FX Consolidates, Commodities Recover, Stocks Sell Off

GBPUSD – technical overview

Monday’s bullish outside day off a fresh 2014 low could warn of some additional corrective upside ahead. However, the downtrend for this major pair remains firmly intact and a break and close back above 1.5826 would be required to confirm the onset of a correction and take the immediate pressure off the downside. Inability to close above 1.5826 will put the focus back on 1.5585 and the next downside extension towards a measured move objective at 1.5350.

• R2 1.5945 – 11Nov high – Strong
• R1 1.5826 - 27Nov high – Medium
• S1 1.5585 – 1Dec/2014 low – Medium
• S2 1.5500 – Psychological – Medium

GBPUSD – fundamental overview

Not much going on in this market right now, with the major pair consolidating off Monday’s 2014 low. The recovery comes on the back of some mild broad based US Dollar selling in recent trade, and a better than expected UK manufacturing PMI print. Key event risk for Sterling comes on Thursday, when the Bank of England decides on rates. No change to policy is expected, though the tone is expected to lean to the dovish side. Interest rate hike expectations for the UK have been pushed back to late 2015.

USDJPY – technical overview

Although the overall outlook remains highly constructive, there are warnings of the formation of some form 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. But a break and daily close back under 117.24 would now be required to take the immediate pressure off the topside and confirm the onset of a correction. Until then, there is still risk for bullish continuation towards the next major psychological barrier at 120.00.

• R2 120.00 – Psychological – Strong
• R1 119.14 – 1Dec/2014 high – Weak
• S1 117.24 – 27Nov low – Strong
• S2 116.80 – 19Nov low – Medium

USDJPY – fundamental overview

Another 7-year high for USDJPY through 119.00 on Monday and it looks as though nothing can stop this market from testing next key psychological barriers at 120.00. Softer inflation data helped to inspire the rally through 119.00, while the Moody’s downgrade of Japan’s credit rating has kept USDJPY dips supported. Overall, the outlook continues to favour Yen weakness, but some very stretched technical readings and a recent pullback in equity markets should not be dismissed as a potential catalyst for overdue corrective price action.

EURCHF – technical overview

Though the overall pressure remains on the downside, with critical psychological barriers at 1.2000 still in sight, there are signs of potential recovery. Look for a break and daily close back above 1.2045 to confirm recovery prospects and take the immediate pressure off the downside. Inability to establish back above 1.2045 would however suggest a 1.2000 retest is still in the cards.

• 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

A bit of a pop for EURCHF on Monday, with the market trading further away from 1.2000 after the result of the weekend Swiss gold referendum. A resounding No vote to the SNB needing to up its gold reserves will unquestionably offer some welcome relief to a central bank that has been trying to prevent the 1.2000 barrier from being broken. Still, even with the event risk out of the way, EURCHF hasn’t managed to gain all that much bullish momentum and remains at risk for a 1.2000 test. Global equities are showing a bit of weakness in recent trade which could inspire some safe haven buying. This safe-haven demand would translate into relative CHF outperformance and could be the next big risk the SNB will be forced to contend with.

AUDUSD – technical overview

The market has broken to a fresh 2014 low, with last week’s break below 0.8541 confirming a fresh lower top at 0.8796 and setting the stage for the next major downside extension towards critical psychological barriers at 0.8000. Any rallies should be very well capped ahead of 0.8700, while ultimately, only back above 0.8911 would compromise the bearish structure.

• R2 0.8723 – 21Nov high – Strong
• R1 0.8615 - 27Nov high – Medium
• S1 0.8417 – 1Dec/2014 low – Medium
• S2 0.8400 – Figure – Medium

AUDUSD – fundamental overview

The RBA rate decision produced no real surprise on Tuesday. The central bank came out and left rates unchanged at 2.5% as expected, while repeating the line that it was prudent to have a period of stable interest rates. While the RBA did add a comment that a lower Aussie was needed to achieve balanced growth in the economy, this wasn’t going to open any additional Aussie selling, with all of this already priced. In fact, the decision was on the whole less dovish than many had been looking for, and rate cut expectations for 2015 were scaled back from pre-event risk levels of 84% down to 60%. Aussie has since recovered on the back of this less dovish decision. Nevertheless, rallies are expected to continue to remains well capped. Markets will now look ahead to Wednesday’s Aussie GDP.

USDCAD – technical overview

The market remains locked in a well defined bullish channel, and is looking for a break to fresh 2014 highs beyond 1.1467. A push above 1.1467 would confirm a higher low in place at 1.1191 and open the door for the next major upside extension towards a measured move around 1.1750. Ultimately, only back under 1.1122 would delay the constructive outlook.

• R2 1.1500 – Psychological – Medium
• R1 1.1467- 5Nov/2014 high – Strong
• S1 1.1235 – 27Nov low – Medium
• S2 1.1191 – 21Nov low – Strong

USDCAD – fundamental overview

Economic data out of Canada over the past few weeks is having little influence in the Loonie’s direction. This has been highlighted by a blowout employment report, solid manufacturing, a hotter CPI print, healthy retail sales and better GDP. Market participants have been much more focused on the price action in the commodities markets, with the direction in both oil and gold ultimately deciding the currency’s fate.  As such, Monday’s sharp recovery in commodities has opened a decent rebound in CAD. Still, with US economic data also on the positive side and commodities overall remaining under pressure, the outlook continues to favour US Dollar yield differentials and a higher USDCAD rate. Attention shifts to Wednesday’s Bank of Canada rate decision.

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, with a break back below 0.7766 to accelerate declines towards 0.7660.

• R2 0.8035 – 21Oct high – Strong
• R1 0.7975 - 17Nov high – Medium
• S1 0.7766 – 25Nov low – Medium
• S2 0.7660 – 7Nov/2014 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has helped up rather well in recent trade, despite some overall weakness in commodities prices, highlighted by the release of the latest ANZ commodity price index, which produced the 9th straight month of declines. Perhaps the risk correlation and higher yield of the currency has helped to keep the currency supported somewhat. However, with global equities looking stretched and the New Zealand economy showing signs of cooling, there are plenty of formidable offers from larger accounts seen on rallies towards 0.8000 in NZDUSD. RBNZ Governor Wheeler was out on Monday once again talking down the local currency, repeating the mantra that Kiwi remains unjustifiably and unsustainably higher. Looking ahead, Fonterra’s dairy auction is due later today and could open some volatility given the ongoing drag in dairy prices.

US SPX 500 – technical overview

The market is finally showing signs of exhaustion following the push to fresh record highs at 2077 in the previous week. Look for Monday’s close below 2052 to trigger the onset of a long overdue correction and open the door for deeper setbacks back towards 2000 in the days ahead. However, back above the recent record high at 2077 would negate and open the door for another surge to the next key psychological barrier at 2100.

• R2 2100.00 – Psychological – Strong
• R1 2077.00 – 26Nov/Record high – Medium
• S1 2039.00 – 20Nov low – Medium
• S2 2030.00 – 17Nov low – Strong

US SPX 500 – fundamental overview

Risk markets are under pressure in the early week and this has been a drag on the SPX500 which is tracking lower and looking like it could finally be poised for an overdue correction off recently established record highs just shy of 2080. It seems the prospect of additional central bank accommodation may be losing some of its appeal (at least for now). Softer global economic data and the Moody’s downgrade of Japan have also been sourced for the latest bout of profit taking.

GOLD (SPOT) – technical overview

Price action in this market has been absolutely wild in recent trade, with the price gravitating back towards the recent 4-year low at 1131, before stalling just shy and violently reversing in Monday trade. Monday’s bullish outside day formation has resulted in a very rare technical occurrence, with the market not only consuming the previous day’s range, but the previous 15 daily ranges! Still, while the price holds below 1256, the overall structure remains bearish.

• R2 1256.00 – 21Oct high – Strong
• R1 1208.00 – 21Nov high – Medium
• S1 1131.00 – 7Nov/2014 low – Strong
• S2 1100.00 – Psychological – Medium

GOLD (SPOT) – fundamental overview

Gold put in a memorable performance on Monday. After it looked as though the commodity could dip to fresh multi-year lows below 1130, the market recovered sharply and rallied hard into the end of the day. Though there was no specific catalyst that could be cited for the resurgence in demand, signs of ongoing stress in the global economy and some weakness in equity markets, seemed to raise questions over the effectiveness of easy money central bank policy. Investors appeared to be quite comfortable buying into the hard asset, with the push back above 1210 taking a lot of the pressure off the downside. There are still good offers out there, but dealers are now citing  good two way interest.

Feature – technical overview

USDRUB has been in parabolic mode for some time now, with the market breaking to yet another record high on Monday. All major timeframes for this pair are well overextended and while the market remains locked within a very well defined uptrend, there is risk for a healthy corrective reversal. Monday’s retreat into the close sets up a potential topping formation, with a break below 48.60 to confirm and trigger the needed correction where a fresh medium-term higher low will eventually be sought out.

• R2 55.00 – Psychological – Strong
• R1 53.85 – 1Dec/Record high – Strong
• S1 48.60 – 7Nov high – Medium
• S2 44.35 - 24Nov low – Strong

Feature – fundamental overview

A lot of talk of CBR presence in the market on Monday, after the Rouble dropped to another record low before quickly recovering a bit. The CBR has been warning of additional intervention to offset the furious decline in its local currency, but there was no confirmation offered from the Russian central bank of such an intervention on Monday. But it is entirely possible there was no such intervention this time, with currencies finding strength across the board against the Buck and oil mounting an impressive recovery off its latest collapse to 5+ year lows (Rouble supportive). The markets are pricing in another CBR rate hike ahead, but for now, the currency could find some corrective relief with commodities recovering and the USD under a little pressure. Geopolitical developments should also be watched closely. Ukrainian Defence Minister Lysenko’s accusations Russian troops were involved in the attack on the Donetsk Airport, are certainly not seen as Rouble supportive. If the US Dollar regains momentum, the Russia/Ukraine conflict escalates, and oil comes back under pressure, we are practically guaranteed some form of aggressive intervention and measures to be taken by the CBR.