EURCHF, GOLD Drop To Fresh 2014 Lows

GBPUSD – technical overview

The pair remains confined to a bearish consolidation, with the focus on a retest of the recent yearly low at 1.5875. A break below 1.5875 would open the next major downside extension into the 1.5500 area. Key short-term resistance comes in at 1.6227 and only a break above would take the immediate pressure off the downside.

• R2 1.6300 – Figure – Weak
• R1 1.6227 - 9Oct high – Strong
• S1 1.5925 – 3Nov low – Medium
• S2 1.5875 – 15Oct/2014 low – Strong

GBPUSD – fundamental overview

Not a lot going on in UK markets at the moment, with the Pound taking a back seat to more pressing themes. Traders failed to show any reaction to the softer than expected BRC shop price inflation which came in at -1.9% versus consensus estimates of -1.7%, and will now digest the latest services PMIs and official reserves. But with Cable locked within a well-defined range ahead of tomorrow’s Bank of England rate decision, it is clear a break below the 2014 low at 1.5875 or back above 1.6230 will be required to draw more attention.

USDJPY – technical overview

The market has gone parabolic, surging through the previous yearly peak at 110.10, to a fresh 7-year high above 114.00. The bullish break confirms a medium-term higher low at 105.20, which now opens a measured move upside objective to 115.00 in the sessions ahead. Stretched studies could unwind a bit from overbought but any setbacks should be well supported above 110.00.

• R2 115.50 – Mid-Figure – Weak
• R1 115.00 – Psychological – Very Strong
• S1 112.57 – 3Nov low – Medium
• S2 112.00 – Figure – Medium

USDJPY – fundamental overview

The Yen has extended its slide against the Buck on Wednesday, with USDJPY breaking back over 114.00 on comments from Governor Kuroda that current FX rates reflect good economic fundamentals and he doesn’t think there is a limit for BOJ steps. Yen volumes remain at elevated levels on the exchange, and the market is clearly fixated on a test of the major psychological barrier at 115.00, where decent option barriers are also reported. Also seen supporting the major pair are post US mid-term election results, with the Republican victory initially inspiring fresh risk on bids.

EURCHF – technical overview

The market has finally broken down below the yearly low from September at 1.2045 after being so well supported just above the level for so many days. The break now exposes critical support at 1.2000, below which would open an acceleration of declines. Back above 1.2080 would be required to take the immediate pressure off of the downside, while only above 1.2140 shifts the bearish structure.

• R2 1.2140 – 7Oct high – Very Strong
• R1 1.2080 – 15Oct high – Strong
• S1 1.2033 – 5Nov/2014 low – Weak
• S2 1.2000 – Psychological – Very Strong

EURCHF – fundamental overview

Market participants seem content on continuing to call the SNB’s bluff, with EURCHF breaking down to a fresh 2014 low and now threatening an imminent test of the central bank’s 1.2000 line in the sand. The SNB has repeatedly warned markets that it is prepared to act “immediately” to defend the floor and is firmly committed to keeping the price supported above the barrier. Still, it appears the talk is losing its effect and until there is an actual response, the selling will persist. Some analysts have attributed the weakness to concern next month’s referendum in Switzerland will require the SNB to increase its GOLD reserves, thereby diminishing the amount in reserve for FX intervention.

AUDUSD – technical overview

Inability to establish above 0.8900 last week leaves the market confined to a bearish consolidation and increases the prospect for a break to fresh yearly lows below 0.8642. Below 0.8642 would open the door for the next major downside extension towards 0.8400. Ultimately, only a daily close above 0.8900 would take the immediate pressure off the downside.

• R2 0.8854 – 30Oct high – Medium
• R1 0.8785 - 10-Day SMA – Medium
• S1 0.8642 – 3Oct/2014 low – Strong
• S2 0.8600 – Figure – Weak

AUDUSD – fundamental overview

The Australian Dollar is expected to remain under pressure with deteriorating local fundamentals, a more neutral central bank, and falling commodity prices all viewed as currency negative. This comes at a time when the US Dollar has been in strong demand on improving US economic data and the likelihood the Fed will reverse monetary policy in favour of higher rates. Yield differentials continue to narrow in favour of the Buck and deeper setbacks could be in the cards for Aussie down towards 0.8400 in the days ahead should the market put in a fresh yearly low and close below 0.8640.

USDCAD – technical overview

Fresh 2014 highs for this pair, with the market breaking above the previous yearly high at 1.1386 on Tuesday to set the stage for a test of the next measured move objective at 1.1500. A higher low has now been confirmed at 1.1121, with any setbacks expected to be well supported above the level. Only a close back below 1.1121 would delay the short-term bullish structure.

• R2 1.1500 – Psychological – Strong
• R1 1.1444- 5Nov/2014 high – Weak
• S1 1.1185 – 31Oct low – Medium
• S2 1.1122 – 29Oct low – Strong

USDCAD – fundamental overview

The drop in oil prices has been a key contributor to the Loonie’s decline to fresh 2014 lows. This follows Saudi oil price cuts to the US and downgraded oil forecasts from the European Commission. However, this shouldn’t overshadow recent comments from BoC Governor Poloz who stressed the need for continued monetary stimulus and warned additional stimulus could be forthcoming if headwinds persisted. This further highlights the diverging Fed/BoC monetary policy paths and should continue to support USDCAD over the medium-term. Dealers talk of interest towards 1.1500, with fresh bids between 1.1250-1.300.

NZDUSD – technical overview

Monday’s break below the multi-day bearish consolidation low at 0.7707 sets the stage for the next major downside extension towards 0.7400 over the coming days. However, next key support in the form of the 2013 base at 0.7680 will need to be taken first to get things going to the downside. Until then, expect some more inter-day chop. But ultimately, only back above 0.8035 would negate the underlying bearish trend.

• R2 0.8035 – 21Oct high – Strong
• R1 0.7880- 31Oct high – Medium
• S1 0.7698 – 3Nov/2014 low – Medium
• S2 0.7680 – 24Jun/2013 low – Strong

NZDUSD – fundamental overview

Some better than expected New Zealand employment data helped to support Kiwi in early Wednesday trade. However, the fact that wage costs were still contained and the employment data is ultimately a lagging indicator, kept the market from getting too far ahead of itself. Also seen weighing on Kiwi gains was the latest poorly received Fonterra dairy auction, further highlighting the ongoing deterioration in the commodities markets. Commodity currencies have not had a good run of late with so much downside pressure in the sector. The RBNZ has reacted by downgrading its hawkish stance at a time when the Fed is moving closer to a tightening. This ultimately should continue to weigh on the higher yielding Kiwi.

US SPX 500 – technical overview

Gains have stalled out a bit since Monday’s fresh record high, with the market attempting to carve some form of a short-term top. However, a break and daily close back below Tuesday’s 2002 low would now be required to take the immediate pressure off the topside and open a more legitimate corrective decline.

• R2 2040.00 – Psychological – Medium
• R1 2026.00 – 3Nov/Record high – Weak
• S1 2002.00 – 4Nov low – Medium
• S2 1966.00 – 30Oct low – Strong

US SPX 500 – fundamental overview

US equities markets have been supported in early Wednesday trade on the back of a positive reaction to the US mid-term election results which secured Republican control in the House and Senate. However, with the Fed already starting to lean more to the hawkish side, the current rally to record highs could be a last gasp effort before capitulation. Major stock market corrections were seen on lack of Fed stimulus at the end of QE1 and QE2, and with QE3 now done, we could see the same again sooner than later.

GOLD (SPOT) – technical overview

The market has finally broken down to clear the critical multi-month base at 1180 to expose 1000 further down. However, there is some solid support going back to 2010 in the 1100-1150 area, and with daily studies well oversold, risk for additional declines should be limited for now in favor of a corrective rebound. Still, only a break back above 1256 would officially alleviate immediate downside pressure.

• R2 1256.00 – 21Oct high – Strong
• R1 1203.00 – 31Oct high – Medium
• S1 1100.00 – Psychological – Medium
• S2 1000.00 – Psychological – Very Strong

GOLD (SPOT) – fundamental overview

Gold continues to slump to fresh 4-year lows towards 1100, with the market unable to find support as favourable US Dollar yield differentials and surging equity markets detract from the metal’s lure as an alternative investment. Still, gold’s alternative safe haven appeal should not be discounted with the global economy looking more fragile and massive currency depreciations underway as central banks away from the US battle deflation. Technicians cite an oversold short-term market, while dealers talk of good demand all the way down to 1100.

Feature – technical overview

USMXN gains have stalled out for now after the market put in a fresh 2014 high on Tuesday at 13.68. Technical studies are a little stretched on the daily, so there is room for a short-term corrective pullback towards 13.27 before the market looks to resume the broader underlying uptrend. Only a daily close below 13.37 would force a shift in the structure.

• R2 13.80 – Psychological – Medium
• R1 13.68 – 4Nov/2014 high – Medium
• S1 13.40 – 31Oct low – Medium
• S2 13.27 - 9Oct low – Strong

Feature – fundamental overview

Rapidly declining commodity prices, fears of widespread deflation, concern over the outlook for global growth and contrasting US fundamentals have been the fuel that has driven the Peso to fresh 2014 lows against the Buck. While the ongoing surge in equity markets and a hawkish Banxico have helped to mitigate declines somewhat, ultimately, the Peso should continue to be vulnerable over the medium-term on the more bearish MXN themes cited above.