US Dollar Slowly Gaining Momentum

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 1.5550 – 78.6% Fib retrace – Strong
• R1 1.5509 – 15Oct high – Medium
• S1 1.5415 – 15Oct low  – Medium
• S2 1.5300 – Figure – Strong

GBPUSD – fundamental overview

The Pound was initially propped above 1.5500 in Tuesday trade following hawkish comments from BOE McCafferty who said policy should avoid being behind the curve, while adding that borrowing costs could rise without a disruption to the economy. However another attempt above 1.5500 was well capped with the market retreating on the broad based resurgence in demand for the US Dollar as 2015 Fed liftoff odds crept back up. Looking ahead, the big events for the day will be UK public finances and public sector net borrowing and a speech from Governor Carney at 17:00 GMT. 

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. The market has finally broken out of a multi-day triangle, with the downside break exposing a retest of the August low at 116.12. At this point, only a daily close above 122.00 would negate the bearish outlook.

• R2 120.57 – 6Oct high – Strong
• R1 120.00 – Psychological – Medium
• S1 119.41 – 20Oct low – Strong
• S2 118.83 – 16Oct low – Medium

USDJPY – fundamental overview

BOJ easing chatter is picking up some lost ground ahead of next week’s meeting after Japanese trade produced an ugly result. The market was looking for a surplus and instead got hit with a major deficit, showing setbacks in both exports and imports. There was a clear sign of a cooling in demand from China, and this has stoked recession fears. Still, USDJPY has only received a minor prop on the back of the data, with the softer trade print offset by some renewed safe haven flows. Looking ahead, lack of first tier economic data for the remainder of the day will leave this major pair trading off broader flows.

EURCHF – technical overview

The market has entered a period of multi-day consolidation following an impressive recovery earlier in the year. At this point, the recovery structure remains intact, with only a break back below 1.0714 to compromise. Look for setbacks to be well supported ahead of 1.0714 in favour of the next major upside extension through 1.1050 and towards 1.1200 further up.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0910 – 15Oct high – Medium
• S1 1.0783 – 16Oct low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

Setbacks in this cross rate have been very well supported, with the market mostly shrugging off softer Eurozone data and hints 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.

AUDUSD – technical overview

The corrective rally out from multi-year lows has finally stalled out following 9 consecutive positive closes. Last 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 0.7382 – 12Aug high – Strong
• R1 0.7337 – 16Oct high – Medium
• S1 0.7239 – 19Oct low – Medium
• S2 0.7198 – 14Oct low – Strong

AUDUSD – fundamental overview

Although we have seen some renewed demand for the US Dollar in recent sessions the Australian Dollar has managed to hold up rather well on a relative basis. Tuesday’s less dovish RBA Minutes has been sourced as the primary driver after the central bank said it wasn’t looking to ease policy further, content with the pickup in economic growth and softer currency, while also citing concern over the bubbling property market. Still, any gains have been limited, with participants more focused on broader flow and the possibility the Fed will still raise rates come December. Looking ahead, the economic calendar is razor thin and the focus will be on broader flows.

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 1.2800 area. Any setbacks from here should continue to be very well supported around previous resistance turned support in the form of the March peak. Look for the onset of a bullish resumption in the sessions ahead back towards and eventually above the 1.3457 high. Ultimately, only a daily close below 1.2800 will delay.

• R2 1.3080 – 13Oct high – Strong
• R1 1.3047 – 20Oct high – Medium
• S1 1.2935 – 20Oct low – Strong
• S2 1.2832 – 15Oct low – Medium

USDCAD – fundamental overview

Some relative underperformance for the Canadian Dollar this week, with the currency hit on lower OIL and uncertainty post the Canada election result which produced new leadership. Still, the Liberal party’s pledge to boost the economy through spending would take some of the pressure off the Bank of Canada to implement further easing and this has stalled Loonie declines somewhat. Attention now shifts to the big event of the day, with the Bank of Canada rate decision in the spotlight. No change is expected on policy, though the recent lackluster performance in the Canadian economy could result in a more dovish overall decision.

NZDUSD – technical overview

The impressive rally out from recent multi-year lows is finally showing signs of stalling out after being well capped ahead of 0.6900. From here, look for some form of a more meaningful top in the sessions ahead, in favour of an acceleration to the downside and bearish resumption. Ultimately, only a daily close above 0.7000 will negate and potentially force a shift in the structure.

• R2 0.6893 – 16Oct high– Strong
• R1 0.6846 – 20Oct high– Medium
• S1 0.6740 – 12Oct high – Medium
• S2 0.6700 – Figure – Medium

NZDUSD – fundamental overview

An impressive recovery in the New Zealand Dollar has stalled out in recent trade, with the currency coming back under some relative pressure. Monday’s disappointing China industrial output print opened initial selling, while Tuesday’s disappointing GDT auction triggered additional declines. Many participants believe the weakness in dairy coupled with a recovery in the New Zealand Dollar will have a damaging impact on demand and as such, it seems there is now added risk for additional RBNZ easing. Still, a healthy bid in equity markets is doing a good job of supporting setbacks for now. Looking ahead, the economic calendar is razor thin and the focus will be on broader flows.

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 2040.00 – 20Oct high – Strong
• S1 1990.00 – 14Oct low – Medium
• S2 1970.00 – 7Oct low – Strong

US SPX 500 – fundamental overview

Disappointing data out of the US this month has 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. Interestingly enough, the market has even shrugged off solid data over the past few sessions that would be supportive of a 2015 liftoff, after US CPI came in hotter, initial jobless claims dropped back to record lows, Michigan sentiment was a good deal above forecast and housing impressed.

GOLD (SPOT) – technical overview

Last 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 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. We have seen a bit of a pullback off recent highs following an improvement in US data over the past few sessions, while Monday’s discouraging China industrial output showing could also be acting as a cap. However, overall, with risk assets looking shaky at lofty heights, plenty of buyers are reported into dips.

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

The market has been pricing up the chances for a December Fed rate hike, with the odds improving a good deal since the middle of last week. More well received US economic data since last Thursday has been attributed to the increased liftoff odds and this has resulted in some profit taking in this latest Singapore Dollar recovery rally. Overall, with 2015 Fed liftoff prospects coming back on the table, yield differentials should continue to favour the US Dollar side of this equation. On Monday, Fed Williams helped to support the Buck after reiterating his view that a Fed rate hike would be appropriate sooner than later.