Yen Will It End? USDJPY To Another 7-Year High!

GBPUSD – technical overview

Recovery attempts have been unsuccessful in recent trade, with the downtrend firmly intact and the market considering a break to yet another 2014 low below 1.5593. Below 1.5593 would open the door for the next key downside target in the form of the 1.5500 barrier, while a break back above Monday’s high at 1.5735 would be required to take the immediate pressure off the downside. Still, any rallies above 1.5735 would be classified as corrective, with the market seen carving a lower top somewhere below 1.5945 in favour of bearish resumption.

• R2 1.5945 – 11Nov high – Strong
• R1 1.5735 - 17Nov high – Medium
• S1 1.5593 – 14Nov/2014 low – Weak
• S2 1.5550 – Mid-Figure – Weak

GBPUSD – fundamental overview

A lot of the fate for the Pound on Wednesday will be dictated by how the markets digest the Bank of England Minutes. The Minutes are expected to show a unanimous 9-0 vote for no change on the APF target, but could shake things up if they show hawks Weale and Mccaferty defecting back over to the doves on rates. This is not expected but if confirmed, would open fresh downside in the Pound. Cable trades off 2014 lows and will need to clear short-term buy-stops above 1.5735 if it wants to take the pressure off the downside.

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 over 1200 points since mid-October is deserving of a healthy retreat. Look for any additional gains to have a hard time establishing beyond 117.00, with a break and daily close back under 115.45 to confirm short-term topping and onset of the anticipated correction that should expose 113.86 further down.

• R2 118.00 – Figure – Medium
• R1 117.32 – 14Nov/2014 high – Weak
• S1 116.34 – 18Nov low – Medium
• S2 115.45 – 17Nov low – Strong

USDJPY – fundamental overview

USDJPY has broken to yet another 7-Year high Wednesday, on the back of PM Abe’s call for a snap election, the announcement of a delay in the sales tax and an expectation for further stimulus. All of this comes after Monday’s disastrous Japanese GDP release, which set the tone for the first half of the week. The Bank Of Japan decision understandably has taken a backseat in light of these developments, with the only potential additional boost for USDJPY coming from the revelation of an improved 8-1 majority vote on the central bank’s easing program. Clearly the message over the past several days is that the BOJ is prepared to still do more as needed, and this continues to widen the divergence in Fed, BOJ central bank policies. Today’s FOMC Minutes will shed further light and could open additional volatility if the Fed upgrades its growth or inflation outlook.

EURCHF – technical overview

The market remains under pressure since breaking down below the previous yearly base at 1.2045, most recently dropping just below 1.2010. 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 1.2009 – 18Nov/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 now sought out ahead of a bearish resumption. Monday’s 0.8796 high is now a strong candidate for that next lower top in favour of bearish resumption back towards and below 0.8541. Ultimately only back above 0.8911 would compromise the bearish structure and give reason for pause.

• R2 0.8830 – 78.6% retrace – Medium
• R1 0.8796 - 17Nov high – Medium
• S1 0.8591 – 11Nov low – Medium
• S2 0.8541 – 7Nov/2014 low – Strong

AUDUSD – fundamental overview

RBA Stevens was anything but upbeat on Tuesday, and the comments have opened the door for renewed weakness in the Australian Dollar. The central bank governor alluded to rates staying at current levels for “years” on the back of economic weakness, highlighted by weaker jobs growth. Stevens also went on to talk down the local currency after coming out with some strong language, saying there was a “pretty material risk the currency would fall further.” OIS is now not pricing in a rate hike until at least October 2016. There have been sizable offers into the latest Aussie rally and there is still quite a lot of selling pressure from larger accounts at current levels.

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 1.1260 – 18Nov low – Medium
• S2 1.1185 – 31Oct low – Medium

USDCAD – fundamental overview

Not much of a reaction on the news of the US Senate vote approving the Keystone XL oil pipeline project. Lack of any economic data out of Canada on Wednesday, will put the attention squarely on the reaction to the FOMC Minutes. Overall, commodities remain under pressure and this in conjunction with an expectation the Fed will hike before the BoC is what is driving the medium-term price action. As such, USDCAD should remain well supported into additional declines, with USDCAD seen back through the recent 2014 high sooner than later.

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 has now stalled out ahead of some formidable resistance at 0.8035 and looks like it could be carving the next lower top ahead of a bearish resumption back towards and eventually below 0.7660. Ultimately, only a break and close back above 0.8035 would compromise the bearish outlook.

• R2 0.8035 – 21Oct high – Strong
• R1 0.7975 - 17Nov high – Medium
• S1 0.7798 – 12Nov low – Medium
• S2 0.7660 – 7Nov/2014 low – Strong

NZDUSD – fundamental overview

The ongoing decline in dairy prices will likely have an impact on the RBNZ at its next policy decision, with the central bank expected to cement it recently adopted more accommodative stance. Fonterra’s latest dairy auction showed prices dropping to the lowest levels since 2009, and this opens the door for more payout cuts in early December. Adding more fuel to the fire has been the drop of 5.1% in whole milk powder, New Zealand’s largest dairy export. Oversupply, lack of demand in key markets and Russian sanctions have all been cited as causes for the price declines. The RBNZ has been quite vocal with its opinion on the overvalued local currency, and with the economy now suffering from the relative Kiwi strength, more downside is to be expected over the medium-term.

US SPX 500 – technical overview

The latest round of consolidation has been broken, with the market ascending to fresh record heights just shy of 2060. However, an intense surge of well over 10% in a month is a red flag for near-term exhaustion and topping, and at some point over the coming sessions the market should look for a healthy retreat. The key level to watch comes in at 2030 and a break and close below would trigger the correction and open a deeper drop towards 2002 further down. Inability to take out 2030 will keep the immediate pressure on the topside.

• R2 2100.00 – Psychological – Strong
• R1 2059.00 – 18Nov/Record high – Medium
• S1 2030.00 – 17Nov low – Strong
• S2 2002.00 – 4Nov low – Strong

US SPX 500 – fundamental overview

US equity markets could finally be at risk for reversal off fresh record highs following impressive 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 and if this continues over the coming weeks, it could very well seal the deal on the Fed removing its “considerable time” language in the monetary policy statement next month. The market will now look for added colour out of today’s FOMC Minutes.

GOLD (SPOT) – technical overview

A nice little recovery rally for this market over the past week or so, with the price poking back above 1200. A daily close above 1200 on Wednesday could open the door for additional corrective gains towards the 78.6% fib retrace off the 1256 to 1131 move around 1230. However, inability to establish above 1200 would suggest a lower top is in the cards ahead of a bearish resumption back towards the recent 4-year low at 1131. 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 third straight week, since dropping to 4-year lows below 1180. The yellow metal recently poked back above 1200 and interestingly enough, the recovery comes at a time when the US Dollar is still in demand. Perhaps gold’s safe haven status is the cause, which 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.

Feature – technical overview

USDZAR has been content with some sideways trade over the past several weeks, with the market tracking mostly between 10.9600-11.3800. Look for the current round of setbacks to once again be supported into the 10.9600 area, ahead of another push back towards the 11.3800 range high. Overall, the medium-term structure remains constructive with the trend favouring an eventual break beyond 11.3800 and through the 2014 high from January at 11.3920. Only a close back below 10.8250 would compromise the outlook.

• R2 11.3800 – 3Oct high – Strong
• R1 11.2500 – 12Nov high – Medium
• S1 10.9600 – Internal support – Medium
• S2 10.8250 - 29Oct low – Strong

Feature – fundamental overview

The Rand has managed to recover a bit over the past several days with the price action mostly attributed to external factors which include some broad USD corrective selling and a rebound in the price of gold back above 1200. However, additional upside may prove harder for the emerging market currency into Thursday’s SARB rate decision. Perhaps the outside possibility of a rate hike has also been supporting the Rand a bit, but with inflation outlook improving, and with this being Governor Kganyago’s first meeting, it is more likely that there is no rocking of the boat and policy remains on hold until 2015. The market will digest some CPI data on Wednesday, but this shouldn’t factor into tomorrow’s decision. Expectations center on a 5.9% y/y print.