Broader Themes in Focus

GBPUSD – technical overview

The market has broken out of a multi session consolidation off the multi-year low, which has opened a sizable correction higher. Ultimately, there is room to run a little more to the 1.2800 area 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 1.2796 – 6Jul low – Strong
• R1 1.2705 – 8Dec high – Medium
• S1 1.2549 – 8Dec low – Medium
• S2 1.2386 – 28Nov low – Strong

GBPUSD – fundamental overview

Reduction in odds for a hard Brexit have resulted in expectations for a still cautious but more neutral Bank of England outlook this week. This has been helping to keep the Pound well supported on dips, despite ongoing broad based demand for the US Dollar, with the Fed on the verge of pushing forward with policy normalisation. The economic calendar is quiet today, but it will be a busy week for this major pair as we take in both the Fed and BOE meetings on Wednesday and Thursday respectively.

USDJPY – technical overview

The major pair has seen an intense bullish shift in recent days, with the most recent break above 110.00 exposing fresh upside towards next meaningful resistance in the 115.00 area. However, daily studies are looking stretched which suggests that additional upside could be limited  in favour of a more significant healthy corrective pullback. But ultimately, any setbacks are expected to be well supported above previous resistance at 110.00.

• R2 116.00 – Figure – Strong
• R1 115.78 – 12Dec high – Medium
• S1 114.01 – 9Dec low – Medium
• S2 112.87 – 5Dec low – Strong

USDJPY – fundamental overview

Absolutely no reaction to early Monday Japan data in the form of mixed machine orders and slightly firmer producer prices. Clearly the driver for this market has been monetary policy divergence and record high equities. The combination of the two of these themes has propelled USDJPY to multi-day highs, with the major pair easily pushing through psychological barriers at 115.00. At this point, the Buck is looking a little extended, so there is risk for profit taking in the sessions ahead, particularly with Wednesday’s FOMC decision on the horizon.

EURCHF – technical overview

A recent close below 1.0800 which had been defined as the bottom of a multi-week range 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 1.0900 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 1.1014 – 24Jun high – Strong
• R1 1.0900 – 8Dec high – Strong
• S1 1.0687 – 18Nov low – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB has unquestionably had a challenging time of late, with the central bank forced to contend with an ongoing wave of demand for the Swiss Franc, mostly recently on the back of this dovishly perceived ECB decision. 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, with risk on and global equities elevated, 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. All of this should make for an interesting week ahead with the SNB on tap for its final policy decision of the year.

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 0.7582 – 15Nov high – Strong
• R1 0.7509 – 8Dec high– Medium
• S1 0.7371 – 1Dec low – Medium
• S2 0.7312 – 21Nov low – Strong

AUDUSD – fundamental overview

The Australian Dollar hasn’t been doing much at all in recent trade, with the currency more comfortable trading within a consolidation and deferring to broader macro flow. On the one side, the ongoing bid for equities has been helping to prop the risk correlated commodity currency, while on the other side, demand for the US Dollar on policy divergence drivers has been capping rallies. On net, it’s been a wash and with the economic calendar as light as it is on Monday, there’s little reason to expect an major moves in either direction.

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 1.3356 – 5Dec high – Strong
• R1 1.3251 – 9Dec high – Medium
• S1 1.3112 – 12Dec low – Medium
• S2 1.3100 – Figure – Strong

USDCAD – fundamental overview

News of more supply cuts over the weekend has propelled OIL prices to fresh yearly highs, with the move ultimately opening the door for an extension of an already impressive Canadian Dollar run. The Canadian Dollar has also been a beneficiary of more upbeat data and a balanced Bank of Canada, though looking ahead, with the FOMC decision due Wednesday, it’s possible we soon see some profit taking on long Loonie exposure in favour of a resumption of a broader trend that has been net bearish the Canadian Dollar.

NZDUSD – technical overview

Despite the latest bounce, the overall pressure has shifted back to the downside with the market now expected to be very well capped on rallies ahead of 0.7300. 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 0.7223 – 8Dec high – Strong
• R1 0.7189 – 9Dec high – Medium
• S1 0.7115 – 12Dec low – Medium
• S2 0.7095 – 6Dec low– Strong

NZDUSD – fundamental overview

Some positive developments out of New Zealand early Monday have been helping to prop the New Zealand Dollar. NZIER’s quarterly survey has come out rather upbeat, producing upwards revisions to growth through 2019, while on the political front, Bill English has been confirmed as the new leader of the National Party and Prime Minister following the unexpected resignation of John Key. Otherwise, trade has been fairly tame, with Kiwi traders waiting on the next big push on the macro front. However, this might not come until Wednesday when we get the highly anticipated FOMC policy decision. 

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 monthly 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. Next resistance comes in at 2300, while initial support comes in at 2180, with a break below to take the immediate pressure off the topside.

• R2 2300.00 – Psychological – Strong
• R1 2271.00 – 12Dec/Record high – Medium
• S1 2180.00 – 5Dec low – Medium
• S2 2156.00 – 25Oct high– Strong

US SPX 500 – fundamental overview

The ongoing support for US equities has been more than impressive, particularly at a time when the Fed is about to embark on a 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 monetary policy tools globally and an inability for central banks to continue to support and stimulate growth. Look no further than this latest ECB decision, which tried as hard as it could to paint a dovish slant, but in the end, produced a form of conditional taper. 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 1197.70 strengthens the outlook and should accelerate gains towards a retest of the 2016 peak at 1375.

• R2 1221.10 – 22Nov high – Strong
• R1 1197.70 – 28Nov high – Medium
• S1 1154.50 – 12Dec 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, this time through psychological barriers at 3.5000, stalling just shy of 3.6000. While the uptrend remains firmly intact, daily studies are now in the process of unwinding from intense overbought readings. Medium-term studies are also extended, yet another reason for a short-term pullback. Ultimately however, any setbacks should be well supported ahead of 3.2000.

• R2 3.5950 – 2Dec/Record High – Strong
• R1 3.4970 – 8Dec high – Medium
• S1 3.3410 – 8Dec low – Medium
• S2 3.3000 – Psychological – Strong

Feature – fundamental overview

Two knocks to the Lira last week, which once again is staring at a test of fresh record lows against the Buck. First it was the disappointing Turkish Economic Coordination Committee (“ECC”) measures which many had thought would produce something more substantive. Then it was a dovish read of the ECB decision which opened the door for a broad based recovery in the US Dollar as the monetary policy divergence theme with the Fed came back into the spotlight. And already into Monday, the Lira has suffered another blow in reaction to the fatal twin bombings in Istanbul over the weekend. Overall, event risk and political risk are major headaches on the domestic front, while the CBRT also has to continue to worry about Fed normalisation and pressure on the CBRT to raise rates ever higher in an effort to slow the rapid depreciation in the Lira. The one saving grace for the Lira has been the ongoing bid in global equities, though with these markets well overextended, this could only add to pressure on the currency going forward.