US Dollar Sell-Off Intensifies, BOJ Unchanged

GBPUSD – technical overview

Deeper setbacks are favoured over the coming sessions, with the major pair seen gravitating below recent key support at 1.5090 and towards the 1.5000 psychological barrier further down. Any rallies are now expected to be well capped below 1.5400, while ultimately, only a close back above 1.5700 (78.6% of recent high-low move) would negate the bearish outlook.

• R2 1.5289 – 24Sep low – Strong
• R1 1.5261 - 25Sep high – Medium
• S1 1.5128 – 2Oct low – Medium
• S2 1.5090 – 4May low – Strong

GBPUSD – fundamental overview

A softer round of trade data out of the US has added to US Dollar bearishness into the mid-week, with traders building on last Friday's post-NFP Dollar sell-off. The softer US employment data has forced the market to seriously reconsider prospects for a 2015 Fed rate hike and this has been the primary driver of the minor recovery in the Pound. Still, with UK data also coming in on the softer side, as reflected by the most recent UK services PMI showing, BOE rate hike bets have also been scaled back and this has tempered the GBP recovery somewhat. Looking ahead, UK industrial and manufacturing production are the big releases in an otherwise quiet day.

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 121.23 – 25Sep high – Strong
• R1 120.59 – 28Sep high – Medium
• S1 119.87 – 5Oct low – Medium
• S2 119.25 – 29Sep low – Strong

USDJPY – fundamental overview

The BOJ has done a good job disappointing those who had been expecting some form of an indication for additional easing, after the central bank left policy on hold in a repeat of the previous decision. USDJPY has since come back under pressure in the aftermath of what had been a leaked decision. The policy statement offered no easing hints, while the BOJ maintained its assessment the economy continued to recover moderately, while inflation was rising over the long run. The market will now digest the latest Kuroda presser, while also reflecting on broader flows which have seen widespread selling of the US Dollar in the following last week's discouraging US employment report which resulted in a scaling back of 2015 Fed liftoff bets.

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 1.0983 – 25Sep high – Medium
• S1 1.0824 – 22Sep low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

Setbacks in this cross rate continue to be very well supported, with the market shrugging off softer Eurozone data and calls for additional ECB stimulus, instead choosing to prioritize a mild recovery in stock markets and ongoing SNB Franc rhetoric. The SNB continues to remind investors of its readiness to step in and intervene on behalf of the Franc should the currency attempt to mount any meaningful recoveries, with additional negative interest rate policy not to be ruled out. The SNB still views the Franc as highly overvalued and remains committed to additional Franc weakness going forward. Perhaps also supporting this rate in recent trade is a USDCHF long USDCHF recommendation from Morgan Stanley, with the investment house looking for a move to 1.0100 on what it sees as favourable risk conditions going forward.

AUDUSD – technical overview

The correction out from recent multi-year lows sub-0.7000 has stalled out, with the market now looking for the next lower top at 0.7280 ahead of a bearish continuation and fresh downside extension. Look for rallies to be well capped below 0.7200 on a daily close basis, while ultimately, only back above 0.7440 would compromise the bearish outlook.

• R2 0.7197 – 21Sep high – Strong
• R1 0.7188 - 7Oct high – Medium
• S1 0.7067 – 6Oct low – Medium
• S2 0.6998 – 1Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar has performed well this week, extending its recovery off recent multi-year lows against the Buck. The currency has benefitted from a number of developments including a less dovish RBA policy decision, recovery in equity markets, scaled back Fed rate hike bets and better bid commodities. An early Wednesday pullback in Aussie construction PMIs has failed to weigh on the market, with broad based currency gains fueling a fresh wave of demand. Even comments from Fed Williams, reaffirming his expectation for a 2015 Fed liftoff and IMF downgrades of global and China growth have failed to temper the Aussie recovery. Looking ahead, the calendar is light, with only US consumer credit standing out. Performance in stocks and sentiment will likely be the major driver.

USDCAD – technical overview

The market has finally entered a period of healthy corrective activity after pushing to fresh 11-year highs just shy of 1.3500. Still, the overall uptrend remains well intact and a fresh higher low is now sought out in the 1.3000 area ahead of the next major upside extension and bullish continuation beyond 1.3500. Ultimately, only below 1.2860 would force a shift in the constructive outlook.

• R2 1.3175 – 5Oct high – Strong
• R1 1.3134 - 6Oct high – Medium
• S1 1.3012 – 18Sep low – Medium
• S2 1.2952 – 12Aug low– Strong

USDCAD – fundamental overview

Weaker than expected Tuesday trade data results out of Canada and the US were offsetting, with the market deferring its focus to broader macro flows. The primary driver of price action at the moment is the wave of across the board US Dollar selling in the aftermath of last Friday's discouraging US employment report. Also helping fuel relative demand for the Loonie has been an impressive recovery in the price of OIL. Looking ahead, the calendar only features second tier data in the form of Canada building permits and US consumer credit. As such, look for OIL prices and sentiment to dictate direction.

NZDUSD – technical overview

Despite the latest bounce, the market remains 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. The current rally is viewed as corrective and ultimately, only a break back above 0.6740 would compromise the bearish structure.

• R2 0.6607 – 21Aug low– Strong
• R1 0.6598 - 7Oct high– Medium
• S1 0.6479 – 6Oct low – Medium
• S2 0.6437 – 5Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has already been enjoying an impressive recovery rally on the back of scaled back Fed liftoff bets, improved global sentiment and healthier commodities prices. Throw in the most recent positive GDT auction result at +9.9% and it isn't hard to see why the risk correlated currency is stronger these days. However, the market will be careful not to get too ahead of itself with a 2015 Fed rate hike still on the table as evidenced by Fed Williams' latest comments. Moreover, the recovery in global equities is still on shaky ground and there is a sense it could be compromised at any moment, which would once again put the pressure back on the downside for Kiwi.

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 recent rebound out from the 1830 area low has been well capped above 2000 and a fresh lower top is now sought out ahead of a bearish continuation below 1830. Only a daily close back above 2022 would delay the bearish outlook.

• R2 2022.00 – 17Sep high – Strong
• R1 1996.00 – 28Aug high – Medium
• S1 1946.00 – 5Oct low – Medium
• S2 1892.00 – 2Oct low – Strong

US SPX 500 – fundamental overview

The stock market continues to build on momentum from last Friday's horrid US employment report, with the gains fueled off speculation this will keep the Fed from moving on rates. While the data was definitely discouraging, the market still seems to be more comforted with the fact that lower for longer monetary policy will keep asset prices elevated. However, with the Fed having little left in the tank as far as what it can do to help stimulate the economy, there is risk another downturn in sentiment will open an intensified liquidation in stocks, even with the Fed keeping policy at current levels. Though his comments haven't received much attention just yet, it's also worth noting Fed Williams has reiterated his call for a 2015 rate hike even after the latest round of softer US data.

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 1200.00 – Psychological – Medium
• R1 1170.00 – 24Aug high – Strong
• S1 1099.00 – 11Sep low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

Last Friday's much weaker than expected US employment report has been a welcome relief for the GOLD market, with the metal finding a fresh wave of demand on the news. This has now been followed up by discouraging US trade data and the combination of concern over the implications of the softer data on US and global recovery prospects and some broad based selling in the US Dollar post event, continue to support the metal's recovery.

Feature – technical overview

USDZAR uptrend remains firmly intact with the market pushing to yet another record high. A higher low is now sought out above 13.0000 ahead of the next major upside extension and bullish continuation towards 15.0000. Ultimately, only a daily close below 13.0000 would delay the highly constructive outlook.

• R2 14.2000 – Figure – Medium
• R1 14.1590 –29Sep/Record – Strong
• S1 13.4160 – 22Sep low – Medium
• S2 13.1650 - 17Sep low – Strong

Feature – fundamental overview

SARB Governor Kganyago comments have been helping to fuel an already bid Rand market, with the central banker saying longer-term inflation expectations were at the top end of the target range while adding that gradual tightening would help achieve the central bank's mandate. These hawkish comments come at a time when currencies are recovering across the board against the US Dollar as the market scales back 2015 Fed liftoff bets in the aftermath of last week's softer US employment report and most recent discouraging US trade data. This has sparked a recovery in risk assets, with the correlated Rand benefitting from the flow. Still, overall, the Rand and emerging markets remain under longer-term pressure and could be at risk of renewed downside if risk assets falter in the sessions ahead.