USD Demand Picks Up into New Week

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 1.2796 – 6Jul low – Strong
• R1 1.2674 – 11Nov high– Medium
• S1 1.2526 – 11Nov low – Medium
• S2 1.2353 – 9Nov low – Strong

GBPUSD – fundamental overview

In a bit of a twist, the Pound has emerged as an outperformer over the past week. All of the major currencies are tracking lower against the Buck, while the UK currency is actually up against the US Dollar. Some have attributed the move to a short squeeze, while others cite the prospect for a much softer Brexit now that Trump is taking office. Still, with the Fed on course to push forward with policy normalisation, and with the market buying into Trump’s fiscal stimulus, tax cuts and financial deregulation, it would seem that any additional upside should be met with formidable resistance as yield differentials continue to favour the Buck. At the same time, we are starting to see a bit of a rotation where investors are finally finding value in the UK currency against the rest of its peers. Looking ahead, lack of first tier data in the UK and US will leave the market focused on broader macro themes.

USDJPY – technical overview

A strong bullish performance in the previous week, 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 111.45 in the days ahead. Any setbacks from here should be very well supported above 103.00.

• R2 109.14 – 3Jun high – Strong
• R1 108.00 – Figure – Medium
• S1 106.73 – 14Nov low – Medium
• S2 106.03 – 11Nov low – Strong

USDJPY – fundamental overview

BOJ Kuroda was on the wires earlier today though his comments aren’t factoring into price action. Kuroda stresses the central bank would adjust monetary policy as needed and that it was effective in raising price expectations. Kuroda also said disorderly FX moves were undesirable but made it clear the FinMin was in charge of FX policy. Overall, early Monday Yen strength comes from broad based US Dollar demand on expectations for a more consistent tightening from the Fed going forward and a concurrent rally in risk assets. Looking ahead, lack of first tier data will leave the market focused on broader macro themes.

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 the latestdaily 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 previous range.

• R2 1.0865 – 28Oct high – Medium
• R1 1.0832 – 9Nov high – Strong
• S1 1.0700 – Figure – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB has unquestionably had a difficult time of late, 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 going forward.

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 0.7700 – Figure – Medium
• R1 0.7630 – 11Nov high– Medium
• S1 0.7526 –11Nov low – Medium
• S2 0.7507 – 13Oct low – Strong

AUDUSD – fundamental overview

Although the Australian Dollar was softer against the Buck in the previous week, setbacks were rather mild considering the intense wave of US Dollar demand on ramped up Fed rate hike expectations. It seems Aussie has been able to find support on the offsetting risk on flow, with the correlated currency feeling better about the concurrent rally in global equities, while into Monday, Aussie is also finding additional cross related demand against the New Zealand Dollar as the market reacts to the weekend news of the earthquake in New Zealand. Elsewhere, China retail sales and industrial production came in on the softer side but isn’t doing anything to attract attention. Looking ahead, lack of first tier data will leave the market focused on broader macro themes.

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 1.4000 area. Ultimately, only back below 1.2764 would delay the constructive outlook.

• R2 1.3588 – 29Feb high – Strong
• R1 1.3549 – 11Nov high – Medium
• S1 1.3457 – 11Nov low – Medium
• S2 1.3387 – 10Nov low– Strong

USDCAD – fundamental overview

The Canadian Dollar continues to take its hits despite some broad based risk on trade post Trump, with the Loonie clearly more focused on US yield differentials and falling OIL. The market has done a 180 on pricing the Trump presidency and is now looking for Trump to push the Fed into a more aggressive position of normalising monetary policy given Trump’s higher inflation policies. Canadian Dollar bulls are also worried about what Trump means for existing trade deals and any hiccups that may come from a possible renegotiation of these deals. Meanwhile, OIL prices continue to slump and this only adds to the downside pressure on the commodity currency. Looking ahead, lack of first tier data out of Canada or the US will leave this market watching OIL and focused on broader macro themes.

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 0.7229 – 11Nov high – Strong
• R1 0.7177 – 10Nov low  – Medium
• S1 0.7100 – Figure – Medium
• S2 0.7035 – 13Oct low – Strong

NZDUSD – fundamental overview

The intense wave of broad based US Dollar demand in the aftermath of the Trump victory has already been a major strain on the New Zealand Dollar, with the currency now under additional pressure in the early week following the weekend 7.4 magnitude earthquake. The government is already assessing the fallout and PM Key has said it will cost at least a couple billion to tidy things up. Dealers now cite major stops below 0.7000 and cross related AUDNZD demand is adding to the downside pressure on NZDUSD into Monday. Looking ahead, lack of first tier data will leave the market focused on the earthquake and broader macro themes. It seems the only saving grace for Kiwi right now is the post Trump euphoric rally in equities markets.

US SPX 500 – technical overview

While this latest surge back towards the record high could compromise what has been the possibility for a toppish structure, the risk is still tilted to the downside if the market fails to establish above the record high from August just shy of 2200. But ultimately, at this point, any topside failure will also need to be met with a break back below 2100 to once again encourage the possibility for a bearish structural shift.

• R2 2194.00 – 23Aug/Record high – Strong
• R1 2185.00 – 10Nov high – Medium
• S1 2148.00 – 8Nov high – Medium
• S2 2100.00 – Psychological– Strong

US SPX 500 – fundamental overview

Reaction to the US election has been dominated flow 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, 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 1200, 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 1337.30 – 9Nov high – Strong
• R1 1265.50 – 11Nov high – Medium
• S1 1212.70 – 11Nov low – Medium
• S2 1199.90 – 30May 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. Dealers cite strong demand in the $1200 area.

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 sessions 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 21.3950 – 11Nov/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 last week’s US election. This has opened a dramatic collapse in the Peso, with the currency sinking to a fresh record low against the Buck and down some 10% post election. This will make the Banxico’s job extremely difficult going forward, with many expecting the central bank to soon 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 somewhat effective, with the central bank getting help from the surprising surge in risk assets which is supportive of the emerging market FX bloc.