Tensions Mount into Friday, Canadian Dollar Slammed

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. Next key support comes in the form of the May 2010 low at 1.4230. 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, potentially towards 1.5000. Ultimately, only back above 1.5240 would negate the bearish structure.

• R2 1.4560 – 12Jan high – Strong
• R1 1.4476 – 13Jan high – Medium
• S1 1.4352 – 12Jan low  – Strong
• S2 1.4300 – Figure  – Medium

GBPUSD – fundamental overview

The initial bullish GBP reaction to the unchanged voting breakdown in the Bank of England rate decision proved short-lived, with market participants focusing more on the central bank’s upgraded concerns over subdued wage growth. Setbacks were however supported ahead of Tuesday’s multi-year low, with the Pound finding some relief from softer US economic data in the form of initial jobless claims and import prices, along with more reserved comments from Fed Bullard, who said the weakness in OIL prices could prevent the Fed from an immediate follow up rate hike. Looking ahead, we get the BOE credit conditions survey and UK construction output followed by a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.

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, the market is in the process of consolidating, to allow for some oversold studies to unwind. 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 118.38 – 13Jan high – Strong
• S1 117.23 – 12Jan low – Medium
• S2 116.69 – 11Jan low – Strong

USDJPY – fundamental overview

Though we are only in the early stages of 2016, it’s worth noting the Yen has been the standout outperformer. USDJPY has come under a good deal of pressure in 2016 on the back of a massive round of risk liquidation flow amidst concern over a struggling China and the pressures of diverging Fed monetary policy. Although the Bank of Japan won’t be too comfortable with an intense appreciation in the Yen, recent comments from former Deputy Ito suggest there won’t be any real concern over the rate unless it goes back to 110.00. Ito does however concede USDJPY 120-125 would be a comfortable range. USDJPY remains pressured into Friday following a weak round of US data and comments from Fed Bullard highlighting concern over the possibility for a follow up rate hike in light of OIL prices. Looking ahead, we get a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.

EURCHF – technical overview

The market has entered a period of multi-week consolidation. At this point, the recovery structure remains intact, with only a break back below 1.0715 to compromise. As such, look for setbacks to continue to be well supported ahead of 1.0715 in favour of the next major upside extension through 1.1050 and towards 1.1500 further up. The recent break above 1.0950 suggests the market could be poised for a bullish move over the coming days following a period of contracted volatility.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0982 – 14Jan high – Medium
• S1 1.0870 – 13Jan low – Medium
• S2 1.0828 – 6Jan low – Strong

EURCHF – fundamental overview

SNB’s Zurbruegg was on the wires this week using his latest appearance as another opportunity to talk down the Franc. The Swiss central banker said that despite weakness in the Franc over the past year, the currency is still overvalued. Zurbruegg added that the combination of negative interest rates and the SNB’s willingness to intervene in the market have proven to be effective tools in making the Franc less attractive. Certainly recent price action would agree, with the EURCHF rate mounting an impressive rally this week towards 1.1000, despite an intensification in risk liquidation flows. Zurbruegg echoes remarks from SNB Jordan this past weekend. All of this comes on the one year anniversary of the SNB’s historic move to remove the Franc cap.

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, with deeper setbacks projected in the sessions ahead below the recent multi-year base just shy of 0.6900 and towards 0.6500 further down. At this point, only a daily close back above 0.7085 would take the immediate pressure off the downside.

• R2 0.7048 – 13Jan high – Strong
• R1 0.7000 – Psychological – Medium
• S1 0.6908 – 4Sep/2015 low – Strong
• S2 0.6853 – April 2009 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a good job outperforming this week on the back of the much better than expected Aussie employment data. However, the currency is still struggling against the mighty US Dollar, with Fed policy divergence and ongoing concern over the outlook for the China economy forcing AUDUSD to consider fresh multi-year lows below the 0.6900 area 2015 base. Softer Thursday US initial jobless claims and import prices, along with comments from Fed Bullard highlighting concern over the possibility for a follow up rate Fed hike, have propped Aussie a bit, though a higher Friday USDCNY fixing and fear of instability in financial markets leave any intraday rallies very well capped, with the market still tracking just off the 2015 base. Looking ahead, we get a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.

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 into the 1.4500 area thus far. However, with daily, weekly and monthly studies looking stretched, the risk for any meaningful upside beyond the 1.4500 handle is limited, with a more significant and healthy correction favoured before bullish trend continuation. A daily close below 1.4343 will be required to trigger a bearish reversal and take the immediate pressure off the topside.

• R2 1.4600 – Figure – Medium
• R1 1.4530 -15Jan high – Strong
• S1 1.4343 – 15Jan low – Medium
• S2 1.4187 – 13Jan low – Strong

USDCAD – fundamental overview

Speculation the Bank of Canada may be forced to cut rates next week, amidst the ongoing decline in the price of OIL, has helped keep the Canadian Dollar under intense pressure at +12 year lows. Interestingly, even with OIL stabilising on Thursday, US data coming in softer and Fed Bullard casting doubt over the possibility for a follow up Fed rate hike, the Loonie has still managed to extend declines, with USDCAD exploding through major barriers at 1.4500 early Friday. At this point, it feels like the trade is entirely momentum driven, with little thought put into the super-extended technical readings. Looking ahead, we get Canada existing home sales, along with slew of data out of the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak. Of course, the direction in OIL and broader risk sentiment will continue to play a key role.

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 a bearish resumption to fresh multi-year lows. A daily close below 0.6429 with strengthen the outlook and accelerate declines. Only back above 0.6510 would take the immediate pressure off the downside.

• R2 0.6590 – 13Jan high– Strong
• R1 0.6492 – 15Jan high– Medium
• S1 0.6400 – Figure – Medium
• S2 0.6289 – 29Sep low – Strong

NZDUSD – fundamental overview

A data light week has left Kiwi trading on broader macro flows. Clearly the risk currency has been underperforming as a result, amidst China fears, OIL weakness, Fed divergence and a slumping dairy sector. Even a round of softer Thursday US data and Fed Bullard casting doubt over the possibility for a follow up Fed rate hike have failed to prop the risk correlated, commodity currency. All of this could force the RBNZ to consider more accommodation or at minimum, err on the dovish side when it meets on January 28th. Next week’s New Zealand CPI readings and GDT auction results could therefore play an important role in factoring into the RBNZ’s decision. Looking ahead, we get a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.

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 a retest of medium-term support in the 1830 area over the coming sessions. Any rallies should now be well capped below 2000.

• R2 1993.00 – 14Dec low – Strong
• R1 1955.00 – 13Jan high – Medium
• S1 1870.00 –29Sep low – Medium
• S2 1834.00 – 24Aug low – Strong

US SPX 500 – fundamental overview

The market isn’t too focused on earnings season in the US at present, as it contends with larger, more worrying macro risk. The combination of a Fed on a path to policy normalisation in a global economy that is still struggling has not been a welcome mix for investors into 2016. Stocks are fast approaching the August 2015 flash crash lows, with setbacks intensifying as OIL continues to collapse. The shakeup in China markets has also been a major factor on massive capital outflows from China. Stocks got a little relief on Thursday from from Fed Bullard, who cast doubt over the possibility for a follow up Fed rate hike, in light of the ongoing weakness in OIL prices. Still the market remains shaky and will need a whole lot more if it has any hope for a meaningful recovery. Looking ahead, we get a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.

GOLD (SPOT) – technical overview

The early January push back above 1100 was 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 above 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, rising geopolitical tensions and a collapse in the price of OIL. 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. Dealers cite solid demand in the $1170-1180 area and talk of buy-stops above $1115.

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. A weekly close above 1.4450 is required to confirm the bullish shift and open the next major upside extension towards 1.5000 over the coming weeks. However, inability to hold above 1.4450 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 1.4273 – 8Jan low – Strong
• S2 1.4150 – 4Jan low – Medium

Feature – fundamental overview

A higher fixing in the USDCNY rate and heightened alert in Singapore following Thursday ISIS attacks in Jakarta, haven’t done anything to help an already beaten Singapore Dollar, just off multi-year lows from earlier this week. The emerging market currency got some relief on Thursday from a softer round of US data and dovish comments from Fed Bullard. But the level of fear in markets at the moment is more than offsetting, as massive capital outflows from China and ongoing weakness in global equities can not be ignored. Looking ahead, we get a slew of data in the US featuring retail sales, PPI, empire manufacturing, industrial production and Michigan confidence. On the official circuit, Fed Dudley is slated to speak.