Safe Haven Bids Ahead of US Employment

GBPUSD – technical overview

The recent daily close below the 200-Day SMA suggests the market could be on the verge of rolling over for deeper setbacks towards 1.5000 in the sessions ahead. The market had mostly been trading above the 200-Day SMA since early June and after stalling ahead of the 2015 high, the price action is suggestive of some form of topping. Next key support comes in at 1.5170, below which exposes 1.5000. At this point, only a daily close back above 1.5500 would take the pressure off the downside.

• R2 1.5408 – 1Sep high – Strong
• R1 1.5313 – 3Sep high – Medium
• S1 1.5219 – 3Sep low  – Medium
• S2 1.5170 – 1Jun low  – Strong

GBPUSD – fundamental overview

Thursday’s economic calendar produced some softer UK services PMIs and another round of solid US data, with US trade and ISM non-manufacturing coming in stronger than expected. This only helps strengthen the case for a sooner than later Fed rate hike. The market has also been paying a lot of attention to US, UK yield differentials, with many expecting the BOE to start raising rates shortly after the Fed commences its liftoff. However, with UK data turning down a bit in recent weeks, it seems the Bank of England may not be as quick to follow and this has been weighing on the Pound. Looking ahead, today is all about the monthly employment report out of the US.

USDJPY – technical overview

The latest rally has been well capped ahead of 122.00 and a lower top is now sought out in favour of a resumption of declines back towards the recent extreme low at 116.12. At this point, only a break back above 121.74 would negate the short-term bearish outlook and put the pressure back on the topside.

• R2 120.70 – 3Sep high – Strong
• R1 120.18 – 4Sep high – Medium
• S1 119.22 – 2Sep low – Medium
• S2 118.25 – 25Aug low – Strong

USDJPY – fundamental overview

The major pair was less influenced by solid US economic data on Thursday, instead choosing to focus more on a shaky risk environment and vulnerable equities. While we didn’t see any major moves in risk markets on Thursday, there was a flavour of safe haven demand, perhaps on the back of a more dovish and cautious ECB, with the central bank downgrading its growth and inflation forecasts and Draghi warning the central bank would be prepared to inject more stimulus if needed. The net result was a moderately stronger Yen into what could be a volatile session today as the market prepares to digest the all-important monthly employment report out of the US. The market is looking for a 218k NFP print and a 0.1% drop in the unemployment rate to 5.2%.

EURCHF – technical overview

The market looks to be in the process of carving a meaningful base since taking out key multi-day range resistance at 1.0575 several days back. This has opened the latest break above the February peak at 1.0815 which now exposes fresh upside through psychological barriers at 1.1000 and towards 1.1500 further up. Any setbacks should now be well supported ahead of 1.0700, with only a break back below 1.0575 to negate the constructive outlook.

• R2 1.0962 – 12Aug high – Strong
• R1 1.0903 – 3Sep high – Medium
• S1 1.0714 – 20Aug low – Strong
• S2 1.0575 – Previous Resistance – Strong

EURCHF – fundamental overview

SNB Jordan was on the wires this week and helped keep the Franc offered after reiterating the currency was markedly overvalued and the central bank stood ready to intervene. Jordan also said the current negative interest rate of -0.75% is not the bottom and sub-zero levels are likely to be appropriate for a considerable period of time. But overall, there is still a lot of uncertainty out there, and investors are growing increasingly wary of the impact of stimulatory moves by central banks and governments. The SNB balance sheet has ballooned to around 85% of GDP, which means it is unlikely there is a lot left in the tank for future interventions. If risk liquidation themes intensify going forward, it could open renewed Franc demand and once again put the SNB in an uncomfortable position where it will need to make some decisions. Swiss inflation data ahead.

AUDUSD – technical overview

Setbacks have accelerated to the downside to yet another multi-year low, below critical psychological barriers at 0.7000. The drop opens the door for a fresh measured move downside extension towards 0.6830 in the sessions ahead. Technical studies are however tracking in oversold territory across multiple timeframes which suggests the market could be poised for a correction in the coming sessions. Still, any rallies are expected to be very well capped, with only a break back above 0.7440 to compromise the bearish outlook.

• R2 0.7205 – 28Aug high – Strong
• R1 0.7082 – 31Aug low – Medium
• S1 0.6960 – 4Sep/2015 low – Medium
• S2 0.6900 – Figure – Strong

AUDUSD – fundamental overview

The big standouts out of Australia this week were an RBA still committed to accommodation, softer GDP readings and weaker retails sales. Aussie is trading just off fresh 6-year lows set this week and is at risk for additional declines given the softer data and ongoing concern over the outlook for the correlated China economy. Meanwhile, US readings have been supportive of the US economic recovery and suggest the Fed is on the verge of raising rates. Dealers cite solid Aussie sell interest into rallies, with medium-term players now looking for a drop towards 0.6500. Looking ahead, plenty of volatility is expected with the all-important monthly employment report due out in the US later today.

USDCAD – technical overview

The market is locked within a well defined uptrend, pushing to fresh 11-year highs and closing in on next major psychological barriers at 1.3500. However, with medium-term studies looking stretched, we are seeing the onset of a correction to allow for these stretched studies to unwind. But ultimately, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of a bullish continuation.

• R2 1.3354 – 25Aug/2015 high – Strong
• R1 1.3290 – 3Sep high – Medium
• S1 1.3137 – 3Sep low – Medium
• S2 1.3117 – 31Aug low– Strong

USDCAD – fundamental overview

A solid day for the Canadian Dollar, with the Loonie finally finding decent demand on the back of a supported OIL market and some impressive economic data. OIL has been showing signs of recovery over the past week and setbacks are now finding decent interest. The stabilization in OIL is helping to attract renewed Loonie demand, with the currency highly correlated to the direction in the commodity. Meanwhile, Canada trade data also came in a good deal better than expected and this has given CAD the added boost. Still, overall, the outlook for the Canadian Dollar is not constructive, with the economy in technical recession and contending with a US economy heading in a more positive direction. The Bank of Canada needs to consider additional accommodation, while the Fed is on the verge of a rate hike. Looking ahead, today’s North American session will be a volatile one for this market, with participants absorbing the double whammy of US and Canada employment reports.

NZDUSD – technical overview

Daily studies are in the process of unwinding from oversold off an intense decline to fresh multi-year lows the other week and there is risk for additional consolidation in the sessions ahead to allow for these studies to further unwind before the market considers a legitimate bearish continuation below 0.6130. Still, any rallies should be well capped below 0.6740 in favour of the existing downtrend.

• R2 0.6467 – 31Aug high– Strong
• R1 0.6415 – 3Sep high– Medium
• S1 0.6312 – 2Sep low – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

The Kiwi market has found moderate interest into Friday, with the gains perhaps attributed to another solid dairy auction this week. Still the data is somewhat misleading, with the dairy price increase more a function of a drop in volume than rising demand. Many also now believe this week’s round of softer New Zealand business confidence seals the deal on another RBNZ rate cut when the central bank meets next week on September 9th. This would be the third rate cut since May and could very well open the door for fresh declines below last Monday’s 0.6130 multi-year low. Ongoing uncertainty surrounding China and global equity market weakness are also a negative for the New Zealand Dollar and will continue to be monitored closely. Looking ahead, Friday trade is all about the monthly employment report out of the US.

US SPX 500 – technical overview

The recent breakdown below 2040 has been a significant development, with the move confirming the formation of a major top off record highs. We have since seen a rapid acceleration of declines, with the market crashing through a measured move downside extension objective at 1940, stalling just shy of 1800 thus far. Technical studies are now unwinding from super stretched readings, so there is risk for some additional consolidation before the market looks for a bearish continuation below 1800. Still, any rallies are now expected to be well capped below 2000 on a daily close basis.

• R2 1996.00 – 28Aug high – Strong
• R1 1977.00 – 3Sep high – Medium
• S1 1902.00 – 1Sep low – Medium
• S2 1946.00 – 26Aug low – Strong

US SPX 500 – fundamental overview

Not a lot of volume in stock markets on Thursday and this was certainly reflected in the price action, with the market trying to break higher early on before falling flat and retreating back to daily opening levels. Overall, the market looks like it’s undergoing a structural shift, with sentiment turning down as investors worry about the risk associated with China and the rest of the global economy along with the implications of a Fed on the verge of tightening policy. Although China markets have been closed for holiday, Thursday’s ECB downgrades of growth and inflation forecasts perhaps factored into some of the latest wave of risk off flow. Looking ahead, all eyes are on today’s monthly employment report out of the US. The market is looking for a 218k NFP print and a 0.1% drop in the unemployment rate to 5.2%.

GOLD (SPOT) – technical overview

Finally signs of a potential base since breaking down to fresh multi-year lows below 1100. The recent recovery back above the previous 2015 base at 1142 strengthens the outlook and could open the door for additional upside towards 1233 over the coming days. Look for the latest round of setbacks to now be well supported on dips ahead of 1100. Only a daily close below 1100 negates and puts the pressure back on the downside.

• R2 1188.00 – 29Jun high – Strong
• R1 1170.00 – 24Aug high – Medium
• S1 1118.00 – 26Aug low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

Overall, there is still plenty of uncertainty out there, and with US stocks topping off record highs and China doing its best to keep its faltering economy going, there is plenty of interest for safe haven GOLD at current levels, just off multi-year lows. Hedge funds are slowly stepping back into the long position and the added risk of rising inflation over the coming months is making the position all the more compelling. There has been some mild weakness over the past couple of sessions on a stabilization in equity markets, however, this is hardly anything that should derail the current recovery.

Feature – technical overview

USDSGD continues to push to fresh +5-year highs and remains highly constructive. The uptrend is firmly intact with the latest break above 1.4170 opening the next measured move upside extension towards 1.4400. In the interim, look for any setbacks to be well supported above 1.3800. Only a daily close below 1.3800 will delay the bullish outlook.

• R2 1.4245 – 2010 high – Strong
• R1 1.4186 – 2Sep/2015 high – Strong
• S1 1.4048 – 31Aug low – Medium
• S2 1.3940 – 25Aug low – Strong

Feature – fundamental overview

It has not been a good run for the Singapore Dollar, which remains under pressure along with the rest of the emerging markets on a deteriorating China economic outlook and more favourable US Dollar yield differentials. The Singapore Dollar has been suffering from the blow to China manufacturing after a recent China Caixin PMI print produced its lowest reading in more than 6 years. This data also follows softer fixed asset investment, retail sales, industrial production and export readings and likely suggests more soft data in the months ahead. Meanwhile, pressure has been building for the MAS to ease after economists cut Singapore growth and inflation forecasts. All of this in conjunction with the expectation for a Fed rate hike at any moment should translate into more SGD weakness going forward.