Some investor caution into the weekend

GBPUSD – technical overview

The market is in a consolidation phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3200 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

• R2 1.3913 – 14 September high – Strong
• R1 1.3835 – 20 October high – Medium
• S1 1.3709 – 18 October low – Medium
• S2 1.3653 – 14 October low – Strong

GBPUSD – fundamental overview

UK CBI data came in weaker than expected on Thursday and the US Dollar was bid across the board. Key standouts on today’s calendar include UK retail sales, German and Eurozone manufacturing PMIs, UK manufacturing PMIs, Canada retail sales and manufacturing sales, and some US PMI reads.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 114.55 to negate the outlook.

• R2 115.00 – Psychological– Strong
• R1 114.70 – 20 October/2021 high – Medium
• S1 113.65 – 21 October low – Medium
• S2 113.00 – 12 October low – Strong

USDJPY – fundamental overview

Monetary policy divergence continues to be a fundamental catalyst driving Yen underperformance to multi-month lows against the Buck. However, Yen selling has been aggressive and this in conjunction with some risk off flow and a reversal in oil have contributed to some renewed Yen demand into the end of the week. Meanwhile, the BOJ is considering a wind-down of its pandemic loan program. On the data front, Japan PMI reads improved, and inflation was in line with expectation. Key standouts on today’s calendar include UK retail sales, German and Eurozone manufacturing PMIs, UK manufacturing PMIs, Canada retail sales and manufacturing sales, and some US PMI reads.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy consolidation following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there are signs of the market wanting to turn back up and any setbacks should be well supported down into the 0.7200 area. Look for a weekly close above 0.7500 to strengthen the outlook and force a shift in the structure.

• R2 0.7599 – 6 July high – Strong
• R1 0.7547 – 21 October high – Medium
• S1 0.7378 – 18 October low – Medium
• S2 0.7323 – 13 October low – Strong

AUDUSD – fundamental overview

Earlier today, the RBA announced it was purchasing AUD $1 billion of April 2024 bonds. There had been speculation such a move could be made this week, as the yield on this bond spiked beyond the RBA's 10bps target. We also heard from RBA Governor Lowe who said elevated inflation pressures can't persist without stronger wage pressures. On the data front, Aussie PMI prints for October showed an improving trend, with the indices back above 50.0. Key standouts on today’s calendar include UK retail sales, German and Eurozone manufacturing PMIs, UK manufacturing PMIs, Canada retail sales and manufacturing sales, and some US PMI reads.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

• R2 1.2563 – 8 October high – Strong
• R1 1.2499 – 12 October high – Medium
• S1 1.2288 – 21 October low – Medium
• S2 1.2252 – 23 June low – Strong

USDCAD – fundamental overview

The Canadian Dollar has finally come under some pressure into the end of the week. The combination of lower oil, broad US Dollar demand and a market that has all but priced in a hawkish BoC meeting next week are all factoring into the profit taking on Loonie longs. Key standouts on today’s calendar include UK retail sales, German and Eurozone manufacturing PMIs, UK manufacturing PMIs, Canada retail sales and manufacturing sales, and some US PMI reads.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. Back above the April high at 0.7317 would be required to force a shift in the structure.

• R2 0.7300 – Figure – Strong
• R1 0.7219 – 21 October high – Medium
• S1 0.7049 – 18 October low – Medium
• S2 0.7000 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand government announced it would end lockdowns to manage virus cases once full vaccination rates reached 90%. Given current vaccination rates are around 68%, this could take a little while to achieve, which ultimately may trim odds for a 50bps hike at the November RBNZ meeting. Key standouts on today’s calendar include UK retail sales, German and Eurozone manufacturing PMIs, UK manufacturing PMIs, Canada retail sales and manufacturing sales, and some US PMI reads.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4600, with a break back below 4353 to strengthen the outlook.

• R2 4600 – Psychological – Strong
• R1 4553 – 21 October/Record high – Medium
• S1 4436 – 15 October low – Medium
• S2 4272 – 1 October low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment in Q4 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

• R2 1917 – 1 June high – Strong
• R1 1835 – 15 July high – Medium
• S1 1700 – Round number – Medium
• S2 1677 – 8 March/2021 low – 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 exhausted monetary policy, extended global equities, and coronavirus fallout. 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.