Harsh realities and data dependency

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September. A break above the September high at 1.1739 will solidify the recovery. Until then, look for setbacks to be well supported ahead of 1.0800.

• R2 1.1646– 27 October high – Strong
• R1 1.1422 – 3 November high – Medium
• S1 1.1150 – 4 November low – Medium
• S2 1.061 – 21 November low – Medium

GBPUSD – fundamental overview

The Bank of England has been forced into a near impossible balancing act of not tightening policy too much so as to exacerbate an already gloomy outlook for a struggling UK economy, while not keeping policy too loose so that inflation runs out of control and wreaks havoc from that front. This comes at a time when the Federal Reserve has more flexibility to push higher on rates, without needing to worry as much about the impact on US growth. What this translates to is yield differentials in favour of the US Dollar, which could continue to weigh on the Pound in 2022.Key standouts on today’s calendar come from German factory orders, an ECB Lagarde speech, Eurozone services PMI reads, UK construction PMI reads, Eurozone producer prices, the Canada jobs report, US jobs report, and Canada Ivey PMIs.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped on rallies above 150.00. Next key support comes in at 145.43.

• R2 152.00 – Round Number – Strong
• R1 151.95 – 21 October/2022 high – Strong
• S1 145.11– 27 October low – Strong
• S2 143.52 –5 October low – Medium

USDJPY – fundamental overview

The Yen has remained under pressure as the BOJ maintains its accommodative policy stance and the Fed keeps with its hawkish communications. Key standouts on today’s calendar come from German factory orders, an ECB Lagarde speech, Eurozone services PMI reads, UK construction PMI reads, Eurozone producer prices, the Canada jobs report, US jobs report, and Canada Ivey PMIs.

AUDUSD – technical overview

Overall pressure remains on the downside with the market confined to a well defined downtrend. A break back above 0.6682 would be required to take the pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6000.

• R1 0.6523 – 27 October high – Strong
• R2 0.6493 –2 November high – Medium
• S1 0.6300 – Figure – Medium
• S2 0.6272 – 24 October low – Strong

AUDUSD – fundamental overview

A surge in Aussie trade surplus has been largely overlooked, Aussie retail sales were as expected, and there was nothing surprising from the RBA SOMP. This has left the Australian Dollar under pressure on the back of poor action in Chinese markets and a growing policy divergence between Australia and the US in the aftermath of this week's more hawkish leaning Fed decision. Clearly the RBA is shifting more to a focus on growth worry over inflation worry, all while the Fed keeps its focus on inflation. Key standouts on today’s calendar come from German factory orders, an ECB Lagarde speech, Eurozone services PMI reads, UK construction PMI reads, Eurozone producer prices, the Canada jobs report, US jobs report, and Canada Ivey PMIs.

USDCAD – technical overview

A recent surge back above 1.3000 signals an end to a period of bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

• R2 1.3978 – 13 October/2022 high – Strong
• R1 1.3855 – 21 October high – Medium
• S1 1.3496 – 27 October low – Medium
• S2 1.3409 – 22 September low – Medium

USDCAD – fundamental overview

Canada building approvals sunk, while a downward revision to the Canada trade surplus did nothing to help the Canadian Dollar either. All of this comes at a time when we've seen renewed US Dollar demand in the aftermath of a more hawkish leaning Fed decision. Key standouts on today’s calendar come from German factory orders, an ECB Lagarde speech, Eurozone services PMI reads, UK construction PMI reads, Eurozone producer prices, the Canada jobs report, US jobs report, and Canada Ivey PMIs.

NZDUSD – technical overview

Overall pressure remains on the downside with the focus on a retest of the critical low from 2020 at 0.5469. A break back above 0.6162 would be required to take the immediate pressure off the downside.

• R2 0.6026 – 15 September high – Medium
• R1 0.5943 – 2 November high – Medium
• S1 0.5740– 3 November low – Medium
• S2 0.5657 – 24 October low – Medium

NZDUSD – fundamental overview

New Zealand economic data has been stronger of late, while inflation continues to climb, all of which has resulted in Kiwi outperformance against its peers. At the same time, the New Zealand Dollar has stumbled against the Buck in the aftermath of the latest hawkish Fed communication. Key standouts on today’s calendar come from German factory orders, an ECB Lagarde speech, Eurozone services PMI reads, UK construction PMI reads, Eurozone producer prices, the Canada jobs report, US jobs report, and Canada Ivey PMIs.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 4000 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3200.

• R2 3922 – 20 September high – Medium
• R1 3921 – 1 November high – Strong
• S1 3634 – 21 October low – Medium
• S2 3492 – 13 October/2022 low – Strong

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2022 that results in downside pressure into rallies.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension.

• R2 1766 – 25 August high – Strong
• R1 1736 – 12 September high – Medium
• S1 1615 – 28 September/2022 low – Medium
• S2 1600 – Round Number – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about inflation risk and a less upbeat global growth outlook. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.