Healthy Dollar Appetite with December Still on Table

GBPUSD – technical overview

The market continues to show signs of topping off the 2015 peak at 1.5930, putting in a series of lower tops. The latest topside failure has stalled just over 1.5500 with a fresh lower top now sought out below 1.5659 ahead of the next major downside extension back towards the 1.5000 area. At this point, only a daily close above 1.5509 would delay the outlook.

• R2 1.5509 – 22Oct high – Strong
• R1 1.5497 – 2Nov high – Medium
• S1 1.5347 – 28Oct high  – Medium
• S2 1.5305 – 30Oct low – Strong

GBPUSD – fundamental overview

Lack of any meaningful data releases in the early week has kept the Pound mostly confined to choppy consolidation below 1.5500. Overall, it seems the UK currency is still vulnerable against the US Dollar, with the Fed considering the possibility for rate liftoff next month. At the same time, this has also been supporting the Pound against other currencies, with the BOE expected to be the next in line to follow the Fed. Looking ahead, UK services PMIs and a batch of US data including, US ADP employment, the trade balance and ISM non-manufacturing, will be the main focus for today. But we also get plenty of Fed speak as well, with Yellen, Fischer, Dudley, Harker and Brainard, all scheduled. Market participants will take in all that comes today but will be sure to be aware of the major event risk for this pair on Thursday, as the BOE decides on policy and releases its Minutes and the Quarterly Inflation Report.

USDJPY – technical overview

Overall, the major pair has been locked in a bout of consolidation over the past several weeks, since recovering from the intense August decline. Still, at this point, the consolidation is classified as a bearish consolidation while the market holds below 121.75 on a daily close basis. As such, look for the latest rally to have a hard time establishing above 121.75 in favour of another topside failure and bearish reversal. A daily close below 120.00 will confirm and accelerate declines.

• R2 121.51 – 26Oct high – Strong
• R1 121.38 – 4Nov high – Medium
• S1 120.26 – 2Nov low – Medium
• S2 120.02 – 28Oct low – Strong

USDJPY – fundamental overview

It has been very difficult to ignore the ongoing surge in equity markets, with the price action clearly supporting the risk correlated pair. Throw in a round of solid US ISM manufacturing data on Tuesday, and this further fuels the possibility for the Fed to move in December, which in turn has benefitted yield differentials in favour of the US Dollar. At the same time, the Yen hasn’t been nearly as offered as it could be in the current environment, with the currency still holding up relatively well as USDJPY remains capped below critical resistance at 121.75. Looking ahead, performance in stocks will be important to watch, while on the economic calendar, we get a batch of US data featuring ADP employment, the trade balance and ISM non-manufacturing. Plenty of Fed speak on the docket as well, with Yellen, Fischer, Dudley, Harker and Brainard, all scheduled.

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 1.0919 – 30Oct high – Medium
• S1 1.0759 – 23Oct low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

SNB Jordan was out on Tuesday reminding the market that the central bank remain committed to a policy directed at weakening an overvalued local currency. Overall, setbacks in the EURCHF rate have been very well supported, with the market doing a good job of absorbing the ECB dovishness, instead choosing to prioritize this expectation for ongoing, offsetting 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 market continues to show signs of topping out in favour of a resumption of the broader underlying downtrend, with a fresh lower top sought out at the recent 0.7382 high. Intraday rallies should continue to be well capped, with deeper setbacks projected in the sessions ahead back towards the recent multi-year base just shy of 0.6900. At this point, only a daily close back above 0.7400 would threaten the bearish outlook.

• R2 0.7297 – 23Oct high – Strong
• R1 0.7269 – 25Oct high – Medium
• S1 0.7112 – 3Nov low – Medium
• S2 0.7067 – 6Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been holding up rather well this week, in the face of ongoing broad based US Dollar demand, as the possibility for Fed liftoff in December remains viable. The currency has managed to outperform its peers on the back of a less dovish RBA decision this week, solid trade data, and relatively in line retail sales. Also seen supporting the currency are AUDNZD cross related flows, with the New Zealand Dollar getting hit on a disappointing GDT auction and abysmal employment. Looking ahead, performance in stocks will be important to watch given Aussie’s correlation with risk, while on the economic calendar, we get a batch of US data featuring ADP employment, the trade balance and ISM non-manufacturing. Plenty of Fed speak on the docket as well, with Yellen, Fischer, Dudley, Harker and Brainard, all scheduled.

USDCAD – technical overview

The market is focused back on the topside after recently being well supported in the 1.2800 area, with the latest recovery strengthening the case for a bullish continuation to fresh multi-year highs beyond the recent 11-year peak from September, just shy of 1.3500. Any setbacks from here should ideally be propped above 1.3000 on a daily close basis, though ultimately, only a break below 1.2800 would force a shift in the constructive outlook.

• R2 1.3280 – 28Oct high – Strong
• R1 1.3193 – 30Oct high – Medium
• S1 1.3038 – 3Nov low – Medium
• S2 1.3000 – Psychological – Strong

USDCAD – fundamental overview

The Canadian economic calendar has been exceptionally light this week, though this hasn’t stopped the Loonie from holding up relatively well. There has been plenty of broad based US Dollar demand as market participants continue to price in the possibility for a December Fed liftoff, though for the time being, the Canadian Dollar has been immune to these flows, with most of the attention in this market on the price action in OIL. A Brazilian OIL worker strike is slashing Petrobas’ daily output by 25%, while the closure of an OIL export terminal in Libya is also getting attention. All of this has been supportive of the price of OIL, which in turn has helped keep the Canadian Dollar somewhat bid. Looking ahead, Canada trade data is due along with a batch of US data including, US ADP employment, the trade balance and ISM non-manufacturing. We also get plenty of Fed speak, with Yellen, Fischer, Dudley, Harker and Brainard, all scheduled.

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 0.6792 – 30Oct high– Strong
• R1 0.6700 – Figure – Medium
• S1 0.6622 – 28Oct low – Medium
• S2 0.6536 – 7Oct low – Strong

NZDUSD – fundamental overview

It hasn’t been a great 24 hours for the New Zealand Dollar, with the currency standing out as a relative underperformer despite an ongoing surge in equity markets and risk sentiment. The primary driver behind the currency weakness comes from another disappointing GDT auction and much weaker than expected employment data. All of this is fueling speculation the RBNZ will be that much closer to introducing additional monetary policy accommodation at upcoming meetings and this in conjunction with an overdone Kiwi rally and Fed that still could be moving towards liftoff in December, have opened the door for renewed selling in the commodity currency. Looking ahead, performance in stocks will be important to watch given Kiwi’s correlation with risk, while on the economic calendar, we get a batch of US data featuring ADP employment, the trade balance and ISM non-manufacturing. Plenty of Fed speak on the docket as well, with Yellen, Fischer, Dudley, Harker and Brainard, all scheduled.

US SPX 500 – technical overview

The recovery rally out from the August low continues, with the market clearing critical resistance in the form of the 78.6% retracement off the May record high to August low move. The break above this level exposes a full retracement back towards the 2137 record high in the days ahead. At this point, a break and close back below 2058 would be required at a minimum to take the immediate pressure off the topside.

• R2 2137.00 – 19May Record – Very Strong
• R1 2117.00 – 3Nov high – Medium
• S1 2058.00 – 27Oct low – Medium
• S2 2015.00 – 21Oct low – Strong

US SPX 500 – fundamental overview

Stocks have extended the impressive recovery rally off the extreme August low, with the market now within a stone’s throw from the May record highs. The market has mostly been supported on expectations for ongoing ultra accommodative central bank policies. Recent signals for more easing from the ECB and additional measures at the PBOC, have unquestionably contributed to this latest push. However, interestingly enough, the Fed was not as dovish last week, and yet, even with the FOMC decision leaving the door open for a December hike, the market has continued to push higher. But if the market becomes more convinced the Fed will actually move in December, it could start to weigh in the sessions ahead, particularly with stocks once again so elevated. Certainly a stronger US employment report on Friday will contribute to this cause. Perhaps today’s ADP employment will have an influence on price action.

GOLD (SPOT) – technical overview

The recent 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. As such, the latest round of setbacks into medium-term rising trend-line support are now expected to be well supported in favour of the next upside extension, with only a break and close back below 1100 to give reason for concern.

• R2 1192.00 – 15May high – Strong
• R1 1163.00 – 29Oct high – Medium
• S1 1114.00 – 3Nov low – Medium
• S2 1098.00 – 11Sep low – Strong

GOLD (SPOT) – fundamental overview

GOLD has come back under some pressure in recent sessions in the aftermath of last week’s more hawkish FOMC rate decision.  The fallout from the Fed has triggered  resurgence in US Dollar demand after the central bank left the door open for a December rate hike. Still, despite the US Dollar recovery, GOLD is expected to continue to remain well supported on dips, with the global economy struggling and plenty of uncertainty in the air, particularly now that accommodative central bank policies are so extended and additional stimulatory options are limited. Longer term macro players have been accumulating the metal as a hedge against on overinflated equity market that could be on the verge of a major capitulation. Dealers cite plenty of demand aha of $1100.

Feature – technical overview

USDSGD has been very well supported into this latest corrective decline, with setbacks stalling out at the 50% fib retrace of the April to October move. A medium term higher low is now sought out at the 50% fib retrace ahead of the next major upside extension and bullish continuation beyond the October peak at 1.4365. At this point, only a close below the 50% fib retrace would compromise the bullish structure.

• R2 1.4145 – 8Oct high – Strong
• R1 1.4075 –29Oct high – Medium
• S1 1.3835 – 23Oct low – Medium
• S2 1.3755 – 50% Fib retrace – Strong

Feature – fundamental overview

The prospect of higher US rates in a still struggling global economy is not a healthy mix for risk correlated currencies, with the Singapore Dollar remaining well offered into rallies. Last week, the Fed left the door open for a December liftoff, and this comes at a time where there is plenty of concern over the outlook for the China economy, with the latest batch of manufacturing data, mostly coming in on the softer side. We did get some encouraging local data in the previous week, with Singapore employment bettering forecasts, while US equities continue to remain well in demand, also supporting the Singapore Dollar a bit. Ultimately however, US Dollar yield differentials are driving trade, and with a December Fed liftoff on the cards, more SGD weakness is to be expected. Also, look out for any signs of capitulation in an elevated stock market to intensify liquidation in the emerging market currencies. Plenty of Fed speak today, with  Yellen, Fischer, Dudley, Harker and Brainard, all scheduled.