Hints of Risk Off; Kiwi Underperforms, Yen Rallies

GBPUSD – technical overview

Although the pressure still remains on the downside after the market broke to yet another 2014 low, last Wednesday’s bullish outside day formation has been offering temporary relief for the Pound. The market would need to break and close back above 1.5738 for confirmation of the onset of a legitimate correction towards 1.5945. However, inability to extend gains would keep the immediate pressure on the downside and open the door for the next drop below 1.5590 and into the 1.5400-1.5500 area.

• R2 1.5945 – 11Nov high – Strong
• R1 1.5738 - 20Nov high – Medium
• S1 1.5590 – 19Nov/2014 low – Weak
• S2 1.5550 – Mid-Figure – Weak

GBPUSD – fundamental overview

Last week’s less dovish than expected BOE Minutes and solid UK retail sales have done a good job of helping to prop a beaten down Sterling market. Not a lot on the economic calendar in the UK until tomorrow’s GDP release, and in the interim, the Pound should defer to broader price action and flows. Overall, the ongoing theme of central bank policy divergence should keep any rallies well capped, with the BOE and other major central banks moving in an opposite direction than the Fed. The market has scaled back BOE rate hike expectations to H2 2015. For today, participants will take in second tier BBA mortgage approvals data and a Mark Carney speech.

USDJPY – technical overview

Although the overall outlook remains highly constructive, there are strong signs of the formation of some for of a top in favour of a period of correction and consolidation. Daily, weekly, and monthly studies are well overbought and long overdue for a healthy retreat. Last Thursday’s bearish close has set the stage for a reversal, and a daily close below 116.80 would confirm and likely accelerate declines back into the 114.00s. Only back above 119.00 negates the short-term corrective outlook.

• R2 120.00 – Psychological – Strong
• R1 118.98 – 20Nov/2014 high – Medium
• S1 116.80 – 19Nov low – Medium
• S2 115.45 – 17Nov low – Strong

USDJPY – fundamental overview

USDJPY has dropped back below 118.00 and is contemplating whether or not it is finally time to respect some highly overbought technical readings. Dealers cite sell-stops built up below 117.35 and 116.80. Otherwise, all is relatively quiet for this market, with very little reaction to today’s BOJ Governor Kuroda comments. The central banker hasn’t come out with anything new, as he repeats familiar rhetoric that Japan’s positive economic cycle is still intact as a trend, and core inflation will still reach the projected 2% 2015 target.

EURCHF – technical overview

Though the overall pressure remains on the downside, there are some signs emerging of the potential for a recovery. Look for a break and daily close back above 1.2045 to confirm the recovery and officially take the immediate pressure off the downside and a test of the critical psychological barrier at 1.2000.

• R2 1.2080 – 15Oct high – Strong
• R1 1.2045 – Previous base – Medium
• S1 1.2009 – 19Nov/2014 low – Weak
• S2 1.2000 – Psychological – Very Strong

EURCHF – fundamental overview

Though last week’s poll on the “Save Our Swiss Gold” initiative, which showed only 38% in favour, failed to inspire any meaningful recovery in EURCHF, the same could not be said after Thursday’s comments from SNB Zurbruegg. The central banker said the SNB would firmly defend the 1.2000 floor, with unlimited FX intervention and other measures ‘immediately,” if needed. This is the first we have heard from an SNB official in several days, and the comments have opened a push back over 1.2020. Nevertheless, the gains have been rather mild and it seems until the SNB actually shows its hand, market participants will continue to call the central bank’s bluff.

AUDUSD – technical overview

The latest corrective rally has stalled out, with the market poised for bearish resumption and looking to carve a lower top around 0.8800 in favour of a drop back below the recent 2014 low at 0.8541. The overall structure remains quite bearish, and only a break above 0.8911 would compromise the outlook. Intraday rallies are expected to continue to be well capped. A daily close below 0.8541 will trigger a fresh downside extension into the 0.8300 area.

• R2 0.8830 – 78.6% retrace – Medium
• R1 0.8796 - 17Nov high – Medium
• S1 0.8541 – 7Nov/2014 low – Strong
• S2 0.8500 – Psychological – Strong

AUDUSD – fundamental overview

The China rate cut euphoria appears to have worn off, with Aussie back under pressure and once again threatening a break to fresh 2014 lows. A slowing Australian economy, ongoing downbeat comments from RBA Stevens and pressured commodities, should ultimately keep the Australian Dollar from running too far. RBA Lowe is on the wires on Tuesday and nothing Aussie bullish is expected from the central banker, who could do some more talking down of the local currency.

USDCAD – technical overview

The market has entered a period of correction after establishing fresh 2014 highs at 1.1467 several days back. 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 1.1192 – 21Nov low – Medium
• S2 1.1122 – 29Oct low – Strong

USDCAD – fundamental overview

Over the past several days, we have seen some really impressive economic data out of Canada. This has been highlighted by a blowout employment report, very solid manufacturing, some impressive wholesale sales, and Friday’s hotter CPI print. Throw in the ECB Draghi comments, the China rate cut and a mild recovery in oil prices and it is not surprising to see some demand for the Loonie. Nevertheless, in the grand scheme, the Canadian Dollar hasn’t been able to really extend gains all that much, with solid US economic data offsetting and the Bank of Canada still not likely to act ahead of the Fed on rate hikes. There are plenty of good USDCAD buyers into the current dip, with fresh bids all the way down towards 1.1100. Tuesday’s data out of the US and Canada will be important for short-term direction, with the highlights coming in the form of US GDP and Canada retail sales.

NZDUSD – technical overview

The latest corrective rally has stalled out, with the market poised for bearish resumption and looking to carve a lower top at 0.7975 in favour of a drop back below the recent 2014 low at 0.7660. The overall structure remains quite bearish, and only a break above 0.8035 would compromise the outlook. Intraday rallies are expected to continue to be well capped. A daily close below 0.7660 will trigger a fresh downside extension into the 0.7300 area.

• R2 0.8035 – 21Oct high – Strong
• R1 0.7975 - 17Nov high – Medium
• S1 0.7740 – 10Nov low – Medium
• S2 0.7660 – 7Nov/2014 low – Strong

NZDUSD – fundamental overview

Kiwi is back under pressure in Tuesday trade, with the China rate cut euphoria fading away and some harsher realities setting back in following the release of the softer RBNZ 2-year inflation expectations. The data only reaffirms the RBNZ’s recent move away from its tightening bias, and this in conduction with downgraded growth forecasts from the central bank, should keep Kiwi on the back foot. It is worth noting that the recent data also showed house price inflation at uncomfortably elevated levels. But there isn’t much the central bank will be able to do about this right now, which adds to the strain on the higher yielding NZD.

US SPX 500 – technical overview

While the market has managed to surge to yet another fresh record high at 2075, an intense surge of well over 10% since mid-October is a red flag for near-term exhaustion and topping. 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 towards 2100.

• R2 2100.00 – Psychological – Strong
• R1 2075.00 – 21Nov/Record high – Medium
• S1 2030.00 – 17Nov low – Strong
• S2 2002.00 – 4Nov low – Strong

US SPX 500 – fundamental overview

US equity markets could soon be at risk for reversal off fresh record highs following these impressive gains post ramped up BOJ, ECB and China 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 gains since mid-October, traders may start thinking about profit taking into year-end, particularly with so much uncertainty surrounding the global growth outlook and effectiveness of quantitative easing as a stimulatory measure over the long-term.

GOLD (SPOT) – technical overview

A nice little recovery rally for this market over the past several days, with the price poking back above 1200. Lat Friday’s close above 1200 could now open the door for additional corrective gains towards the 78.6% fib retrace off the 1256 to 1131 move around 1230. However, the overall structure still remains bearish while below 1256, and a lower top is likely sought out over the coming sessions, ahead of bearish resumption. Ultimately, only above 1256 would compromise the underlying bearish structure.

• R2 1256.00 – 21Oct high – Strong
• R1 1208.00 – 21Nov high – Medium
• S1 1175.00 – 19Nov low – Medium
• S2 1131.00 – 7Nov/2014 low – Strong

GOLD (SPOT) – fundamental overview

Though gold has come a bit off recent recovery highs, the yellow metal is still well above recent 4-year lows at 1131. Gold poked back above 1200 last week and has been consolidating around the psychological barrier since. Despite some prominent weakness in recent months, the metal’s 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 plenty of healthy two-way activity at current levels.

Feature – technical overview

USDSGD remains locked within a very well defined uptrend, with the market in the process of correcting and seeking out the next higher low ahead of bullish resumption back above the recent 2014 high at 1.3100. Any setbacks from here should be well supported ahead of 1.2864, with only a break back below this level to compromise the bullish outlook.

• R2 1.3200 – Figure – Medium
• R1 1.3100 – 20Nov/2014 high – Strong
• S1 1.2960 – 21Nov low – Medium
• S2 1.2864 - 10Nov high – Strong

Feature – fundamental overview

Not much of a reaction out of Singapore to the better than expected GDP data, with the SGD still very well offered on any form of a dip. There is no doubt that the price action here has been correlating with USDJPY, though the gains have been less intense. Yet the Singapore Dollar is still selling off quite hard and this has provoked comments from MAS Robinson that the MAS is prepared to curb excessive volatility in the SGD. It is worth noting the Singapore Dollar will be added to the China Foreign Exchange Trade System (CFETS) platform, which currently offers 10 foreign currencies.