Digesting election results, prepping for US inflation data

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 1.1646– 27 October high – Strong
• R1 1.1599 – 8 November high – Medium
• S1 1.1146 – 4 November low – Medium
• S2 1.061 – 21 November low – Medium

GBPUSD – fundamental overview

The Pound didn't get as much love as other currencies on Tuesday, this on worry out of the BOE around recession prospects. JP Morgan added that a UK recession would leave the economy 10% smaller than pre-COVID levels. There is no first-tier economic data on Wednesday’s calendar, with only some Fed speak standing out.

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 145.11– 27 October low – Strong
• S2 143.52 –5 October low – Medium

USDJPY – fundamental overview

The prospect of the BOJ considering a policy exit and a BOJ Summary showing some members seeing the possibility of an inflation overshoot, was enough to inspire a fresh round of Yen demand. There is no first-tier economic data on Wednesday’s calendar, with only some Fed speak standing out.

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 0.600 – Figure – Medium
• R2 0.6552 – 8 November high – Medium
• S1 0.6300 – Figure – Medium
• S2 0.6272 – 24 October low – Strong

AUDUSD – fundamental overview

The metals market believes China will reopen and it's only a matter of time. This has resulted in a surge in metals prices, which in turn, has driven some outperformance in the Australian Dollar. There is no first-tier economic data on Wednesday’s calendar, with only some Fed speak standing out.

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 1.3809 – 3 November high – Medium
• S1 1.3387 – 8 November low – Medium
• S2 1.3358 – 21 September low – Medium

USDCAD – fundamental overview

The Canadian Dollar is still outperforming as the market reprices monetary policy divergence back in favour of the Loonie, on account of last week's blowout Canada jobs report. There is no first-tier economic data on Wednesday’s calendar, with only some Fed speak standing out.

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 0.6000 – 8 November high – Medium
• S1 0.5740– 3 November low – Medium
• S2 0.5657 – 24 October low – Medium

NZDUSD – fundamental overview

New Zealand two-year inflation expectations jumped to 3.62%, their highest since 1991. Meanwhile, RBNZ Gov Orr has been reappointed to a five-year term, and is seen delivering another 50 bps rate hike this month. There is no first-tier economic data on Wednesday’s calendar, with only some Fed speak standing out.

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 3921 – 1 November high – Strong
• S1 3699 – 3 November low – Medium
• S2 3634 – 21 October 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 Q4 2022 and Q1 2023 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 1736 – 12 September high – Medium
• R1 1717 – 8 November high – Medium
• S1 1665 – 8 November low – Medium
• S2 1615 – 28 September/2022 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 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.