Central Bank Rush

GBPUSD – technical overview

The market remains confined to an intense downtrend and is in the process of consolidating just off the recent +30-year low from July. Any rallies are classified as corrective ahead of what should be the next major break below 1.2800 and towards 1.2500. Only back above 1.3533 will take the immediate pressure off the downside and force a shift in the structure.

• R2 1.3138 – 14Sep low – Strong
• R1 1.3091 – 19Sep high – Medium
• S1 1.2945 – 21Sep low – Medium
• S2 1.2796 – 6Jul/+30 Year Low – Strong

GBPUSD – fundamental overview

There isn’t any first tier economic data out of the UK this week and the market has been focused on broader macro themes. UK pubic finance data will therefore take a back seat to reaction from the BOJ decision and upcoming FOMC decision. The market has been pricing the risk for a more hawkish Fed and this has invited downside pressure in the Pound, with the UK currency gravitating back towards the +30 year low from July. There has also been renewed Sterling offers on Brexit risk, with many now fearing more BOE rate cuts as the fallout from the referendum becomes more of a haunting reality for the UK economy.

USDJPY – technical overview

Although we’ve seen an impressive bounce in recent trade, overall, the pressure remains on the downside with a lower top sought out ahead of 107.49 in favour of the next major downside extension below the recent yearly and multi-month low at 98.99. At this point, only a break back above 105.00 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 103.36 – 14Sep high – Strong
• R1 102.78 – 21Sep high – Medium
• S1 101.42 – 13Sep low – Medium
• S2 101.20 – 7Sep low – Strong

USDJPY – fundamental overview

It’s going to take some time for the market to digest the latest twists from the Bank of Japan decision. In summary, the BOJ left rates on hold, maintained the annual pace of JGB buying but also abandoned the monetary policy target. ETF purchases also remained unchanged. The key components in the decision were the adjustment on the timeframe for reaching its 2% inflation target, now changed to “the earliest possible time,” and the introduction of QQE yield curve control. Overall it seems like a lot of technical tweaking this time round and the question of whether the limitations of effective policy accommodation measures have been reached is still very much alive. More volatility expected throughout the day and into the Fed decision.

EURCHF – technical overview

Not much doing here over the past several days, with the market confined to a range trade, roughly between 1.0800 and 1.1000. At this point, a daily close above 1.1000 or back below 1.0800 will be required for clearer directional insight. Until then, look for dips to be supported and rallies well capped.

• R2 1.1014 – 24Jun high – Strong
• R1 1.1001 – 1Sep high – Medium
• S1 1.0870 – 24Aug low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

No major reaction to the latest SNB decision which came in as expected, with the central bank echoing its usual mantra. Overall, SNB smoothing activity to prop the EURCHF rate has been helping to elevate the cross, but at the same time, any upside moves haven’t been sustainable with the cross rate continuing to get sold aggressively into rallies towards 1.1000. Ultimately, this is a market going nowhere right now and it seems stops need to get taken out below 1.0750 or above 1.1000 for clearer insight. US stocks have been supporting EURCHF but are now looking extended which could invite additional Franc demand if the market continues to roll over from record highs in the sessions ahead.

AUDUSD – technical overview

The market has struggled on rallies above 0.7700 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835 in favour of the next major downside extension. Look for a break back below 0.7421 to strengthen this outlook and accelerate declines towards 0.7000 in the days ahead. Ultimately, only back above 0.7758 will negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7616 – 2Sep high – Strong
• R1 0.7573 – 19Sep high – Medium
• S1 0.7475 –16Sep low – Medium
• S2 0.7443 – 13Sep low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been holding up well this week, with the currency supported on a balanced RBA Minutes and downside pressure in the Kiwi exchange rate which is inviting cross related demand for AUDNZD. Mostly however, the price action can be classified as a consolidation, with the currency not really looking to commit in either direction too much ahead of today’s highly anticipated FOMC event risk and subsequent RBNZ decision. Both of these central bank moves could have a major impact on Aussie and it will be interesting to see how it plays out.

USDCAD – technical overview

This market looks to be in the process of carving out a longer-term base off the 1.2461, 2016 low. Look for any additional weakness to be supported ahead of 1.2655 in favour of the next major upside extension through 1.3254 and towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2655 would delay the constructive outlook.

• R2 1.3300 – Figure – Medium
• R1 1.3254 – 27Jul high – Strong
• S1 1.3128 – 14Sep low – Medium
• S2 1.3029 – 12Sep low– Strong

USDCAD – fundamental overview

The Canadian Dollar didn’t really do all that much on Tuesday and seemed content to mostly sit back and wait to see where the chips would fall after today’s central bank risk was out of the way. The recovery in the price of OIL over the past couple of sessions has helped the Loonie a bit, though overall, the pressure remains on the downside and is favouring more US Dollar strength. There is an expectation the Fed could very well lean more hawkish today and if confirmed, this will likely fuel another round of Canadian Dollar selling. Tuesday’s BoC Poloz speech was also viewed as dovish leaning after the central banker said the economy was still facing strong headwinds and the central bank needed to see if government stimulus measures would pan out.

NZDUSD – technical overview

Finally signs of a potential top after the market stalled out at 2016 highs ahead of major psychological barriers at 0.7500. Daily studies had already traded up into overbought territory warning of the reversal and this latest bearish reversal strengthens the toppish outlook. Look for a break and close back below 0.7200 to confirm the structural shift and accelerate declines.

• R2 0.7413 – 9Sep high – Strong
• R1 0.7359 – 20Sep high  – Medium
• S1 0.7235 – 13Sep low – Medium
• S2 0.7204 – 30Aug low – Strong

NZDUSD – fundamental overview

Tuesday’s disappointing GDT auction result was already starting to weigh on the New Zealand Dollar and the selling has intensified into Thursday. Initially, softer New Zealand credit card spending got the Kiwi rate moving lower in early Wednesday trade before the BOJ decision sparked broad based US Dollar demand, opening more Kiwi weakness. Looking ahead, plenty more volatility expected for Kiwi with the FOMC and RBNZ decisions on tap. The Fed could very well adopt a more hawkish tone, while the RBNZ may be inclined to lean more dovish given recent softness in economic data an elevated exchange rate and subdued inflation.

US SPX 500 – technical overview

Signs of a potential top after the market recently broke below critical support at 2147. This now opens the door for a meaningful period of weakness exposing a more pronounced decline towards the June base at 1990. Look for any rallies to now be well capped ahead of 2180, with only a break back above this level to compromise the newly adopted bearish outlook. Below 2100 accelerates.

• R2 2180.00 – 9Sep high – Strong
• R1 2164.00 – 12Sep high – Medium
• S1 2100.00 – Psychological – Medium
• S2 2073.00 – 6Jul low– Strong

US SPX 500 – fundamental overview

It all feels like it’s starting to come to a head for the US equity market. In recent weeks, we have been hearing a lot about the limitations of monetary policy. We’ve also seen a notable shift in the overall tone out from Fed officials, with things moving over to the hawkish side, even in the face of softer US data and reduced odds for a September hike. Looking ahead, it will be interesting to see what comes of today’s FOMC decision. The market is going to want to see just how serious the Fed is about trying to raise rates this year. Clearly anything that comes across as more hawkish will be an added weight for an equity market that has been artificially supported by monetary policy for so many years.

GOLD (SPOT) – technical overview

The structure remains highly constructive with dips continuing to be very well supported. A recent round of setbacks were propped ahead of the 100-Day SMA and it looks like a fresh higher low could be in place around 1300 in favour of the next major upside extension beyond the current 2016 peak at 1375 and towards 1450-1500 further up.

• R2 1352.70 – 6Sep high – Strong
• R1 1332.05 – 13Sep high – Medium
• S1 1306.30 – 16Sep low – Medium
• S2 1302.50 – 1Sep low – Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDZAR has come under a good deal of pressure in recent months, trading down to a fresh 2016 low around 13.2000. However, it now appears as though the market is finally ready to turn back up in favour of a resumption of the broader uptrend. In the interim, look for any setbacks to be well supported ahead of 13.2000, with fresh upside seen towards 15.0000 in the sessions ahead. Only back below 13.2000 gives reason for pause.

• R2 15.0000 – Psychological – Strong
• R1 14.7540 – 1Sep high – Strong
• S1 13.8330 – 8Sep low – Medium
• S2 13.2000 – 10Aug/2016 low – Strong

Feature – fundamental overview

The Rand has done a really good job holding up in recent trade in the face of the possibility of a South Africa ratings downgrade in the pipeline, particularly after Moody’s placed five South Africa state owned companies on watch. It seems this latest recovery in risk sentiment is helping to keep the correlated currency supported for now, though overall, there are still plenty of Rand sellers into rallies as the Fed looks to normalise policy and yield differentials move in the Bucks’s favour. Looking ahead, plenty of room for volatility with South Africa CPI due today, followed  by the SARB policy decision on Thursday. Of course, the market will also be intensely focused the fallout from today’s BOJ and Fed decisions given the potential impact on risk assets. Ultimately, it will come down to risk flow. If risk appetite increases, the Rand will move higher, if risk appetite deteriorates, the Rand will fall.