Global Sentiment Deteriorates, Fed Hike Looms

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 1.5336 – 19Nov high – Strong
• R1 1.5265 – 13Nov high – Medium
• S1 1.5111 – 10Dec low  – Medium
• S2 1.5061 – 8Dec high  – Strong

GBPUSD – fundamental overview

The Pound has been a primary beneficiary of some broad based US Dollar selling against the major currencies ahead of this week’s all important FOMC rate decision. Still, overall, with the Bank of England in no hurry to raise rates on a subdued inflation outlook, and with the Fed expected to finally raise rates for the first time in nearly a decade, yield differential flows should continue to be supportive of the US Dollar on dips. Lack of first-tier economic data on Monday will leave the major pair trading on broader flow, though there is a good chunk of important UK risk this week, with CPI, employment and retail sales all due, Tuesday, Wednesday, Thursday, respectively. Fitch and S&P of come out affirming UK ratings, though S&P has warned the Pound would lose its status as a global reserve currency if Britain voted to leave the European Union. An improvement in UK Rightmove house prices hasn’t factored into trade.

USDJPY – technical overview

A period of multi-day consolidation between 123.75 and 122.20 has finally been broken, with the market dropping below range support at 122.20 to open an acceleration to the downside. Deeper setbacks are now projected towards 119.00 in the sessions ahead, with any rallies expected to be well capped on a daily close basis, below previous support turned resistance at 122.20. Ultimately, only back above 123.76 puts the focus back on the topside.

• R2 122.23 – 11Dec high – Strong
• R1 121.87 – 10Dec high – Medium
• S1 120.58 – 11Dec low – Medium
• S2 120.00 – Psychological – Strong

USDJPY – fundamental overview

The mixed BOJ Tankan report has failed to factor into early Monday trade, with the market more focused on the latest wave of risk liquidation. Friday’s sharp sell-off in equity markets has opened an intensification of profit taking on Yen shorts, with the major pair pulling back sharply towards psychological barriers at 120.00. Lack of first-tier economic data on Monday will leave the major pair trading on broader flow and sentiment for the remainder of the day, while participants will also continue to position ahead of this week’s highly anticipated event risk in the form of the FOMC rate decision.

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

The SNB has been able to breathe out this month, in the aftermath of a less dovish European Central Bank decision. As such, we saw an SNB taking advantage of the opportunity to leave policy unchanged this past Thursday, avoiding having to venture deeper into negative interest rate territory. Still, there has been the emergence of a fresh 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 intensifies.

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 0.7385 high. Any rallies are therefore classified as corrective and should continue to be well capped ahead of 0.7385, 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 0.7385 would undermine the bearish structure.

• R2 0.7281 – 11Dec high – Strong
• R1 0.7245 – 9Dec high – Medium
• S1 0.7159 – 23Nov low – Medium
• S2 0.7102 – 19Nov low – Strong

AUDUSD – fundamental overview

A wave of intense risk liquidation and talk of China looking to accelerate the pace of Yuan weakness, have been negative drivers for the Australian Dollar in recent trade, though setbacks early Monday have been supported somewhat on a healthy round of China data and a downplaying of the China currency depreciation chatter. Weekend China data produced better than expected retail sales and industrial output prints. Still, overall, monetary policy divergence is key here and with the Fed expected to initiate liftoff this week, and the RBA still battling subdued inflation from ongoing weakness in commodities prices, plenty of offers are reported into any form of a rally, with any Aussie gains not expected to last. Lack of first-tier economic data for the remainder of the day will leave this market trading on broader macro flows.

USDCAD – technical overview

The strong uptrend remains well intact, with the market taking out the previous 11-year peak from September, and surging to fresh multi-year highs into the 1.3700s thus far. The bullish break is a significant medium-term development and could result in a test of the major psychological barrier at 1.4000 in the days ahead. Daily studies are however tracking in overbought territory, though any corrective setbacks should be well supported ahead of 1.3000, while ultimately, only back below 1.2800 would compromise the constructive structure.

• R2 1.3800 – Figure – Strong
• R1 1.3758 – 11Dec/2015 high – Medium
• S1 1.3640 – 10Dec high – Medium
• S2 1.3532 – 10Dec low – Strong

USDCAD – fundamental overview

Nothing going right for the Canadian Dollar into Fed week, with the Loonie getting clobbered on the intense downside pressure in the price of OIL, down a dramatic 10% last week. Adding insult to injury has been a poor showing on the economic data front, with recent employment data coming in well below forecast. The combination of the weakness in the commodity markets and concerning data on the local front, continue to pressure the Canadian Dollar to fresh 11-year lows against the Buck, with USDCAD now closing in on the major psychological barrier at 1.4000. All of this in conjunction with a Fed on the verge of its first rate rise in nearly a decade, is not a pretty combination for the Loonie and will continue to pressure the currency going forward. Monday’s economic calendar is quite light and participants may look to square up on short CAD exposure ahead of the FOMC decision.

NZDUSD – technical overview

Any rallies continue to be very well capped, with the market confined to a broader downtrend. From here, look for the formation of a meaningful lower top at 0.6893, in favour of an acceleration to the downside and bearish resumption to fresh multi-year lows. Ultimately, only a daily close above 0.6893 will negate and potentially force a shift in the structure.

• R2 0.6893 – 16Oct high– Strong
• R1 0.6788 – 4Dec high– Medium
• S1 0.6700 – Figure – Medium
• S2 0.6571 – 9Dec low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar continues to hold up rather well in the aftermath of the hawkish RBNZ rate cut last week. This in conjunction with a less aggressive drop in food prices, solid Kiwi services PMIs and some better than expected weekend data out of China have been supporting the market on dips, despite the intense wave of broad based risk liquidation and ongoing weakness in commodities. Looking ahead, the calendar for Monday is exceptionally thin, and the focus will shift to broader risk sentiment and positioning ahead of Wednesday’s all important FOMC rate decision. But Kiwi traders will have more to digest than just the FOMC this week, with the GDT auction and NZD GDP due Tuesday and Thursday respectively.

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 2040 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 only back above 2117 negates and exposes a direct retest of the record high.

• R2 2117.00 – 3Nov high – Strong
• R1 2057.00 – 11Dec high – Medium
• S1 2003.00 – 16Nov low – Strong
• S2 1970.00 – 7Oct low – Medium

US SPX 500 – fundamental overview

A round of across the board less dovish than expected central bank policy decisions over the past several days could perhaps be sending a message to stock market participants that an era of ultra loose monetary policy accommodation is coming to an end. To this point, stocks haven’t been too worried about 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, market participants could now finally be waking up to the fact that central banks are no longer willing or able to support policies fueling dangerous bubbles, undermining recovery prospects. All of this will come to a head this Wednesday, when the market finally gets a glimpse at the highly anticipated FOMC policy decision, where the Fed is expected to raise rates for the first time in nearly a decade.

GOLD (SPOT) – technical overview

Signs of a potential base off fresh multi-year lows in the previous week, with a stretched market finally deferring to an overdue, healthy recovery. While the broader downtrend remains intact for the moment, a break and daily close back above 1100 will do a good job of alleiviating immediate downside pressure, opening the door for a more meaningful recovery. However, inability to establish above 1100 could open a fresh drop below 1046 and towards the major psychological barrier 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

Despite the US Dollar in strong demand as the Fed prepares for liftoff, GOLD is finding formidable 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. This has helped GOLD stay somewhat supported, despite broader weakness in the commodity sector. Dealers now cite sell-stops below 1040 and buy stops above 1100.

Feature – technical overview

USDZAR has broken to yet another fresh record high, with the market taking out the previous peak, and surging through major psychological barriers at 15.0000 to just over 16.000 thus far. However, daily studies are tracking in highly overbought territory, and there is risk for some form of a corrective decline to allow for studies to unwind before any meaningful bullish resumption. Still, any setbacks should be very well supported ahead of previous resistance in the 14.4500 area, while only back below 13.8920 would compromise the highly constructive outlook.

• R2 16.5000 – Psychological – Medium
• R1 16.0330 –11Dec/Record – Strong
• S1 14.4415 – 16Nov high – Strong
• S2 13.8920 – 20Nov low – Medium

Feature – fundamental overview

The Rand is enjoying a very welcome minor recovery off fresh record lows, with the currency benefitting from news of President Zuma’s appointment of seasoned Pravin Gordhan as finance minister. Initially, after sacking Nene, Zuma announced the appointment of unknown lawmaker David van Rooyen. The uncertainty of van Rooyen was not taken well by an already struggling Rand, which then accelerated to fresh record lows against the Buck. The Gordhan appointment has restored temporary order, while some broad profit taking on US Dollar longs ahead of this week’s FOMC is also helping the Rand a bit. But clearly, it’s 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, a struggling economy, declining commodities prices, rating agency downgrades 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 going forward.