US Dollar Strong Post NFPs, Risk Sentiment Holds Up

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 confirmed at 1.5509 ahead of the next major downside extension below critical psychological barriers at 1.5000 and towards medium-term support in the form of the 2015 low at 1.4566. At this point, look for intraday rallies to be well capped ahead of 1.5300.

• R2 1.5219 – 6Nov high – Strong
• R1 1.5200 – 13Oct low – Medium
• S1 1.5027 – 6Nov low  – Medium
• S2 1.5000 – Psychological – Strong

GBPUSD – fundamental overview

The combination of last week’s more dovish Bank of England rate decision and blowout US employment report, have hit the Pound hard, with the UK currency collapsing towards psychological barriers at 1.5000. Monetary policy divergence has become even more pronounced with Fed December rate hike odds jumping up to about 80%, while in the UK, odds for a rate increase have been moving in the opposite direction after the BOE lowered inflation forecasts and Governor Carney showed no rush to move towards a policy reversal. Friday’s solid UK manufacturing production and trade data have failed to influence price action. Looking ahead, the calendar is exceptionally thin today, with no data scheduled in the UK. Market participants will be left digesting the fallout from the last week’s major developments.

USDJPY – technical overview

A period of multi-week consolidation has finally been broken, with the market clearing key resistance at 121.74, opening the door for a resumption of the broader uptrend. Setbacks should now be well supported ahead of 121.50, with fresh upside seen back towards the multi-year high from earlier this year at 125.85. Ultimately, only back below 120.00 would force a shift in the outlook and put the pressure back on the downside.

• R2 124.15 – 20Aug high – Medium
• R1 123.50 – 21Aug high – Strong
• S1 122.50 – Mid-Figure – Medium
• S2 122.00 – 5Nov high – Strong

USDJPY – fundamental overview

With risk sentiment holding up relatively well in the aftermath of the blowout US employment data, USDJPY was left trading on yield differentials, with the market shooting higher, establishing well back above the August recovery high at 121.74. The market is now pricing about and 80% chance for December Fed liftoff, and this has opened a fresh wave of demand for the US Dollar across the board, with the Yen also weakening on the diverging policy theme. Still, there is risk equity investors will become a little more nervous about the prospect for higher rates in the US, and if this happens, we could see an intensified liquidation in stocks and correlated markets like USDJPY. Friday’s post-NFP Bullard comments have also helped to keep USDJPY well supported, after the central banker said the jobs report was ‘very good’ and the economy was effectively at ‘full employment.’

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 continue 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 1.0738 – 6Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

SNB Jordan was out last 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 0.7170 – 5Nov high – Strong
• R1 0.7100 – Figure – Medium
• S1 0.7023 – 6Nov low – Medium
• S2 0.7000 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar wasn’t immune to the broad based appreciation in the US Dollar following the stellar US employment report. However, it is worth noting Aussie has managed to outperform all other major currencies over the past week. While AUDUSD could very well be poised for deeper setbacks and a retest of recent multi-year lows, we could see more Aussie outperformance going forward against other currencies. Indeed, the RBA maintained its accommodative bias at the recent meeting, but it also came out less dovish than the market had been expecting and this could suggest the RBA has set a high bar for any additional easing below the current record low 2.00% levels. Aussie has been holding up in the early week despite the discouraging decline in China imports. Looking ahead, the calendar is exceptionally thin on Monday and price action is likely to be dictated off the fallout from Friday’s US 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 at 1.3457. 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 1.3457 – 29Sep/2015 high – Strong
• R1 1.3318 – 6Nov high – Medium
• S1 1.3200 – Figure – Medium
• S2 1.3141 – 5Nov low – Strong

USDCAD – fundamental overview

An impressive round of Canada employment data was shrugged off, with the market more focused on the blowout US employment readings. This opened a surge in the USDCAD pair back towards recent 11-year highs, with the Canadian Dollar finding additional offers on yet another side in OIL prices. Ultimately, with the market now pricing a near 80% chance for Fed liftoff in December, the monetary policy divergence theme cannot be ignored, with the Bank of Canada still in accommodative mode. Looking ahead, the calendar is rather thin today, though we do get Canada housing starts. For the most part, traders will continue to digest the implications from this latest US NFP report, while also watching the price of OIL and broader sentiment.

NZDUSD – technical overview

The impressive rally out from recent multi-year lows has finally stalled out after being well capped ahead of 0.6900. From here, look for the formation of a meaningful lower top, 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 0.6668 – 4Nov high– Strong
• R1 0.6625 – 6Nov high – Medium
• S1 0.6499 – 6Nov low – Medium
• S2 0.6437 – 5Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was one of the hardest hit currencies last week, with the currency initially taking a hit on another soft GDT auction and unimpressive employment data out of New Zealand. Adding insult to injury was Friday’s blowout US employment report, with the data pretty much solidifying prospects for a 2015 Fed rate hike. Monetary policy divergence and yield differentials are driving price action at the moment, with the RBNZ moving in the direction of another cut, while the Fed gets set for liftoff. Look for the latest round of softer China import data and comments from the Fonterra CEO that it could lose China market share to Europe, to weigh some more in the early week, while any signs of a pullback in broader risk sentiment, could open a a more intensified liquidation in Kiwi. The economic calendar for Monday is exceptionally thin and participants will continue to digest the implications from this latest stellar US employment report.

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 sessions 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 come under mild pressure in recent trade after trading up to within 1% of the May record high. The latest wave of Fed hawkishness has been followed up by a stellar employment report out of the US, and this is starting to weigh on investor sentiment. The prospect of higher rates is a negative for stocks, as it takes away from the free money incentive to be long risk assets. Perhaps even more concerning for equity bulls right now is the wage growth component in this latest employment report, which is starting show signs of a real pickup. This could be something that forces the Fed into a more aggressive path to policy normalization that it might want.

GOLD (SPOT) – technical overview

The market has come back under intensified pressure over the past several days, with the recent break below 1100 threatening recovery prospects and exposing a retest of the recent multi-year low from September. A break below 1073 would expose fresh downside towards psychological barriers at 1000 further down. At this point, the market will need to establish back above 1112 to take the immediate pressure off the downside.

• R2 1123.00 – 4Nov high – Strong
• R1 1112.00 – 5Nov high – Medium
• S1 1085.00 – 6Nov low – Medium
• S2 1077.00 – 24Jul/2015 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 find solid support into this latest dip, given the struggling global economy and 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 also 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 $1075.

Feature – technical overview

USDZAR has broken to yet another fresh record high, with the market taking out the previous September peak, opening the door for the next major upside extension. From here, look for the rally to extend towards psychological barriers at 14.5000 in the sessions ahead, while any setbacks should be very well supported ahead of 13.5000. Ultimately however, only back below 13.0120 would negate the highly constructive outlook.

• R2 14.5000 – Psychological – Medium
• R1 14.2080 –6Nov/Record – Strong
• S1 13.8620 – 5Nov low – Medium
• S2 13.7245 – 2Nov low – Strong

Feature – fundamental overview

It hasn’t been the greatest of times for emerging market FX, and the Rand is by no means any exception, with the currency sinking to yet another record low in the aftermath of the stellar US employment report. The US data has significantly bolstered odds for a December rate hike from the Fed, and this has been having a major impact on yield differentials. SARB Governor Kgayango hasn’t done anything to help the beleaguered Rand’s cause after saying the central bank still expects a large current account deficit and that the timing of prospective Fed rate hikes was not optimal. Kgayango went on to welcome Rand weakness given its rebalancing impact on economic growth.