Investors Struggle With China and Fed, BOE Ahead

GBPUSD – technical overview

The market has done a nice job recovering in recent sessions after taking out key support at 1.5170. Still, the outlook favours additional weakness in the sessions ahead, with a lower top sought out ideally below 1.5500 ahead of the next downside extension towards psychological barriers at 1.5000. Only a daily close back above 1.5500 would compromise.

• R2 1.5443 – 28Aug high – Strong
• R1 1.5412 – 9Sep high – Medium
• S1 1.5289 – 7Sep high  – Medium
• S2 1.5165 – 4Sep low  – Strong

GBPUSD – fundamental overview

The Pound has help up remarkably well into Thursday trade in the face of some horrid data out of the UK and a solid US JOLTS showing. Wednesday’s UK releases weren’t pretty, with industrial and manufacturing production well below forecast, trade data a big miss and NIESR GDP off. All of this comes ahead of today’s Bank of England rate decision, where the central bank is widely expected to leave policy on hold, with rates steady at 0.50% and the APT unchanged at GBP375B. In the lead up to the decision there had been some chatter the BOE would still be pushing towards a sooner than later rate hike. But with all the negatives of late, it seems this prospect could be less realistic. Clearly this has inspired profit taking over the past several days. Also out on Thursday are secondary releases out of the US in the form of initial jobless claims, wholesale sales and import prices.

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 daily close back above 122.00 would negate the short-term bearish outlook and put the pressure back on the topside.

• R2 121.74 – 28Aug high – Strong
• R1 121.20 – 9Sep high – Medium
• S1 119.80 – 9Sep low – Medium
• S2 118.60 – 4Sep low – Strong

USDJPY – fundamental overview

The major pair enjoyed a nice start to Wednesday, before reversing into the close. The market was initially bid up on China stimulus talk and comments from Japanese PM Abe that he was looking to cut corporate tax by at least 3.3% in FY2016. Additional demand came post an impressive US JOLTS report, with USDJPY tripping stops and poking above 121.00. However, the gains proved fleeting, with the market unable to sustain the rally, giving in to an intense intraday reversal in sentiment. A liquidation in equities off the daily highs fueled the USDJPY selling, leaving the market under pressure into Thursday. Looking ahead, sentiment should continue to dictate trade, while the market will also take in secondary US readings in the form of initial jobless claims, wholesale sales and import prices.

EURCHF – technical overview

The recovery outlook remains intact, with the price piercing through key resistance at 1.0962, confirming a higher low at 1.0714 and opening the next major upside extension towards a measured move objective in the 1.1200 area. Only back below 1.0714 would negate.

• R2 1.1200 – Measured Move – Strong
• R1 1.0983 – 9Sep high – Medium
• S1 1.0800 – 4Sep low – Medium
• S2 1.0714 – 20Aug low – Strong

EURCHF – fundamental overview

Overall, an impressive recovery in this market over the past several weeks, despite ongoing uncertainty. The recovery rally has resulted in a fresh post-SNB Franc cap cancellation high, with the market now trying to establish above 1.1000. Softer Swiss inflation readings and some strong language from SNB Jordan have been notable drivers of recent Franc weakness, though gains were tempered on Wednesday, with the market unable to ignore the latest bout of risk liquidation and safe have demand. Risk correlated markets are standing on less than solid foundations at the moment and all of this could deteriorate rather quickly, which could pose problems for EURCHF upside prospects going forward.

AUDUSD – technical overview

Setbacks recently 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 unwinding from oversold readings which suggests the market could be poised for additional 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 0.7154 – 1Sep high – Strong
• R1 0.7070 – 9Sep high – Medium
• S1 0.0.6946 – 10Sep low – Medium
• S2 0.6910 – 4Sep/2015 low – Strong

AUDUSD – fundamental overview

Any setbacks from broader risk liquidation on Wednesday have been well supported in Thursday trade, with Aussie avoiding a break to fresh multi-year lows on the back of a far better than expected employment report. A total of 17.4k jobs were added, well above the 5k forecast, while the unemployment rate dropped down to 6.2% from 6.3% previous. Meanwhile, China inflation readings didn’t hurt, after CPI came in hotter than expected. Still softer China PPI was somewhat offsetting. Looking ahead, Aussie direction will likely trade off macro flows and global sentiment, though the market will pay attention to some secondary US data in the form of initial jobless claims, wholesale sales and import prices.

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 1.3327 – 31Aug high – Medium
• S1 1.3137 – 3Sep low – Medium
• S2 1.3117 – 31Aug low– Strong

USDCAD – fundamental overview

A frustrating day for the Canadian Dollar on Wednesday, with the currency unable to hold onto a post Bank of Canada rally, closing lower on the day. As expected, the Bank of Canada left policy on hold. But a less dovish and more neutral monetary policy statement encouraged some CAD buying in the aftermath of the decision, with the central bank balancing out concern over external risk and financial stability with some satisfaction over the impact lower rates were having on the Canadian Dollar. But with the US JOLTS release exceeding expectations, OIL coming back under pressure and stocks selling off into the close, CAD gains were erased and the Loonie was back under pressure towards recent 11 year lows agains the Buck. Looking ahead, Canada capacity utilization and house prices will be accompanied by US data in the form of initial jobless claims, import prices and wholesale sales.

NZDUSD – technical overview

The market remains under pressure just off fresh multi-year lows, locked within a well defined downtrend. Deeper setbacks are favoured below 0.6130, with the break to open the next major downside extension through psychological barriers at 0.6000. Any rallies are viewed as corrective and ultimately, only a break back above 0.6740 would compromise the bearish structure.

• R2 0.6425 – 9Sep high– Strong
• R1 0.6354 – 10Sep high– Medium
• S1 0.6244 – 7Sep low – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been a standout underperformer in Thursday trade, following the latest RBNZ rate decision, which produced a third consecutive 25bp cut, taking the OCR to 2.75%. While the market had been expecting the cut, the more dovish than expected statement was what drove the Kiwi declines post announcement. The central bank noted concern over China and the emerging markets, highlighted the monetary policy divergence with the Fed, cited subdued inflation, warned additional Kiwi depreciation was necessary and concluded further easing in the OCR seemed likely. All of this does not bode well for Kiwi going forward and more sell interest is expected to emerge over the coming sessions. Wednesday’s equity slide only adds to the bearish case for the risk correlated commodity currency.

US SPX 500 – technical overview

The market has been locked in some choppy consolidation following the sharp pullback from record high territory several days back. The breakdown reflects a major structural shift in the works, with deeper setbacks now favoured over the coming days and weeks. The rebound out from the 1830 area low is viewed as corrective, with a lower top sought out at 1996 ahead of the next major downside extension and bearish continuation below 1800. Only a close back above 2000 would delay the newly adopted bearish outlook.

• R2 2032.00 – 21Aug high – Strong
• R1 1996.00 – 28Aug high – Medium
• S1 1932.00 – 8Sep low – Medium
• S2 1902.00 – 1Sep low – Strong

US SPX 500 – fundamental overview

This week’s recovery in stocks has already been compromised, with the market back under pressure into Thursday. There had been some post China, US holiday euphoria on talk of additional China stimulus and hope the Fed would hold off on rates, but this hasn’t been enough to truly inspire sustained rallies on very low volume. Wednesday’s solid US JOLTS report only strengthens the Fed liftoff case if data dependency is being used as the gauge for the Fed’s decision making, and this isn’t sitting well with investors. The prospect of higher rates is unnerving to many and has been weighing more heavily on stocks these past weeks.

GOLD (SPOT) – technical overview

Finally signs of a potential base since breaking down to fresh multi-year lows below 1100. The recent recovery to 1170 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 above 1100 on a daily close basis. 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 1101.00 – 9Sep low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

The GOLD market has been struggling with two-way flows, not knowing whether to pay more attention to broader US Dollar demand on Fed liftoff prospects or to put the focus on risk liquidation themes and flight to safety bids. On Wednesday, it seems as though the former won out, with Dollar demand opening a pullback in the metal. However, it has also been difficult for many funds to ignore the lure of safe haven GOLD appeal on the deterioration in global sentiment. Dealers cite solid demand around $1100.

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 the current round of setbacks to be well supported above 1.3900. Only a daily close below 1.3900 will delay the bullish outlook.

• R2 1.4400 – Figure – Medium
• R1 1.4294 – 8Sep/2015 high – Strong
• S1 1.4110 – 9Sep low – Medium
• S2 1.4048 – 31Aug low – Strong

Feature – fundamental overview

It hasn’t taken long for the Singapore Dollar to come back under pressure after a minor bout of relief in the early week. The latest pullback in equities has unquestionably weighed on the risk correlated currency, which is on pace for another fresh multi-year low against the Buck. S&P has come out slashing Asian economies’ growth forecasts on “abysmal” trade data and China uncertainty, while also calling for more currency weakness in the region. All of this negative fallout in conjunction with Fed liftoff prospects does not bode well for the Singapore Dollar going forward.