Fed Liftoff Odds Jump, UK Super Thursday Arrives

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

A solid UK services PMI print helped to support somewhat on Wednesday, though ultimately, the UK currency couldn’t hold onto gains following some more impressive US economic data and hawkish comments from the Fed Chair that a December liftoff was still in play. Looking ahead, it’s Super Thursday in the UK and the event is sure to bring a good deal of volatility, with the BOE rate decision, BOE Minutes and Quarterly Inflation Report all due. While no change is expected on policy, it will be interesting to see what comes of the latest growth and inflation forecasts. It will also be interesting to see if the Minutes produce any change in the voting breakdown, with Weale or Forbes, or both moving over to join McCafferty in the hawkish camp. The BOE presser should also be watched closely to see if Governor Carney offers any additional insights into the timing of a rate hike. Other economic data of note on the day includes UK Halifax house prices and US initial jobless claims.

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 122.00 – Figure – Medium
• R1 121.74 – 28Aug high – Strong
• S1 121.00 – 4Nov low – Medium
• S2 120.26 – 2Nov low – Strong

USDJPY – fundamental overview

A solid round of US economic data and comments from the Fed Chair that a December liftoff is still a possibility, helped to lift the major pair towards critical resistance in the form of the August range high. USDJPY had already been bid up in recent days on the back of ongoing demand for equities, though with stocks pulling back on Wednesday, it was yield differentials that took over as the positive driver. Still, with global sentiment looking shaky and US equities sitting at lofty heights, there is risk it all could come crashing down at any moment, which would ultimately inspire a fresh round of Yen demand on safe haven flows. Looking ahead, US initial jobless claims is the only notable data on the calendar for the remainder of the day, though participants are sure to start positioning ahead of tomorrow’s highly anticipated US NFP report.

EURCHF – technical overview

The market has entered a period of multi-week 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. As such, 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 1.0919 – 30Oct high – Strong
• R1 1.0869 – 4Nov 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, despite ECB dovishness and some safe haven Franc demand on this latest round of equity selling, setbacks in the EURCHF rate have been well supported, with the market choosing to prioritize the SNB’s policy commitment. Dealers do however cite decent sell-stops below 1.0700 and if this level is taken out, it could open the door for an acceleration of declines.

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 0.7224 – 4Nov high – Medium
• S1 0.7112 – 3Nov low – Medium
• S2 0.7067 – 6Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar hasn’t been immune to the latest wave of broad based US Dollar demand on the back of some healthy US data and hawkish comments from the Fed Chair that a December liftoff was still on the table. Still, Aussie has managed to perform better than some of its peers this week, with Wednesday’s better than expected Aussie trade data and the recent less dovish RBA policy decision helping to prop a bit. RBA Stevens has however been out reminding of the possibility for additional easing if needed, though the comments haven’t factored into trade. Nothing new from an RBA Lowe speech earlier today and the focus now shifts to US initial jobless claims and some pre-NFP positioning.

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 Dollar has come back under pressure into the mid-week, with the currency hit on a number of fronts. The combination of a pullback in OIL prices, solid US data and hawkish comments from the Fed Chair leaving the door open for a December rate hike, have all opened the door for renewed selling in the Loonie. Looking ahead, the economic calendar is empty in Canada, with US initial jobless claims the only notable standout. The market will mostly start positioning ahead of a more volatile Friday session featuring the double whammy of US and Canada monthly employment data.

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 0.6668 – 4Nov high – Medium
• S1 0.6536 – 7Oct low – Medium
• S2 0.6437 – 5Oct low – Strong

NZDUSD – fundamental overview

Not a good week for the New Zealand Dollar, with market participants seriously reconsidering views on the currency after another terrible GDT auction and abysmal New Zealand employment report. These results have now ramped up expectations the RBNZ will indeed move forward with additional rate cuts as the central bank had warned was a real possibility at its most recent policy decision. Adding more downside pressure to the currency into Thursday have been another round of solid US economic data, hawkish comments from the Fed Chair leaving the door open for a December hike, and some downside pressure in equities. Looking ahead, we get US initial jobless claims, though most of the day will be about positioning into Friday’s month employment report out of the US.

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 2070 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 2070.00 – 2Nov 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, even with the Fed still 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. Wednesday’s hawkish Yellen comments leaving the door open for a December hike have already weighed a bit, though a stronger US employment report on Friday could really start to knock stocks off the highs.

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 are now expected to be well supported above 1100 on a daily close basis 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 1106.00 – 4Nov low – Medium
• S2 1098.00 – 11Sep low – Strong

GOLD (SPOT) – fundamental overview

GOLD has come back under some intense 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 ahead 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. Wednesday’s solid US data and hawkish Fed comments only intensify the monetary policy divergence theme and should continue to drive Singapore Dollar weakness. The market will now start to position ahead of tomorrow’s all important monthly employment report out of the US. Anything as expected or better should open another round of EM weakness.