Buck Declines on ‘Sell the Fact’ Reaction

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 1.5361 – 4Nov low – Strong
• R1 1.5300 – Figure – Medium
• S1 1.5227 – 19Nov low  – Medium
• S2 1.5155 – 17Nov low – Strong

GBPUSD – fundamental overview

Lack of first-tier economic data out of the UK over the past couple of sessions, has left the Pound playing a game of follow the leader, with the Euro leading the way. Despite hawkish Fed comments and an FOMC Minutes that confirmed the likelihood for a December liftoff, the Pound has found bids in the aftermath on the back of some broad based profit taking on US Dollar longs. But with the fundamental picture unchanged and continuing to highlight monetary policy divergence, plenty of offers are reported into rallies. For today, the key focus will be on the release of UK retail sales data, while in the US, we get initial jobless claims, leading indicators and the Philly Fed index. Also out late in the day are speeches from Fed Lockhart and Fischer.

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 123.61 to strengthen the case for a more meaningful bullish resumption and full retracement back to the 125.85 peak. Inability to establish above 123.61 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 124.16 – 20Aug high – Medium
• R1 123.76 – 18Nov high – Strong
• S1 123.00 – Figure – Medium
• S2 122.23 – 16Dec low – Strong

USDJPY – fundamental overview

With the exception of some slightly dovish comments on inflation, we didn’t get anything new from the Bank of Japan on Thursday, with the central bank comfortable leaving policy on hold, while maintaining an upbeat assessment that ‘the economy is continuing to recover moderately.’ Broad based profit taking on US Dollar long positions post FOMC Minutes had already capped USDJPY upside, with the BOJ decision triggering a wave of Yen demand on a let down the BOJ wasn’t prepared to commit to more easing just yet. However, a recovery in risk assets, has helped to support the major pair into dips. Looking ahead, US initial jobless claims, leading indicators and the Philly Fed index are due, followed by speeches from Fed Lockhart and Fischer.

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 1.1050 – 11Sep high – Strong
• R1 1.0919 – 30Oct high – Medium
• S1 1.0755 – 12Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

SNB Jordan continues to remind the market the central bank remains committed to a policy directed at weakening an overvalued local currency. Overall, despite ECB dovishness, 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 intense acceleration of declines. SNB Maechler is on the wires later today.

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 0.7200 – Figure – Medium
• S1 0.7102 – 19Nov low – Medium
• S2 0.7069 – 18Nov low – Strong

AUDUSD – fundamental overview

The Australian Dollar has mounted and impressive recovery over the past several sessions, with this latest wave of demand coming from a bout of broad based profit taking on US Dollar longs post FOMC Minutes. Also seen supporting the currency are risk on flows, with the recovery in stocks propping the correlated market. Still, with the Fed well on course for a December liftoff, the current bout of US Dollar weakness is viewed as nothing more than a short-term correction, with plenty of Aussie offers reported into rallies, as market participants look to take advantage in a world that favours the Buck on yield differentials. Looking ahead, US initial jobless claims, leading indicators and the Philly Fed index are due, followed by speeches from Fed Lockhart and Fischer.

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 1.3371 – 16Nov high – Medium
• S1 1.3225 – 12Nov low – Medium
• S2 1.3200 – Figure – Strong

USDCAD – fundamental overview

Broad based profit taking on US Dollar long positions is factoring into USDCAD price action into Thursday, with the pair pulling back from recent highs despite the FOMC Minutes signaling a Fed liftoff in December. It seems the price action can be attributed to a ‘sell the fact’ reaction than anything else, with fresh bids expected to emerge into dips. OIL prices continue to trade with a heavy tone, and this should be an added incentive to be looking to fade any Canadian Dollar strength. Looking ahead, Canada wholesale sales and the Bank of Canada Review are due, along with US initial jobless claims, leading indicators and the Philly Fed index. Also out late in the day are speeches from Fed Lockhart and Fischer.

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 to fresh multi-year lows. Ultimately, only a daily close above 0.7000 will negate and potentially force a shift in the structure.

• R2 0.6588 – 11Nov high– Strong
• R1 0.6550 – Mid-Figure – Medium
• S1 0.6465 – 19Nov low – Medium
• S2 0.6429 – 18Nov low – Strong

NZDUSD – fundamental overview

The early Thursday jump in New Zealand producer prices has been a bit of a head turner for local traders, with the data perhaps scaling back bets on an upcoming rate cut from the RBNZ. Kiwi had already been bid up on some broad based profit taking on USD longs post Fed Minutes, with an accompanying rally in stocks also contributing. But overall, the Fed remains on course for liftoff next month, while economic data in New Zealand has been less than supportive as highlighted by this latest GDT auction. As such, any additional Kiwi rallies are expected to find solid offers going forward. Looking ahead, US initial jobless claims, leading indicators and the Philly Fed index are due, followed by speeches from Fed Lockhart and Fischer.

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 2000 to confirm and accelerate, while back above 2117 negates and exposes a direct retest of the record high.

• R2 2117.00 – 3Nov high – Strong
• R1 2092.00 – 11Nov high – Medium
• S1 2003.00 – 16Nov low – Medium
• S2 1990.00 – 14Oct low – Strong

US SPX 500 – fundamental overview

US equities have once again managed to mount an impressive recovery, with this market seemingly supported at every turn. Recent hawkish Fed commentary pointing to a December liftoff, along with a blowout monthly employment report, had opened a wave of liquidation in equities several days back, but a good chunk of these setbacks have already been recovered, despite ongoing signals from the Fed of a December liftoff. The price action is somewhat perplexing given the negative risk implications of higher rates in the US, though it seems market participants continue to shrug off this possibility until it becomes a reality. For today, we get US initial jobless claims, leading indicators and the Philly Fed index, followed by speeches from Fed Lockhart and Fischer.

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. A daily close below 1050 would expose deeper setbacks towards major psychological barriers at 1000.

• R2 1112.00 – 5Nov high – Strong
• R1 1098.00 – 16Nov high – Medium
• S1 1065.00 – 18Nov/2015 low – Medium
• 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.

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 14.4415 –16Nov/Record – Strong
• S1 14.0725 – 12Nov low – Medium
• S2 13.8620 – 5Nov low – Strong

Feature – fundamental overview

The SARB wil have a difficult decision on its hands when it meets today, with the central bank having to contend with a currency just off recent record lows and a struggling local economy. But Wednesday’s as expected inflation readings and recent comments from the SARB Governor suggest the central bank will hold off on a tightening this time round. A broad based round of profit taking on US Dollar longs post FOMC Minutes will also be an added comfort to the SARB, while signs of a bounce in GOLD offer added short-term relief to a central bank that would rather avoid raising rates if it can.