The Buck Doesn’t Stop Here

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. A daily close below 1.2350 will put the immediate pressure back on the downside.

• R2 1.2592 – 14Nov high – Strong
• R1 1.2505 – 17Nov high– Medium
• S1 1.2380 – 15Nov low – Medium
• S2 1.2353 – 9Nov low – Strong

GBPUSD – fundamental overview

Thursday’s UK retail sales data were super impressive, blowing away expectations. And yet, the Pound wasn’t able to put in a positive performance on the back of this showing, with developments in the US more than offsetting the flow. The combination of a hawkish Yellen, confirming the Fed’s move to rate hikes going forward, including at next month’s meeting, and solid US data, with initial jobless claims at a 4 decade low and robust housing starts, was enough to have the US Dollar winning out on the day. Still, we have seen the emergence of some relative strength in the UK currency relative to the other majors. Looking ahead, the only notable standouts on the calendar come in the form of speeches from Fed’s Bullard and Dudley.

USDJPY – technical overview

The major pair has seen an intense bullish shift in recent days, with the most recent break above 107.50 exposing fresh upside towards next meaningful resistance at 111.45 in the sessions ahead. However, daily studies are looking stretched which suggests that additional upside could be limited for now in favour of a healthy corrective pullback. Ultimately, any setbacks are expected to be well supported above 105.00.

• R2 111.45 – 30May high – Strong
• R1 111.00 – Figure – Medium
• S1 109.97 – 18Nov low – Medium
• S2 108.55 – 17Nov low – Strong

USDJPY – fundamental overview

It’s been nothing but one way traffic in this major pair, with the market most recently surging through psychological barriers at 110.00, to its highest levels since May. We had already seen Yen selling early Thursday on news the BOJ had offered to buy an unlimited amount of Japanese government bonds at fixed rates of 0.020%, while higher equities were also helping to keep the major pair elevated. And then later in the day, the Yen took another hit after US data came in solid as reflected through initial jobless claims and housing starts, and the Fed Chair offered hawkish testimony, signalling a path forward that included rate hikes. Dealers do however cite offers above 111.00. As far as the calendar goes, speeches from Fed’s Bullard and Dudley are the only notable standouts for the remainder of the day.

EURCHF – technical overview

The latest daily close below 1.0738 strengthens the bearish outlook and opens the door for an acceleration of declines towards the 2016 low at 1.0624. At this point, a daily close back above 1.0865 would now be required to take the immediate 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 1.0760 – 15Nov high – Strong
• S1 1.0688 – 14Nov low – 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 latest break below 0.7400 is a significant development and now opens the door for deeper setbacks towards next key support at 0.7145 in the days ahead. At this point, look for any rallies to be well capped ahead of 0.7600. Only back above 0.7700 delays the bearish outlook.

• R2 0.7502 – 17Nov high – Strong
• R1 0.7450 – Mid-Figure – Medium
• S1 0.7305 –24Jun low – Medium
• S2 0.7285 – 16Jun low – Strong

AUDUSD – fundamental overview

It hasn’t been the best of weeks for the Australian Dollar which was initially hit on soft undertones from Thursday’s Aussie employment report and then accelerated to the downside through stops below 0.7400 on more hawkish than expected Yellen testimony and US data that was supportive of the Fed’s move towards higher rates. Perhaps the only supportive theme for the Australian Dollar, helping to prop it somewhat on dips, has been the ongoing bid tone for US equities, which trade just off record highs. Looking ahead, speeches from Fed Bullard and Dudley are the only notable standouts.

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 well 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 1.3000 would delay the constructive outlook.

• R2 1.3650 – Mid-Figure – Medium
• R1 1.3589 – 14Nov high – Strong
• S1 1.3400 – 17Nov low – Medium
• S2 1.3354 – 1Nov low– Strong

USDCAD – fundamental overview

The Canadian Dollar continues to link itself to the direction in OIL, while hawkish Fed testimony from the Fed Chair and solid US data have also factored into the latest setbacks in the Loonie. Looking ahead, Canada CPI will get a lot of attention later today, especially with the US economic calendar empty. The only other notable standouts will come in the form of Fed speeches from Bullard and Dudley.

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 0.6952 and towards medium-term support at 0.6675 further down.

• R2 0.7114 – 16Nov high – Strong
• R1 0.7050 – Mid-Figure  – Medium
• S1 0.6952 – 21Jul low – Strong
• S2 0.6900 – Figure – Medium

NZDUSD – fundamental overview

A tough week for the New Zealand Dollar, which actually will be a welcome development over at the RBNZ, with the central bank delighted with the pullback as it alleviates monetary policy pressure. Still, things haven’t gone well for the currency, initially hit in the early week on fallout from the earthquake and then accelerating to the downside into Friday following the hawkish Fed Yellen testimony and another wave of healthy US economic data. Now that critical psychological barriers at 0.7000 have been taken out, dealers talk of interest from larger players to be selling down towards 0.6500. Looking ahead, speeches from Fed’s Bullard and Dudley are the only notable standouts.

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 2188.00 – 17Nov high – Medium
• S1 2148.00 – 8Nov high – Medium
• S2 2100.00 – Psychological– Strong

US SPX 500 – fundamental overview

The ongoing bid for US equities has been more than impressive, particularly at a time when the Fed is about to embark on a more steady path to policy normalisation. But 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 globally and an inability for central banks to continue to support and stimulate growth. This leaves financial markets vulnerable to any shocks and exposed to intense periods of additional risk liquidation going forward, especially at a time when the Fed is moving further away from accommodation.

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 1205.65 – 18Nov 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 turn up even faster in a Trump presidency. 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 as much as 10% post election. It has also forced the Banxico into the uncomfortable position of having to raise rates another 50bps to offset the rapid Peso depreciation at a time when such a hike will only act as a major strain on the local economy and Mexico’s growth prospects. The only help to the Peso at the moment is the ongoing bid for US equities, but with this market in desperate need of a major correction, things could really get ugly if risk comes off.