Investors Looking to Yellen for Renewed Confidence

GBPUSD – technical overview

Deeper setbacks are favoured over the coming sessions, with the major pair seen gravitating back towards recent key support at 1.5089, which guards against the 1.5000 psychological barrier further down. Ultimately, only a close back above 1.5700 (78.6% of recent high-low move) would negate the bearish outlook.

• R2 1.5367 – 23Sep high – Strong
• R1 1.5340 – 22Sep low – Medium
• S1 1.5221 – 23Sep low  – Medium
• S2 1.5165 – 4Sep low  – Strong

GBPUSD – fundamental overview

The Pound remains under intense pressure into the latter half of the week, with the UK currency extending declines in Wednesday trade on the back of some cross related demand for EURGBP. It seems a wave of less dovish than expected ECB speak, highlighted by President Draghi, was the primary catalyst for Sterling underperformance. Draghi said more time would be needed to judge whether additional stimulus would be required. Looking ahead, the UK calendar features some secondary data in the form of BBA loans for house purchases, but the market will be looking past this data to the US calendar, with durable goods, initial jobless claims and new home sales due. Also out on Thursday at 21:00 GMT is a Janet Yellen lecture in Massachusetts.   

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. The market has been showing range contraction over the past several days, which warns of a near-term pickup in volatility. 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 121.00 – 17Sep high – Strong
• R1 120.66 – 21Sep high – Medium
• S1 119.33 – 23Sep low – Medium
• S2 119.05 – 18Sep low – Strong

USDJPY – fundamental overview

Despite last week’s more dovish FOMC rate decision, risk assets remain under pressure and this downside pressure has been helping to prop the correlated, safe haven Yen currency. Market uncertainty over the timing of Fed rate liftoff has put most of the focus here on performance in the stock market, and with stocks still heading lower, it hasn’t been much of a surprise to see a stronger Yen. All will be looking for additional clarity on the Fed policy outlook from the Fed Chair later today, when she gives a lecture in Massachusetts at 21:00 GMT, though it is unlikely she will deviate too much from her comments in the previous week. Otherwise, the focus will be on the earlier batch of US data in the form of durable goods, initial jobless claims and new home sales.

EURCHF – technical overview

The recovery outlook remains intact, with the price recently 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. Only back below 1.0714 would negate the constructive outlook.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0958 – 21Sep high – Medium
• S1 1.0824 – 22Sep low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

Setbacks in this cross rate have been very well supported this week, with the market shrugging off a wave of risk off flow, instead choosing to focus on the latest comments out of Switzerland relating to the Franc. On Wednesday, Swiss economy minister Schneider-Ammann said the strong Franc endangered price stability and offered his view that purchasing power parity in EURCHF was well above 1.20. Finally, he reminded the market the SNB was on the same page, working towards a weaker local currency.

AUDUSD – technical overview

The correction out from recent multi-year lows sub-0.7000 has finally stalled out, with the market now looking for the next lower top ahead of a bearish continuation and fresh downside extension. Ultimately, only back above 0.7440 would compromise the bearish outlook.

• R2 0.7197 – 21Sep high – Strong
• R1 0.7090 – 23Sep high – Medium
• S1 0.6946 – 10Sep low – Medium
• S2 0.6908 – 4Sep/2015 low – Strong

AUDUSD – fundamental overview

Aussie is slowly gravitating back towards its recent multi-year low against the Buck, with the latest wave of declines coming on the back of softer China flash manufacturing PMIs. Also pressuring the currency has been more weakness in global equities and fresh selling in commodities. Looking ahead, the focus will be on a batch of US economic data featuring initial jobless claims, durable goods and new home sales, while the market will then turn its attention to a 21:00 GMT lecture from the Fed Chair.

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. Ultimately, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of bullish continuation.

• R2 1.3400 – Figure – Medium
• R1 1.3357 – 23Sep/2015 high – Strong
• S1 1.3233 – 23Sep low – Medium
• S2 1.3160 – 16Sep low– Strong

USDCAD – fundamental overview

Fresh 11-year lows for the Canadian Dollar on Wednesday, with the Loonie coming under pressure on the back of deluge of negative drivers including much softer Canada retail sales, a pullback in OIL prices and more downside pressure in equities. Perhaps one more driver of CAD weakness came from the political side, after the main opposition party swore off joining any minority coalition government under Prime Minister Harper. Dealers now cite interest towards 1.3500. Looking ahead, the Canadian calendar is empty and the key focus will be on US data and a Fed Chair lecture at 21:00 GMT. US economic data features initial jobless claims, durable goods and new home 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 0.6332 – 22Sep high– Strong
• R1 0.6305 – 23Sep high– Medium
• S1 0.6236 – 23Sep low – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

A mixed showing out from the latest batch of New Zealand trade data, with the deficit coming in wider than expected, but export data coming in stronger. Overall however, the New Zealand Dollar remains pressured to the downside and tracks just off recent multi-year lows, with the downturn in global sentiment, lower commodities prices and monetary policy divergence with the Fed all driving price action. Looking ahead, the key focus will be on US data and a Fed Chair lecture at 21:00 GMT. US economic data features initial jobless claims, durable goods and new home sales.

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 last Thursday’s 2020 area spike high, ahead of the next major downside extension and bearish continuation below 1800. Only a daily close back above 2022 would delay the newly adopted bearish outlook.

• R2 2022.00 – 17Sep high – Strong
• R1 1980.00 – 21Sep high – Strong
• S1 1922.00 – 23Sep low – Medium
• S2 1902.00 – 1Sep low – Strong

US SPX 500 – fundamental overview

Price action in US equities post FOMC rate decision has been unsettling to say the least, with the market extending declines into the latter half of this week. The Fed has relied heavily on its ultra accommodative central bank policy to keep asset prices well supported and if stocks remain under pressure, this could spell more trouble for financial markets. The combination of a monetary policy that isn’t likely to get more accommodative and a faltering stock market is a recipe for disaster the Fed does not want on its hands but may not be able to avoid. Perhaps more clarity on the Fed policy outlook will be offered later today at 21:00 GMT, when the Fed Chair speaks in Massachusetts.

GOLD (SPOT) – technical overview

The latest impressive recovery out from the 1100 area suggests the market is in the process of carving a meaningful higher low ahead of the next major upside extension through 1170. Look for a break above 1170 to confirm and open an acceleration back towards medium-term resistance at 1233. Only a close below 1100 negates. 

• R2 1170.00 – 24Aug high – Strong
• R1 1148.00 – 1Sep high – Medium
• S1 1099.00 – 11Sep low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

The GOLD market has been very well supported in recent trade, with gains holding up even as the US Dollar recovers this week. Broad based risk liquidation and downside pressure in equity markets have inspired safe haven buying, with the yellow metal standing out as a primary candidate for these flows. The elevated concern over the outlook for the global economy is inviting renewed demand for GOLD, with the metal recovering impressively over the past few sessions. Dealers cite decent buy stops above $1170.

Feature – technical overview

USDZAR 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 to fresh record highs. Ultimately, only a daily close below 13.0000 would delay the highly constructive outlook.

• R2 14.0150 – 7Sep/Record – Strong
• R1 13.8970 –24Sep high – Medium
• S1 13.6350 – 23Sep low – Medium
• S2 13.1650 – 17Sep low – Strong

Feature – fundamental overview

A softer than expected South Africa inflation reading was somewhat of a relief to the SARB on Wednesday, as it helped to back up the central bank’s decision to leave policy on hold, despite calls for another 25bp hike to 6.25%. The SARB also came out downgrading its growth forecasts with all of this opening a fresh wave of downside pressure in the Rand, closing in on a retest of recent record lows against the Buck. Currency weakness is a big concern for the central bank, but for the interim, these risks are being offset by the greater risk to the local economy if the central bank further tightened policy. Perhaps in an effort to keep the Rand from sliding too much, the central bank maintained its restrictive policy outlook.