Dollar-Yen Parabolic, Sterling Relief, US CPI

GBPUSD – technical overview

Although the pressure still remains on the downside after the market broke to yet another 2014 low on Wednesday, a bullish outside day formation could finally be offering a little relief for the Pound. The market would need to break and close back above 1.5735 for confirmation of the onset of a legitimate correction, while inability to do so would keep the immediate pressure on the downside and open the door for the next drop below 1.5590 and into the 1.5400-1.5500 area.

• R2 1.5945 – 11Nov high – Strong
• R1 1.5735 - 17Nov high – Medium
• S1 1.5590 – 19Nov/2014 low – Weak
• S2 1.5550 – Mid-Figure – Weak

GBPUSD – fundamental overview

Sterling is trying its best to capitalize on the less dovish than expected BOE Minutes. There had been concern pre-Minutes that hawks Weale and Mccafferty may have defected to the dovish side in light of recent data, with the very downbeat Quarterly Inflation Report then only fueling more dovish expectations. But this wasn’t confirmed in the Minutes, and traders were quick to cover Sterling shorts on the revelation that some BOE members were concerned with the risks to rising inflation. UK retail sales are in focus today and could help determine if we will see an additional recovery in the Pound or fresh 2014 lows against the Buck.

USDJPY – technical overview

Although the market continues to race to fresh 7-year highs, there are strong signs of near-term topping in favour of a period of correction and consolidation. Daily, weekly, and monthly studies are well overbought, and a now parabolic surge of over 1300 points since mid-October is deserving of a healthy retreat. However, given the intensity of the uptrend, the market will need to initially break back below Wednesday’s low at 116.80 to encourage the short-term reversal prospect and open the door for the anticipated correction. Until then, the uptrend will not be threatened, with the market clearly looking to major psychological barriers at 120.00.

• R2 120.00 – Psychological – Strong
• R1 118.98 – 20Nov/2014 high – Medium
• S1 116.80 – 19Nov low – Medium
• S2 115.45 – 17Nov low – Strong

USDJPY – fundamental overview

Not much direction from the Fed Minutes, with much of the timing on the anticipated rate hike now very much dependent on economic data. But this hasn’t stopped USDJPY from its now parabolic move, with the price easily clearing 118.00 to another 7-year high, putting the focus squarely on the next major barrier at 120.00. Developments out of Japan this week have inspired much of the rally, with the administration committed to its super expansionary policy to stimulate a struggling Japanese economy. This further highlights the ongoing divergence in Fed BOJ monetary policy paths and should continue to be USDJPY supportive. Still, with this market having run so far so fast, there continues to be risk of sharp corrections from violently overbought USDJPY technical readings.

EURCHF – technical overview

The market remains under pressure since breaking down below the previous yearly base at 1.2045, most recently dropping just below 1.2010. The break exposes critical support at 1.2000, below which would open an acceleration of declines. Back above 1.2045 would be required to take the immediate pressure off of the downside, while only above 1.2140 shifts the bearish structure.

• R2 1.2080 – 15Oct high – Strong
• R1 1.2045 – Previous base – Medium
• S1 1.2009 – 19Nov/2014 low – Weak
• S2 1.2000 – Psychological – Very Strong

EURCHF – fundamental overview

The “Save Our Gold” initiative suffered a setback on Wednesday, with a poll showing only 38% of the Swiss population supporting the gold referendum. Interestingly enough, this didn’t do much to inspire any rally in EURCHF, which continues to hover just over the all-important 1.2000 SNB barrier. It seems until the SNB shows its hand, market participants will continue to call the central bank’s bluff. Still, there has been some interest around 1.2010, given the proximity to 1.2000 and favourable risk-reward dynamics, on an expectation the SNB will follow through with its strong warnings and defend the floor.

AUDUSD – technical overview

A corrective rally looks to finally have stalled out, with the market poised for bearish resumption and looking to carve a lower top around 0.8800 in favour of a drop back below the recent 2014 low at 0.8541. The overall structure remains quite bearish, and only a break above 0.8911 would compromise the outlook. Below 0.8541 triggers a fresh downside extension into the 0.8300 area.

• R2 0.8830 – 78.6% retrace – Medium
• R1 0.8796 - 17Nov high – Medium
• S1 0.8541 – 7Nov/2014 low – Strong
• S2 0.8500 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar doesn’t have a whole lot going for it at the moment. Tuesday’s downbeat RBA Stevens comments have been followed up with an FOMC Minutes that does nothing to change the Fed’s course towards tighter policy in 2015. Throw in the softer China PMI print early Thursday and ongoing sluggishness in commodities markets and the outlook for Aussie continues to be quite bearish. Rapidly declining iron ore prices to 5-year lows have also been getting a lot of attention of late and could force some of the major Aussie players in this market out of business.

USDCAD – technical overview

The market has entered a period of correction after establishing fresh 2014 highs at 1.1467 the other week. However, the uptrend remains firmly intact and any setbacks are expected to be well supported, ideally in favour of a fresh higher low above 1.1122 and bullish resumption beyond 1.1467. Ultimately, only below 1.1122 would delay the bullish structure.

• R2 1.1467 – 5Nov/2014 high – Strong
• R1 1.1402- 11Nov high – Medium
• S1 1.1260 – 18Nov low – Medium
• S2 1.1185 – 31Oct low – Medium

USDCAD – fundamental overview

The rejection in US Senate of the Keystone Pipeline bill has helped to open a fresh wave of selling in the Canadian Dollar. The Loonie has already been under pressure over the past several months, with the expectation the Fed will hike rates before the BoC driving much of the price action. USDCAD is looking for another push to fresh 2014 highs beyond 1.1500 and towards 1.2000 over the medium-term. Declining oil prices are yet another thorn at the side of the Canadian Dollar at the moment. Still, economic data on the Canadian side of the border hasn’t been all that bad of late, which could keep the currency from falling too far too fast.

NZDUSD – technical overview

An impressive recovery for this market over the past several days, since dropping to a fresh 2014 low at 0.7660. However, the underlying structure is still bearish and the gains are classified as corrective. The market has now stalled out ahead of some formidable resistance at 0.8035 and looks like it could be carving the next lower top ahead of a bearish resumption back towards and eventually below 0.7660. Ultimately, only a break and close back above 0.8035 would compromise the bearish outlook.

• R2 0.8035 – 21Oct high – Strong
• R1 0.7975 - 17Nov high – Medium
• S1 0.7798 – 12Nov low – Medium
• S2 0.7660 – 7Nov/2014 low – Strong

NZDUSD – fundamental overview

The ongoing decline in dairy prices will likely have an impact on the RBNZ at its next policy decision, with the central bank expected to cement it recently adopted more accommodative stance. Fonterra’s latest dairy auction showed prices dropping to the lowest levels since 2009, and this opens the door for more payout cuts in early December. Adding more fuel to the fire has been the drop of 5.1% in whole milk powder, New Zealand’s largest dairy export. Oversupply, lack of demand in key markets and Russian sanctions have all been cited as causes for the price declines. The RBNZ has been quite vocal with its opinion on the overvalued local currency, and with the economy now suffering from the relative Kiwi strength, more downside is to be expected over the medium-term. Thursday’s softer PPI readings won’t do anything to help Kiwi’s cause.

US SPX 500 – technical overview

The latest round of consolidation has been broken, with the market ascending to fresh record heights just shy of 2060. However, an intense surge of well over 10% in a month is a red flag for near-term exhaustion and topping, and at some point over the coming sessions the market should look for a healthy retreat. The key level to watch comes in at 2030 and a break and close below would trigger the correction and open a deeper drop towards 2002 further down. Inability to take out 2030 will keep the immediate pressure on the topside.

• R2 2100.00 – Psychological – Strong
• R1 2059.00 – 18Nov/Record high – Medium
• S1 2030.00 – 17Nov low – Strong
• S2 2002.00 – 4Nov low – Strong

US SPX 500 – fundamental overview

US equity markets could finally be at risk for reversal off fresh record highs following impressive gains post ramped up BOJ and ECB easing measures. Though these central banks have moved further into accommodation, the Fed has ended QE and is now on a path towards tightening. Major stock market corrections were seen at the end of QE1 and QE2, and with QE3 done, this pattern could play out again. Given the massive +10% move over the past month, traders may start thinking about profit taking into year-end, particularly with so much uncertainty surrounding the growth outlook and effectiveness of quantitative easing as a means of stimulating global economy.

GOLD (SPOT) – technical overview

A nice little recovery rally for this market over the past week or so, with the price poking back above 1200. A daily close above 1200 on Thursday could open the door for additional corrective gains towards the 78.6% fib retrace off the 1256 to 1131 move around 1230. However, inability to establish above 1200 would suggest a lower top is in the cards ahead of a bearish resumption back towards the recent 4-year low at 1131. Ultimately, only above 1256 would compromise the underlying bearish structure.

• R2 1256.00 – 21Oct high – Strong
• R1 1205.00 – 18Nov high – Medium
• S1 1146.00 – 11Nov low – Medium
• S2 1131.00 – 7Nov/2014 low – Strong

GOLD (SPOT) – fundamental overview

Though gold has come a bit off recent recovery highs, the yellow metal is still well above recent 4-year lows at 1131. Gold poked back above 1200 on Tuesday, but had a hard time holding onto gains on Wednesday following the news the Swiss referendum was not likely to pass. But the metal’s safe haven status should not be discounted with the global economy looking more fragile and massive currency depreciations underway as central banks away from the US battle deflation. There is plenty of shelty two-way activity at current levels.

Feature – technical overview

USDTRY remains locked within a broader well defined uptrend. Recent setbacks are therefore classified as corrective, with the market looking for the next higher low ahead of bullish continuation. Tuesday’s low at 1.2180 could very well be that next higher low, with Wednesday’s bullish reversal day helping to confirm the reversal prospect. Look for a break and close back above 2.2400 to strengthen the constructive outlook and open the door for a push back into the 2.2800 to 2.3065 area in the days ahead. Ultimately, only back below 2.1895 would negate the outlook.

• R2 2.3065 – 3Oct high – Strong
• R1 2.2800 – 7Nov high – Medium
• S1 2.2180 – 18Nov low – Medium
• S2 2.1895 - 29Oct low – Strong

Feature – fundamental overview

The fact that the CBRT has been easing Lira funding conditions over the past week, with the interbank overnight dropping, should reflect a central bank that is certainly leaning more to the dovish side. The CBRT has a tough task on its hands but would like to continue with its move more to the accommodative side should market conditions permit. Still, no change is expected from the CBRT today, with rates to hold steady at 8.25%. But another dovish Basci statement could very well open the door for more Lira weakness following a nice recovery over the past several days.