Investors Welcome China Closure, ECB Ahead

GBPUSD – technical overview

The recent daily close below the 200-Day SMA suggests the market could be on the verge of rolling over for deeper setbacks towards 1.5000 in the sessions ahead. The market had mostly been trading above the 200-Day SMA since early June and after stalling ahead of the 2015 high, the price action is suggestive of some form of topping. At this point, a daily close back above 1.5509 would be required to put the focus back on the topside.

• R2 1.5509 – 27Aug high – Strong
• R1 1.5408 – 1Sep high – Medium
• S1 1.5264 – 2Sep low  – Medium
• S2 1.5170 – 1Jun low  – Strong

GBPUSD – fundamental overview

Although the pace of declines have slowed, the Pound remains under pressure into Thursday, with a softer round of UK construction PMIs and relatively in line US data directing the price action. US ADP employment and factory orders were only a little softer than forecast, while the Fed Beige Book mostly encouraged the solid economic outlook for the US economy. Looking ahead, UK services PMIs are due, followed by the more influential US round of data in the form of initial jobless claims, trade and ISM non-manufacturing.

USDJPY – technical overview

The latest rally has been well capped ahead of 122.00 and a lower top is now sought out in favour of a resumption of declines back towards the recent extreme low at 116.12. At this point, only a break back above 121.74 would negate the short-term bearish outlook and put the pressure back on the topside.

• R2 121.74 – 28Aug high – Strong
• R1 121.00 – Figure – Medium
• S1 120.00 – Psychological – Medium
• S2 119.22 – 2Sep low – Strong

USDJPY – fundamental overview

On Wednesday, US data came in mostly in line with expectation, while stocks rallied. Both of these developments were supportive of the major pair, given the implications of a Fed on course to raise rates and some risk on price action with sentiment picking up. The Fed Beige Book was also supportive, reflecting a mostly optimistic outlook for the US economy and also showing signs of wage growth. Perhaps another supportive story had been the China market closure for the remainder of the week. With participants not needing to worry about any hiccups in China, it is helping to prop risk assets and the correlated USDJPY pair. Looking ahead, US initial jobless claims, trade and ISM non-manufacturing are the key releases.

EURCHF – technical overview

The market looks to be in the process of carving a meaningful base since taking out key multi-day range resistance at 1.0575 several days back. This has opened the latest break above the February peak at 1.0815 which now exposes fresh upside through psychological barriers at 1.1000 and towards 1.1500 further up. Any setbacks should now be well supported ahead of 1.0700, with only a break back below 1.0575 to negate the constructive outlook.

• R2 1.0962 – 12Aug high – Strong
• R1 1.0903 – 2Sep high – Medium
• S1 1.0714 – 20Aug low – Strong
• S2 1.0575 – Previous Resistance – Medium

EURCHF – fundamental overview

SNB Jordan has been on the wires this week and has helped keep the Franc offered after reiterating the currency was markedly overvalued and that the central bank stood ready to intervene. Jordan also said the current negative interest rate of -0.75% is not the bottom and sub-zero levels are likely to be appropriate for a considerable period of time. A solid performance in US equities on Wednesday and resumption of risk asset buying has also been a welcome development. But overall, there is still a lot of uncertainty out there, and investors are growing increasingly wary of the impact of stimulatory moves by central banks and governments. The SNB balance sheet has ballooned to around 85% of GDP, which means it is unlikely there is a lot left in the tank for future interventions.

AUDUSD – technical overview

Setbacks have accelerated sharply to the downside to yet another multi-year low, below critical psychological barriers at 0.7000. The drop opens the door for a fresh measured move downside extension towards 0.6830 in the sessions ahead. Technical studies are however tracking in oversold territory across multiple timeframes which suggests the market could be poised for a correction in the coming sessions. Still, any rallies are expected to be very well capped, with only a break back above 0.7440 to compromise the bearish outlook.

• R2 0.7205 – 28Aug high – Strong
• R1 0.7082 – 31Aug low – Medium
• S1 0.6982 – 2Sep/2015 low – Medium
• S2 0.6900 – Figure – Strong

AUDUSD – fundamental overview

A mixed round of data out of Australia early Thursday, but this should do nothing to alter the RBA’s accommodative course. While the Aussie trade deficit came in narrower than expected, retail sales were a big disappointment and follow up Wednesday’s softer GDP print. Aussie found some support on Wednesday with many buying risk assets on relief from the China holiday market closure for the remainder of the week, but overall, the trajectory for Aussie continues to point lower. Plenty of solid offers are reported into rallies. Looking ahead, US initial jobless claims, trade and ISM non-manufacturing are the key standouts on the economic calendar later today.

USDCAD – technical overview

The market is locked within a well defined uptrend, pushing to fresh 11-year highs and closing in on next major psychological barriers at 1.3500. However, with medium-term studies looking stretched, we are seeing the onset of a correction to allow for these stretched studies to unwind. But ultimately, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of a bullish continuation.

• R2 1.3354 – 25Aug/2015 high – Strong
• R1 1.3300 – Figure – Medium
• S1 1.3199 – 2Sep low – Medium
• S2 1.3117 – 31Aug low– Strong

USDCAD – fundamental overview

The Canadian Dollar has had plenty of good reason to mount a solid recovery this week, and yet rallies have been rather shallow. The rebound in OIL prices and not as bad Tuesday Canada GDP readings haven’t really don’t much to inspire any meaningful CAD buying and with OIL stalling out and a round of Wednesday US data coming in mostly in line with expectations, the US Dollar has been well supported. Looking ahead, Canada trade will be an important release to watch, while US data should not be overlooked with initial jobless claims, trade and ISM non-manufacturing due.

NZDUSD – technical overview

Daily studies are in the process of unwinding from oversold off a violent decline to fresh multi-year lows and there is risk for additional consolidation in the sessions ahead to allow for these studies to further unwind before the market considers a legitimate bearish continuation below 0.6130. Still, any rallies should be well capped below 0.6740 in favour of the existing downtrend.

• R2 0.6467 – 31Aug high– Strong
• R1 0.6400 – Figure– Medium
• S1 0.6312 – 2Sep low – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

The Kiwi market hasn’t been too encouraged with another jump in dairy prices at this week’s auction, with the gains attributed more to a drop in volume than rising demand. Many also now believe this week’s round of softer New Zealand business confidence seals the deal on another RBNZ rate cut when the central bank meets next week on September 9th. This would be the third rate cut since May and could very well open the door for fresh declines below last Monday’s 0.6130 multi-year low. Ongoing uncertainty surrounding China and global equity market weakness are also a negatives for Kiwi and will continued to be monitored closely. Looking ahead, US initial jobless claims, trade and ISM non-manufacturing are due.

US SPX 500 – technical overview

The recent breakdown below 2040 has been a significant development, with the move confirming the formation of a major top off record highs. We have since seen a rapid acceleration of declines, with the market crashing through a measured move downside extension objective at 1940, stalling just shy of 1800 thus far. Technical studies are now unwinding from super stretched readings, so there is risk for some additional consolidation before the market looks for a bearish continuation below 1800. Still, any rallies are now expected to be well capped below 2000 on a daily close basis.

• R2 1996.00 – 28Aug high – Strong
• R1 1970.00 – 1Sep high – Medium
• S1 1902.00 – 1Sep low – Medium
• S2 1946.00 – 26Aug low – Strong

US SPX 500 – fundamental overview

A nice recovery in equities on Wednesday, though with the price action still confined to the Tuesday range, there wasn’t too much to get excited about. US economic data was mostly in line with expectation and didn’t really factor into price action. Perhaps the biggest support for the ailing market on Wednesday was the relief that China markets were closed for holiday through the end of week. But overall, ongoing uncertainty surrounding the China outlook and an expectation the Fed will indeed go ahead and raise rates this year are not comforting prospects for the stock market and should continue to weigh going forward. Us initial jobless claims, trade and ISM non-manufacturing are the ket releases on the economic calendar today.

GOLD (SPOT) – technical overview

Finally signs of a potential base since breaking down to fresh multi-year lows below 1100. The recent recovery back above the previous 2015 base at 1142 strengthens the outlook and could open the door for additional upside towards 1233 over the coming days. Look for the latest round of setbacks to now be well supported on dips ahead of 1100. Only a daily close below 1100 negates and puts the pressure back on the downside.

• R2 1188.00 – 29Jun high – Strong
• R1 1170.00 – 24Aug high – Medium
• S1 1118.00 – 26Aug low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

Overall, there is still plenty of uncertainty out there, and with US stocks topping off record highs and China doing its best to keep its faltering economy going, there is plenty of interest for safe haven GOLD at current levels, just off multi-year lows. Hedge funds are slowly stepping back into the long position and the added risk of rising inflation over the coming months is making the position all the more compelling. There was some mild weakness in Wednesday trade, with the price action attributed to a rebound in risk sentiment on China holiday market closures. However, this is hardly anything that would derail the current recovery.

Feature – technical overview

USDSGD continues to push to fresh +5-year highs and remains highly constructive. The uptrend is firmly intact with the latest break above 1.4170 opening the next measured move upside extension towards 1.4400. In the interim, look for any setbacks to be well supported above 1.3800. Only a daily close below 1.3800 will delay the bullish outlook.

• R2 1.4245 – 2010 high – Strong
• R1 1.4186 – 2Sep/2015 high – Strong
• S1 1.3940 – 25Aug low – Medium
• S2 1.3890 – 13Aug low – Strong

Feature – fundamental overview

It has not been a good run for the Singapore Dollar, which remains under pressure along with the rest of the emerging markets on a deteriorating China economic outlook and more favourable US Dollar yield differentials. The Singapore Dollar has been suffering from the blow to China manufacturing after a recent China Caixin PMI print produced its lowest reading in more than 6 years. This data also follows softer fixed asset investment, retail sales, industrial production and export readings and likely suggests more soft data in the months ahead. This in conjunction with the expectation for a Fed rate hike this year should translate into more SGD weakness going forward. It’s also worth noting this week’s Singapore manufacturing PMIs came in as expected, but still well below previous to further strengthen the bearish case for the currency. Perhaps the SGD will find some relief from the China holiday market closure for the remainder of the week, but this is yet to be determined.