Are Investors Rooting for a Disappointing NFP Report?

GBPUSD – technical overview

The latest downside acceleration has resulted in a retest and break of the critical 2015 low from March at 1.4566, with setbacks extending to the lowest levels since June 2010. However, at this point, daily studies are looking stretched and there is risk for some form of a decent corrective bounce in the sessions ahead. Look for the correction to potentially extend back towards the 1.5000 area before the market looks for the next lower top and resumption of the downtrend. Ultimately, while there is risk for short-term upside in the sessions ahead, only back above 1.5240 would negate the bearish structure.

• R2 1.4725 – 5Jan high – Strong
• R1 1.4682 – 6Jan high – Medium
• S1 1.4600 – Figure  – Medium
• S2 1.4533 – 7Jan low  – Strong

GBPUSD – fundamental overview

A five and half year low for this major pair on Thursday, with the Pound extending declines on the back of risk liquidation flows from China, solid US initial jobless claims, and ongoing worry on the domestic front. A dovish repricing of BOE rate hike expectations over the past several weeks and fear of Brexit had already knocked the pair lower, with setbacks only intensifying on this week’s risk aversion. Into Friday, we have seen some recovery off the lows, with an oversold market looking to square up on Sterling shorts, while a steady Yuan fixing is also inviting relief. Looking ahead, the key focus on Friday will be the monthly employment report out of the US, though UK trade data will also factor into price action. On the official circuit, Fed Williams and Fed Lacker are scheduled to speak.

USDJPY – technical overview

The market remains pressured to the downside, with the latest break below 118.00 exposing a deeper drop towards the critical August base just ahead of 116.00. However, at this point, it is worth highlighting oversold daily studies that could be warning of the need for some form of a corrective reversal higher. Still, rallies should be well capped towards previous support in the 120.00 area, with only a break back above 120.65 to take the immediate pressure off the downside.

• R2 119.17 – 8Jan high – Strong
• R1 118.75 – 7Jan high – Medium
• S1 118.00 – Figure – Medium
• S2 117.33 – 7Jan low – Strong

USDJPY – fundamental overview

A summary of Bank of Japan opinions from the December meeting has offered no new insights into the monetary policy outlook, and well bid Yen continues to focus on broader macro flows. The Yen has been a primary beneficiary of risk off flow over the past week resulting from China uncertainty. But into Friday, we are seeing the emergence of some Yen selling, with a steady Yuan fixing and bargain hunter bids on USDJPY dips, inviting a mild reversal of flow. Looking ahead, the remainder of Friday will centre on positioning and reaction to the monthly employment report out of the US. NFPs are projected at 200k versus 211k previous, while the unemployment rate is expected to hold steady at 5.0%. On the official circuit, Fed Williams and Fed Lacker are scheduled to speak.

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 was able to find a little relief in December, following a less dovish ECB meeting, allowing the SNB to hold steady and avoid a deeper push into negative interest rate territory. Still, the SNB will need to be careful of risk off flow in 2016, with higher rates in the US and global growth concerns to potentially act as a disincentive to be long risk, which in turn, could weigh on EURCHF. This in conjunction with any Euro weakness could prove to be a double headed dragon the SNB will have a very difficult time battling. But at this point, negative interest policy and commitment to weaken the Franc is proving to be an effective strategy that is offsetting any Franc demand on safe haven flow. Looking ahead, Swiss unemployment and inflation data will be digested on Friday ahead of the anticipated monthly employment report out of the US.

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 0.7132 – 5Jan low – Strong
• R1 0.7100 – Figure – Medium
• S1 0.7004 – 8Jan low – Medium
• S2 0.6980 – 7Jan low – Strong

AUDUSD – fundamental overview

Although Aussie construction data came in below previous, this was offset by a solid retail sales showing, steady fixing in the Yuan rate and recovery in commodities prices. The Australian Dollar has been a standout underperformer over the past week, with the market hit hard on the early 2016 risk liquidation flow. The combination of a higher Fed rate path, geopolitical tension and escalated concerns over the China outlook have all contributed to the currency’s underperformance and after getting hit so hard, the market is finally finding some demand into Friday. But there is still plenty of volatility risk ahead, with the monthly employment report out of the US due. Expectations centre on a 200k NFP print and steady unemployment rate of 5.0%. Also on the wires are speeches from Fed Williams and Lacker.

USDCAD – technical overview

The strong uptrend remains well intact, with the market taking out the previous 11-year peak from December, and surging to a fresh +12 year high beyond the 1.4007, 2004 peak to 1.4170 thus far. However, with daily, weekly and monthly studies looking stretched, the risk for any meaningful upside beyond 1.4170 is limited, with a more significant and healthy correction favoured before bullish trend continuation. There is room for a correction back into the 1.3600-1.3800 area, from where the market will look to carve the next meaningful higher low.

• R2 1.4170 – 7Jan high – Strong
• R1 1.4122 – 8Jan high – Medium
• S1 1.3973 – 6Jan low – Medium
• S2 1.3898 – 5Jan low – Strong

USDCAD – fundamental overview

Despite all the headwinds for the Canadian Dollar at the moment, which include softer domestic data, ongoing OIL weakness, risk abroad and policy divergence with the Fed, Governor Poloz was unwilling to make any commitment to more rate cuts in a speech on Thursday. This along with a mild recovery in the price of OIL helped to support the Loonie off fresh 12 year lows against the Buck. We have since seen stablisation in markets, aided by a steady Yuan fixing on Friday, and this has helped to keep the Loonie in check. But there is still a lot of uncertainty in the air, and the Canadian Dollar will have to contend with this uncertainty on Friday, while taking in monthly employment reports out of Canada and the US. Clearly, there could be a lot of volatility into the close, with Fed speak from Williams and Lacker topping it all off.

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 in the 0.6900 area, 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 0.6758 – 5Jan high– Strong
• R1 0.6708 – 6Jan high– Medium
• S1 0.6591 – 7Jan low – Medium
• S2 0.6571 – 9Dec low – Strong

NZDUSD – fundamental overview

Lack of any data out of New Zealand has left Kiwi trading on broader macro flows into Friday. Over the past week, the New Zealand Dollar has taken a hit on the deterioration risk sentiment, with the fallout in China at the centre of this price action. Another disappointing GDT auction has also factored into Kiwi underperformance. Of the developed currencies, only the Australian Dollar has performed worse in this period, given Australia’s more direct correlation with China. But some market stabilisation into Friday has helped support Kiwi off the weekly low, with a steady Yuan fixing and position squaring into today’s monthly employment report out of the US, helping to prop the market. Also out on Friday and worth paying attention to will be Fed speeches from Williams and Lacker.

US SPX 500 – technical overview

Signs of exhaustion following an impressive multi-year rally to a fresh record high in 2015. The market has finally stalled out at 2137, with the recent break back below 2000 strengthening the case for the formation of a major top. Look for this bearish price action to pave the way for the next downside extension towards medium-term support in the 1870 area. Any rallies should be well capped below 2100, while ultimately, only back above 2117 negates.

• R2 2026.00 – 5Jan high – Strong
• R1 1999.00 – 7Jan high – Medium
• S1 1936.00 – 7Jan low – Medium
• S2 1870.00 – 29Sep low – Strong

US SPX 500 – fundamental overview

It seems gravity is finally taking hold, with any bullishness from the Fed’s confidence in initiating liftoff, offset by harsher realities. The fact that the Fed will be looking to raise rates four times this year should be somewhat concerning to a market that has been supported to record highs over the past several years on near zero interest rate policy. This in conjunction with serious worry over the China outlook and rising geopolitical tensions should continue to weigh on stocks going forward. Certainly another round of Yuan weakness and a circuit breaker on China stocks this week are not helping matters though we have seen some stabilisation into Friday on the steady Yuan fixing and position squaring into the anticipated monthly employment report out of the US. But it gets a bit tricky for stocks when it comes to the jobs report. A solid showing could open more downside pressure as it will keep the Fed thinking about those four rate hikes this year. Fed Williams and Lacker are also on the docket today.

GOLD (SPOT) – technical overview

The recent close back above 1100 is a significant development and suggests the market is in the process of a bullish structural shift. Look for a meaningful base to now be in place down at 1046, with fresh upside projected back towards the 1200 area over the coming days and weeks. Any setbacks should be well supported ahead of 1070, with only a close back below this level to compromise the newly adopted bullish outlook.

• R2 1123.00 – 4Nov high – Strong
• R1 1112.00 – 8Jan high – Medium
• S1 1075.00 – 6Jan low – Medium
• S2 1046.00 – 3Dec/2015 low – Very Strong

GOLD (SPOT) – fundamental overview

Despite favourable US Dollar fundamentals as the Fed finally initiates liftoff, GOLD is finding formidable support into 2016, given deteriorating global sentiment and uncertainty in the air, most recently brought on by a worrisome China outlook and rising geopolitical tensions. Longer term macro players have been accumulating the metal as a hedge against an overinflated equity market that could be on the verge of a more significant decline. The market now looks ahead to the next batch of volatility from today’s anticipated employment report out of the US. Fed speeches from Lacker and Williams should not be overlooked.

Feature – technical overview

USDSGD looks to be wanting to end a period of multi-week consolidation, following this latest break of the range to a fresh multi-year high. Look for a weekly close above 1.4400 to confirm the bullish shift and open the next major upside extension towards 1.5000 over the coming weeks. However, inability to hold above 1.4400 could warn of exhaustion and the potential for a bearish reversal back into the range.

• R2 1.4500 – Psychological – Strong
• R1 1.4428 –7Jan high – Medium
• S1 1.4150 – 4Jan low – Medium
• S2 1.3923 – 4Dec low – Strong

Feature – fundamental overview

Price action in emerging market Asia FX has been all about China this week, with the latest slide in the Yuan and circuit break on China stocks fueling another round of Singapore Dollar weakness to fresh multi-year lows. The Singapore Dollar has since recovered from its Thursday low on reassurances from China officials and a steady Friday Yuan fixing, but is finding decent offers from macro accounts on rallies. Overall, with sentiment deteriorating, Fed monetary policy divergence weighing, and a very real risk for additional Yuan depreciation, any recoveries in the emerging market currency are expected to be short-lived. China’s attempts earlier in the week have long been forgotten and there is a worry that intervention tools may no longer be as effective as they once were.