Flurry of Fed Speak Hijacks Thursday Calendar

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 1.5350.

• R2 1.5300 – Figure – Strong
• R1 1.5246 – 11Nov high – Medium
• S1 1.5145 – 10Nov high  – Medium
• S2 1.5092 – 10Nov low – Strong

GBPUSD – fundamental overview

The Pound has managed to recoup all of its post-NFP losses against the Buck, with the UK currency benefitting from a drop in UK unemployment to 7 year lows. The Pound is also generating demand on broad based US Dollar selling, though dealers continue to cite plenty of sell interest into rallies from medium-term accounts. Lack of any UK data on the calendar today will leave this market focused on broader macro flows along with US initial jobless claims and a flurry of Fed speak featuring Yellen, Bullard, Lacker, Evans and Dudley.

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

Any upside in USDJPY has stalled out for now, with the major pair coming back under pressure on broad based USD selling this week, and some renewed downside pressure in risk assets. Still, with the monetary policy divergence theme front and centre, there is an ongoing expectation dips will continue to be very well supported. Today, we get US initial jobless claims data, though most of the focus will be on a slew of Fed speak, with Yellen, Bullard, Lacker, Evans and Dudley all on the docket.

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. ECB Hansson has offered further support to the cross rate after coming out on Wednesday, saying there wasn’t a need for additional ECB accommodation at this time. 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 0.7224 – 4Nov high – Strong
• R1 0.7170 – 5Nov high – Medium
• S1 0.7078 – 11Nov high – Medium
• S2 0.7016 – 10Nov low – Strong

AUDUSD – fundamental overview

The Australian Dollar is the clear standout outperformer on Wednesday on the back of some very impressive data. Wednesday’s pickup in consumer confidence has been followed up today with a stellar employment report that produced a drop in the unemployment rate from 6.2% to 5.9%, and a whopping 58.6k jobs added after the market had been looking for a significantly more modest print of 15k, up from -0.8k previous (post revision). The data has done a good job pushing back any expectations the RBA will be cutting rates in the meetings ahead, and this is supporting Aussie, as yield differentials move back in its favour. Cross related demand has been notable, with AUDNZD rallying sharply in the aftermath of the employment report. Looking ahead, we get US initial jobless claims data, though most of the focus will be on a slew of Fed speak, with Yellen, Bullard, Lacker, Evans and Dudley all on the docket.

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

Some lighter trade on Wednesday, with North American volumes dropping off given the Remembrance Day and Veterans Day holidays. The Canadian Dollar has been finding some demand this week following last Friday’s solid Canada employment data and this week’s broad selling in the US Dollar. Still, with OIL under pressure and the Fed on pace to make a move next month, there is risk for continued downside pressure in the Loonie over the medium-term. Economic data for the day includes the Canada new housing price index and US initial jobless claims. However, this data is likely to take on a supporting role, with the market more focused on a slew of Fed speak featuring Yellen, Bullard, Lacker, Evans and Dudley.

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 0.6625 – 6Nov high– Strong
• R1 0.6588 – 11Nov high – Medium
• S1 0.6499 – 6Nov low – Medium
• S2 0.6437 – 5Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar received a bit of a prop on Wednesday following better than expected China retail sales and comments from the RBNZ that recent Kiwi weakness was a significant buffer for the economy. But cross related Kiwi selling has emerged into Thursday on the back of the blowout Aussie employment report. This has weighed on NZDUSD, while opening a surge in the AUDNZD rate. Overall, rallies in NZDUSD should continue to be well offered, with the Fed on pace for a December rate hike and the RBNZ still seriously considering additional accommodation. For today, the focus shifts to US initial jobless claims and a batch of Fed speak featuring Yellen, Bullard, Lacker, Evans and Dudley.

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. The market will get more insight into monetary policy direction today, with the Fed’s Yellen, Bullard, Lacker, Evans and Dudley all on the docket.

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 1084.00 – 11Nov 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 just off record lows. Also seen helping to support the beleaguered Rand is the latest round of solid South African manufacturing production. 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. Emerging market FX will now be placing close attention to today’s raft of Fed speak.