US Dollar Regains Composure Post NFPs

GBPUSD – technical overview

The market remains under pressure after breaking to a fresh 2014 low in the previous week. This has set the stage for the next major downside extension into the 1.5500 area in the days ahead. Rallies are now expected to be well capped below 1.6040, while only back above 1.6227 would compromise 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

Not much of a recovery for Cable, with broad based USD buying reasserting on Monday. The market is expected to trade off broader flows on Tuesday, with nothing of note on the economic calendar. In fact, the only key UK releases this week come on Wednesday, in the form of UK employment and the BOE Quarterly Inflation Report. Bank of England Governor Mark Carney was out on Monday welcoming the new rules from the Financial Stability Board, which will effectively put the responsibility on the banks, bank shareholders, and bank creditors in the event of distress, rather than on the taxpayer.

USDJPY – technical overview

Although the market has managed to break to yet another high on Tuesday, there are signs of near-term topping in favour of a period of correction and consolidation. Daily and weekly studies are well overbought, and a surge of over 1000 points since mid-October is deserving of a healthy retreat. Look for any additional gains to have a hard time establishing beyond 116.00, with a break and daily close back under 113.86 to confirm short-term topping and the onset of the correction. However, ultimately, the uptrend remains firmly intact, with only a drop below the previous peak at 110.10 to compromise.

• R2 116.50 – Mid-Figure – Medium
• R1 116.00 – 11Nov/2014 high – Medium
• S1 113.41 – 5Nov low – Medium
• S2 112.57 – 3Nov low – Strong

USDJPY – fundamental overview

A surge in the Nikkei beyond 17000 and a weaker than expected Japanese consumer confidence print, have been sourced as the primary drivers behind an early Tuesday rally in USDJPY. Also seen propping the major pair is chatter PM Abe will postpone a planned sales tax hike. The broader macro theme of diverging Fed policy and US economic fundamentals has already opened resurgence in across the board US Dollar buying, and an anemic economic calendar this week, will likely keep markets trading off broader themes. Dealer’s talk of decent USDJPY sell-stops below 113.85.

EURCHF – technical overview

The market has finally broken down below the previous 1.2045 yearly low from September after being so well supported just above the level for so many days. The break 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 1.2022 – 10Nov/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 in 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

Renewed downside pressure in commodities and a fresh wave of US Dollar demand has resulted in a limited Aussie recovery off its 2014 lows against the Buck from the previous week. Setbacks have been tempered just a bit on Tuesday, with Aussie business conditions rising to 13 from 1, to put in the biggest gain on record for this series. But the data is hardly first tier and concurrent business confidence readings were somewhat offsetting, dropping down to 5 from 6. There is no other data of note on the Aussie economic calendar this week, with the currency left to trade of broader themes.

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

The blowout Canada employment report from this past Friday seems to be losing influence, with the Cad recovery getting swallowed up on Monday. It seems the market is more focused on the US side of this equation, which shows risk for a Fed tightening in 2015 and an overall improving US economic landscape. The pullback in oil prices should also not be discounted, with the weakness in this commodity highly correlating to performance in the Canadian Dollar.

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

Kiwi gains are expected to continue to find solid resistance, as the fundamental backdrop is not currency supportive, 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. Also watch out for RBNZ Wheeler’s early Wednesday testimony before Parliament, where he could do some more talking down of the local currency.

US SPX 500 – technical overview

Despite posting fresh record highs on a daily basis, the market is showing signs of exhaustion following a remarkable recovery rally of over 200 points from mid-October. However, a break and daily close back under 2025 will be required to trigger a correction and take the immediate pressure off the topside. Inability to close below 2025, will keep the market looking for new highs.

• R2 2100.00 – Psychological – Strong
• R1 2050.00 – Psychological – 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. But volume for Tuesday could be a good deal lighter in light of the Veteran’s Day holiday.

GOLD (SPOT) – technical overview

The market has come under pressure since breaking below previous multi-month support at 1180. This has opened the door for a measured move downside extension into the 1100 area over the coming days. In the interim, any corrective rallies are expected to be well capped below 1200, with only a break back above 1256 to compromise the bearish structure.

• R2 1256.00 – 21Oct high – Strong
• R1 1202.00 – 20-Day SMA – Medium
• S1 1131.00 – 7Nov/2014 low – Medium
• S2 1100.00 – Measured Move – Strong

GOLD (SPOT) – fundamental overview

The gold market remains under pressure off fresh yearly lows from the previous week, as broad based demand for the US Dollar detracts from the appeal of the yellow metal. 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. There is a lot of talk of sizable demand on dips into the 1100-1150 area.

Feature – technical overview

US OIL (spot) remains under intense pressure, with the price recently dropping to a fresh 2014 low through the 2012 base. Next key support comes in the form of the 2010 base at 74.95, with a break below 75.90 to open the door for a direct retest of the key level. A daily close back above 79.85 would be required to take the immediate pressure off the downside.

• R2 82.85 – 29Oct high – Strong
• R1 79.85 – 10Nov high – Medium
• S1 75.90 – 4Nov/2014 low – Medium
• S2 74.95 - 2010 Base – Strong

Feature – fundamental overview

Oil is back to pressuring the recent yearly low which guards against the 2010 base at 74.95. Net speculative positioning is still weighted to the long side, but is not at levels that would suggest a bottom has been reached just yet. It seems the market still wants to head lower and clear out sell-stops before considering a base. The net supply/demand balance for the commodity remains oil negative, but at this point, the lower prices have not yet compromised US production. Ongoing developments out of Saudi Arabia and on the geopolitical front should be watched closely.