Paradigm Shift and Payrolls

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 has set 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 1.5336, while only back above would compromise the immediate bearish structure.

• R2 1.5196 – 23Nov high – Strong
• R1 1.5159 – 3Dec high – Medium
• S1 1.5051 – 1Dec low  – Medium
• S2 1.4994 – 30Nov low  – Strong

GBPUSD – fundamental overview

The Pound was already relieved by the better than expected Thursday UK services PMI showing, viewed as a ray of sunshine, following softer manufacturing and construction components in this series earlier in the week. This helped to support the market off recent multi-day lows, with gains accelerating dramatically on the momentum from the sharp Euro rally, post less dovish ECB. Looking ahead, the UK economic calendar is a non-factor on Friday, with the key focus shifting to the release of the monthly employment report out of the US.

USDJPY – technical overview

Rallies continue to stall out 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 123.76 to strengthen the case for a more meaningful bullish resumption and full retracement back to the 125.85 peak. Inability to establish above 123.76 could open the door for the formation of a lower top and renewed downside pressure. A daily close below 122.23 on Friday will strengthen this prospect.

• R2 124.63 – 13Aug high – Medium
• R1 123.76 – 18Nov high – Strong
• S1 122.23 – 16Nov low – Strong
• S2 122.00 – Figure – Medium

USDJPY – fundamental overview

Softer US ISM services data and a wave of risk off trade post the less dovish European Central Bank decision, opened the door for some renewed downside pressure in the major pair on Thursday. Dealers cite major stops below 122.00 and if this level is taken out, it could further accelerate declines, ending a period of multi-session sideways trade. In the interim, setbacks have been supported on dips, with many participants still favouring the positive US Dollar yield differentials and expectation the Fed will move on rates in a couple of weeks. For now, the attention shifts to today’s monthly employment report out of the US.

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 – 13Oct high – Medium
• S1 1.0755 – 12Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

Overall, the SNB was able to breathe out a bit on Thursday, after the ECB let down the market and underdelivered with its latest round of easing measures. This opened a massive surge in the Euro, alleviating some of the pressure on the SNB to defend against unwanted Franc appreciation from Euro weakness. Still, the consequence of this latest move has been the initiation of a bout of risk off flow in the market, which in turn has also acted as a weight on the risk correlated EURCHF rate. This is something that could be a concern to the SNB going forward, particularly if the Euro rally fades and risk off price action persists.

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. Any rallies are therefore classified as corrective and should continue to be well capped ahead of 0.7382, 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 0.7382 would undermine the bearish structure.

• R2 0.7382 – 12Oct high – Strong
• R1 0.7363 – 3Dec high – Medium
• S1 0.7284 – 3Dec low – Medium
• S2 0.7222 – 1Dec low – Strong

AUDUSD – fundamental overview

The Australian Dollar did a good job absorbing weakness from Thursday’s disappointing Aussie trade data, and then managed to trade higher on the day, on the back of the surge in the Euro following the less dovish ECB decision. Overall, it has been a good run for the commodity currency, which has enjoyed a healthy Friday Aussie retail sales print, solid Aussie GDP earlier in the week, and a more upbeat RBA. Still, monetary policy divergence with the Fed is a major theme, and the expectation for Fed liftoff in a couple of weeks and initiation of a path to policy normalisation in the States, should once again weigh on the Australian Dollar. Looking ahead, the major focus on Friday will be the release of the monthly employment report out of the US.

USDCAD – technical overview

The market is focused 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 11-year peak from September at 1.3457 and towards 1.4000 further up. In the interim, any setbacks 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 highly constructive outlook.

• R2 1.3457 – 29Sep/2015 high – Strong
• R1 1.3408 – 2Dec high – Medium
• S1 1.3293 – 3Dec low – Medium
• S2 1.3247 – 19Nov low – Strong

USDCAD – fundamental overview

Not much movement in the Canadian Dollar into Friday, with the currency unable to muster any meaningful gains off recent lows despite a less dovish Bank of Canada this week, broad based rally in currencies against the Buck post ECB, and mild recovery in OIL prices. This isn’t the most encouraging sign for the beleaguered Loonie, though it will have another chance to at recovery later today, with the releases of the double whammy of employment reports out of the US and Canada. Ultimately, it seems the combination of risk off flow and ongoing expectation for a rate hike from the Fed in a couple of weeks, will continue to weigh on the Canadian Dollar going forward.

NZDUSD – technical overview

The impressive rally out from recent multi-year lows has 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 0.6900 will negate and potentially force a shift in the structure.

• R2 0.6792 – 30Oct high– Strong
• R1 0.6706 – 3Dec high – Medium
• S1 0.6608 – 3Dec low – Medium
• S2 0.6515 – 30Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been a primary beneficiary of a surge in the Euro in the aftermath of the less dovish ECB decision. Still, gains have been somewhat tempered by a massive wave of EURNZD demand and a bout of risk off flow. Overall, expectations for another RBNZ rate cut next week have been somewhat tempered by this week’s encouraging GDT auction and a pattern of less dovish central bank rate decisions from the RBA, Bank of Canada and ECB. However, ultimately, with the Fed on the cusp of its first rate hike and set to initiate its path to normalisation, the monetary policy divergence theme can not be ignored and could weigh on the New Zealand Dollar over the medium-term. Looking ahead, the primary focus in Friday trade will be the release of the monthly employment report out of the US.

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 2068 strengthening the case for some form of a lower top and additional setbacks ahead. Look for a daily close below 2003 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 2097.00 – 3Dec high – Medium
• S1 2041.00 – 3Dec low – Medium
• S2 2003.00 – 16Nov low – Strong

US SPX 500 – fundamental overview

It would seem investors have been let down by the latest European Central Bank decision, which is perhaps sending a message to the market that an era of ultra loose monetary policy accommodation could soon be coming to an end. Stocks haven’t been too responsive to the prospect of higher rates in the US, which should be an equity bearish development, in light of the removal of policy that incentivizes investment in risk assets, but could now finally be waking up to the fact that central banks are no longer willing to support policies, that at this point, could fuel dangerous bubbles and undermine any recovery prospects. Looking ahead, much of the focus for the remainder of the day will be on digesting today’s monthly employment report out of the US.

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 more significant 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 1046.00 – 3Dec/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 1040 and buy stops above 1100. The market will now be paying close attention to today’s monthly employment report out of the US.

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 15.0000 in the weeks 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 14.4950 –1Dec/Record – Strong
• S1 13.8920 – 20Nov low – Medium
• S2 13.8620 – 5Nov low – Strong

Feature – fundamental overview

An already beaten down Rand suffered another blow this week, after the release of a much wider than expected South Africa trade deficit. This has opened another fresh record low in the Rand against the Buck, with the currency continuing its downward trajectory, despite efforts from the central bank to offset weakness with rate hikes in recent days. 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 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. Looking ahead, beyond risk associated with today’s US employment report, this market will also be stressing about potential South Africa downgrades from rating agency reviews.