Calendar Heats Up, ECB Decision Ahead

Special report: ECB Decision Preview

Today’s report: Calendar Heats Up, ECB Decision Ahead

Market participants haven't had a whole lot to chew on this week, with the lack of first tier data pushing most to the sidelines, resulting in thinner trade. However, this picture is likely to change as the market prepares for the anticipated ECB decision, while also digesting more significant economic releases.

Wake-up call

Chart talk: Major markets technical overview video

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

Rallies over the past several months have met formidable resistance ahead of 1.1500, and the latest topside failure further confirms, with the market reversing sharply after stalling just shy in the previous week. This sets the stage for a more meaningful bearish resumption, potentially back towards 1.1087 in the days ahead. At this point, only a close above 1.1500 would negate the broader bearish outlook for the pair.

Screen Shot 2015-10-22 at 7.17.21 AM

  • R2 1.1496 – 15Oct high – Strong
  • R1 1.1395 – 16Oct high – Strong
  • S1 1.1306 – 20Oct low – Medium
  • S2 1.1267 – 9Oct high – Strong

EURUSD – fundamental overview

A data light economic calendar and some pre-ECB rate decision caution have kept the Euro trading in a tight range into Thursday. Volatility is however expected to pick up later today, once the decision is out of the way. There has been a lot of talk of more ECB stimulus, though the broad consensus is that the ECB won’t make any policy adjustments today. This could open some Euro short covering, though any rallies are likely to be well capped, with the ECB still expected to lean to the dovish side and potentially talk down recent Euro strength. Also on the calendar today are US initial jobless claims and existing home sales.

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.

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  • R2 1.5550 – 78.6% Fib retrace – Strong
  • R1 1.5509 – 15Oct high – Medium
  • S1 1.5412 – 22Oct low  – Medium
  • S2 1.5300 – Figure – Strong

GBPUSD – fundamental overview

BOE Governor Carney’s speech discussing a report on how EU membership affects the central bank’s objectives didn’t really favor into trade, with the Pound mostly confined to consolidation into Thursday. Carney discussed the pros and cons of EU membership and the market was left with nothing to trade off. But looking ahead to today’s calendar, volatility is expected to pick up, with a BOE Cunliffe speech on the calendar, along with UK retail sales. Also out today that could impact price action is the potential fallout from ECB rate decision implications, and US initial jobless claims.

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.

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  • R2 120.57 – 6Oct high – Strong
  • R1 120.09 – 21Oct high – Medium
  • S1 119.41 – 20Oct low – Strong
  • S2 118.83 – 16Oct low – Medium

USDJPY – fundamental overview

BOJ easing expectations were ramped up on Wednesday following the release of some horrid Japanese trade data. This opened some more upside in a recovering USDJPY off recent lows. However, gains were well capped into the 120s, with the downturn in risk sentiment and concurrent pullback in equities weighing on the major pair. Looking ahead, the market will continue to play the guessing game of what to expect from the upcoming BOJ and Fed meetings, but for today, the focus will be on any fallout from the ECB meeting, US initial jobless claims and existing home sales.

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.

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  • 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. For today, market price action will unquestionably be influenced by the fallout from the ECB rate decision.

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 last 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.

Screen Shot 2015-10-22 at 7.18.57 AM

  • R2 0.7307 – 19Oct high – Strong
  • R1 0.7276 – 21Oct high – Medium
  • S1 0.7198 – 14Oct low – Medium
  • S2 0.7165 – 8Oct low – Strong

AUDUSD – fundamental overview

The latest round of Aussie setbacks have found mild support into Thursday on the back of a moderately upbeat NAB business confidence survey. Though business confidence for the next 3 months dropped off, forward indicators were more positive, with expectations of business conditions over the next 3 months rising. Moreover, there was a notable improvement in forward orders, capex and capacity utilization. Overall however, Aussie has come back under broader pressure on some improved 2015 Fed liftoff odds and faltering global equities. Looking ahead, fallout from the ECB decision, US initial jobless claims and existing home sales, will be the key standouts on today’s calendar.

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.

Screen Shot 2015-10-22 at 7.19.26 AM

  • R2 1.3175 – 5Oct high – Strong
  • R1 1.3145 – 22Oct high – Medium
  • S1 1.3047 – 20Oct high – Strong
  • S2 1.2969 – 21Oct low – Medium

USDCAD – fundamental overview

The Canadian Dollar was already a standout underperformer on Wednesday ahead of the Bank of Canada rate decision, with faltering China equities, weakness in OIL prices and uncertainty post the Liberal party victory, all weighing on the Loonie. Although the Bank of Canada left rates unchanged as was expected, its downgrade of GDP forecasts was enough to open another intense round of Loonie weakness. Looking ahead, Canada retail sales are due along with US initial jobless claims and existing home sales. Also to be watched is any contagion impact from the ECB rate 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.

Screen Shot 2015-10-22 at 7.19.41 AM

  • R2 0.6846 – 20Oct high– Strong
  • R1 0.6800 – Figure – Medium
  • S1 0.6698 – 21Oct low – Medium
  • S2 0.6619 – 13Oct low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been finding some support on dips on Thursday, with comments from FinMin English assigned to the Kiwi bid. Although English conceded there was room for additional monetary policy easing, his positive outlook on China and comment that the FX rate had adjusted considerably, were enough to inspire some of the latest gains. Overall however, with risk sentiment waning and prospects for a 2015 Fed liftoff increasing, additional rallies should continue to be well capped following an impressive run for Kiwi over the past several days. Looking ahead, fallout from the ECB decision, US initial jobless claims and existing home sales will be the key standouts.

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.

Screen Shot 2015-10-22 at 7.20.23 AM

  • R2 2051.00 – 12Aug low – Strong
  • R1 2043.00 – 6Jul low – Strong
  • S1 1990.00 – 14Oct low – Medium
  • S2 1970.00 – 7Oct low – Strong

US SPX 500 – fundamental overview

Disappointing data out of the US earlier in the month is feeling further away, with data improving over the past week. This has helped improve 2015 Fed liftoff prospects, while at the same time making investors more cautious about bullish equity bets. For the most part, ongoing expectation the Fed will leave rates lower for longer has been the fuel that has supported stocks and if there is a sense this fuel is running out, the market will be at risk for a more intense liquidation. Looking to today’s calendar, the market will be watching reaction to the ECB decision, while at the same time absorbing US initial jobless claims and existing home sales.

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.

Screen Shot 2015-10-22 at 7.21.00 AM

  • 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

The GOLD market has come under mild pressure over the past few sessions as the US Dollar recovers following a more impressive week of US data. At the same time, the implication from the stronger US data is risk negative, with equities coming under pressure on fear of the strain Fed liftoff will have on the global economy. This has kept dips in the metal well supported, with the accompanying safe haven flows offsetting.

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.

Screen Shot 2015-10-22 at 7.21.26 AM

  • 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 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. Also weighing on the Singapore Dollar has been a downturn in global sentiment, with equity markets pulling back. Looking ahead, the market will take in the ECB rate decision along with US data featuring initial jobless claims and existing home sales. On Friday, we get Singapore CPI.

Peformance chart: Five day performance v. US dollar

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