Get Ready for a Wild One

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 1.2728 – 13Dec high – Medium
• S1 1.2549 – 8Dec low – Medium
• S2 1.2386 – 28Nov low – Strong

GBPUSD – fundamental overview

The Pound did its best to put in a rally in the aftermath of Tuesday’s hotter than expected UK CPI data, but ultimately could not hold onto gains as offers swarmed in ahead of some major resistance in the 1.2800 area. Ultimately, it seems the UK currency is a little less confident making any additional decisions on its direction until the Fed is out of the way. Still, the Pound also will need to worry about Thursday’s BOE and ongoing developments on the Brexit front. As far as risk ahead of today’s Fed goes, we get some important UK employment data followed up by US retail sales.

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 116.00 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 116.13 – 12Dec high – Strong
• R1 115.50 – Mid-Figure – Medium
• S1 114.01 – 9Dec low – Medium
• S2 112.87 – 5Dec low – Strong

USDJPY – fundamental overview

The major pair hasn’t been doing much of late, seemingly more comfortable waiting for the outcome of today’s highly anticipated FOMC decision. We did see a little boost earlier on the back of the BOJ announcement it would be increasing JGB purchases, but that rally has since been capped on HFT profit taking. Otherwise, no reaction to a slightly softer Tankan report. Ahead of the Fed, the market could see another minor wave of volatility on the back of US retail sales.

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 latter half of the week, 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 0.7524 – 13Dec high– Medium
• S1 0.7371 – 1Dec low – Medium
• S2 0.7312 – 21Nov low – Strong

AUDUSD – fundamental overview

The Australian Dollar isn’t doing much this week and the price action is reasonable considering the upcoming event risk in the form of the Fed decision and the impact it could have on the currency one way or the other. And so, it’s been about event risk positioning for Aussie. We did see softer Aussie Westpac consumer confidence earlier in the day but that hasn’t factored into price action. Ahead of the Fed, we get US retail sales which could make some waves but again, not much is expected with the Fed on the horizon.

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 1.3103 – 13Dec low – Medium
• S2 1.3055 – 18Oct low – Strong

USDCAD – fundamental overview

Those watching the Loonie are keeping an eye on this latest Trump appointment of Rex Tillerson as Secretary of State. Back in 2015 Tillerson had offered supportive comments relating to the importance and effectiveness of the Keystone Pipeline. The Canadian Dollar continues to be well bid on the back of more solid local data a rise in the price of OIL and some USD profit taking into today’s FOMC decision. But from here, it will likely be the outcome of the Fed that determines the next big move and with the Loonie having run so far and fast, we could be close to seeing a resumption of broader Canadian Dollar declines. Second tier Canada data won’t factor into trade, though US retail sales could move the market a bit.

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 0.7267 – 20Oct high – Strong
• R1 0.7233 – 13Dec high – Medium
• S1 0.7115 – 12Dec low – Medium
• S2 0.7095 – 6Dec low– Strong

NZDUSD – fundamental overview

Overall, Kiwi is more interested in broader flows right now. On the one side, Dollar profit taking into year end and an ongoing bid for global equities is supporting, while on the other side, monetary policy divergence is capping. Clearly today’s FOMC decision will have a major influence on direction going forward, though US retail sales should not be overlooked. As far as local developments go, we have seen some demand against the Australian Dollar, with the AUDNZD rate dropping back to longer-term cyclical lows.

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 2278.00 – 13Dec/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 last week’s 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 1151.30 – 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

The Lira has managed to avoid fresh record lows this week on account of CBRT comments, profit taking on US Dollar longs and record high US equities. On Tuesday, the CBRT said it would take necessary measures on the FX market if needed. Still, overall, event risk, political risk and geopolitical 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.