Key takeaway from the week that was

Today’s report: Key takeaway from the week that was

If there’s one screaming takeaway from this week that was, it’s this. Central banks still have a firm grasp on global markets. It’s been an incredible run of central bank meetings over the past several days.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported above 1.1500 on a weekly close basis in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up. Only a weekly close below 1.1500 would force a rethink.

  • R2 1.1756 – 22 September high– Strong
  • R1 1.1693 - 28 October high – Medium
  • S1 1.1528 - 4 November low – Medium
  • S2 1.1525 – 12 October/2021 low – Strong

EURUSD – fundamental overview

The Euro rolled over on Thursday after bond yields broke hard, with bund yields at their lowest levels in a month. The market pushed back rate hike expectations from 10bps of hikes in December 2022 to 2023. Meanwhile, German factory orders came in well below forecast. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

EURUSD - Technical charts in detail

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 1.3699 – 4 November high – Strong
  • R1 1.3600 – Figure – Medium
  • S1 1.3471 – 4 November low – Medium
  • S2 1.3412 – 29 November low – Medium

GBPUSD – fundamental overview

We warned about it in our Thursday special report previewing the Bank of England decision and in the end, our suspicions were confirmed. The market was looking for a BOE rate hike but the central bank failed to produce a hike, scaling back on recent hawkish rhetoric. This of course sent the Pound south. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

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 113.25 – 28 October low – Medium
  • S2 113.00 – 12 October low – Strong

USDJPY – fundamental overview

The Yen hasn't been sure how to react into the end of the week, getting sold on the widening yield differential with the US and more record gains in US stocks, but getting bought on broad based US Dollar selling from dovish Fed communications. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

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 0.7556 – 28 October high – Medium
  • S1 0.7378 – 18 October low – Medium
  • S2 0.7323 – 13 October low – Strong

AUDUSD – fundamental overview

It's been a rough week for the Australian Dollar. The currency came under pressure to start the week after a dovish RBA communication and has since suffered more from softer economic data in the form of retail sales and trade. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

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 1.2499 – 12 October high – Strong
  • R1 1.2472 – 4 November high – Medium
  • S1 1.2288 – 21 October low – Medium
  • S2 1.2252 – 23 June low – Strong

USDCAD – fundamental overview

We didn't see much demand for the Canadian Dollar on Thursday, despite the better than expected Canada trade data. It seems the market was more focused on this week's pullback in the price of oil. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

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 0.7080 – 5 November low – Medium
  • S2 0.7049 – 18 October low – Strong

NZDUSD – fundamental overview

New Zealand Dollar stocks are looking a little heavier into the end of the week and the local currency has come under pressure as a consequence. Also not helping matters are comments from ex-PM Key who said New Zealand was vulnerable to the next downturn from debt burden and as China turned inward. Key standouts on Friday’s calendar include German industrial production, Eurozone construction PMIs, German construction PMIs, Eurozone retail sales, Canada employment, Canada Ivey PMIs, and the monthly employment report out of the US.

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. At the same time, the latest breakout above 4600 introduces the possibility for the next major upside extension through 4800. At this stage, it will take a break back below 4272 to take the immediate pressure off the topside.

  • R2 4700 – Psychological – Strong
  • R1 4686 – 5 November/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.

Peformance chart: 30 Day Performance vs. US dollar (%)

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