US Employment Report Takes Centre Stage

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 1.5509 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 1.5360 – 3Nov low – Strong
• R1 1.5300 – Figure – Medium
• S1 1.5150 – Mid-Figure  – Medium
• S2 1.5107 – 30Sep low – Strong

GBPUSD – fundamental overview

Any expectations for a shift to the hawkish side, or any expectations for a pickup in optimism from the BOE, were sorely let down on ‘Super Thursday,’ with the Bank of England leaning to the dovish side. The BOE showed no signs of being in any hurry to raise interest rates, while the Minutes produced the same 8-1 split as had been before. Heading into the big event risk, participants were angling towards the UK currency, looking for some form of bullish signs. But inability to provide such a sign resulted in a massive intraday decline in the Pound. Downgrades to inflation forecasts offered an excuse for an added blow, and the Pound is back towards recent range lows ahead of today’s US NFPs. We do get some more UK data risk ahead of the US number, with UK manufacturing and industrial production due along with UK trade.

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 121.00 will confirm and accelerate declines.

• R2 122.50 – Mid-Figure – Medium
• R1 122.00 – 5Nov high – Strong
• S1 121.00 – 4Nov low – Medium
• S2 120.26 – 2Nov low – Strong

USDJPY – fundamental overview

The major pair has been driving higher this week, clearing key resistance in the form of the August peak, on the back of ramped expectations the Fed will move on rates next month. Fed Chiar Yellen’s comment that December was a live month has been backed up by Fed Lockhart overnight and this has helped keep the market bid. Also seen supporting are early Friday comments from Governor Kuroda. Although the central banker mostly echoed recent sentiment, there was a tinge of added pessimism with the economic outlook. Kuroda reminded markets the BOJ could still adjust policy if needed. The market will now position ahead of today’s monthly employment report out of the US.

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 earlier this week reminding the market that the central bank remains 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

Nothing new from the latest RBA statement on monetary policy, and it looks like the RBA will continue to use the possibility of additional easing as more of an insurance option than anything else. The bar for additional cuts looks to have been set rather high given the uptick in recent data and less dovish central bank tone. Looking ahead, all eyes will be fixated on the results of today’s employment report out of the US. This along with broader macro and sentiment flows are likely to dictate trade. Next Thursday, we get key Aussie employment data.

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

Relatively in line Canada trade data on Thursday, failed to materially influence the market, though a weaker OIL export component was somewhat discouraging and kept the Canadian Dollar on the back foot. Ramped up expectations for a December Fed liftoff and weakness in the price of OIL, have been the main drivers of price action, with these themes forcing the Canadian Dollar back towards it recent 11-year low. Looking ahead, Friday’s calendar features the double whammy of risk, in the form of monthly employment reports out of the US and Canada. While the clear market focus will be on the US number, the Canada number should also be watched closely and will serve as an additional source of volatility.

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 are ramped up Fed liftoff prospects in December and some downside pressure in equities. Looking ahead, all eyes will be fixated on the results of today’s monthly employment report out of the US, which is likely to inspire a good deal of volatility.

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 this week. 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 today could really trigger liquidation.

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 1104.00 – 5Nov low – Medium
• S2 1098.00 – 11Sep low – Strong

GOLD (SPOT) – fundamental overview

GOLD has come back under intense pressure in recent days as the market ramps up expectations for a December Fed liftoff and more aggressively buys US Dollars. Still, despite the US Dollar demand, 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 an overinflated equity market that could be on the verge of a major capitulation. Dealers cite plenty of demand ahead of $1100 and buy-stops back above $1125.

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 1.4365 – 2Oct high – Strong
• R1 1.4145 –8Oct high – Medium
• S1 1.3930 – 4Nov low – Medium
• S2 1.3835 – 23Oct low – 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. Odds for a Fed rate hike in December have increased substantially over the past two weeks, well back above 50%, 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. This past Wednesday’s solid US data and hawkish Fed Chair comments only intensify the monetary policy divergence theme and should continue to drive Singapore Dollar weakness. The market is now positioning ahead of today’s all important monthly employment report out of the US. Anything as expected or better should open another round of EM weakness.