Buy the Rumour, Buy the Fact?

GBPUSD – technical overview

The market continues to show signs of topping off the 2015 peak at 1.5930, putting in a series of lower tops. A fresh lower top has been confirmed at 1.5336, following the break to fresh multi-day lows below 1.5027. This has set up the next major downside extension towards medium-term support in the form of the 2015 low at 1.4566. At this point, look for the next potential lower top at 1.5240 to be confirmed on a break below 1.4895, while only back above 1.5336 would ultimately compromise the immediate bearish structure.

• R2 1.5098 – 16Dec high – Strong
• R1 1.5003 – 17Dec low – Medium
• S1 1.4923 – 17Dec low  – Medium
• S2 1.4895 – 2Dec low  – Strong

GBPUSD – fundamental overview

The Pound has extended declines against the Buck in the aftermath of the FOMC rate decision, where the Fed went ahead as expected and raised rates by 25bps. Overall, the Fed did a good job of preparing markets for the move and the reaction was rather tame considering. Still, any hopes for a less aggressive dot plot, with the Fed scaling back its four hike timeline in 2016, were let down, after the Fed maintained its expectations for four hikes next year. This in conjunction with a BOE more inclined to sit back and wait it out, has opened a more prominent divergence in yield differentials between the US Dollar and Pound, which now exposes deeper Cable setbacks towards the 2015 low into the end of year. Wednesday’s UK employment data was a non factor, though the recent bout of much softer UK PPI had already been weighing on the Pound ahead of the Fed. For today, we get UK retail sales and CBI trends, followed by initial jobless claims, the Philly Fed, current account and leading indicators in the US.

USDJPY – technical overview

A period of multi-day consolidation between 123.75 and 122.20 has finally been broken, with the market recently dropping below range support at 122.20 to open an acceleration to the downside. Deeper setbacks are now projected towards 119.00 in the sessions ahead, with the current rally expected to be well capped below 123.00. Ultimately, only back above 123.76 puts the focus back on the topside.

• R2 123.05 – 9Dec high – Strong
• R1 122.64 – 17Dec high – Medium
• S1 122.20 – 17Dec low – Medium
• S2 121.38 – 16Dec low – Strong

USDJPY – fundamental overview

The Yen has come back under pressure over the past couple of sessions, with setbacks accelerating post FOMC, after the Fed went ahead and raised rates by 25bps as expected. Though the decision was priced in, the driving force behind the latest surge in USDJPY has come from the firmer than expected Fed dot plot, with the central bank still adhering to expectations for four rate hikes in 2016, and from a resurgence in risk sentiment, with stocks rallying despite the higher rates, presumably on the message of confidence the Fed is sending to the global economy with its first rate hike in nearly a decade. Looking ahead, we get a healthy batch of data in the US featuring initial jobless claims, the Philly Fed, current account and leading indicators. Attention will then turn to the early Friday BOJ policy decision where the BOJ is widely expected to remain on hold.

EURCHF – technical overview

The market has entered a period of multi-week consolidation following an impressive recovery earlier in the year. At this point, the recovery structure remains intact, with only a break back below 1.0714 to compromise. As such, look for setbacks to continue to be well supported ahead of 1.0714 in favour of the next major upside extension through 1.1050 and towards 1.1200 further up.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0950 – 13Oct high – Medium
• S1 1.0755 – 12Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

The SNB has been able to breathe out this month, in the aftermath of a less dovish European Central Bank decision. We saw the SNB take advantage of the opportunity to leave policy unchanged last week, avoiding the need to venture deeper into negative interest rate territory. Still, the SNB will need to be careful of any emergence of risk off flow post FOMC, with the higher rates in the US to potentially act as a disincentive to be long risk assets, which would in turn weigh on the correlated EURCHF rate. But for now, the initial risk reaction to the FOMC hike has been positive, with markets finding confidence in the Fed’s gesture.

AUDUSD – technical overview

The market continues to show signs of topping out in favour of a resumption of the broader underlying downtrend, with a fresh medium-term lower top sought out at the recent 0.7385 high. Any rallies are therefore classified as corrective and should continue to be well capped ahead of 0.7385, with deeper setbacks projected in the sessions ahead back towards the recent multi-year base just shy of 0.6900. At this point, only a daily close back above 0.7385 would undermine the bearish structure.

• R2 0.7334 – 10Dec high – Strong
• R1 0.7283 – 15Dec high – Medium
• S1 0.7159 – 23Nov low – Medium
• S2 0.7102 – 19Nov low – Strong

AUDUSD – fundamental overview

Shortly after Blackrock came out with a call for an RBA rate cut in 2016, Citi has come out revising its 2016 RBA rate cut  bet, calling for an RBA rate hold next year. However, this hasn’t factored much into price action, with Aussie weighed down in the aftermath of the FOMC rate decision, after the Fed moved ahead as expected and lifted rates for the first time in nearly a decade. Yield differentials have moved back in the Buck’s favour post decision, while ongoing pressure in commodities markets and elevated concerns over the China outlook are also weighing on Aussie. The rebound in equity markets has however provided a little support on dips, with risk markets initially feeling good about the Fed’s confidence in moving forward with its first rate hike in nearly a decade. Looking ahead, we get a healthy batch of US data featuring initial jobless claims, the Philly Fed, current account and leading indicators.

USDCAD – technical overview

The strong uptrend remains well intact, with the market taking out the previous 11-year peak from September, and surging to fresh multi-year highs into the 1.3800s thus far. The bullish break is a significant medium-term development and could result in a retest of the 2004 high, just over the 1.4000 psychological barrier in the days ahead. Technical studies are however tracking in overbought territory across the board, and there is risk for some form of a healthy corrective retreat. Still, any setbacks should be well supported ahead of 1.3400, while ultimately, only back below 1.3000 would delay the constructive structure.

• R2 1.4007 – 2004 high – Very Strong
• R1 1.3848 – 16Dec/2015 high – Strong
• S1 1.3728 – 16Dec low – Medium
• S2 1.3673 – 15Dec low – Strong

USDCAD – fundamental overview

Solid Canada international securities transactions were an afterthought in Wednesday trade, with the market more focused on the outcome from the FOMC rate decision. The Fed’s as expected move of a 25bp rate hike helped keep the US Dollar supported at 11-year highs against the Loonie, while the unrevised Fed dot plot, still looking for four rate hikes in 2016, offered added US Dollar support. Meanwhile, ongoing weakness in OIL prices could not go unnoticed, keeping the US Dollar very well supported on any form of a dip, despite extended technical readings against the Canadian Dollar. Dealers now site demand towards the 1.4007, 2004 peak, with no decent sell-stops reported until below 1.3720. Looking ahead, lack of first tier economic data out of Canada today will leave the market focused on US data featuring initial jobless claims, the Philly Fed, current account and leading indicators.

NZDUSD – technical overview

Any rallies continue to be very well capped, with the market confined to a broader downtrend. From here, look for the formation of a meaningful lower top at 0.6893, in favour of an acceleration to the downside and bearish resumption to fresh multi-year lows. Ultimately, only a daily close above 0.6893 will negate and potentially force a shift in the structure.

• R2 0.6893 – 16Oct high– Strong
• R1 0.6835 – 16Dec high– Medium
• S1 0.6691 – 14Dec low – Medium
• S2 0.6571 – 9Dec low – Strong

NZDUSD – fundamental overview

The slightly better than expected New Zealand GDP print hasn’t been able to keep Kiwi supported into Thursday, with the market more focused on the fallout from the Fed rate hike and unrevised Fed expectations for four rate hikes in 2016. Also seen weighing on the New Zealand Dollar is ongoing weakness in commodities and the latest comments from FinMin English who says the New Zealand Dollar still looks overvalued. Looking ahead, the market will take in a batch of US data featuring initial jobless claims, the Philly Fed, current account and leading indicators.

US SPX 500 – technical overview

Signs of potential exhaustion following an impressive recovery rally off the August lows. The market has stalled out above 2100, shy of the 2137 record peak from earlier this year, with the latest break back below 2003 strengthening the case for some form of a lower top and additional setbacks ahead. Look for a daily close below 2003 to confirm and accelerate towards next medium-term support in the 1870 area, while only back above 2117 negates and exposes a direct retest of the record high.

• R2 2117.00 – 3Nov high – Strong
• R1 2077.00 – 16Dec high – Medium
• S1 1993.00 – 14Dec low – Strong
• S2 1970.00 – 7Oct low – Medium

US SPX 500 – fundamental overview

The initial reaction to the Fed decision has been positive, with stocks paying more attention to the dovish undertones in the Fed’s monetary policy statement, while also feeding off the Fed’s level of confidence in making the decision to move forward with its first rate hike in nearly a decade. Still, the fact that the Fed will be looking to raise rates four times next year should be somewhat concerning to a market that has been supported to record highs over the past several years on near zero interest rate policy. Looking ahead, the market will take in a batch of US data featuring initial jobless claims, the Philly Fed, current account and leading indicators.

GOLD (SPOT) – technical overview

Signs of a potential base off fresh multi-year lows in the previous week, with a stretched market finally deferring to an overdue, healthy recovery. While the broader downtrend remains intact for the moment, a break and daily close back above 1100 will do a good job of alleiviating immediate downside pressure, opening the door for a more meaningful recovery. However, inability to establish above 1100 could open a fresh drop below 1046 and towards the major psychological barrier at 1000.

• R2 1112.00 – 5Nov high – Strong
• R1 1098.00 – 16Nov high – Medium
• S1 1046.00 – 3Dec/2015 low – Medium
• S2 1000.00 – Psychological – Very Strong

GOLD (SPOT) – fundamental overview

Despite the US Dollar in strong demand as the Fed finally initiates liftoff, GOLD is finding formidable support into this latest dip, given the struggling global economy and uncertainty in the air, particularly now that Fed is reversing course and other central banks are fully extended with accommodative measures. Longer term macro players have also been accumulating the metal as a hedge against an overinflated equity market that could be on the verge of major capitulation. This has helped GOLD stay somewhat supported, despite broader weakness in the commodity sector. Dealers cite stops major stops below $1040 and above $1100.

Feature – technical overview

USDZAR has recently broken to yet another fresh record high, with the market taking out the previous peak, and surging through major psychological barriers at 15.0000 to just over 16.000 thus far. Daily studies are however now in the process of unwinding from severely overbought territory, and there is risk for additional healthy, corrective declines and consolidation in the sessions ahead before any meaningful bullish resumption. Still, setbacks should be very well supported ahead of previous resistance in the 14.4500 area, while only back below 13.8920 would compromise the highly constructive outlook.

• R2 16.5000 – Psychological – Medium
• R1 16.0330 –11Dec/Record – Strong
• S1 14.4415 – 16Nov high – Strong
• S2 13.8920 – 20Nov low – Medium

Feature – fundamental overview

While Moody's affirmed South Africa's BAA2 government issuer ratings on Wednesday, it also revised its rating outlook from stable to negative. This in conjunction with the wave of US Dollar demand post FOMC rate hike and ongoing commodity weakness, opened the door for renewed downside pressure in the emerging market currency. The Rand had enjoying a recovery off last Friday’s record lows on the Gordhan appointment as finance minister, though it seemed like it was only a matter of time before the euphoria from this decision would fade away. Clearly, it’s going to take a lot more from the SARB and local economy if the currency wants to truly avoid further record low declines. The combination of rising South African inflation, a struggling economy, declining commodities prices, rating agency downgrades and Federal Reserve on a path to policy normalisation, is not a pretty combination for the Rand, and this should continue to challenge the emerging market currency going forward.