 September high – Medium
• R1 0.5900 – Figure – Medium
• S1 0.5657– 24 October low – Medium
• S2 0.5600 – 21 October low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been finding some demand on the back of broad based US Dollar outflows and renewed risk on flow. Key standouts on today’s calendar come from German consumer confidence reads, the ECB policy decision, US GDP, durable goods, and initial jobless claims.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 4000 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3200.

• R2 3922 – 20 September high – Medium
• R1 3890 – 26 October high – Strong
• S1 3634 – 21 October low – Medium
• S2 3492 – 13 October/2022 low – Strong

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2022 that results in downside pressure into rallies.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension.

• R2 1766 – 25 August high – Strong
• R1 1736 – 12 September high – Medium
• S1 1615 – 28 September/2022 low – Medium
• S2 1600 – Round Number – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about inflation risk and a less upbeat global growth outlook. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.