USD sensitivity ahead of the ADP Non-Farm Employment change

Global Market

A buildup of tension can be observed within the financial markets as the anxieties over China entering a deep economic downturn, in addition to emerging market weakness continue to have an adverse impact on investor sentiment. The Fed’s defiant action to not raise US rates in September lingers on, not only pressuring the markets further but also promoting a heightened level of sensitivity within the USD. With no clear direction offered to market participants, this has resulted in a case of jitters that has translated to a risk-off trading environment.

The risk-off trading environment has resulted in the Sterling experiencing an extended period of losses against the JPY. A string of negative PMI data from the UK economy this month has pushed back UK interest rate expectations which has exposed the GBP to further losses. The risk-off environment has promoted appetite for the JPY and because of this the GBPJPY has become fundamentally bearish. GBP weakness and JPY strength may result in the GBPJPY trading to the next relevant support at 180.00.

As a result of the risk averse trading environment, equities have received some punishment meandering between gains and losses. European equities have taken a hit, especially the FTSE100 which declined to levels not seen since the 24th of August. Soft data from Asia last week which resulted in a decline in mining stocks translated to an aggressive sell off within the FTSE100. This index remains technically bearish on the daily timeframe, and if the official September manufacturing managers index (PMI) and financial Caixin/Markit PMI for China fail to meet expectations this Thursday, then this should expose the FTSE100 to further vulnerability, opening a path to the 5850 support.

With the requirements of a US hike reverting back to a dependency on US data, the ADP Non-Farm employment change which will be released in the New York session may provide some clarity. An announcement which beats the expectations will not only promote an appreciation within the sensitive USD but may act as an attribute that may bring the Fed closer to a US rate hike before the end of 2015.

AUDNZD

The AUDNZD remains technically bearish on the daily timeframe as long as prices can keep below the 1.1200 resistance. A breakdown below the 1.0900 support may open a path to the next relevant support at 1.0700.

AUDJPY

The AUDJPY remains technically bearish on the daily timeframe as long as prices can keep below the 85.00 resistance. Prices are trading below the daily 20 SMA and the MACD has traded to the downside. The next relevant support may be based at 82.00.

EURNZD

The EURNZD currently remains in a range. Support can be found at 1.7250 and resistance can be found at 1.8000. A breakdown below the 1.7250 support may open a path to the next relevant support at 1.6700.