Two Reasons Why US NFPs Won’t Matter

GBPUSD – technical overview

The market has broken out of a multi session consolidation off the multi-year low, which could now open the door for a more significant correction higher in the days ahead. Ultimately, there is room to run towards 1.2800 without compromising the intense downtrend, with a lower top sought out in favour of a bearish resumption back towards 1.2000. Only a weekly close above 1.2800 would compromise the structure.

• R2 1.2622 – 7Oct high – Strong
• R1 1.2500 – Psychological – Medium
• S1 1.2297 – 3Nov low – Medium
• S2 1.2206 – 1Nov low – Strong

GBPUSD – fundamental overview

A breakout day for the Pound on Thursday, with the UK currency getting a double jolt following the High Court ruling and BOE decision. Initially, the High Court ruled against the government, deeming PM May would need to consult with Parliament before triggering Article 50. This removed some fears over a more immediate hard Brexit scenario and inspired a relief rally. Then the Bank of England delivered a less dovish decision, after it removed language signalling additional rate cuts this year, while also highlighting limitations of how much it would allow inflation to overshoot. The Pound remained well supported into North America after US claims and ISM non manufacturing disappointed. Looking ahead, the market will be monitoring Brexit headlines, dealing with US election risk, while also taking in US NFPs later in the day.

USDJPY – technical overview

The recent rally above 105.00 could not be sustained and the pressure has once again shifted back to the downside following this latest break back below 103.15. Look for a daily close below 103.00 to reaffirm bearish momentum, exposing a potential retest of the 2016 low around 99.00. At this point, back above 105.53 will be required to take the pressure  off the downside.

• R2 104.17 – 2Nov high – Strong
• R1 103.45 – 3Nov high – Medium
• S1 102.55 – 3Nov low – Medium
• S2 101.84 – 29Oct high – Strong

USDJPY – fundamental overview

The major pair has come back under pressure this week on account of risk liquidation flow, weakness in crude oil and jitters ahead of next week’s US election. But we have seen some demand into dips into Friday, with the return of flows out of Japan following the Culture Day holiday. Japanese fundamentals have taken a backseat to all of this and should continue to over the coming sessions. As far as today goes, US NFPs aren’t likely to factor into price action all that much given the already expected December Fed hike and overhang of the US election. And so, the primary driver on Friday will be risk sentiment flow.

EURCHF – technical overview

The latest break below 1.0800 warns the market could be getting set to deviate from what had been a well defined range between 1.0800 and 1.1000. Look for a daily close below previous support at 1.0755 to strengthen the outlook and open the door for an acceleration of declines towards the 2016 low at 1.0624 further down. At this point, a daily close back above 1.0865 would be required to suggest the market is once again looking settle back into the range.

• R2 1.0900 – Figure – Medium
• R1 1.0865 – 28Oct hig – Strong
• S1 1.0755 – 2Nov low – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

SNB President Jordan reiterated his central bank’s stance on monetary policy this week, saying the SNB was committed to using its two tools of intervention and negative interest rates to prevent further appreciation in the Swiss Franc. However, this strategy to prop the local currency is going to prove to be a very tough go if the SNB finds itself in a battle with global themes and flows that demand safe haven passage into the Swiss Franc. Certainly this latest wave of Trump momentum has made the SNB’s job all the more challenging. There had been many talking about 1.0800 as an unofficial EURCHF floor, but with that level broken, the market could quickly turn its attention to the post Brexit 2016 low in the lower 1.0600s.

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 0.7709 – 26Oct high – Strong
• R1 0.7690 – 1Nov high – Medium
• S1 0.7558 –28Oct low – Medium
• S2 0.7507 – 13Oct low – Strong

AUDUSD – fundamental overview

The RBA Statement on Monetary Policy came in rather balanced on Friday, while Aussie retail sales did a good job beating expectations. All of this has helped to support the commodity currency on setbacks, though overall, macro players continue to look to take advantage of rallies up towards 0.7700, using them as opportunity to build into existing shorts. Looking ahead, the US employment report won’t be getting much attention, with the primary focus on sentiment heading into next week’s US election.

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 1.3435 – 28Oct high – Medium
• S1 1.3353 – 27Oct low – Medium
• S2 1.3278 – 25Oct low– Strong

USDCAD – fundamental overview

The Canadian Dollar is the only developed currency into Friday that has underperformed against the US Dollar over the past week. The relative weakness comes primarily from a sharp pullback in the price of OIL, though tensions ahead of the US election and Canada’s proximity to the US have also made the Canadian Dollar less attractive. But all of this could change later today, when the market takes in the monthly Canada employment data. US NFPs are also out but won’t get that much attention this time round with US election risk front and centre. Other data out includes Canada trade, Canada Ivery PMIs and US trade.

NZDUSD – technical overview

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 0.7400 in favour of the next major downside extension below 0.7000 and towards medium-term support at 0.6675 further down.

• R2 0.7369 –22Sep high – Strong
• R1 0.7350 – Mid-Figure  – Medium
• S1 0.7279 – 3Nov low – Medium
• S2 0.7181 – 2Nov low – Strong

NZDUSD – fundamental overview

The market is pricing in an RBNZ rate cut at next week’s meeting, though the story has changed a bit this week in the aftermath of an impressive round of Kiwi data. A stronger GDT auction, robust employment report and uptick in RBNZ inflation expectations have all suggested the central bank will potentially signal an end of its easing cycle if it does go ahead and cut. Up until this week, there was an expectation the RBNZ would continue to consider additional easing going forward, though the one factor that might keep the RBNZ thinking this way is the elevated exchange rate, something the RBNZ is not comfortable with. Looking ahead, the US employment report won’t be getting much attention, with the primary focus on sentiment heading into next week’s US election.

US SPX 500 – technical overview

Signs of a potential top after the market recently broke below critical support at 2108. 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 2156, with only a daily close back above this level to compromise the newly adopted bearish outlook.

• R2 2156.00 – 25Oct high – Strong
• R1 2137.00 – 31Oct high – Medium
• S1 2085.00 – 200-Day SMA – Strong
• S2 2073.00 – 6Jul low– Strong

US SPX 500 – fundamental overview

US equities have taken a big hit this week, with the market getting clobbered and dropping back below the critical low from September. Investors have been citing US election risk as the reason behind the move, though it would be unfair to dismiss the bigger story at hand, which is an exhaustion of global monetary policy tools and an inability for central banks to continue to support and stimulate the global economy. This leaves financial markets vulnerable to any shocks and exposed to intense periods of risk liquidation going forward. Looking ahead, we get US NFPs and trade data.

GOLD (SPOT) – technical overview

Despite a major setback in October, 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. Back above 1300 strengthens the outlook and should accelerate gains towards a retest of the 2016 peak at 1375.

• R2 1313.10 – 4Oct high – Strong
• R1 1308.00 – 2Nov high – Medium
• S1 1260.40 – 24Oct low – Medium
• S2 1241.45 – 7Oct 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, 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

USDSGD has been well bid in recent trade, with the market establishing back above 1.3500 and pushing up towards 1.4000. However, while the structure remains constructive and additional upside is projected, scope exists for a shorter-term correction to allow for stretched interday studies to unwind. Still, look for any setbacks to be well supported above 1.3700 in favour of the next major higher low and bullish resumption.

• R2 1.4000 – Psychological – Strong
• R1 1.3962 – 27Oct high – Medium
• S1 1.3818 – 2Nov low – Strong
• S2 1.3770 – 12Oct low – Medium

Feature – fundamental overview

Though we have seen a minor recovery this week, the overall outlook for the Singapore Dollar is not that bright right now, with the currency under pressure on yield differentials with the US and reduced appetite for emerging market FX. Meanwhile on the domestic front, in its macroeconomic review, the MAS said it did not expect the Singapore economy to pick up significantly in the near term on the drag from lackluster external demand and weak global trade. This has also contributed to more pessimistic growth forecasts. Of course, this latest liquidation in risk assets is also not welcoming of Singapore Dollar demand and if the sell off in equity markets continues, the Singapore Dollar could very well be in for a fresh run of weakness. Dealers cite plenty of demand for USDSGD on dips into the 1.3700s.