Euro Back To 2012 Base Against Buck

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

Euro rallies continue to be very well capped into the 50-Day SMA. The latest topside failure by the 50-Day SMA has opened a fresh downside extension, with the market finally trading down into the critical 1.2040 area, at the 2012 base. A clear break and close below 1.2040 would then expose the next medium-term downside target in the form of the 2010 low at 1.1875. Ultimately, only a daily close above the 50-Day SMA would take the immediate pressure off the downside.


  • R2 1.2222 – 29Dec high – Medium
  • R1 1.2124 - 30Dec low – Medium
  • S1 1.2035 - 2Jan/2015 low – Weak
  • S2 1.2000 – Psychological – Strong

EURUSD – fundamental overview

Setbacks in EURUSD have been notable in the opening hours of 2015, with the major pair finally trading down into critical support in the form of the 2012 base at 1.2040. Once again, it is the diverging central bank policy theme that continues to drive price action, with the Fed on course to raise rates in the first half of 2015, while the ECB prepares for QE implementation on January 22nd. Of course, psychological barriers at 1.2000 are in focus, though the next major downside barrier for the major pair comes in at the 1.1875, 2010 base. For today, market participants will take in German and EMU PMIs in the very light post holiday session.

GBPUSD – technical overview

A multi-day bearish consolidation has been broken, with the major pair taking out the previous 1.5541 range base, to open fresh lows and the next major downside extension. From here, deeper setbacks are now seen towards a measured move objective in the 1.5250 area, while only back above 1.5826 would compromise the bearish outlook.


  • R2 1.5786 – 16Dec high – Strong
  • R1 1.5682 - 19Dec high – Medium
  • S1 1.5485 – 23Dec/2014 low  – Medium
  • S2 1.5400 – Figure – Medium

GBPUSD – fundamental overview

Despite some mild bids in recent sessions, Cable remains under pressure into the new year. The weakness comes on the back of diverging Fed, BOE central bank policies and contrasting economic data, which most recently showed UK growth coming in softer than expected, and US Q3 GDP coming in much better than forecast. While the market will digest today’s UK consumer credit, mortgage approvals, money supply and manufacturing PMIs, given the very thin post holiday trade, not much is expected in the way of volatility on Friday. Look for normal trade to resume Monday, into the first full week of 2015.

USDJPY – technical overview

The market remains locked within a very well defined uptrend, with setbacks continuing to be very well supported on minor dips. The recent correction off fresh 7-year highs at 121.85 has stalled out around 115.50 and a fresh higher low is now sought ahead of the next major upside extension back through 121.85 and towards the 125.00 area further up. Only back under 115.50 delays.


  • R2 121.85 – 8Dec/2014 high – Strong
  • R1 120.83 – 23Dec high – Medium
  • S1 118.87 – 30Dec low – Strong
  • S2 118.25 – 18Dec low – Medium

USDJPY – fundamental overview

The major pair continues to be very well supported on dips, despite a minor retreat in equities and concern over the China growth outlook. USDJPY is still considered to be an attractive long play in 2015 as economic data further highlights the ongoing policy divergence between the Fed and BOJ. Also supporting USDJPY has been a fear that falling commodities prices will prevent the BOJ from achieving its 2% inflation objective.  Japan markets have been closed in the latter half of this week and not much is expected until fuller trade resumes next week.

EURCHF – technical overview

The market has finally broken out of a very tight multi day range, with the price surging back through key resistance at 1.2045 to suggest a major base in the works. Look for a daily close above 1.2045 to confirm the constructive outlook and open the door for a test of next key resistance at 1.2140 further up. Inability to close above 1.2045 will however delay recovery prospects.


  • R2 1.2140 – 7Oct high – Strong
  • R1 1.2098 – 18Dec high – Medium
  • S1 1.2020 – 26Dec low – Medium
  • S2 1.2007 – 17Dec/2014 low– Strong

EURCHF – fundamental overview

The impact of the SNB’s negative interest rate policy move is diminishing with each passing day, as the EURCHF market fails to break away from the 1.2000 floor. It seems the likelihood for some form of additional accommodation from the ECB on January 22nd could be offsetting the case for Franc depreciation and this is surely an unwelcome development for the SNB. The SNB remains committed to defending the 1.2000 floor, but until it steps up with another intervention, it looks like the market will continue to test the central bank’s resolve.

AUDUSD – technical overview

The pair continues to extend declines to fresh yearly and multi-year lows, with the price approaching the next key psychological barrier at 0.8000. While the structure remains intensely bearish, with deeper setbacks ahead, the market is in the process of a minor consolidation to allow for stretched studies to unwind before bearish resumption. But ultimately, any rallies should prove to be very well capped below 0.8400 in favour of the next major downside extension towards and below 0.8000. Look for a daily close below 0.8088 to confirm.


  • R2 0.8274 – 16Dec high – Medium
  • R1 0.8216 - 31Dec high – Medium
  • S1 0.8122 – 30Dec low – Medium
  • S2 0.8088 – 23Dec/2014 low – Strong

AUDUSD – fundamental overview

Overall, the Australian Dollar sits just off fresh +4-year lows, and remains at risk for deeper setbacks in 2015. US economic data has been solid and will put more pressure on the Fed to move sooner than later with a rate hike in 2015, while the Australian economy is contending with a slowing China and rapidly declining commodities prices. RBA Stevens has done nothing to help Aussie’s cause, welcoming an exchange rate closer to 0.7500. We are hearing talk of fresh offers from some larger macro accounts as the 2015 year kicks off.

USDCAD – technical overview

The outlook for this pair remains highly constructive, with the price recently breaking some medium-term resistance and pushing to fresh multi-year highs. The next key topside objective comes in at 1.1750, while any setbacks are now expected to be very well supported into previous resistance turned support around 1.1465. Ultimately, only back below 1.1300 would stall the bullish momentum.


  • R2 1.1750 – Measured Move – Strong
  • R1 1.1674 - 15Dec/2014 high – Medium
  • S1 1.1547 – 15Dec low – Medium
  • S2 1.1467 – Previous 2014 High – Strong

USDCAD – fundamental overview

Although we have seen a mild stabilization, the Canadian Dollar remains under a good amount of pressure, with USDCAD at 5-year highs. The ongoing slide in oil prices has been a major drag on the Canadian Dollar, with the Canada economy heavily correlated to the direction in the commodity, which has given up about half its value since June. Recent speculative positioning data shows a pickup in Canadian Dollar short positions in reaction to the oil slide. Bank of Canada Governor Poloz has warned the drop in oil prices could be reflected in January’s monetary policy statement, and this is something the markets will be watching.

NZDUSD – technical overview

Although the market trades just off recent 2014 lows, price action in this pair has been mostly sideways of late. However, the underlying downtrend remains firmly intact, with deeper setbacks favoured towards 0.7200 on a break below 0.7600. Look for the 0.7800-0.7900 area to continue to act as formidable resistance, while ultimately, only back above 0.8035 would compromise the bearish outlook.


  • R2 0.7975 – 17Nov high – Strong
  • R1 0.7871 - 11Dec high – Medium
  • S1 0.7728 – 26Dec low – Medium
  • S2 0.7680 – 18Dec low – Strong

NZDUSD – fundamental overview

The NZD has been relatively supported of late on surging US equity prices and some decent local data. But with stocks looking vulnerable at record highs and commodities under constant pressure, the risk correlated currency could soon be exposed. Last week’s solid US economic data, highlighted by strong Q3 GDP only further highlights the ongoing Fed, RBNZ policy divergence and should weigh on the higher yielding Kiwi into 2015. Look out for cross related Kiwi offers against the Australian Dollar, with AUDNZD sitting at multi-year lows and potentially at risk for a bounce.

US SPX 500 – technical overview

The broader uptrend is well intact, with the market putting in another key higher low at 1970 and reversing sharply to fresh record highs. However, there are signs of exhaustion after recent gains stalled out shy of 2100 and reversed below 2060. A weekly close below 2060 could set the stage for a meaningful top and more significant bearish reversal, while inability to establish below 2060 will keep the uptrend intact, with the focus still on a break of 2100.


  • R2 2100.00 – Psychological – Very Strong
  • R1 2096.00 – 29Dec/Record High – Strong
  • S1 2060.00 – 2Jan low – Medium
  • S2 2033.00 – 12Dec high – Strong

US SPX 500 – fundamental overview

While it’s unclear how much longer the easy money angle will support an overinflated equity market, for the time being, the bull market remains intact, with the SPX500 rallying to fresh record highs in the final days of 2014. Still, Yellen has signaled a possible rate hike as soon as April, and this could be something that starts to weigh more heavily into early 2015, especially now that portfolio managers have locked in 2014 returns. The fact that the US Dollar has mostly appreciated in reaction to the Fed, could also be a bit of a red flag for stocks.

GOLD (SPOT) – technical overview

The market has done a good job of mounting a healthy recovery over the past several weeks, out from multi-year lows at 1131. The price action could be suggestive of some form of a meaningful base in the works. But a break back above 1256 would be required to strengthen this outlook. Inability to clear 1256 would keep the underlying downtrend intact and leave the market vulnerable to another test of the 1131 base.


  • R2 1256.00 – 21Oct high – Strong
  • R1 1238.00 – 10Dec high – Medium
  • S1 1170.00 – 22Dec low – Medium
  • S2 1131.00 – 7Nov/2014 low – Strong

GOLD (SPOT) – fundamental overview

Gold has dropped back below 1200 in recent sessions, with investors losing confidence in the metal as an alternative investment. The ongoing drag in oil prices has not helped, and with inflation nowhere to be seen, many investors have been scaling back on the traditional inflation hedge. Interestingly enough, speculators have actually been increasing long gold exposure, nearly doubling bets since November. These speculators still see gold as an attractive play in an historically low interest rate environment that should ultimately translate into a pickup in global inflation. This has been supporting the market on dips.

Feature – technical overview

US OIL (spot) recoveries have been short-lived, despite some very overextended technical readings. From here, there is risk for another downside extension following this week’s early break of a multi-session range base, which could expose a measured move objective into the 49.00 area. However, with the market having dropped so sharply in recent months, there is also good risk for some form of stabilization and the formation of an interim base sooner than later. Ultimately, only back above 59.00 would strengthen the case for the onset of a legitimate correction.


  • R2 59.25 – 17Dec high – Strong
  • R1 55.85 – 29Dec high – Medium
  • S1 52.70 – 30Dec/2014 low – Medium
  • S2 50.00 - Psychological – Very Strong

Feature – fundamental overview

The pullback in oil prices by around 50% in 2014 has been  major story in global markets, and it’s clear this is a theme that will continue to garner the market’s attention into 2015. Saudi Arabia has been quite vocal that it will do nothing to help prop the price, as it will not be cutting production, while oversupply and lack of demand has further depressed prices. Looking ahead, it will be interesting to see if opposition from other countries within OPEC opens the door for a lift in prices. It will also be important to keep an eye on US shale producers to see just how much longer they can sustain business at current levels. Geopolitical risk is another theme that could influence in 2015 and should not be overlooked. Recent data shows specs scaling back on long bets for the first time in 4 weeks, and reducing exposure by some 5%, after being frustrated with attempts to find a bottom in this market.

Peformance chart: Friday performance v. US dollar (8:00GMT)


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