Contemplating the US Dollar outlook

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

The revelation of a smaller issuance plan from the UK Debt Management Office was not well received by the Pound on Wednesday. This resulted in some underperformance on the day. Key standouts on today’s calendar include German unemployment, Eurozone confidence and sentiment reads, German inflation, the ECB decision, and US data in the form of GDP, initial jobless claims and pending home sales.

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 113.41 – 22 October low – Medium
• S2 113.00 – 12 October low – Strong

USDJPY – fundamental overview

The widening rate gap between the US and Japan, and ongoing record highs in US equities have been behind most of this latest weakness in the Yen. However, we are seeing some Yen demand into the latter half of the week as risk assets start to come under some pressure. Key standouts on today’s calendar include German unemployment, Eurozone confidence and sentiment reads, German inflation, the ECB decision, and US data in the form of GDP, initial jobless claims and pending home sales.

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

The Australian Dollar has come under a little pressure on Thursday, with the pullback in stocks, iron ore futures and crude oil weighing on the correlated commodity currency. That being said, there is still demand in the aftermath of this week's hotter Aussie inflation data and expectations the RBA will be leaning more to the hawkish side at next week's meeting. Key standouts on today’s calendar include German unemployment, Eurozone confidence and sentiment reads, German inflation, the ECB decision, and US data in the form of GDP, initial jobless claims and pending home sales.

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 was jolted higher on Wednesday, after the Bank of Canada surprised with the announcement of an end to QE. Balance sheet expansion is now over, with only maturing bond proceeds to be reinvested. Key standouts on today’s calendar include German unemployment, Eurozone confidence and sentiment reads, German inflation, the ECB decision, and US data in the form of GDP, initial jobless claims and pending home sales.

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 Dollar continues to find support on hawkish RBNZ bets. The benchmark New Zealand 10-year yield has traded to its highest levels since late 2018. Still, there are some offers into rallies on the back of a wave of risk off flow. Key standouts on today’s calendar include German unemployment, Eurozone confidence and sentiment reads, German inflation, the ECB decision, and US data in the form of GDP, initial jobless claims and pending home sales.

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 4650 – Psychological – Strong
• R1 4600 – 26 October/Record high – Medium
• S1 4500 – Psychological – Medium
• S2 4482 – 19 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.