UK GDP Stands Out in Friday Trade

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 1.2300 will put the immediate pressure back on the downside.

• R2 1.2674 – 11Nov high – Strong
• R1 1.2513 – 22Nov high– Medium
• S1 1.2302 – 18Nov low – Medium
• S2 1.2206 – 1Nov low – Strong

GBPUSD – fundamental overview

The Pound has done a good job avoiding the thin holiday trade market volatility, with the UK currency more comfortable in a range for now. Of course, the Pound could also be positioning ahead of today’s UK GDP reading. Later in the day we get a few releases out of the US, featuring trade, wholesale inventories and services PMIs. It’s worth noting there are many out there who feel the risks over the coming days are tilted for additional Sterling demand on a potential short squeeze, particularly when considering UK fiscal spending plans and the BOE’s neutral stance on policy.

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 in the 114.50 area. However, daily studies are looking stretched which suggests that additional upside could be limited  in favour of a healthy corrective pullback. But ultimately, any setbacks are expected to be well supported above previous resistance at 107.50.

• R2 114.87 – 16Feb high – Strong
• R1 113.90 – 25Nov high – Medium
• S1 113.00 – Figure – Medium
• S2 112.37 – 24Nov low – Strong

USDJPY – fundamental overview

HFT accounts and leveraged specs were said to be behind this latest surge in the major pair, this time up to an 8 month high at 113.90. Of course, it’s not uncommon to see extended markets push in the direction of a trend in thinner holiday trade and with yield differentials US Dollar supportive and US equities at record highs there seems to be very little out there to undermine the current run in this pair. Earlier today, Japan CPI came in hotter than expected but hasn’t factored into price action. Looking ahead, we get a few releases out of the US, featuring trade, wholesale inventories and services PMIs.

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 1.0687 – 18Nov 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 not depreciating as much as the SNB would probably like to see and if global risk sentiment deteriorates, it could invite a massive wave of demand for the Franc that the SNB will be unable to offset.

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 0.7365 –24Nov low – Medium
• S2 0.7285 – 16Jun low – Strong

AUDUSD – fundamental overview

All has been fairly quiet for the Australian Dollar in this thinner holiday latter half of the week. However, we have seen the emergence of demand, reportedly on the back of higher copper and iron ore prices. AUDNZD related demand is yet another source for some of the Aussie bids, though overall, favourable US Dollar yield differentials are expected to keep any meaningful rallies well capped. Looking ahead, we get a few releases out of the US, featuring trade, wholesale inventories and services PMIs.

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 1.3589 – 14Nov high – Strong
• R1 1.3565 – 18Nov high – Medium
• S1 1.3378 – 22Nov low – Medium
• S2 1.3354 – 1Nov low– Strong

USDCAD – fundamental overview

The Canadian Dollar hasn’t exactly performed well in recent months, but it is worth noting the Loonie has outperformed the US Dollar over the past week. It would seem that most of this outperformance is a function of a healthy recovery in the price of OIL, though others contend that the improving growth prospects in the US are a positive for the Canadian economy given the fact that the US is Canada’s largest export market. Looking ahead, we get a few releases out of the US, featuring trade, wholesale inventories and services PMIs.

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 0.7086 – 22Nov high  – Medium
• S1 0.6972 – 24Nov low – Medium
• S2 0.6952 – 21Jul low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has not been immune to this wave of US Dollar buying over the past several weeks and has come under increased pressure in recent days as hawkish Fed bets ramp up. Kiwi has also taken some hits against its Aussie cousin as local players look to pick up the AUDNZD cross. Looking ahead, more downside is expected below 0.7000, though given the thinner holiday trade in this latter half of the week, short covering rallies are capable of keeping Kiwi supported. Earlier today, Kiwi trade data came in better than expected which also could be helping to prop a bit. As fas as today’s docket goes, we get a few releases out of the US that include trade, wholesale inventories and services PMIs.

US SPX 500 – technical overview

While this latest surge back to a fresh 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 2200 on a weekly close basis. 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 2250.00 – Psychological – Strong
• R1 2210.00 – 25Nov/Record 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 constructive with the market in the process of carving out a longer-term base. Look for any weakness to be very well supported above 1130, with only a close back below this level to negate the basing outlook and give reason for pause. Back above 1233.10 strengthens the outlook and should accelerate gains towards a retest of the 2016 peak at 1375.

• R2 1265.50 – 11Nov high – Strong
• R1 1233.10 – 18Nov high – Medium
• S1 1170.95 – 25Nov low – Medium
• S2 1150.00 – Psychological – Strong

GOLD (SPOT) – fundamental overview

GOLD has suffered quite a blow over the past several days, with the yellow metal unable to ignore the intense rotation into the US DOllar. However, solid demand from medium and longer-term players continues to emerge on dips despite the setbacks, with these players more concerned about 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.

Feature – technical overview

USDTRY continues to push into unchartered territory, breaking to yet another record high on Friday. While the uptrend remains firmly intact, daily studies are now at the point where they are violently overextended, with the daily RSI showing a reading above 90. This warns of some form of a major corrective pullback ahead to allow for these studies to unwind. Medium-term studies are also extended, yet another indication we could soon see a period of correction. Ultimately however, any setbacks should be well supported ahead of 3.2000.

• R2 3.5000 – Psychological – Strong
• R1 3.4750 – 25Nov/Record High – Medium
• S1 3.3520 – 21Nov low – Medium
• S2 3.3090 – 17Nov low – Strong

Feature – fundamental overview

While it’s been clear for some time the Erdogan government has been opposed to rate hikes, it has also been very difficult to ignore the necessity for such action with the Lira continuing to decline to record lows. On Thursday, the CBRT went ahead and pushed rates up 50 basis points in an effort to offset some of this currency depreciation, though it seems the market is going to need an even more aggressive move if it is going to make a dent in the current environment. Event risk and political risk are major headaches for the Turkish central bank going forward, though recent FX reserve changes provide sufficient FX to cover half the current account deficit until the first quarter of 2017, which eases TRY pressure.