Highly Anticipated Fed Day Finally Arrives

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 1.5600 – Figure – Strong
• R1 1.5529 – 16Sep high – Medium
• S1 1.5400 – Figure  – Medium
• S2 1.5329 – 15Sep low  – Strong

GBPUSD – fundamental overview

Wednesday was all about the Pound, with the UK currency standing out as a clear outperformer. The market received a major boost on the release of a much better than expected UK employment report which showed a drop in the unemployment rate and pickup in wages. The data helped increase odds of a sooner hike from the Bank of England, and stops were tripped, with the market surging through psychological barriers at 1.5500. Of course, comments from BOE Carney downplaying risk associated with China and warnings from BOE Forbes that rates we need to go up did nothing to hurt the impressive rally. US CPI then came in softer than forecast which opened more gains in the North American session. Today’s economic calendar features some UK retail sales and a batch of US data in the form of initial jobless claims, building permits, housing starts and the Philly Fed. But all of this will be an afterthought, with attention squarely focused on the FOMC rate decision.

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 119.85 – 14Sep low – Medium
• S2 119.40 – 15Sep low – Strong

USDJPY – fundamental overview

A disappointing Japanese trade report is getting attention in Thursday trade, with the data casting doubt over the Bank of Japan’s economic outlook and increasing the chances for additional stimulus when the BOJ next meets. Export growth was halved to 3.1% y/y from 7.6% prior resulting in a 5th consecutive deficit reading. A slowing China has been sourced as a primary driver behind the drop in exports and this has opened some fresh sell interest in the Yen. Still, liquidity conditions have been thin this week, and the major pair is comfortable remaining confined to a range into today’s all-important Fed rate decision. Other data out today includes US initial jobless claims, building permits, housing starts and the Philly Fed.

EURCHF – technical overview

The recovery outlook remains intact, with the price piercing through key resistance at 1.0962, confirming a medium-term higher low at 1.0714 and opening the next major upside extension towards a measured move objective in the 1.1200 area. The rally has since stalled a bit but only back below 1.0714 would negate the constructive outlook.

• R2 1.1200 – Measured Move – Strong
• R1 1.1050 – 11Sep high – Medium
• S1 1.0873 – 8Sep low – Medium
• S2 1.0800 – 4Sep 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 today, but is unlikely to rock the boat given the Franc’s slide 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 0.7250 – 25Aug high – Strong
• R1 0.7206 – 28Aug high – Medium
• S1 0.7085 – 15Sep low – Medium
• S2 0.7035 – 11Sep low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been well bid over the past several sessions as it recovers out from multi-year lows against the Buck. The commodity currency has managed to build on momentum from last week’s solid Aussie employment report, with Wednesday’s softer US inflation print driving the most recent gains. But overall, volumes have been lighter than normal and a lot of the price action has also been attributed to some pre-FOMC event risk position squaring. Today’s economic calendar features a wave of US data in the form of initial jobless claims, building permits, housing starts and the Philly Fed. But all of this will take a major back seat to the Fed decision late in the day.

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 1.3257 – 16Sep high – Medium
• S1 1.3117 – 31Aug low – Medium
• S2 1.2952 – 12Aug low– Strong

USDCAD – fundamental overview

Wednesday was a good day for the Canadian Dollar, with the beaten down currency benefitting from a number of factors. Canada manufacturing sales were stronger, OIL mounted an impressive surge and demand for US equities fueled additional demand for currencies across the board. The Loonie then managed to generate additional bids in the aftermath of a softer US CPI print. Later today, we get some secondary US data in the form of initial jobless claims, building permits, housing starts and the Philly Fed. But all of this will be quickly forgotten with attention shifting to the highly anticipated FOMC rate decision.

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 0.6379 – 16Sep high– Medium
• S1 0.6293 – 15Sep low – Medium
• S2 0.6244 – 7Sep low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to extend its mild recovery rally out from multi-year lows, with the currency most recently benefitting from a well received dairy auction, softer US inflation and demand for global equities. Still, gains have been well capped into rallies, with the early Thursday softer than expected New Zealand GDP showing weighing on Kiwi. Looking ahead, today’s economic calendar features a wave of US data in the form of initial jobless claims, building permits, housing starts and the Philly Fed. But all of this will take a major back seat to the highly anticipated Fed decision late in the day.

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 around 2000 ahead of the next major downside extension and bearish continuation below 1800. Only a daily close back above 2000 would delay the newly adopted bearish outlook.

• R2 2032.00 – 21Aug high – Strong
• R1 2000.00 – Psychological – 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 remains a good amount of uncertainty in the air and a sense that even if the Fed holds off later today, it will still be on pace for an unwelcome policy reversal this year that makes investment in risk assets less attractive.

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

An impressive recovery for the GOLD market on Wednesday, with the metal surging from the $1100 area, putting in one of its strongest days in nearly a month. The inverse correlation with the US Dollar continues to be a primary driver of price action, with Wednesday’s broad based decline in the Buck fueling the latest wave of demand. The US Dollar sell-off comes on the back of a softer US inflation reading, something the metal is also traditionally sensitive to. Of course, more volatility is expected later today as the market digests the latest FOMC rate decision.

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 Rand managed to extend its recovery into Thursday, building on gains from some better South Africa trade data, softer US CPI and a recovery in global sentiment as reflected through equity prices. The market will now focus on today’s highly anticipated Fed rate decision and the broad reaction to the US Dollar in the aftermath, will likely dictate direction in this market. Market participants will then start to look ahead to the SARB rate decision later this month, where the central bank will need to balance the pressure of higher rates on a declining currency with a slowing domestic economy. Investec has been advocating for an on hold SARB despite Rand weakness, as any additional tightening would have a more detrimental impact on confidence.