Counterintuitive price action?

GBPUSD – technical overview

The market is in a consolidation phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3200 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

• R2 1.3751 – 23 September high – Strong
• R1 1.3659 – 8 October high – Medium
• S1 1.3412 – 29 September/2021 low – Medium
• S2 1.3400 – Figure – Strong

GBPUSD – fundamental overview

The Pound continues to hold up well overall with the rates market pricing a more hawkish BOE. UK money markets are now pricing a 1% base rate by December 2022. Key standouts on today’s calendar come in the form of ECB and BOE speak, US initial jobless claims, US producer prices, and some Fed speak.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 114.55 to negate the outlook.

• R2 114.00 – Figure– Strong
• R1 113.81 – 13 October/2021 high – Medium
• S1 112.00 – Figure – Medium
• S2 110.82 – 4 October low – Strong

USDJPY – fundamental overview

The Yen has been sold off following currency comments from a senior government official and dovish comments from the BOJ's Noguchi. Sentiment is further shaped by gains in Japanese equities and US stock index futures. Kozo Yamamoto, senior member of the Japanese government said "a weak Yen is beneficial for the economy, as it boosts competitiveness." He also mentioned the BOJ should aggressively purchase JGBs to help fund the fiscal spending. Key standouts on today’s calendar come in the form of ECB and BOE speak, US initial jobless claims, US producer prices, and some Fed speak.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there is risk for additional declines, though setbacks are expected to be well supported down into the 0.7000 area. Look for a weekly close above 0.7500 to force a shift in the structure.

• R2 0.7410 – 10 September high – Strong
• R1 0.7395 – 13 October high – Medium
• S1 0.7226 – 6 October low – Medium
• S2 0.7170 – 29 September low – Strong

AUDUSD – fundamental overview

Australia's employment change fell more than expected, with the 2nd straight monthly employment decline driven by the lockdown across Australia's east coast. This meant overall employment was back below pre-pandemic levels. That said, this was offset by the fact that the bulk of job losses came in part-time positions, while full-time employment actually rose. The unemployment rate was also better than expected, although this was largely down to a decline in the participation rate. Most of the Aussie demand we're seeing today comes from broad USD weakness. Key standouts on today’s calendar come in the form of ECB and BOE speak, US initial jobless claims, US producer prices, and some Fed speak.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

• R2 1.2775 – 29 September high – Strong
• R1 1.2648 – 6 October high – Medium
• S1 1.2422– 30 July low – Srong
• S2 1.2400 – Figure – Strong

USDCAD – fundamental overview

The Canadian Dollar has rallied to its highest levels against the Buck since late-July. Canadian 10-yr yields have now recovered from pandemic losses, closing at Jan 2020 levels. Canada 10-yr inflation breakeven has also risen to eight-year highs, up 14 bps on month. Broad selling of the US Dollar, strong oil, solid Canada data have all factored into the flow. Key standouts on today’s calendar come in the form of ECB and BOE speak, US initial jobless claims, US producer prices, and some Fed speak.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, rallies should be well capped and there is still room for deeper setbacks into the 0.6500-0.6800 area before we see an attempt at a higher low and resumption of upside pressure. Back above the April high at 0.7317 would be required to force a shift in the structure.

• R2 0.7094 – 23 September high – Medium
• R1 0.7000 – Psychological – Strong
• S1 0.6860 – 29 September low – Medium
• S2 0.6809 – 19 August/2021 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is shaking off downside from the rise in New Zealand coronavirus cases, instead focusing on broad based US Dollar weakness, US equities demand and the latest comments from RBNZ Governor Bascand who has reinforced the notion that the central bank is on a gradual tightening path. Key standouts on today’s calendar come in the form of ECB and BOE speak, US initial jobless claims, US producer prices, and some Fed speak.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4600, with a break back below 4353 to strengthen the outlook.

• R2 4552 – 3 September/Record high – Strong
• R1 4485 – 27 September high – Medium
• S1 4272 – 1 October low – Medium
• S2 4233 – 19 July low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment into Q4 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

• R2 1917 – 1 June high – Strong
• R1 1835 – 15 July high – Medium
• S1 1700 – Round number – Medium
• S2 1677 – 8 March/2021 low – 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 exhausted monetary policy, extended global equities, and coronavirus fallout. 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. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2021/09/15seplmaxaudio.mp3"][/audio]