Plenty to Digest in Light Calendar Monday

GBPUSD – technical overview

The latest break below 1.2800 opens the door for the next major downside extension exposing fresh +30 year lows into the 1.1500 to 1.2000 area. At this point, any rallies are classified as corrective, with only a break back above previous support turned resistance at 1.2796 to take the immediate pressure off the downside and delay bearish momentum.

• R2 1.2622 – 7Oct high – Strong
• R1 1.2500 – Psychological – Medium
• S1 1.2ooo – Psychological – Medium
• S2 1.1841 – 7Oct/+30 year low – Strong

GBPUSD – fundamental overview

The Pound will be relieved that it has a quiet Monday calendar, though the UK currency is likely to remain on the defensive in light of ongoing Brexit uncertainty and fear immigration will play a larger role in talks than the economy. The Pound has however found some welcome support off the flash crash lows, perhaps helped along by Friday’s softer US employment report.

USDJPY – technical overview

Despite the latest impressive rally, overall, the pressure still remains on the downside with a lower top sought out at 104.32 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 and daily close back above 104.32 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 104.32 – 2Sep high – Strong
• R1 104.16 – 6Oct high – Medium
• S1 102.67 – 5Oct low – Strong
• S2 101.84 – 29Sep high – Medium

USDJPY – fundamental overview

Japan is closed for holiday and the US will be as well on Monday and this all makes for some thin trade. However, the Yen has regained notable momentum over the past couple of sessions, with uncertainty creeping back into markets and fueling flight to safety flow. Brexit uncertainty, US political uncertainty and Deutsche Bank uncertainty are only a few of the overhangs at the moment that are influencing price action.

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 1.1000 – Psychological – Medium
• S1 1.0893 – 3Oct low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

Last Thursday’s super subdued Swiss inflation readings are just one more reason the SNB is committed to preventing additional appreciation in the Swiss Franc. 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. Certainly the wave of uncertainty from this latest decline in the Pound could be an added headache for the SNB. For today, the market will digest this latest Swiss unemployment data.

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 0.7711 – 29Sep high – Strong
• R1 0.7645 – 5Oct high – Medium
• S1 0.7554 –7Oct low – Medium
• S2 0.7531 – 20Sep low – Strong

AUDUSD – fundamental overview

Comments from Aussie Treasurer Morrison that he doesn’t see much appetite within the RBA for further rate cuts could be helping to prop the Australian Dollar a bit in Monday trade, while last Friday’s softer US NFPs could also be supporting the commodity currency a bit. But overall, Aussie continues to be very well offered into rallies, with the primary driver of direction being influenced by yield differentials which continue to favour the US Dollar. Uncertainty is another Aussie negative out there right now, with the market selling risk correlated currencies as it lacks clarity on stories like Brexit, US politics and Deutsche Bank to name a few.

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 towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.3000 would delay the constructive outlook.

• R2 1.3281 – 27Sep high – Strong
• R1 1.3249 – 6Oct high – Medium
• S1 1.3161 – 5Oct low – Medium
• S2 1.3048 – 29Sep low– Strong

USDCAD – fundamental overview

The fact that Friday’s Canada employment data was super strong and US employment data disappointed had no major impact on the Canadian Dollar, with the Loonie instead placing its focus on the drop in OIL and a wave of uncertainty in global markets. Ultimately, this led to buy stops cleared in USDCAD, with the pair pushing to its highest levels since March. But as far as today goes, there may not be all that much volatility with both the Canada and US out for Thanksgiving and Columbus Day holidays respectively.

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 daily close back below 0.7100 to strengthen the structural shift and accelerate declines.

• R2 0.7311 –4Oct high – Strong
• R1 0.7209 – 5Oct high  – Medium
• S1 0.7110 – 7Oct low – Medium
• S2 0.7087 – 8Aug low – Strong

NZDUSD – fundamental overview

Any potential Kiwi benefit to Friday’s softer US NFPs has been offset by hawkish comments from Fed’s Mester and George and a wave of uncertainty in the markets right now. Brexit risk, US election risk and Deutsche Bank risk are just a few of the worries out there fueling flight to safety bids and ultimately weighing on the risk correlated Kiwi. Moreover, New Zealand economic data has not been great of late, with last week’s disappointing GDT auction result only creating a more pronounced divergence between Fed and RBNZ policy, with the Fed on the verge of hiking while the RBNZ is forced to consider additional cuts. Today’s economic calendar is exceptionally thin with Japan already closed and the US also out for holiday.

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 daily close back above this level to compromise the newly adopted bearish outlook. Below 2108 accelerates.

• R2 2194.00 – 15Aug/Record high – Strong
• R1 2180.00 – 222Sep high – Medium
• S1 2108.00 – 12Sep low – Medium
• S2 2073.00 – 6Jul low– Strong

US SPX 500 – fundamental overview

There is a growing concern for stock market bulls that we have reached the limits of monetary policy accommodation and investors will no longer be able to be able to benefit from government and central bank artificial support. Up until recently, softer US economic data had actually been a prop to equities on the assumption it would keep the Fed in accommodative mode. But there has been a notable shift of late and we are starting to see signs of a deterioration in stocks even when data comes in soft. Friday’s US employment report is a clear reflection of this fact, with stocks off despite the softer data. Perhaps the added hiccups of US election risk, Brexit risk and Deutsche Bank risk are also weighing on sentiment. Right now, the September base at 2108 will be the key level to watch. If that goes, the market could really fall off. As far as Monday goes, the US is out for the Columbus Day holiday.

GOLD (SPOT) – technical overview

Despite the latest major setback, the overall structure remains highly constructive with the market in the process of carving out a longer-term base. Look for additional weakness to be very well supported above 1235, with only a close back below this level to delay the bullish outlook and give reason for pause.

• R2 1302.50 – 1Sep low – Strong
• R1 1277.20 – 5Oct high – Medium
• S1 1241.45 – 7Oct low – Medium
• S2 1234.95 – 7Jun low – Strong

GOLD (SPOT) – fundamental overview

Broad based US Dollar demand on hawkish Fed speak and strong US data have been cited as major drivers behind GOLD’s slide. But 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, extended global equities and systemic risk. All of this will almost certainly continue to keep the commodity in demand, even if the Buck is propped up, 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

USDMXN is in the process of correcting off fresh record highs from late September. While there is still scope for additional declines in the sessions ahead, ultimately, the uptrend remains intact and a higher lower is now sought out ahead of a bullish resumption and break to another record high through major psychological barriers at 20.0000. At this point, only back below 17.9030 would compromise the highly constructive outlook.

• R2 19.9250 – 26Sep/Record high – Strong
• R1 19.6685 – 30Sep high – Medium
• S1 18.9225 – 10Oct low – Medium
• S2 17.9030 – 16Aug low – Strong

Feature – fundamental overview

The Mexican Peso has been holding up relatively well in recent days, particularly after the currency had sunk to fresh record lows in late September. It seems the Banxico’s efforts to dissuade the market from selling Pesos have been effective, at least in the short term, after the central bank raised rates the other week. Meanwhile, a major bank is calling for more tightening in financial conditions from the Banxico over the coming months so that investors will be increasingly uncomfortable holding more expensive short Peso exposure. Still, the impact of higher rates on a struggling local economy is not ideal, while risk for liquidation in global equities on a fear of higher US rates is also something that could easily offset these Banxico moves and once again invite renewed downside pressure on the risk correlated EM currency. Certainly the recent fallout in the Pound and better Trump performance in the second US election debate are also not welcoming of Peso gains.