Yen Recovers As Risk Comes Off Post Shocking Japan GDP

GBPUSD – technical overview

Finally a little bit of relief for this market, after dropping to fresh 2014 lows at 1.5593 in the previous week. While the overall structure continues to favour the downside, there is scope for a bit of a corrective bounce in the sessions ahead to allow for some stretched studies to unwind. Monday’s break back above Friday’s high ends a sequence of consecutive daily lower tops and opens the door for a push back towards resistance at 1.5945. However, look for the market to stall out somewhere around 1.5945 ahead of bearish continuation. Ultimately, only back above 1.6227 would compromise the current bearish structure.

• R2 1.5945 – 11Nov high – Strong
• R1 1.5790 - 7Nov low – Medium
• S1 1.5593 – 14Nov/2014 low – Weak
• S2 1.5550 – Mid-Figure – Weak

GBPUSD – fundamental overview

There have been some attempts at recovery for the Pound in the early week, with the currency benefitting from broad based currency gains against the Buck. Cable had fallen to a fresh yearly low at 1.5593 on Friday, with the market already weighed down before the daily open on the downbeat Bank of England Quarterly Inflation Report and then accelerating to the low in North American trade, post the better than expected US retail sales print. However, for the moment, there has been a bit of relief for the beleaguered UK currency despite today’s downbeat Rightmove house price showing. BOE Carney was out earlier today in Singapore talking about fixed pay regulation for bankers in an effort to rebuild trust in financial institutions post crisis.

USDJPY – technical overview

Although the market continues to race to fresh 7-year highs, there are strong signs of near-term topping in favour of a period of correction and consolidation. Daily, weekly, and monthly studies are well overbought, and a surge of nearly 1200 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 onset of the anticipated correction that should expose 112.00 further down. A close below 116.30 on Monday would confirm a a bearish outside day formation and could act as the catalyst for the anticipated reversal.

• R2 117.05 – 17Nov/2014 high – Strong
• R1 116.83 – 14Nov high – Medium
• S1 114.88 – 12Nov low – Medium
• S2 113.86 – 10Nov low – Strong

USDJPY – fundamental overview

The Yen stands out as the big story for Monday following a shockingly poor Japan Q3 GDP showing. The data came in at -0.4% q/q versus estimates of +0.5%, with the y/y sliding to -1.6%, against calls for a +2.2% print. USDJPY initially spiked on the news, above 117.00 to a fresh 7 year high at 117.05, but reversed sharply back under 116.00 as risk correlations took hold. The alarming print has sent the Nikkei through the floor, and this in turn has opened some profit taking on long USDJPY positioning. Still, while we could see additional downside in USDJPY over the coming sessions, the threat of a Japanese recession, prospects for a delayed tax hike and PM Abe calling a snap election should all keep the major pair well supported on dips, particularly in the face of increasingly favourable US Dollar yield differentials.

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 weeks. 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 1.2080 – 15Oct high – Strong
• R1 1.2045 – Previous base – Medium
• S1 1.2011 – 14Nov/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. Still, there has been some interest below 1.2020, given the proximity to 1.2000 and favourable risk-reward dynamics.

AUDUSD – technical overview

The market has been in the process of correcting since breaking down to fresh 2014 lows at 0.8541 the other week. However, additional gains should prove hard to come by, with a lower top sought out ahead of a bearish resumption. Look for the 0.8830, 78.6% fib retracement off of the recent 0.8911-0.8541 move to cap gains, while only back above 0.8911 would compromise the structure and give reason for pause.

• R2 0.8911 – 29Oct high – Strong
• R1 0.8830 - 78.6% retrace – Medium
• S1 0.8648 – 14Nov low – Medium
• S2 0.8541 – 7Nov/2014 low – Strong

AUDUSD – fundamental overview

Although the Australian Dollar has extended gains against the Buck, additional rallies could prove difficult give the ongoing divergence in central bank monetary policy paths. The RBA has its foot on the break and retains its view the Australian Dollar is overvalued, while the Fed is inching closer and closer to that 2015 rate hike. Any gains in recent sessions are more a function of some broad based corrective weakness in the US Dollar, with a bit of a pop in commodities prices off recent lows also helping a bit. There is strong sell related interest from macro accounts towards 0.8800 and all the way up into the 0.8850 area. Also worth noting an abysmal Aussie new motor vehicle sales print on Monday.

USDCAD – technical overview

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

• R2 1.1467 – 5Nov/2014 high – Strong
• R1 1.1402- 11Nov high – Medium
• S1 1.1185 – 31Oct low – Medium
• S2 1.1122 – 29Oct low – Strong

USDCAD – fundamental overview

The Canadian Dollar has found a bit of a bid tone in recent trade, with the currency benefitting from a mild, broad based US Dollar correction. Still, there has been room for some relative strength, with Friday’s solid Canada manufacturing data and the recent blowout Canada employment report helping the Loonie a bit. Meanwhile, oil prices have also recovered off recent lows, and given Cad’s correlation with the commodity, it isn’t surprising to see some more profit taking on long USDCAD trades. Overall however, the expectation the Fed will hike before the BoC is what is driving the medium-term price action, and this pair should remain well supported into additional declines, with USDCAD seen back through the recent 2014 high.

NZDUSD – technical overview

An impressive recovery for this market over the past several days, since dropping to a fresh 2014 low at 0.7660. However, the underlying structure is still bearish and the gains are classified as corrective. The market is now approaching some formidable resistance at 0.8035 and only a break and close above this level would delay the bearish outlook. Look for gains to stall out somewhere ahead of, or around 0.8035 in the coming sessions in favour of a lower top and bearish resumption back towards and eventually below 0.7660.

• R2 0.8035 – 21Oct high – Strong
• R1 0.8000 - Psychological – Medium
• S1 0.7798 – 12Nov low – Medium
• S2 0.7660 – 7Nov/2014 low – Strong

NZDUSD – fundamental overview

The past week or so of trade has been quite good to the New Zealand Dollar, with the currency outperforming and trading back towards 0.8000 against the Buck. A broad currency rally, recovering commodity price and solid local data have all been helping to drive the Kiwi gains. New Zealand retail sales were out early Monday and nearly doubled expectation at +1.5% versus analyst forecasts for a +0.8% showing. Still, this shouldn’t do much to change the broader picture, with NZ economic data on the whole on the softer side and RBNZ policy diverging from the Fed. Dealer’s have been talking about a lot of renewed sell interest in NZDUSD towards 0.8000.

US SPX 500 – technical overview

After posting fresh record highs on a near daily basis over the past month, the market is finally showing signs of exhaustion following a remarkable recovery rally of well over 200 points from mid-October. A daily close back under 2031 on Monday would confirm the onset of the correction and open the door for an acceleration of declines back towards key support at 2002. However, inability to close below 2031 would delay the overdue pullback and keep the immediate pressure on the topside.

• R2 2100.00 – Psychological – Strong
• R1 2049.00 – 13Nov/Record high – Medium
• S1 2015.00 – 6Nov low – Medium
• S2 2002.00 – 4Nov low – Strong

US SPX 500 – fundamental overview

US equity markets could finally be at risk for reversal following impressive record gains post ramped up BOJ and ECB easing measures. Though these central banks have moved further into accommodation, the Fed has ended QE and is now on a path towards tightening. Major stock market corrections were seen at the end of QE1 and QE2, and with QE3 done, this pattern could play out again. Given the massive +10% move over the past month, traders may start thinking about profit taking into year-end. US economic data has been solid on the whole, with Friday’s impressive retail sales print potentially sealing the deal on the Fed removing its “considerable time” language in the monetary policy statement next month.

GOLD (SPOT) – technical overview

A nice little recovery rally for this market over the past couple of sessions, with the price rallying back to the 20-Day SMA. A daily close above the 20-Day SMA could open the door for additional gains in the days ahead, while inability to establish above the moving average would suggest a lower top is in the cards ahead of a bearish resumption back towards the recent multi-year low at 1131 and then 1100 further down. Ultimately, only above 1256 would compromise the underlying bearish structure.

• R2 1256.00 – 21Oct high – Strong
• R1 1200.00 – Psychological – Medium
• S1 1146.00 – 11Nov low – Medium
• S2 1131.00 – 7Nov/2014 low – Strong

GOLD (SPOT) – fundamental overview

Gold has managed to extend its recovery for the second straight week, since dropping to 4-year lows below 1180. A bout of broad based selling in the US Dollar has helped to inspire some of the gains in this market over the past week. Still, gold’s alternative safe haven status 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

USDSGD is in the process of consolidating after recently piercing through psychological barriers at 1.3000 and setting a fresh 2014 high of 1.3015. At this point, there is room for some corrective declines in the sessions ahead to allow for stretched studies to unwind, but only a break and close below recent support at 1.2863 would take the immediate pressure off the topside and delay the prospect for additional gains.

• R2 1.3100 – Figure – Medium
• R1 1.3015 – 14Nov/2014 high – Strong
• S1 1.2900 – 14Nov low – Medium
• S2 1.2863 - 10Nov low – Strong

Feature – fundamental overview

The Singapore Dollar remains under pressure into the new week, after posting another fresh 2014 low against the Buck on Friday. Broad currency gains against the Buck in recent days have not done anything to slow the SGD decline, and with Singapore’s October NODX declining to -1.5% y/y, there is still room for additional USDSGD gains ahead. Dealer’s cite the recent high at 1.3015 and 1.2865 as the key levels to watch above and below.