Participants Welcome ‘Lower for Longer’

GBPUSD – technical overview

Although the market has put in an impressive recovery rally in recent sessions, any additional upside is expected to be well capped below 1.5600 on a daily close basis, in favour of a lower top and resumption of declines back towards psychological barriers at 1.5000. Ultimately, only a close back above 1.5550 (78.6% of recent high-low move) would delay the bearish outlook.

• R2 1.5529 – 22Sep high – Strong
• R1 1.5495 – 14Oct low – Medium
• S1 1.5388 – 13Oct high  – Medium
• S2 1.5300 – Figure – Strong

GBPUSD – fundamental overview

An impressive performance for the Pound over the past 24 hours, with the UK currency making an astonishing comeback following Tuesday’s bearish performance. Initially, the market was supported on the drop in the UK unemployment rate to 5.4%, the lowest levels since 2008. Interestingly enough, participants chose to downplay offsetting components in the employment release after the claimant count was higher than forecast and wage growth was more subdued. But another round of disappointing US economic data proved to be too much for the Pound to ignore, with an intense short covering rally ensuing on the back of below forecast retail sales, PPI, and a Fed Beige Book highlighting a downturn in manufacturing activity. Looking ahead, we get US CPI, Empire manufacturing, the Philly Fed and some more Fed speak, with Bullard, Dudley and Mester on the wires.

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, warning 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 120.57 – 6Oct high – Strong
• R1 119.80 – 14Oct high – Medium
• S1 118.60 – 4Sep low – Strong
• S2 118.00 – Figure – Medium

USDJPY – fundamental overview

The combination of some risk off flow and another round of discouraging economic data out of the US could not be ignored by this major pair, with the Yen easily finding bids on both drivers. USDJPY sell-stops were cleared below 119.00, setting the stage for a potential retest of the memorable August low down around 116.00. The market has since found some support in early Wednesday trade as equity markets stabilize and participants wonder if the US Dollar sell-off has finally run its course. More clarity will be offered later today when the US economic calendar gets going. US CPI, Empire manufacturing, and the Philly Fed are due, along with some more Fed speak featuring Bullard, Dudley and Mester.

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 Eurozone 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 recent 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 ended 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 0.7440 – 11Aug high – Strong
• R1 0.7382 – 12Oct high – Medium
• S1 0.7297 – 15Oct low – Medium
• S2 0.7198 – 14Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a remarkable job holding up into Thursday trade, despite a soft Aussie employment report. Perhaps the only comforting sign in the data was the as expected steady unemployment rate. The RBA’s confidence in the labour market improvement over the past several months is what has had many pricing out the chance for additional accommodation, yet the combination of today’s softer showing along with escalating concerns over the China outlook, could get the market once again considering the possibility for another cut. Still, Aussie has also managed to benefit from a more intensified focus on broader US Dollar selling in the aftermath of ongoing weakness in US data and the implication the Fed will remain on hold through 2015. Looking ahead, we get US CPI, Empire manufacturing, the Philly Fed and some more Fed speak, with Bullard, Dudley and Mester on the wires.

USDCAD – technical overview

A correction out from 11-year highs at 1.3457 looks to be finally be stalling out, with the market finding solid support in the 1.2900 area. 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 1.3080 – 13Oct high – Strong
• R1 1.3000 – Psychological – Medium
• S1 1.2901 – 9Oct low – Medium
• S2 1.2867 – 29Jul low– Strong

USDCAD – fundamental overview

Any Canadian Dollar weakness this week on the back of declining OIL prices, has been more than offset by the broad based liquidation in US Dollar long positions, as the market continues to price out the chances for a Fed rate hike in 2015. Another round of discouraging US economic data on Wednesday, highlighted by US retail sales and PPI misses, was enough to open more downside pressure in USDCAD, which now comes into some key support in the 1.2800s. Some renewed demand for OIL in early Thursday trade is also contributing to CAD gains. Looking ahead, existing home sales are the standout on the Canadian economic calendar, while in the US, we get CPI, Empire manufacturing, the Philly Fed and some more Fed speak, with Bullard, Dudley and Mester on the wires.

NZDUSD – technical overview

The impressive rally out from recent multi-year lows continues to extend, with the market taking out some key resistance in the 0.6700s. At this point, the gains are still classified as corrective, with the broader downtrend firmly intact. As such, look for some form of a top in the sessions ahead, potentially around the 50% fib retrace off the April to August, high-low move. Ultimately, only a daily close above 0.7000 will potentially force a more meaningful structural shift.

• R2 0.6924 – 25Jun high– Strong
• R1 0.6846 – 15Oct high– Medium
• S1 0.6740 – 12Oct high – Medium
• S2 0.6618 – 13Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been on fire in recent days, with the currency standing out as a top gainer. While Kiwi gains have clearly been driven off broad based selling of the US Dollar as Fed liftoff bets are scaled back to 2016, the currency is finding relative demand on developments closer to the home front. A recovery in dairy is one source of encouragement, while Wednesday’s surprise revelation of a healthy surplus after the market was expecting a deficit is also contributing. Today’s New Zealand manufacturing PMIs have also come in healthy, while expectations that softer China inflation will invite more PBOC stimulus is just one more risk positive development supporting this market. It seems RBNZ Wheeler’s Wednesday warning for the possibility of additional easing have long been forgotten. Looking ahead, we get US CPI, Empire manufacturing, the Philly Fed and some more Fed speak, with Bullard, Dudley and Mester on the wires.

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

Softer US retail sales, subdued inflation, a discouraging Fed Beige Book and downbeat guidance from the world’s largest retailer (Wal-Mart), have all helped to keep the backwards equity market supported, with participants encouraged by the lower for longer Fed policy implications from the softness in the US economy. Still, the market is skating on thin ice if it expects this strategy to continue to hold up, particularly with so little left in the Fed’s tank in terms of what it can do to further artificially support the recovery. Looking ahead, we get more earnings, US CPI, Empire manufacturing, the Philly Fed and Fed speak, with Bullard, Dudley and Mester on the wires.

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 1233.00 – 18May high – Strong
• R1 1206.00 – 18Jun high – Medium
• S1 1163.00 – 14Oct low – Medium
• S2 1130.00 – 5Oct low – Strong

GOLD (SPOT) – fundamental overview

This month’s much weaker than expected US employment report, subsequent soft US data prints and renewed concern 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. This in conjunction with a massive wave of US Dollar selling, has opened a surge in the yellow metal through major buy-stops above $1170. This is now attracting a fresh round of interest from larger macro accounts and other major players with targets now set at a move into the mid-1200s.

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 above 1.3700 ahead of a bullish continuation and the next major upside extension back through 1.4365. Only a close below 1.3700 would delay the constructive outlook and give reason for concern.

• R2 1.4145 – 8Oct high – Strong
• R1 1.4055 –9Oct high – Medium
• S1 1.3755 – 50% Fib retrace – Medium
• S2 1.3700 – Figure – Strong

Feature – fundamental overview

A less dovish MAS policy decision and solid Singapore GDP results were already helping the Singapore Dollar this week, before the currency found an additional wave of demand on massive hedge fund selling in USDSGD post Wednesday’s abysmal US economic data. The softer US prints further support the case the Fed will hold off in 2015 and this has opened some broad based selling in the US Dollar as yield differentials widen back in the favour of emerging markets. Also contributing to the emerging market currency gains are expectations for more China stimulus following this week’s softer China inflation prints. Looking ahead, we get US CPI, Empire manufacturing, the Philly Fed and Fed speak, with Bullard, Dudley and Mester on the wires.