A world of pain

Next 24 hours: Some reprieve...but not much

Today’s report: A world of pain

Markets have been hit hard this week, mostly on the back of worry around the omicron variant. But we’ve also seen added reason for risk liquidation after the Fed Chair finally conceded the central bank would need to find another way to describe persistently high inflation.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

Setbacks have extended to retest the critical 61.8% fib retrace off the 2020 low to 2021 high move. Technical studies are now tracking in extended territory on the weekly chart, warning of the need for a corrective bounce ahead. Look for the market to hold up on a weekly close basis above the 61.8% fib retrace around 1.1275. Back above 1.1465 strengthens outlook. Weekly close below 1.1275 negates.

  • R2 1.1465 – 15 November high– Strong
  • R1 1.1383 - 30 November high – Medium
  • S1 1.1186 - 24 November/2021 low – Medium
  • S2 1.1168 – June 2020 low – Strong

EURUSD – fundamental overview

The Euro remains well capped into rallies into the new week and just off the recent yearly low. The single currency continues to be weighed down by the widening central bank policy divergence. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs earlier this year. 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 1.3514 – 18 November high – Medium
  • R1 1.3371 – 30 November high – Medium
  • S1 1.3209 – 3 December low – Medium
  • S2 1.3195 – 30 November/2021 low – Strong

GBPUSD – fundamental overview

The Pound hasn't been able to catch a break of late. The currency has been hit on the latest UK virus uptick, concerns about Omicron potentially keeping the BOE from hiking this month, and a composite PMI that was revised lower. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

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 116.00 to negate the outlook.

  • R2 116.00 – Figure – Strong
  • R1 115.53 – 24 November/2021 high – Medium
  • S1 113.00 – 29 November low – Medium
  • S2 112.53 – 30 November low – Strong

USDJPY – fundamental overview

The Yen continues to find more bids in recent session, mostly on the back of traditional flight to safety correlations. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high earlier this year. At this stage, the correction is starting to look stretched and setbacks should be well supported above 0.7000 on a weekly close basis. A weekly close below 0.7000 will force a bearish shift.

  • R2 0.7174 – 1 December high – Strong
  • R1 0.7102– 3 December high – Medium
  • S1 0.0.6993 – 3 December/2021 low – Medium
  • S2 0.6950 – Mid-Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has been hit hard by the latest downturn in global sentiment, sinking to fresh multi-month lows. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

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 1.2949 – 20 August/2021 high – Strong
  • R1 1.2896 – 20 September high – Medium
  • S1 1.2713 – 1 December low – Medium
  • S2 1.2641 – 25 November low – Strong

USDCAD – fundamental overview

The Canadian Dollar remains under pressure and just off two months lows against the Buck after getting hit on declines in US equities and oil. However, we did see the Loonie get some help on Friday via the Canada unemployment beat. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

NZDUSD – technical overview

The market has entered a period of intense correction after running up to a yearly and multi-month high. Back below 0.6700 would suggest a more significant bearish structural shift.

  • R2 0.6894 – 25 November high – Strong
  • R1 0.6868 – 1 December high – Medium
  • S1 0.6741 – 3 December/2021 low – Medium
  • S2 0.6700 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar was already underperforming into December on very discouraging data and dovish comments from RBNZ Orr. We've since seen added pressure, forcing a break to a fresh yearly and multi-month low as worry around COVID intensifies. All of this has the market reconsidering hawkish RBNZ bets. Key standouts on today’s calendar come in the form of German factory orders, German construction PMIs, and UK construction PMIs.

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 4500 to take the immediate pressure off the topside.

  • R2 4745 – 22 November/Record high – Strong
  • R1 4674 – 29 November high – Medium
  • S1 4496 – 3 December low – Medium
  • S2 4432 – 7 October high – 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 1878 – 16 November high – Medium
  • S1 1759 – 3 November low – Medium
  • S2 1722 – 29 September 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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