Trading Thins, US Out for Thanksgiving Holiday

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 ahead of 1.5400 with a fresh lower top sought at 1.5336 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 1.5196 – 23Nov high – Strong
• R1 1.5156 – 24Nov high – Medium
• S1 1.5054 – 24Nov low  – Medium
• S2 1.5000 – Psychological – Strong

GBPUSD – fundamental overview

A mild recovery for the Pound into Thursday trade, with the currency benefitting from a less harsh Chancellor Osborne mid-year budget, which kept growth forecasts broadly intact. While US economic data came in on the better side, with durable goods and initial jobless claims impressing, market participants preferred to book profit on US Dollar longs into the Thanksgiving holiday, which also helped to support the Pound. Lack of first-tier data on Thursday could make for a quiet day of trade, with the thinner holiday conditions also factoring. Dealers report decent offers ahead of 1.5250.

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 123.76 – 18Nov high – Medium
• R1 122.96 – 24Nov high – Strong
• S1 122.23 – 16Nov low – Strong
• S2 121.63 – 6Nov low – Medium

USDJPY – fundamental overview

Geopolitical concerns were addressed on Wednesday, after Russia said there would be no escalation following the downing of a Russian war plane by Turkey. This along with solid US economic data, highlighted by durable goods and initial jobless claims, helped prop the major pair off recent lows. However, broad based profit taking on US Dollar long positions into the Thanksgiving holiday kept the market capped into rallies, and the major pair was ultimately confined to a choppy consolidation. Looking ahead, trading conditions will be super thin for the remainder of the week which could result in some very quiet trade.

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 1.0900 – 19Nov high – Medium
• S1 1.0755 – 12Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

The SNB continues to advertise its strategy of weakening the Franc, with SNB Maechler out last week saying “the Swiss National Bank has an eye on the actions of euro-area policy makers and will keep all options open in its bid to combat the strong franc.” SNB Jordan has also reminded the market this month that the central bank remains committed to a policy directed at weakening an overvalued local currency. Thus 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.

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 medium-term 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 0.7382 – 12Oct high – Strong
• R1 0.7283 – 25Nov high – Medium
• S1 0.7159 – 23Nov low – Medium
• S2 0.7102 – 19Nov low – Strong

AUDUSD – fundamental overview

The Australian Dollar has come under pressure into Thursday, with the currency underperforming on the back of an abysmal Q3 capex showing. The data was a major drag, with the reading tanking by a record 9.2%, more than tripling forecasts. While the RBA is still likely to leave policy on hold next week, the data has increased the chances for a cut when the central bank meets in January. Setbacks have however been supported into this holiday Thursday, with market participants booking profit on long US Dollar positions into Thanksgiving. Looking ahead, lack of any data on the calendar should make for a quiet day of trade.

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 1.3378 – 24Nov high – Medium
• S1 1.3247 – 19Nov low – Medium
• S2 1.3225 – 12Nov low – Strong

USDCAD – fundamental overview

Despite the very healthy round of Wednesday US economic data, highlighted by durable goods, initial jobless claims and new home sales, the Canadian Dollar managed to post mild gains, with the currency recovering from recent lows. It seems the combination of additional recovery in OIL prices and broad based profit taking on long US Dollar positions into the US Thanksgiving holiday, managed to offset the positive US Dollar flows from the impressive US data. Looking ahead, lack of first tier economic data out of Canada and the US holiday should make for a very light day of trade.

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 0.6625 – 6Nov high– Strong
• R1 0.6606 – 20Nov high – Medium
• S1 0.6493 – 23Nov low – Medium
• S2 0.6465 – 19Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been benefitting in recent trade from a round of profit taking on long US Dollar positions into the US Thanksgiving holiday. Still, any gains have been tempered by a healthy dose of US economic data and a less than impressive round of New Zealand trade, which produced a deficit of NZ$963M versus consensus estimates of NZ$937M. Overall, with the Fed expected to raise rates next month, and the RBNZ considering further accommodation, any rallies should continue to be very well capped on the monetary policy divergence theme.

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 2100.00 – Psychological – Medium
• S1 2068.00 – 24Nov low – Medium
• S2 2003.00 – 16Nov 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. Solid US economic data and hawkish Fed commentary solidifying prospects for a December rate hike have failed to have any meaningful impact on the market. The price action is somewhat perplexing given the negative risk implications of higher rates in the US, though it seems market participants are finding comfort in the fact that the Fed has made it abundantly clear its path to normalisation will be painfully slow and gradual. Not much expected in the way of movement for the remainder of the week, with the US out for the Thanksgiving holiday.

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 14.4415 – 16Nov/Record – Strong
• R1 14.2150 –19Nov high – Strong
• S1 13.8920 – 20Nov low – Medium
• S2 13.8620 – 5Nov low – Strong

Feature – fundamental overview

Last week’s surprise move from the SARB to raise rates may have helped the Rand recover from recent record lows, though ultimately, it is going to take a lot more from the SARB and local economy if the currency wants to truly avoid further record low declines. The combination of rising South African inflation, with a struggling economy, declining commodities prices and Federal Reserve on the verge of raising rates, is not a pretty combination for the Rand, and this should continue to pressure the emerging market currency, despite the latest tightening. Certainly, Tuesday’s softer than expected South African GDP showing has done nothing to help the Rand’s cause. This in conjunction with a healthy round of Wednesday US data has opened the door for renewed USD bids. Volumes are expected to thin out for the remainder of the week with the US out for the Thanksgiving holiday.