US Dollar Retreats Into Light Calendar Week

GBPUSD – technical overview

Last Thursday’s break and close below the previous yearly low at 1.5875, opens the door for the next major downside extension towards 1.5500 over the coming days. Corrective rallies should now be well capped below 1.6040, while ultimately, only back above 1.6227 would force a shift in the bearish structure.

• R2 1.6039 – 30Oct high – Medium
• R1 1.6000 - Psychological – Medium
• S1 1.5791 – 7Nov/2014 low – Medium
• S2 1.5750 – Mid-Figure – Weak

GBPUSD – fundamental overview

The Pound has been recovering into Monday off Friday’s fresh yearly low against the Buck. Cable had been weighed down to the new low following the release of the wider than expected UK trade balance, with the data coming in at -9.8B versus -9.5B expected and -8.95B previous, but recovered late Friday on the back of a weaker US employment report. The economic calendar for the week is exceptionally light, with the only releases of note coming on Wednesday, in the form of UK employment and the BOE Quarterly Inflation Report. For Monday, market participants will take in comments from Governor Mark Carney.

USDJPY – technical overview

Finally some signs of topping, after the market surged to a fresh 7-year high beyond a measured move objective at 115.00 to 115.59. While the broader uptrend remains firmly intact, with daily studies still stretched, there is room for additional corrective downside and a period of consolidation before the market considers bullish resumption. Ultimately, any setbacks should now be well supported ahead of the previous 2014 peak at 110.10, with only a break below to compromise the structure.

• R2 116.00 – Figure – Medium
• R1 115.59 – 7Nov/2014 high – Medium
• S1 113.41 – 5Nov low – Medium
• S2 112.57 – 3Nov low – Strong

USDJPY – fundamental overview

It shouldn’t come as much of a surprise to see a bit of a pullback in USDJPY following a period of intense strength, which has seen the market rally over 1000 points in less than a month. A bout of broad profit taking on long US Dollar exposure has been working its way into the market since Friday’s weaker US NFP print, and this in conjunction with a very light economic calendar, is also being cited for the reversal. Overall, the market bias remains overwhelmingly constructive USDJPY on the pronounced divergence in central bank policy paths, but for the time being, we could still see a period of additional corrective activity before the markets consider another push to the topside.

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 now 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 1.2032 – 6Nov/2014 low – Weak
• S2 1.2000 – Psychological – Very Strong

EURCHF – fundamental overview

Although the SNB has been quite vocal with its commitment to defend the EURCHF 1.2000 floor, there are heightened concerns the upcoming Switzerland Gold referendum will prevent the central bank from properly defending the floor. If the SNB is required to increase its Gold reserves as a result of the referendum, it will translate into fewer reserves to fight unwanted Franc appreciation. This has been sourced as a key driver of the latest EURCHF weakness to fresh 2014 lows just shy of 1.2000. It seems until the SNB shows its hand, market participants will continue to call the central bank’s bluff.

AUDUSD – technical overview

The latest break and close below the previous yearly low at 0.8642 now confirms a medium-term lower top at 0.8911 and opens the next major downside extension towards a measured move objective in the 0.8400 area over the coming days. In the interim, look for recovery rallies to be well capped below 0.8800, while only back above 0.8911 compromises the bearish structure.

• R2 0.8911 – 29Oct high – Strong
• R1 0.8762 - 5Nov high – Medium
• S1 0.8541 – 7Nov/2014 low – Medium
• S2 0.8500 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar has been recovering against the Buck in the early week along with the rest of the currency market. The gains have been attributed to a massive bout of profit taking from short-term accounts following Friday’s weaker than expected US NFP print. Monday’s softer house finance data out of Australia, and relatively in line China inflation readings have failed to influence price action. Aussie home loans came in at -0.7% versus -0.4% expected, while China CPI came in as expected at -1.6%, with PPI slightly softer at -2.2% versus -2.0% forecast. There are no first-tier economic releases out of Australia this week.

USDCAD – technical overview

The market has entered a period of correction after establishing fresh 2014 highs at 1.1467 in the previous week. However, the uptrend remains firmly intact and any setbacks are expected to be well supported in favour of a fresh higher low above 1.1122 and bullish resumption beyond 1.1467. Ultimately, only below 1.1122 would delay the short-term bullish structure.

• R2 1.1500 – Psychological – Strong
• R1 1.1467- 5Nov/2014 high – Weak
• S1 1.1263 – 3Nov low – Medium
• S2 1.1185 – 31Oct low – Strong

USDCAD – fundamental overview

Finally a bit of relief for the Canadian Dollar, with the Loonie rallying from 2014 lows against the Buck. While a wave of profit taking on long USD positions has been helping Cad, the currency has been finding relative bids on the very impressive Friday employment data, which came in sharp contrast with concurrent US data. Canada jobs grew 43.1k versus the -5k expected, while the unemployment rate came in at 6.5% versus the 6.9% consensus. This was the lowest unemployment rate since November 2008. Also seen supporting Cad has been some stabilization in rapidly declining oil prices.

NZDUSD – technical overview

The latest break and close below the previous yearly low at 0.7707 now confirms a medium-term lower top at 0.8035 and opens the next major downside extension towards a measured move objective in the 0.7400 area over the coming days. In the interim, look for recovery rallies to be well capped below 0.7900, while only back above 0.8035 compromises the bearish structure.

• R2 0.7978 – 29Oct high – Medium
• R1 0.7842- 5Nov high – Medium
• S1 0.7660 – 7Nov/2014 low – Weak
• S2 0.7600 – Figure – Medium

NZDUSD – fundamental overview

Widespread profit taking on US Dollar long positions post US NFPs is helping to support Kiwi off recently established 2014 lows. Still overall, the fundamental picture in New Zealand does not favour any meaningful extension of Kiwi gains, with the local economy cooling and the RBNZ moving away from a tightening bias. There has been talk that Wednesday’s RBNZ financial stability review will announce the removal of loan to value restrictions, which would further cement the central banks transition to more accommodative policy.

US SPX 500 – technical overview

The market is showing signs of exhaustion off recently established fresh record highs, following a remarkable recovery rally of over 200 points from mid-October. However, a break and daily close back under 2002 will be required to trigger a correction and take the immediate pressure off the topside. Inability to close below 2002, will keep the market looking for new highs.

• R2 2050.00 – Psychological – Strong
• R1 2039.00 – 7Nov/Record high – Medium
• S1 2002.00 – 4Nov low – Strong
• S2 1966.00 – 30Oct low – Strong

US SPX 500 – fundamental overview

US equity markets continue to hold onto record high gains in reaction to ramped up global monetary easing initiatives from the BOJ and ECB. However, with the Fed already starting to lean more to the hawkish side, the current rally 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, this pattern could play out again. The economic calendar is very quiet this week, which could get traders thinking about profit taking into year-end, following a massive surge since mid-October.

GOLD (SPOT) – technical overview

The market has come under pressure since breaking below previous multi-month support at 1180 the other week. However, with daily studies oversold, we are now seeing the onset of a correction to allow for these studies to unwind. But any additional recovery rally is expected to be well capped around the 20-Day SMA in favour of a fresh lower top and bearish resumption towards a measured move objective at 1100. Only back above 1256 would compromise the bearish structure.

• R2 1256.00 – 21Oct high – Strong
• R1 1207.00 – 20-Day SMA – Medium
• S1 1131.00 – 7Nov/2014 low – Medium
• S2 1100.00 – Measured Move – Strong

GOLD (SPOT) – fundamental overview

Finally some demand for the yellow metal in recent sessions, with the commodity recovering off yearly lows as the US Dollar undergoes a period of corrective selling. 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. Also seen supporting has been the resurfacing of geopolitical risk, with tensions mounting in the Russia-Ukraine conflict.

Feature – technical overview

USDSGD is showing signs of short-term topping after posting a fresh 2014 high at 1.2975 in the previous week. There is now room for additional corrective activity down towards some previous resistance at 1.2820, from where the next higher low is ideally sought in favour of bullish resumption. Ultimately, only below 1.2670 compromises the constructive structure.

• R2 1.3000 – Psychological – Strong
• R1 1.2975 – 5Nov/2014 high – Medium
• S1 1.2820 – 3Oct high – Medium
• S2 1.2670 - 9Oct low – Strong

Feature – fundamental overview

Solid trade data out of China over the weekend has helped to keep the Singapore Dollar in recovery following fresh yearly lows against the Buck in the previous week. The USDSGD market had reversed course on Friday after a broad wave of profit taking on long USD positioning kicked in. The weaker than expected US NFP print has been sourced as a primary catalyst for the US Dollar decline and could now open deeper setbacks in this pair towards 1.2800 in the sessions ahead. But overall, the outlook remains constructive with the Fed moving closer to rate hikes and yield differentials expected to benefit the Buck on this theme.