Sentiment Shift Triggers Safe Haven Flow

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 1.5388 – 13Oct high – Strong
• R1 1.5300 – 9Oct low – Medium
• S1 1.5200 – 13Oct low  – Medium
• S2 1.5140 – 6Oct low – Strong

GBPUSD – fundamental overview

Any hopes the Bank of England would be moving on rates sooner than later, or any thoughts the UK central bank could move ahead of the Fed were dashed on Tuesday on the release of CPI data. UK CPI came in on the negative side and a good deal softer than expected, with the reading easily pushing back the BOE rate hike timeline and weighing heavily on the Pound. Looking ahead, more volatility is expected today with the release of UK employment and a batch of US data featuring retail sales, PPI, business inventories and the Fed Beige Book.

USDJPY – technical overview

Rallies have 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 within a multi-day triangle, which warns of a near-term pickup in volatility as the price action finally reaches the apex. At this point, only a daily close 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 119.55 – 13Oct low – Medium
• S2 119.25 – 29Sep low – Strong

USDJPY – fundamental overview

Price action in this major pair continues to be heavily dictated by risk sentiment and equity flows. The latest downside pressure in stocks has weighed on the pair, opening a fresh wave of safe haven Yen demand. Conflicting Fed speak on Tuesday cancelled out any potential influence on this front, after Bullard came out hawkish while Tarullo was dovish. Some of the names noted on the offer have been HFTs and leveraged accounts. Expectation for more BOJ easing at the end of the month has also been brushed aside, with market more focused on the fallout from the early Tuesday China import data disappointment. Looking ahead, we get a batch of US data featuring retail sales, PPI, business inventories and the Fed Beige Book.

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 have been very well supported, with the market shrugging off softer German data and signs of ECB readiness for additional stimulus, instead choosing to prioritize ongoing SNB Franc rhetoric. The SNB continues to remind investors of its commitment 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. Still, the market hasn’t walked away from this latest pullback in risk totally unscathed, with the safe haven flows inviting Franc demand. Perhaps also factoring into price action are the share price hits to Switzerland’s two largest banks, with both UBS and Credit Suisse suffering from news the Swiss FinMin will instruct the banks to comply with a ‘too big to fail rule’ which would impose a 5% leverage ratio.

AUDUSD – technical overview

The corrective rally out from multi-year lows has finally stalled out following 9 consecutive positive closes. Tuesday’s break below Monday’s low also ends a sequence of 9 consecutive daily higher lows and could finally suggest a lower top is in place at 0.7382 ahead of the next major downside extension back towards and eventually below the 0.6908 base. Ultimately, only a close above 0.7440 would delay the bearish outlook.

• R2 0.7382 – 12Oct high – Strong
• R1 0.7305 – 12Oct low – Medium
• S1 0.7198 – 14Oct low – Medium
• S2 0.7150 – 7Oct low – Strong

AUDUSD – fundamental overview

Quite a reversal for the Australian Dollar this week, which has come back under some intense pressure following a healthy multi-session recovery. The downturn in global sentiment has been the primary driver of price action, with the sentiment shift triggered on discouraging economic data out of China. China’s concerning Tuesday import data has been followed up on Wednesday with softer inflation readings. Although these readings could suggest more PBOC easing ahead, ultimately, the softer CPI also reflects an economy that is slowing down. Perhaps the one supportive Aussie development has been a decent Westpac consumer confidence reading. Looking ahead, we get a batch of US data that features retail sales, PPI, business inventories and the Fed Beige Book.

USDCAD – technical overview

A correction out from 11-year highs at 1.3457 looks to be finally be stalling out, after the market found solid support in the 1.2900 area and put in a bullish reversal to break a sequence of consecutive daily lower lows. Any setbacks from here should continue to be very well supported in favour of a bullish resumption back towards and eventually above the 1.3457 high. Ultimately, only a daily close below 1.2860 would delay.

• R2 1.3134 – 6Oct high – Strong
• R1 1.3080 – 13Oct high – Medium
• S1 1.2997 – 13Oct low – Medium
• S2 1.2901 – 9Oct low– Strong

USDCAD – fundamental overview

The Canadian Dollar has come back under pressure this week, following an impressive recovery in recent days. While a good deal of the Loonie decline has been attributed to the downturn in risk, brought on by renewed concern for the China outlook, the Canadian Dollar has also been finding room for its own relative weakness on the pullback in OIL prices. Comments from the IEA that demand will slow and supply will rise in 2016 have weighed on OIL and this has opened further CAD selling. Looking ahead, risk sentiment and OIL direction will continue to dictate flows, while the market will also focus on a batch of US data which features retail sales, PPI, business inventories and the Fed Beige Book.

NZDUSD – technical overview

A rally out from recent multi-year lows has finally stalled out, with the market now poised for bearish continuation. Look for any upside to be well capped below 0.6800 from here, with a daily close back below 0.6585 to strengthen the outlook and accelerate declines towards the 0.6100 area base. Ultimately, only a daily close above 0.6800 delays.

• R2 0.6740 – 12Oct high– Strong
• R1 0.6700 – Figure– Medium
• S1 0.6618 – 14Oct low – Medium
• S2 0.6585 – 8Oct low – Strong

NZDUSD – fundamental overview

Price action in the New Zealand Dollar has been somewhat perplexing into Wednesday, with the currency mounting an impressive recovery off Tuesday lows despite some dovish commentary from RBNZ Governor Wheeler. The central banker was out warning further easing may be required as China remains a serious concern for the local economy. Perhaps some of the Kiwi recovery can be attributed to the more threatening impact a China slowdown would have on Australia, with AUDNZD pulling back sharply intraday post Wheeler. Nevertheless, with risk coming back off, the Kiwi recovery over the past several days could be at an end, with the market poised for a resumption of declines. Looking ahead, the focus will be on US data, with retail sales, PPI, business inventories and the Fed Beige Book due.

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 2050 would delay the bearish outlook.

• R2 2043.00 – 6Jul low – Strong
• R1 2022.00 – 13Oct high – Strong
• S1 1970.00 – 7Oct low – Medium
• S2 1946.00 – 5Oct low – Strong

US SPX 500 – fundamental overview

Stocks have come under mild pressure into Wednesday, with the market weighed down by global growth concerns and the threat of a more intensified China slowdown. Tuesday’s discouraging China import data has been followed up early Wednesday with subdued inflation readings, further supporting the case for a cooling off in the world’s second largest economy. Still, the market has been supported into dips on the expectation the Fed will hold off on a rate increase following this month’s abysmal US employment report. Looking ahead, US earnings and a batch of data featuring retail sales, PPI, business inventories and the Fed Beige Book, will all come into focus.

GOLD (SPOT) – technical overview

Wednesday’s break above critical resistance at 1170 confirms a medium-term higher low in place at 1100 and opens the door for the next major upside extension back towards 1233 in the days ahead. Setbacks are now expected to be well supported on dips, with only a break back below the 1135 area to give reason for concern.

• R2 1206.00 – 18Jun high – Strong
• R1 1188.00 – 29Jun high – Medium
• S1 1136.00 – 8Oct low – Medium
• S2 1099.00 – 11Sep low – Strong

GOLD (SPOT) – fundamental overview

This month’s much weaker than expected US employment report and some renewed concerns over the China growth outlook have been a welcome relief for the GOLD market, with the metal finding a fresh wave of safe haven demand on the news. Major buy-stops have been triggered early Wednesday through $1170 and this is attracting a fresh round of interest from larger macro accounts and other major players.

Feature – technical overview

USDSGD has been in the process of pulling back from recent multi-year highs, with the market entering a period of correction. Still, overall, the broader uptrend remains well intact, with a higher low sought out above 1.3885 ahead of a bullish continuation and the next major upside extension through 1.4365. Only a close below 1.3800 would delay the constructive outlook and give reason for concern.

• R2 1.4145 – 8Oct high – Strong
• R1 1.4055 –9Oct high – Medium
• S1 1.3885 – 17Sep low – Strong
• S2 1.3800 – Figure – Strong

Feature – fundamental overview

Some relative outperformance in the Singapore Dollar on Wednesday after the MAS delivered a less dovish than expected policy decision, maintaining a modest and gradual appreciation of the S$NEER policy band. This in conjunction with some better than expected GDP results have been driving the price action. Still, with risk sentiment deteriorating abroad amidst slowing China concerns, any Singapore Dollar demand from today’s local developments is expected to be met with solid offers.