Longing for Stability

GBPUSD – technical overview

The latest downside acceleration has resulted in a break of the critical 2015 low from March at 1.4566, with setbacks extending to the lowest levels since June 2010. However, at this point, daily studies are looking stretched and there is risk for some form of a decent corrective bounce in the sessions ahead. Look for the correction to potentially extend back towards the 1.5000 area before the market looks for the next lower top and resumption of the downtrend. Ultimately, only back above 1.5240 would negate the bearish structure.

• R2 1.4725 – 5Jan high – Strong
• R1 1.4645 – 8Jan high – Medium
• S1 1.44494 – 11Jan low  – Strong
• S2 1.4400 – Figure  – Medium

GBPUSD – fundamental overview

Another day and another five and half year low for Cable, with the market extending declines on the back of more risk liquidation in global markets. Friday’s healthy US job report has only created a more uncomfortable policy divergence between the Fed and BOE, fueling additional declines in the UK currency. We have since seen some stabilisation ahead of the European open, with a steady Yuan fixing helping to buoy sentiment. Looking ahead, lack of any first tier data on the economic calendar will leave the market focused on global sentiment and some Fed speeches from Lockhart and Kaplan.

USDJPY – technical overview

The market remains pressured to the downside, with the latest break below 118.00 exposing a deeper drop towards the critical August base just ahead of 116.00. However, at this point, it is worth highlighting oversold daily studies that could be warning of the need for some form of a corrective reversal higher. Still, rallies should be well capped towards previous support in the 120.00 area, with only a break back above 120.65 to take the immediate pressure off the downside.

• R2 118.84 – 8Jan high – Strong
• R1 118.00 – Figure – Medium
• S1 116.69 – 11Jan low – Medium
• S2 116.12 – 24Aug low – Strong

USDJPY – fundamental overview

The Japanese Yen continues to be a prime beneficiary of risk off flow, with the currency trading back towards its critical August peak against the Buck. The Yen rally was able to extend into Monday trade on the back of a fresh round of risk liquidation post Friday’s solid US NFP report. While the data invites favourable US Dollar yield differentials, these flows have been offset by the negative risk implication from a Fed moving towards policy normalisation while the rest of the global economy continues to struggle. The Yen rally has however managed to find some offers ahead of the European open following another steady Yuan fixing. Looking ahead, lack of any first tier data on the economic calendar will leave the market focused on global sentiment and some Fed speeches from Lockhart and Kaplan.

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 was able to find a little relief in December, following a less dovish ECB meeting, allowing the SNB to hold steady and avoid a deeper push into negative interest rate territory. Still, the SNB will need to be careful of risk off flow in 2016, with higher rates in the US and global growth concerns to potentially act as a disincentive to be long risk, which in turn, could weigh on EURCHF. This in conjunction with any Euro weakness could prove to be a double headed dragon the SNB will have a very difficult time battling. But at this point, negative interest policy and commitment to weaken the Franc is proving to be an effective strategy that is offsetting any Franc demand on safe haven flow. SNB Jordan was out over the weekend reiterating the central bank’s commitment to weaken the Franc. Jordan added that he expected the Franc to stagnate or weaken in 2016.

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 0.7086 – 7Jan high – Strong
• R1 0.7000 – Figure – Medium
• S1 0.6927 – 11Jan low – Medium
• S2 0.6908 – 4Sep/2015 low – Strong

AUDUSD – fundamental overview

An initial wave of risk liquidation early Monday, opened the door for fresh multi-day lows, with the Australian Dollar stalling just shy of the critical multi-year low from August 2015. The latest round of weakness comes on the back of a healthy US employment report this past Friday, which gave investors more reason to be worried about Fed policy divergence in a struggling global economy. This fueled deeper losses in stocks, with China taking another hit before markets finally stabilised ahead of the European open on another steady Yuan fixing. On the data front, Aussie job ads came in at -0.1%, but didn’t really factor into trade. Looking ahead, lack of any first tier data on the economic calendar will leave the market focused on global sentiment and some Fed speeches from Lockhart and Kaplan.

USDCAD – technical overview

The strong uptrend remains well intact, with the market taking out the previous 11-year peak from December, and surging to a fresh +12 year high beyond the 1.4007, 2004 peak to 1.4189 thus far. However, with daily, weekly and monthly studies looking stretched, the risk for any meaningful upside beyond 1.4189 is limited, with a more significant and healthy correction favoured before bullish trend continuation. There is room for a correction back into the 1.3600-1.3800 area, from where the market will look to carve the next meaningful higher low.

• R2 1.4200 – Measured Move – Strong
• R1 1.4189 -11Jan high – Medium
• S1 1.4100 – Figure – Medium
• S2 1.4051 – 7Jan low – Strong

USDCAD – fundamental overview

Although the Canadian Dollar could not avoid the latest round of downside pressure on the back of a blowout US NFP print and more pressure in OIL and stocks, Loonie setbacks were somewhat mitigated by a much better than expected Canada employment report. Still, the Canadian Dollar traded to fresh 12 year lows against the Buck and could be at risk for further weakness, with OIL at multi-year lows and the Fed policy divergence becoming even more pronounced. Looking ahead, we get the Canada business outlook and loan officer survey, along with speeches from Fed Lockhart and Fed Kaplan.

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 in the 0.6900 area, in favour of an acceleration to the downside and bearish resumption to fresh multi-year lows. Ultimately, only a daily close above 0.6900 will negate and potentially force a shift in the structure.

• R2 0.6678 – 8Jan high– Strong
• R1 0.6591 – 7Jan low– Medium
• S1 0.6509 – 11Jan low – Medium
• S2 0.6429 – 18Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar remains under pressure into the new week, with the currency extending declines early Monday on the back of the fallout from a healthy US jobs report. The solid NFP print makes things all the more uncomfortable for a still struggling global economy that no longer has the back of an as accommodative Fed. China’s deterioration has weighed more heavily on the correlated Kiwi, while another disappointing GDT auction in the previous week has also not helped matters. All of this could force the RBNZ to consider more accommodation or at minimum, err on the dovish side when it meets next on January 28th. Looking ahead, lack of any first tier data on the economic calendar will leave the market focused on global sentiment and some Fed speeches from Lockhart and Kaplan.

US SPX 500 – technical overview

Signs of exhaustion following an impressive multi-year rally to a fresh record high in 2015. The market has finally stalled out at 2137, with the recent break back below 2000 strengthening the case for the formation of a major top. Look for this bearish price action to pave the way for the next downside extension towards medium-term support in the 1870 area. Any rallies should be well capped below 2000, while ultimately, only back above 2117 negates.

• R2 1973.00 – 8Jan high – Strong
• R1 1937.00 – 7Jan low – Medium
• S1 1902.00 –11Jan low – Medium
• S2 1870.00 – 29Sep low – Strong

US SPX 500 – fundamental overview

It seems gravity is finally taking hold, with any bullishness from the Fed’s confidence in initiating liftoff, offset by harsher realities. The fact that the Fed will be looking to raise rates four times this 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. This in conjunction with serious worry over the China outlook and rising geopolitical tensions should continue to weigh on stocks going forward. Certainly, this latest blowout US NFP report has done nothing to help matters, with the very healthy reading only making investors that much more uncomfortable, as it strengthens the possibility the Fed will stick to its more hawkishly perceived rate hike timeline. Looking ahead, earnings season kicks off and could invite additional volatility.

GOLD (SPOT) – technical overview

The recent close back above 1100 is a significant development and suggests the market is in the process of a bullish structural shift. Look for a meaningful base to now be in place down at 1046, with fresh upside projected back towards the 1200 area over the coming days and weeks. Any setbacks should be well supported ahead of 1070, with only a close back below this level to compromise the newly adopted bullish outlook.

• R2 1123.00 – 4Nov high – Strong
• R1 1112.00 – 8Jan high – Medium
• S1 1075.00 – 6Jan low – Medium
• S2 1046.00 – 3Dec/2015 low – Very Strong

GOLD (SPOT) – fundamental overview

Despite favourable US Dollar fundamentals as the Fed finally sets out on its path to policy normalisation, GOLD is finding formidable support into 2016, given deteriorating global sentiment and uncertainty in the air, most recently brought on by a worrisome China outlook and rising geopolitical tensions. Longer term macro players have been accumulating the metal as a hedge against an overinflated equity market that could be on the verge of a more significant decline.

Feature – technical overview

USDSGD looks to be wanting to end a period of multi-week consolidation, following this latest break of the range to a fresh multi-year high. Look for a weekly close above 1.4400 to confirm the bullish shift and open the next major upside extension towards 1.5000 over the coming weeks. However, inability to hold above 1.4400 could warn of exhaustion and the potential for a bearish reversal back into the range.

• R2 1.4500 – Psychological – Strong
• R1 1.4444 –11Jan high – Medium
• S1 1.4150 – 4Jan low – Medium
• S2 1.3923 – 4Dec low – Strong

Feature – fundamental overview

Price action in emerging markets has been all about risk liquidation flows, with the latest slide in the Yuan and solid US NFP report fueling another round of Singapore Dollar weakness to fresh multi-year lows. The Singapore Dollar has since recovered from its early Monday low on another steady Yuan fixing and some chatter of MAS intervention, but is finding decent offers from macro accounts into rallies. Overall, with sentiment deteriorating, Fed monetary policy divergence weighing, and a very real risk for additional Yuan depreciation, any recoveries in the emerging market currency are expected to be short-lived.