Market Reverts to Questionable Trading Strategy

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. The latest recovery rally is now expected to be well capped below 1.5500 on a daily close basis, while ultimately, only a close back above 1.5700 (78.6% of recent high-low move) would negate the bearish outlook.

• R2 1.5481 – 21Sep low – Strong
• R1 1.5400 - Figure – Medium
• S1 1.5245 – 5Oct high – Medium
• S2 1.5219 – 7Oct low – Strong

GBPUSD – fundamental overview

Although the Bank of England rate decision produced an as expected result, the accompanying language leaned to the dovish side. The central bank said it expected inflation to rise more gradually than it had forecast in the previous inflation report, suggesting rates will stay lower for longer. The Pound was knocked back on the language but managed to recover impressively in the final hours of the day, with the more dovishly perceived FOMC Minutes fueling a bout of broad based US Dollar selling. Looking ahead, the key standouts on the calendar are UK trade and construction output, along with US import prices and some Fed speak from Lockhart and Evans.

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 120.57 – 6Oct high – Medium
• S1 119.49 – 1Oct low – Medium
• S2 119.25 – 29Sep low – Strong

USDJPY – fundamental overview

No changes to the fundamental outlook for the major pair, which is getting pull from both sides and in turn going nowhere at all. Those expecting additional insight from the BOJ on further easing measures this week were disappointed which opened the door for some Yen demand. Meanwhile, a bout of broad based currency buying in the aftermath of a more dovishly perceived FOMC Minutes also helped to support Yen bids. On the other side however, the equity market reaction has been positive, with stocks rallying sharply to support the US Dollar side. In the end, no real changes in the price and the market continues to wait for its range break. Looking ahead, the key focus in today's trade will be on some Fed speak which features Lockhart and Evans.

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 ECB readiness for additional 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.

AUDUSD – technical overview

The market is in the process of pushing higher after stalling out ahead of the recent multi-year low. At this point, the gains are still classified as corrective, with the broader downtrend firmly intact. Look for the move to hold below 0.7280 on a daily close basis, with only a break back above 0.7440 to officially force a shift in the structure. Below 0.7067 will confirm the strengthen the outlook and accelerate declines.

• R2 0.7440 – 11Aug high – Strong
• R1 0.7300 - Figure – Medium
• S1 0.7248 – 9Oct low – Medium
• S2 0.7165 – 8Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar hasn't been paying much attention to local data this week, with the latest round of softer housing data failing weigh on the currency. Price action in this currency continues to be driven off an impressive recovery in risk sentiment, stabilisation on commodities and some broad based US Dollar selling on scaled back Fed rate hike bets. Thursday's dovishly perceived FOMC Minutes have been used as an opportunity to fuel additional gains in the currency, though dealers now cite decent sell interest around current levels. Looking ahead, lack of first tier economic data leaves the market focused on some Fed speak featuring Lockhart and Evans.

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 1.2900-1.3000 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 1.3134 – 6Oct high – Strong
• R1 1.3074 - 8Oct high – Medium
• S1 1.2952 – 12Aug low – Medium
• S2 1.2860 – 29Jul low– Strong

USDCAD – fundamental overview

The impressive recovery in the Canadian Dollar continues, with the Loonie extending gains on the back of broad based US Dollar selling post the dovishly perceived FOMC Minutes. Of course, the Canadian Dollar has also managed to find some relative bids on the other big story of the week, which has been the strong recovery in the price of OIL back into the $50 area. More volatility is expected today with the big data on the calendar coming in the form of Canada employment. Otherwise, the market will be looking to hear what Fed Lockhart and Evans have to say.

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 0.6740 – 29Jul low– Strong
• R1 0.6700 - 8Oct high– Medium
• S1 0.6585 – 8Oct low – Medium
• S2 0.6536 – 7Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is the strongest performing major currency over the past week, benefitting from scaled back 2015 rate hike bets, higher equities, better bid commodities and another impressive GDT auction. Thursday's dovishly perceived FOMC Minutes has been the catalyst to open the latest round of Kiwi gains. 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 the Minutes and 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. Looking ahead, lack of first tier economic data will leave the market focused on some Fed speak, with Lockhart and Evans on the docket.

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 is expected to be well capped below 2050 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 2043.00 – 6Jul low – Strong
• R1 2022.00 – 17Sep high – Strong
• S1 1970.00 – 7Oct low – Medium
• S2 1946.00 – 5Oct 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 for a more extended period. Clearly the more dovishly perceived FOMC Minutes have opened additional gains, with calls from most members for a 2015 liftoff shrugged off. Even comments from Fed Williams calling for a 2015 hike have been disregarded this week. Looking ahead, Fed speak will take center stage on Friday, with Lockhart and Evans on the docket.

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 and the latest dovish FOMC Minutes have been a welcome relief for the GOLD market, with the metal finding a fresh wave of demand on the news. The combination of concern over the implications of softer US data and the Fed's worry about external risk have been quite supportive of the safe haven metal. Meanwhile, the resulting price action has fueled an aggressive round of broad based US Dollar selling, also contributing to the GOLD recovery. Dealers cite stops above $1170.

Feature – technical overview

USDZAR is undergoing a correction of record highs, though the uptrend remains firmly intact. 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 14.1590 – 29Sep/Record – Strong
• R1 13.7770 –5Oct high – Medium
• S1 13.1650 – 17Sep low – Strong
• S2 13.0000 - Psychological – Strong

Feature – fundamental overview

For the time being, the market isn't overly concerned with softer domestic data, after South African manufacturing production came in a good deal weaker than expected to follow up an already disappointing mining production release. The Rand has easily brushed aside this data, with the market clearly more influenced by the broad based US Dollar selling as investors scale back Fed liftoff bets in the aftermath of a discouraging US employment report and more dovish FOMC Minutes. Perhaps some hawkish comments from the SARB Governor this week have also been supportive of the Rand recovery, though overall, the emerging market currency remains under broader pressure and could be poised for renewed downside pressure at any moment as fear of a deterioration in global growth persists. For today, Fed speak is the standout, with Lockhart and Evans on the docket.