Trying to Make Some Sense of It All

GBPUSD – technical overview

The market has broken out of a multi session consolidation off the multi-year low, which could now open the door for a more significant correction higher in the days ahead. Ultimately, there is room to run towards 1.2800 without compromising the intense downtrend, with a lower top sought out in favour of a bearish resumption back towards 1.2000. Only a weekly close above 1.2800 would compromise the structure.

• R2 1.2557 – 4Nov high – Strong
• R1 1.2500 – Psychological– Medium
• S1 1.2353 – 9Nov low – Medium
• S2 1.2297 – 3Nov low – Strong

GBPUSD – fundamental overview

Though the Pound was up only marginally on Wednesday, the fact that it was up against the Buck was a big deal, given the massive selling in the other major currencies. Sterling’s outperformance was largely attributed to a kinder outlook for Brexit on account of the Trump administration most likely better aligning with the goals of the UK’s new direction. Still, softer UK trade and the broad USD gains against the Buck did have a weighing impact and with Fed rate hike odds back up, there is additional risk for Cable declines going forward. Looking ahead, US initial jobless claims is the only notable standout.

USDJPY – technical overview

A memorable bullish outside day on Wednesday, with the pair initially pulling back dramatically before surging higher to clear the multi-day range high at 105.53. This resulted in a bullish outside day consuming the previous 27 daily ranges and should now set the stage for the next major upside extension towards next key resistance at 107.49 in the days ahead. Any setbacks from here should be very well supported above 103.00.

• R2 107.49 – 21Jul high – Strong
• R1 105.96 – 10Nov high – Medium
• S1 104.30 – 8Nov low – Medium
• S2 103.77 – 7Nov low – Strong

USDJPY – fundamental overview

One of the nastiest price action showings in this major pair on Wednesday, with the violent swings enough to make anyone feel sick. Initially, the news of the Trump victory opened a sharp decline with the pair looking like it would easily retest the 2016 low down at 99.00. But the risk off trade wouldn’t last for more than a few hours, with the market quickly finding comfort in Trump’s speech and Fed odds racing back up to signal a hike in December. And so, the combination of risk on trade and the likelihood for a Fed hike was enough to open an intense bullish move, with the major pair clearing multi-session highs beyond 105.50. Looking ahead, the market will continue to try and make sense of the price action, while also taking in US initial jobless claims.

EURCHF – technical overview

The recent break below 1.0800 warns the market could be getting set to deviate from what had been a well defined range between 1.0800 and 1.1000. Look for a daily close below 1.0738 to strengthen the outlook and open the door for an acceleration of declines towards the 2016 low at 1.0624 further down. At the same time, a daily close back above 1.0865 would take the pressure off the downside and suggest the market is once again looking settle back into the range.

• R2 1.0865 – 28Oct high – Medium
• R1 1.0832 – 9Nov high – Strong
• S1 1.0738 – 9Nov low – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB has unquestionably had a difficult time this week with the central bank forced to contend with an intense wave of demand for the Swiss Franc. The central bank has been committed to its mandate of ensuring the Franc does not appreciate further through monetary policy and intervention tools. Though despite all efforts, the Franc continues to want to appreciate against the Euro. It seems the strategy has been to buy Euro when risk comes off and to do nothing when risk is back on and natural flows should be CHF bearish. But the trouble is, when risk comes back, the Franc is still appreciating which is a major headache for the SNB and ultimately, could open more unwanted appreciation in the Franc.

AUDUSD – technical overview

The market has struggled on rallies above 0.7700 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835 in favour of the next major downside extension. Look for a break back below 0.7421 to strengthen this outlook and accelerate declines towards 0.7000 in the days ahead. Ultimately, only  a daily close back above 0.7758 will negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7779 – 9Nov high – Strong
• R1 0.7700 – Figure – Medium
• S1 0.7580 –9Nov low – Medium
• S2 0.7507 – 13Oct low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a good job holding up this week, despite Wednesday’s intense bout of US Dollar buying against the major currencies. It seems any negative Aussie flow from an expectation the Fed will still go ahead and hike rates, even with Trump at the helm, has been offset by the intense flow back into risk assets, with equity prices soaring and in turn helping to prop the risk correlated Aussie. Still, Aussie has had a very hard time on rallies above 0.7700 and with the RBA still open to additional accommodation, additional Aussie upside should be limited. Earlier today, Aussie home loan and investment lending data was solid, while consumer inflation expectations pulled back. Looking ahead, we get US initial jobless claims.

USDCAD – technical overview

This market looks to be in the process of carving out a longer-term base off the 1.2461, 2016 low. Look for any additional weakness to be supported ahead of 1.3000 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2764 would delay the constructive outlook.

• R2 1.3588 – 29Feb high – Strong
• R1 1.3525 – 4Nov high – Medium
• S1 1.3400 – Figure – Medium
• S2 1.3265 – 9Nov low– Strong

USDCAD – fundamental overview

The Canadian Dollar hasn’t done all that much of late, with the Loonie mostly caught between flows. While the news of the Trump victory was unsettling for the Canadian Dollar on the prospective implications on trade deals with the US, the intense risk on trade that followed was offsetting, with commodity and risk correlated FX benefitting from this price action. Still, with the US on schedule to hike rates and with plenty of uncertainty around the Trump administration, the Canadian Dollar should continue to find good offers on any rallies. Looking ahead, we get some Canada housing data and US initial jobless claims.

NZDUSD – technical overview

The pressure has shifted back to the downside with the market now expected to be very well capped on rallies. Look for a fresh lower top at 0.7403 in favour of the next major downside extension below 0.7000 and towards medium-term support at 0.6675 further down.

• R2 0.7403 – 8Nov high – Strong
• R1 0.7305 – 10Nov high  – Medium
• S1 0.7236 – 10Nov low – Medium
• S2 0.7181 – 2Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come under pressure on Thursday after mostly trading sideways amidst some wild post US election Wednesday price action. The risk on flow that followed the Trump victory had been supportive of the correlated Kiwi, though the RBNZ decision has since weighed. The RBNZ went ahead and cut rates 25bps to 1.75% as expected, but intervention talk from RBNZ Wheeler and McDermott, along with talk of being open to additional easing from McDermott, was enough to fuel this latest round of declines. Looking ahead, US initial jobless claims is the only notable standout.

US SPX 500 – technical overview

Signs of a potential top after the market recently broke below critical support at 2108. This now opens the door for a meaningful period of weakness exposing a more pronounced decline towards the June base at 1990. As such, look for this latest intense rally be well capped ahead of 2180, with only a daily close back above this level to compromise the newly adopted bearish outlook and expose fresh record highs.

• R2 2194.00 – 23Aug/Record high – Strong
• R1 2180.00 – 22Sep low – Medium
• S1 2148.00 – 8Nov high – Medium
• S2 2100.00 – Psychological– Strong

US SPX 500 – fundamental overview

US election risk is dominating flow at the moment with stocks shockingly surging back to record highs despite Donald Trump emerging as the next President of the United States. But overall, once the election volatility is out of the way, the market will need to once again think about the bigger, more worrying issue at hand, which is an exhaustion of global monetary policy tools and an inability for central banks to continue to support and stimulate the global economy. This leaves financial markets vulnerable to any shocks and exposed to intense periods of additional risk liquidation going forward.

GOLD (SPOT) – technical overview

Despite a major setback in October, the overall structure remains highly constructive with the market in the process of carving out a longer-term base. Look for any weakness to be very well supported above 1240, with only a close back below this level to delay the bullish outlook and give reason for pause. Back above 1300 strengthens the outlook and should accelerate gains towards a retest of the 2016 peak at 1375.

• R2 1375.20 – 6Jul/2016 high – Strong
• R1 1337.30 – 9Nov high – Medium
• S1 1268.10 – 9Nov low – Medium
• S2 1241.45 – 7Oct low – Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy, extended global equities, systemic risk and a bet that record low inflation will eventually start to turn up. All of this will almost certainly continue to keep the commodity in demand, even if the Buck is propped, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDMXN has raced to a fresh record high with the market surging through critical psychological barriers at 20.000. The break to new highs now opens the door for a measured move upside extension towards 22.0000 in the days ahead, following a period of consolidation roughly between 18.0000 and 20.0000. At this point, only back below 18.000 would compromise the highly constructive outlook.

• R2 22.0000 – Measured Move – Strong
• R1 20.7750 – 9Nov/Record High – Medium
• S1 19.5490 – 3Nov high – Medium
• S2 18.1600 – 9Nov low – Strong

Feature – fundamental overview

The danger of a Trump Presidency to the Mexican economy has become a reality, with Trump emerging victorious in Wednesday’s US election. This has opened a dramatic +8% collapse in the Peso, with the currency sinking to a fresh record low against the Buck. This will make the Banxico’s job extremely difficult going forward, with many expecting the central bank to quickly announce as much as a 100 basis point rate hike. And while a hike of this magnitude may slow the pace of the Peso depreciation, it will also act as a major strain on the local economy and Mexico’s growth prospects. Still, for now, the Banxico has preferred to hold off making any immediate decisions and this has proven effective, with the central bank getting some help from the surprising surge in risk assets which is supportive of the emerging market FX bloc.