Friday Batch of Data Features US Retail Sales

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

It has been a relatively quiet week on the UK economic calendar, with the only standout coming from Wednesday’s drop in the unemployment rate to a 7 year low. This, along with profit taking on an extended US Dollar move post last week’s stellar NFP report, have contributed to a decent recovery in the UK currency. But with the Fed still on course for a December liftoff and today’s US data potentially strengthening this prospect, the market has finally started to find offers again. Comments from BOE Haldane haven’t done anything to help the Pound’s cause after saying a UK rate rise was a long way off. Looking ahead, construction output is the only scheduled release in the UK, with more of the attention to be placed on a batch of US data including retail sales, PPI, Michigan confidence and business inventories. On the official circuit, Fed Mester is slated to speak late in the day.

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

An impressive run in the major pair has fizzled out this week, with offers reemerging on the back of some reduced US Dollar exposure across the board following an impressive run, and some downside pressure in the equity market. While yield differentials are a positive for the US Dollar, any deterioration in market risk appetite could be offsetting, with the Yen seen benefitting from the safe haven flow. Looking ahead, the market will be focused on today’s batch of US data which includes, retail sales, PPI, Michigan confidence and business inventories. On the official circuit, Fed Mester is scheduled to speak later in the day on the topic of the outlook for the US economy and monetary policy.

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 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 0.7224 – 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 has enjoyed a nice run in recent days, capped off by a blowout employment report early Thursday. The OIS market has subsequently significantly reduced chances for an RBA rate cut in December, with these odds now diminished to a tiny 7%. The Australian Dollar is one of the top performers on the week into Friday, though ultimately, the commodity currency could face some headwinds, at least against the Buck, with the Fed on course for a December liftoff, commodities under pressure and equities starting to slide. All of this, along with heightened concerns over the China outlook, should make any sustained upside in this pair a difficult task. Looking ahead, we get US retail sales, PPI, Michigan confidence and business inventories. Fed Mester is also slated to speak later in the day on the outlook for the US economy and monetary policy.

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 1.3332 – 1Oct high – Medium
• S1 1.3225 – 12Nov low – Medium
• S2 1.3141 – 5Nov low – Strong

USDCAD – fundamental overview

Any broad based profit taking on long US Dollar positions has been mostly lost on the Canadian Dollar this week, with the Loonie remaining under a good deal of pressure, within a stone’s throw of the 11-year low against the Buck from September. The primary driver of trade this week has been the pullback in OIL prices, with the drag on the commodity weighing on the correlated currency. Another negative for the Loonie has been a reduction in risk appetite, with weakness in equity markets triggering a flight to safety play. Looking ahead, secondary Canada data will take a backseat to US releases in the form of retail sales, PPI, Michigan confidence and business inventories. On the official circuit, BoC Wilkins will be on the wires, while Fed Mester is also scheduled to speak late in the day on the topic of the outlook for the US economy and monetary policy.

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

Comments from the RBNZ that recent Kiwi weakness was a significant buffer for the economy, have perhaps helped to keep the market supported in recent trade. However, 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. Downside pressure in commodities and weakness in equities are also not helping Kiwi’s cause. For today, the focus shifts to a batch of US data, including retail sales, PPI, Michigan confidence and business inventories. Fed Mester is also scheduled to speak late in the day on the topic of the outlook for the US economy and monetary policy.

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 2015.00 – 21Oct low – Medium
• S2 1990.00 – 14Oct low – Strong

US SPX 500 – fundamental overview

Stocks have come under intensified 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 rising wage growth component in last week’s employment report. This could be something that forces the Fed into a more aggressive path to policy normalization than it might want. The market will be looking for more clarity today from a healthy batch of US data featuring retail sales, PPI, Michigan confidence and business confidence. Not to be overlooked is a speech by Fed Mester on the outlook for the US economy and monetary policy.

GOLD (SPOT) – technical overview

The market has come back under intensified pressure over the past several days, with the recent break below 1100 opening an acceleration to fresh yearly and multi-year lows. However, daily studies are looking stretched and the market could be poised for a corrective bounce in the sessions ahead. Still, the market will need to establish back above 1100 to take the immediate pressure off the downside.

• R2 1112.00 – 5Nov high – Strong
• R1 1096.00 – 19Nov high – Medium
• S1 1074.00 – 12Nov/2015 low – Strong
• S2 1000.00 – Psychological – Very Strong

GOLD (SPOT) – fundamental overview

GOLD has come back under intense pressure in recent days, dropping to fresh multi-year lows, 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 $1050.

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. 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. Throw in declining commodities prices and a slide in global equities and fresh record lows in the Rand are to be expected. For today, the focus shifts to a batch of US data featuring retail sales, PPI, Michigan confidence and business inventories. Fed Mester is also on the wires late in the day on the topic of the outlook for the US economy and monetary policy.