End of Month Flow, Central Bank Risk, US NFPs

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 now confirmed at 1.5336, following the break to fresh multi-day lows below 1.5027. This sets up the next major downside extension 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 1.5156 – 24Nov high – Strong
• R1 1.5110 – 27Nov high – Medium
• S1 1.5000 – Psychological  – Strong
• S2 1.4960 – 23Apr low – Medium

GBPUSD – fundamental overview

Friday’s disappointing second estimate of Q3 UK GDP did nothing to help the Pound, with the UK currency coming under added downside pressure, now looking to establish below the psychological barrier at 1.5000. The Pound had already been under intense pressure on the back of ongoing US Dollar demand with the market preparing for Fed liftoff in a couple of weeks, and setbacks intensified in recent days following dovish comments from BOE Carney and Haldane. The BOE officials have suggested rates won’t be going up any time soon, and with Friday’s GDP coming in on the softer side, this only strengthens the rhetoric while further highlighting the ongoing divergence with the Fed. Looking ahead, end of month flows will be the primary driver of Monday trade, though on the economic calendar, we get UK consumer credit and mortgage approvals, followed by Chicago PMIs, US pending home sales and Dallas Fed manufacturing.

USDJPY – technical overview

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

It not looking like the BOJ will be doing anything at its December meeting, based on recent comments from BOJ Governor Kuroda. The central banker said he is of of the ‘clear’ opinion Japan’s price trend is improving, despite last week’s softer inflation readings. Kuroda also added that he was as confident as ever the Japanese economy had become more resilient to external pressures, with fundamentals more solid and demand improving. On the data front, while Japanese industrial production came in a little softer than expected, this was more than offset by solid Japanese retail sales. Looking to the rest of today’s trade, end of month flows, broader sentiment and US data will dictate direction. Chicago PMIs, US pending home sales and Dallas Fed manufacturing are the notable releases.

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 1.0950 – Mid-Figure – 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 the other 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. The major focus for the week will unquestionably be the Thursday ECB decision and with the central bank expect to ease policy further, the SNB will need to be on it toes.

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

Though there has been some concern with subdued Australian inflation, overall, with Aussie economic data picking up nicely these past several weeks, any expectations for additional RBA easing at tomorrow’s meeting have been dismissed. Heading into the event risk, the OIS market is pricing only a 4% chance for an RBA cut. Economic data out early Monday is further supportive of the improvement in the economy, with Aussie company operating profit, inventories and private sector credit all exceeding expectation. Looking ahead, the market will start to position ahead of tomorrow’s RBA, though in the interim, end of month flow and a batch of US data including Chicago PMIs, pending home sales and Dallas Fed manufacturing, will be in focus.

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 1.3400 – Figure – Medium
• S1 1.3300 – Figure – Medium
• S2 1.3247 – 19Nov low – Strong

USDCAD – fundamental overview

The Canadian Dollar has managed to hold just off its recent 11-year low against the Buck from September, though it doesn’t look like it will be able to hold up much longer, in the face of ongoing downside pressure in the commodities market. Friday’s slide in both OIL and GOLD has opened renewed downside pressure on the Loonie, with USDCAD on the verge of pushing to fresh multi-year highs towards 1.3500. Looking ahead, the Canada current account and a batch of US data, featuring Chicago PMIs, pending home sales and Dallas Fed manufacturing, will all be in focus. End of month flows, ongoing price action in commodities and broader sentiment, will also be watched closely.

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

Solid Kiwi building permits and business confidence in the early week, are perhaps helping to prop the currency a bit, though overall, with commodities on the slide and the New Zealand economy showing signs of a broader cooling off, any rallies are expected to be well capped. Moreover, with the Fed on the verge of a rate hike, policy divergence continues to favour Kiwi selling. Looking ahead, the focus in the early week will be on end of month flows, commodities prices, second tier US data and Tuesday’s important dairy auction result.

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 2104.00 – 9Nov high – 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 implication 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. Looking ahead, there is plenty of risk stacked as the week progresses, with central bank meetings and Friday NFPs the primary focus. In the interim, the market will be trading on Monday end of month flows.

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 1052.00 – 27Nov/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. Dealers cite sell-stops below 1050 and buy stops above 1100.

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 15.0000 – Psychological – Strong
• R1 14.4415 –16Nov/Record – Strong
• S1 13.8920 – 20Nov low – Medium
• S2 13.8620 – 5Nov low – Strong

Feature – fundamental overview

Clearly, it’s going to take a lot more from the SARB and local economy if the currency wants to truly avoid further declines. The Rand is trading back to fresh record lows, despite another tightening from the SARB the other week. The combination of rising South African inflation, 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. While rising inflation could be supportive of a currency on tighter policy implications, it can also be currency bearish when the central bank doesn’t have the luxury of offsetting inflation with a rate hike, due to a slowing economy, as is the case right now with the SARB.