USD Could Be Readying for Next Big Push

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 1.2444 – 10Oct high – Strong
• R1 1.2333 – 19Oct high – Medium
• S1 1.2100 – Figure – Medium
• S2 1.2089 – 11Oct low – Strong

GBPUSD – fundamental overview

The recent recovery in the Pound is already showing signs of stalling out, with Thursday’s softer UK retail sales and ongoing Brexit concerns weighing on the UK currency. Of course, with the US Dollar coming back into demand across the board following solid US data and more hawkish Fed speak, this also isn’t doing anything to help the Pound’s cause. Today, UK public finance data is the only notable release on the economic calendar. This is unlikely to have much of an influence on price action, with broader macro flows to play a more influential role in determining direction.

USDJPY – technical overview

The broader pressure remains on the downside with market continuing to struggle on rallies towards 105.00. Key support now comes in at 103.17, with a drop below to strengthen the bearish outlook and expose a potential retest of the 2016 low down around 99.00. At this point, a daily close back above 105.00 would be required to signal a bullish shift in the structure.

• R2 105.00 – Psychological – Strong
• R1 104.82 – 25Oct high – Medium
• S1 103.17 – 19Oct low – Medium
• S2 102.81 – 10Oct low – Strong

USDJPY – fundamental overview

Bank of Japan Governor Kuroda has been on the wires talking about the difficulty of targeting a specific yield rate or range with respect to yield curve control, though this hasn’t really done anything at all to have an impact on Yen price action. Overall, the Yen is sitting back and waiting. The difficulty for the Yen is if it needs to be paying more attention to yield differentials which are not supportive or safe have flow which is Yen supportive. Of course, any added concern that the BOJ is running out of options and has little left to do on the accommodation front, would also potentially be a Yen bullish development. But for now, it’s a sit back and wait situation. Looking ahead, there is nothing on the economic calendar of note for Friday and the market will likely take its cues from risk sentiment flow.

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 1.0911 – 12Oct high – Medium
• S1 1.0798 – 24Oct low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

The combination of a more dovish ECB meeting on Thursday and ongoing fear of risk liquidation have been weighing on this cross rate into the end of the week. Overall, SNB smoothing activity to prop EURCHF has been helping to elevate the cross, but at the same time, upside moves haven’t been sustainable with the cross rate continuing to get sold aggressively into rallies towards 1.1000. Central bank policies from around the globe have been helping to support EURCHF for a long time. But with these policies now exhausted, it could invite additional Franc demand if sentiment continues to roll over in the sessions ahead. Dealers cite major stops below 1.0800.

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 0.7735 – 20Oct high – Strong
• R1 0.7700 – Figure – Medium
• S1 0.7595 –24Oct low – Medium
• S2 0.7557 – 14Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar took a beating on Thursday, with the currency mostly getting clobbered from an abysmal Aussie employment report. RBA’s noted concern over the health of the labour market, more hawkish Fed speak, solid US data and a downturn in risk sentiment, have all only added to the offered tone in the commodity currency. Looking ahead, there is nothing on the economic calendar for the remainder of the day that should have any influence on Aussie, with the market instead to take its cues from risk sentiment flow.

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 1.3000 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2764 would delay the constructive outlook.

• R2 1.3500 – Psychological – Strong
• R1 1.3398 – 24Oct high – Medium
• S1 1.3283 – 25Oct high – Medium
• S2 1.3141 – 19Oct low– Strong

USDCAD – fundamental overview

It seems every time the Canadian Dollar tries to put in a decent rally, the market swoops in to sell the Loonie aggressively into those rallies. Overall, the pressure remains on the downside for the Canadian Dollar, with yield differentials favouring the Buck. More recently, Thursday’s solid US existing home sales and Philly Fed and a reversal in the price of OIL have been seen as the primary drivers of Canadian Dollar weakness. More volatility is expected later today, with the market taking in Canada retail sales and CPI.

NZDUSD – technical overview

Setbacks have stalled out ahead of psychological barriers at 0.7000 for now, though the pressure has shifted back to the downside with the market now expected to be very well capped on rallies. Look for a fresh lower top ahead of 0.7350 in favour of the next major downside extension below 0.7000 and towards medium-term support at 0.6675 further down.

• R2 0.7266 –20Oct high – Strong
• R1 0.7218 – 18Oct high  – Medium
• S1 0.7110 – 24Oct low – Medium
• S2 0.7077 – 14Oct low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar got a prop earlier in the week on solid local data and broad based selling in the US Dollar. But all of this has faded into the end of the week, with the market back to buying the Buck as US data ticks back up, Fed officials talk hawkish and broader risk sentiment deteriorates. The market is still also considering the serious possibility of a rate cut from the RBNZ at its next decision, which should continue to keep Kiwi rallies well capped. Looking ahead, there is nothing on the economic calendar for the remainder of the day that should have any influence on Kiwi, with the market instead to take its cues from risk sentiment flow.

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, especially now that it looks like the Fed will be hiking, and we are starting to see signs of a deterioration in stocks even when data comes in soft. Perhaps the added hiccup of a shaky global backdrop is 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.

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 1240, 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 expectations for a Fed hike have been cited as major drivers behind GOLD’s slide over the past several weeks. 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, systemic risk and a bet that record low inflation will eventually start to turn up. All of this will almost certainly continue to keep the commodity in demand, even if the Buck is propped, 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 19.3810 – 7Oct high – Strong
• R1 19.0990 – 13Oct high – Medium
• S1 18.4550 – 20Oct 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. The likelihood for a Clinton victory in the US election has also been supporting the Peso. Still, overall, the impact of higher rates on a struggling local economy is not ideal, while risk for liquidation on a fear of higher US rates are things that could easily offset the Peso’s run and once again invite renewed downside pressure on the EM currency.