UK Jobs, Official Speak to Dictate Wednesday Trade

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 1.5300 – Figure – Medium
• R1 1.5219 – 6Nov high – Strong
• S1 1.5092 – 10Nov low  – Medium
• S2 1.5027 – 6Nov low – Strong

GBPUSD – fundamental overview

A data light economic calendar thus far on the week will welcome today’s UK employment release, with the series taking centre stage. The Pound has managed to mount a decent correction following the intense declines of the previous week, and anything on the positive side from the employment readings, will likely inspire more short covering. Also getting attention today will be BOE Governor Carney, slated to speak.

USDJPY – technical overview

A period of multi-week consolidation has finally been broken, with the market clearing key resistance at 121.74 and surging into the mid-123.00s thus far. However, gains have stalled out for now around the 78.6% fib retrace off of the yearly high to August low move, and the market will need to establish a daily close above 123.60 to strengthen the case for a more meaningful bullish resumption and full retracement back to the 125.85 peak. Inability to establish above 123.60 could open the door for the formation of a lower top and renewed downside pressure. A daily close below 122.00 will strengthen this prospect.

• R2 123.60 – 9Nov high – Strong
• R1 123.22 – 11Nov high – Medium
• S1 122.50 – Mid-Figure – Medium
• S2 122.00 – 5Nov high – Strong

USDJPY – fundamental overview

Clearly the risk for additional BOJ easing along with the ramped odds for a December Fed liftoff post US employment, have catapulted the major pair well back above 123.00 in recent trade. However, the market has run into resistance ahead of 124.00 with the other major driver of risk sentiment weighing. While the monetary policy and yield differential theme is a net positive for the major pair, signs of risk liquidation have been offsetting this week, as the Yen still benefits from safe haven flow. Also seen supporting the Yen on Wednesday is the broader profit taking on long US Dollar exposure. But given the lack of economic data today and the US Veterans Day holiday, risk sentiment will be important to watch, with equity market performance being used as the central barometer.

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 0.7016 – 10Nov low – Medium
• S2 0.7000 – Psychological – Strong

AUDUSD – fundamental overview

An upbeat Aussie consumer confidence reading has helped fuel additional corrective gains off recent lows from last Friday’s US employment report. Overall, with the Fed expected to raise rates in December, the monetary policy divergence theme should prove to be a weight on Aussie into rallies, though improving Aussie data will soften the blow of the divergence, with the market pricing little chance for an RBA easing at the upcoming meeting. Looking ahead, the economic calendar is quiet for the remainder of the day and trade could thin out in North America, with many off the desks for Veterans Day.

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

Canadian Dollar declines have stalled out this week, following the intense selloff from the previous week, on the back of the stellar US employment report (overshadowing a solid Canadian employment report), solidifying prospects for a Fed December liftoff. The light economic calendar into the middle of the week has left many shorter-term traders content with some profit taking on USD longs, though ultimately, with policy divergence front and centre, more Canadian Dollar weakness can be expected, especially if commodities remain under pressure. OIL has been soft, GOLD is trading just off its multi-year low, while copper has broken to a 6 year low.

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

No significant insights from the RBNZ financial stability report and latest Governor Wheeler speech, though Kiwi has benefitted a bit on what could be perceived as a mildly less dovish FSR. While the FSR highlighted that risks to the financial system had increased on declining dairy, the report also downplayed the need for additional monetary policy easing to offset the sharp rise in funding spreads. Overall, with the Fed looking to move in December and additional RBNZ still a possibility, there is risk for additional Kiwi downside going forward. In the interim, Kiwi is finding demand from broad based profit taking on USD long exposure. The economic calendar for the day is empty and trade is expected to thin out in North America given the Veterans Day holiday.

US SPX 500 – technical overview

Signs of potential exhaustion following an impressive recovery rally off the August lows. The market has stalled out above 2100, shy of the 2137 record peak from earlier this year, with the latest break back below 2070 strengthening the case for some form of a lower top and additional setbacks ahead. Look for a daily close below 2058 to confirm and accelerate, while back above 2117 negates and exposes a direct retest of the record high.

• 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 come under mild pressure in recent trade after trading up to within 1% of the May record high in the previous week. 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 than it might want. Trade will be thinner today given the Veterans Day holiday, and participants will be looking ahead to a slew of Fed speak tomorrow.

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 – 10Nov 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 14.3835 –10Nov/Record – Strong
• S1 13.8620 – 5Nov low – Medium
• S2 13.7245 – 2Nov low – Strong

Feature – fundamental overview

A bout of profit taking on long US Dollar exposure in the aftermath of last week’s solid Dollar run, has been a welcome relief to a South African Rand trading at record lows. Also seen helping to support the beleaguered Rand off record lows are the latest round of solid South African manufacturing production numbers. But overall, the outlook for the Rand remains bleak. Last Friday’s US employment 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 recently 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. Adding insult to injury has been the recent round of weakness in commodities prices.