Long May You Run

GBPUSD – technical overview

The market has seen a sizable correction towards major resistance at 1.2800 over the past several days. Ultimately, however, while the market holds below 1.2800, the downtrend remains intact and a lower top is 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 1.2568 – 15Dec high – Strong
• R1 1.2500 – Figure – Medium
• S1 1.2376 – 15Dec low – Medium
• S2 1.2302 – 18Nov low – Strong

GBPUSD – fundamental overview

Thursday’s better than expected UK retail sales data did very little to inspire demand for the Pound, with the market waiting for more direction from the BOE. In the end, the combination of a neutral BOE with a slower growth outlook for 2017 and ongoing demand for the Buck in the aftermath of a hawkish Fed decision, were enough to open the door for an intense round of declines below 1.2400 before the market found its feet. Looking ahead, the UK calendar is quiet and the only notable standouts on the calendar come in the form of US housing starts and some Fed speak.

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 120.00 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 119.00 – Figure – Strong
• R1 118.67 – 15Dec high – Medium
• S1 117.01 – 15Dec low – Medium
• S2 116.13 – 12Dec high – Strong

USDJPY – fundamental overview

With this market, it’s all about monetary policy divergence and this latest hawkish signal from the Fed, now expecting three rate hikes in 2017 versus the two that had been priced. This has sent an already overbought US Dollar skyrocketing higher, with the major pair closing in on major barriers at 120.00. Perhaps the only thing slightly weighing on the US Dollar at the moment is a minor pullback in risk, with US equities reversing course from record highs, which could invite safe haven Yen demand if equities roll over. Looking ahead, the only notable standouts on the calendar come in the form of US housing starts and some Fed speak.

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. On Thursday, the SNB reiterated its stance on the overvalued Franc.

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 0.7525 – 14Nov high – Strong
• R1 0.7431 – 15Dec high– Medium
• S1 0.7338 – 15Dec low – Medium
• S2 0.7312 – 21Nov low – Strong

AUDUSD – fundamental overview

This week’s solid Aussie employment data is a thing of the past, with the market overwhelmed with more pressing themes of broad based US Dollar demand in the aftermath of a more hawkish Fed decision. Into Friday, we’re seeing more selling interest on the back of comments from an adviser to PM Turnbull that the RBA will reluctantly cut rates again next year. Looking ahead, Friday’s calendar is light and the market will be focusing on the Australian Government’s Mid-year Economic and Fiscal Outlook due Monday.

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 1.3500 – Figure – Medium
• R1 1.3418 – 15Dec high – Strong
• S1 1.3268 – 15Dec low – Strong
• S2 1.3200 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar was already under intense pressure from this broad based wave of US Dollar demand in the aftermath of this week’s hawkish Fed decision, before finding added selling pressure on other factors. The sharp pullback in the price of OIL on news Iraq would boost January OIL exports by 7% and the biggest slide in Canada house sales since 2012 have only added to the increased selling pressure on the Loonie. Looking ahead, we get Canada international securities transactions, US housing starts and building permits and some Fed speak.

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 0.7239 in favour of the next major downside extension below 0.6952 and towards medium-term support at 0.6675 further down.

• R2 0.7180 – 13Dec low – Strong
• R1 0.7122 – 15Dec high – Medium
• S1 0.7010 – 15Dec low – Medium
• S2 0.6952 – 21Jul low– Strong

NZDUSD – fundamental overview

Lack of first tier data out of New Zealand this week has left the risk correlated commodity currency to trade off broader macro themes. Of course, the leading theme this week has been policy divergence with the Fed and highly attractive US Dollar yield differentials in the aftermath of the Fed’s more hawkish rate hike trajectory. We’ve also seen the emergence of Kiwi selling against its Aussie cousin following this week’s better than expected Aussie employment data. Looking ahead, the only notable standouts on the calendar come in the form of US housing starts and some Fed speak. Dealers talking heavy stops below 0.6950.

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 embarking on a more hawkish path to policy normalisation as reflected in Wednesday’s decision. This leaves financial markets vulnerable to any shocks and exposed to intense periods of additional risk liquidation going forward, especially at a time when monetary policy around the rest of the globe is exhausted with very little left in the tank.

GOLD (SPOT) – technical overview

Setbacks in this market have been extreme over the past few weeks, with the weakness potentially compromising any possibility for a longer term base. But the market has dropped into critical support in the form of a 78.6% fib retracement off of the 2015-2016 low-high move, and a hold above this level will keep the basing outlook intact. Daily studies are also well overextended warning of a major reversal.

• R2 1197.70 – 28Nov high – Strong
• R1 1165.90 – 12Dec high – Medium
• S1 1122.75 – 15Dec low – Medium
• S2 1120.00 – 71.8% Fib  – Strong

GOLD (SPOT) – fundamental overview

GOLD has suffered quite a blow over the past few weeks, 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 3.5500 – 12Dec high – Medium
• S1 3.4220 – 9Dec low – Medium
• S2 3.3410 – 8Dec low – Strong

Feature – fundamental overview

The Lira has managed to avoid fresh record lows this week on account of CBRT comments 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 in the aftermath of a more hawkish FOMC decision and pressure on the CBRT to raise rates ever higher in an effort to slow the rapid depreciation in the Lira.