UK Employment, US CPI and FOMC Positioning

GBPUSD – technical overview

Rallies have stalled out ahead of 1.5500, leaving the pressure on the downside, with the market rolling back over. Deeper setbacks are now favoured over the coming sessions, with the major pair seen gravitating back towards next key support at 1.5089 which guards against the 1.5000 psychological barrier further down. Ultimately, only a close back above 1.5500 would negate the bearish outlook.

• R2 1.5476 – 10Sep high – Strong
• R1 1.5400 – Figure – Medium
• S1 1.5300 – Figure  – Medium
• S2 1.5270 – 8Sep low  – Strong

GBPUSD – fundamental overview

Sterling positive M&A chatter did very little to inspire any demand for the Pound on Tuesday, with the UK currency giving back a good chunk to the Buck. The M&A news revolves around Spain’s Sabadell and a potential GBP13B+ bid for Northern Rock, Bradford & Bingley assets. It seems the on the whole better than expected US retail sales print offset any Sterling positives, even with other US data coming in softer. Otherwise, UK inflation came in mostly in line with forecasts and failed to materially influence price action. While the market is mostly looking ahead to Thursday’s critical FOMC rate decision, there will be plenty for this market to soak up today with UK employment and US CPI due.

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 121.33 – 10Sep high – Medium
• S1 119.40 – 15Sep low – Medium
• S2 118.60 – 4Sep low – Strong

USDJPY – fundamental overview

While the Bank of Japan left rates on hold and cut its assessments on exports and output, the fact that there was no mention of near-term economic stimulus was enough to open some downside pressure in the major pair. However, dips continue to be well supported, with Tuesday’s recovery off the lows attributed to a solid US equity market performance and an on the whole better than expected US retail sales print. Looking ahead, participants won’t be anxious to commit too aggressively in any direction with the FOMC rate decision due Thursday. But with US CPI out later today, we can expect to see some more choppy intraday swings.

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 1.1050 – 11Sep 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 looking to establish above 1.1000. Ongoing SNB warnings against Franc appreciation has been a notable driver of recent Franc weakness, while a recovery in stocks has also factored. The SNB is due out with a decision on policy this week, but is unlikely to rock the boat with the Franc pulling back nicely against the Euro in recent weeks. Still, overall, 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 0.7206 – 28Aug high – Strong
• R1 0.7166 – 15Sep high – Medium
• S1 0.7035 – 11Sep low – Medium
• S2 0.6946 – 10Sep low – Strong

AUDUSD – fundamental overview

The Australian Dollar is still riding the wave of last week’s solid Aussie employment report, though gains have begun to stall out into the mid-week. Tuesday’s overall stronger than expected US retail sales print has been sourced as a driver behind some selling off recent highs, while downgraded China outlooks from major banks are further contributing. RBA Debelle comments early Wednesday are also not helping Aussie’s cause after the central banker said the medium-term Australia growth rate may have slowed. Looking ahead, the market will mostly position ahead of Thursday’s FOMC rate decision, though today’s US CPI is not to be overlooked.

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 consolidation 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

The Canadian Dollar has been very quiet in recent trade, with this market deferring to some tight consolidation as the market prepares for Thursday’s major event risk in the form of the FOMC rate decision. Overall, the Loonie is at risk for additional multi-year lows against the Buck, but has since shown some stabilization after a leveling out in declining OIL prices. But Canadian Dollar rallies were limited on Tuesday following an overall well received US retail sales print. Looking ahead, Canada international securities transactions and manufacturing shipments are due alongside US CPI.

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

Although the New Zealand Dollar was weighed down a bit on the back of Tuesday’s overall solid US retail sales print, the currency has managed to shrug off these setbacks and push higher on some encouraging domestic headlines. The GDT auction has produced a third consecutive solid print, while the New Zealand current account came in better than forecast. Looking ahead, the market will have to contend with today’s US CPI release, while also positioning ahead of tomorrow’s critical FOMC rate decision.

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 1930.00 – 10Sep low – Medium
• S2 1902.00 – 1Sep low – Strong

US SPX 500 – fundamental overview

US equities haven’t done a whole lot this week, with the market mostly confined to choppy pre-FOMC consolidation trade. Scaled back Fed liftoff bets have helped support the market somewhat, while ongoing expectation for additional China stimulus has also contributed to mild bids. Yet overall, there is still a good amount of uncertainty in the air and a sense that even if the Fed holds off tomorrow, it will still be on pace for an unwelcome policy reversal that makes investment in risk assets less attractive. Looking ahead, US CPI is the big release in today’s trade.

GOLD (SPOT) – technical overview

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 1099.00 – 11Sep 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 fixate on the negative driver of broader US Dollar demand or to put the focus on the supportive catalyst of risk liquidation and flight to safety. For now, it seems the former is winning out, with broader Dollar demand opening the recent pullback in the metal. While the market is only pricing a 25% chance for a rate hike at tomorrow’s Fed meeting, the fact that the Fed is on pace for a tightening over the coming months has been enough for this to weigh on the price of GOLD which shares an inverse correlation with the US Dollar. Still, there remains a good deal of uncertainty out there at the moment and this uncertainty could once again inspire safe haven demand.

Feature – technical overview

USDZAR has entered a corrective phase after recently breaking to fresh record highs above 14.0000. While there still could be room for additional corrective action ahead, the uptrend remains firmly intact and a higher low is now sought out above 13.0000 ahead of the next major upside extension and bullish continuation. Ultimately, only a daily close below 13.0000 would delay the highly constructive outlook.

• R2 14.0150 – 7Sep/Record – Strong
• R1 13.6990 –11Sep high – Medium
• S1 13.2300 – 1Sep low – Medium
• S2 12.9650 – 24Aug low – Strong

Feature – fundamental overview

The recovery in the Rand over the past several days off record lows against the Buck has been fueled by scaled back Fed rate hike bets and a mild recovery in risk sentiment as reflected through equities. But the emerging market currency has also benefitted from solid data on the local front, with the South African trade deficit coming in narrower than expected, producing the smallest deficit in 4 years. The improvement in this data series has been helped by the weaker Rand which has bolstered exports, while curbing import demand. Looking ahead, much of the price action for the remainder of the week will be predicated on reaction to Thursday’s FOMC rate decision.