Nothing More Than A Healthy Correction

GBPUSD – technical overview

The recent topside failure ahead of 1.2800 was a significant development as it confirmed the rebound from the +30 year low only corrective and kept the overall pressure on the downside. This has now opened a break back below internal support at 1.2300 which could pave the way for a retest of that 1.1840 critical base from October. Only back above 1.2800 forces a shift in the structure.

• R2 1.2500 – Psychological – Strong
• R1 1.2388 – 30Dec high – Strong
• S1 1.2300 – Figure – Medium
• S2 1.2200 – 3Jan low – Strong

GBPUSD – fundamental overview

The beaten down Pound has managed to recover somewhat into Thursday, though the gains have been limited. Wednesday’s solid UK construction PMIs and broad based wave of US Dollar profit taking ahead of and post FOMC Minutes have been the primary drivers of the Sterling recovery. But overall, with Fed policy divergence a major theme and with risk of a hard Brexit very much alive, it’s unlikely the UK currency makes any major moves to the upside at this time. Looking ahead, we get UK services PMIs, US ADP employment, US initial jobless claims and US ISM non manufacturing. Of course, all of this comes ahead of Friday's more anticipated monthly employment report out of the US.

USDJPY – technical overview

Daily studies are now unwinding from stretched levels which suggests additional upside could be limited in favour of a more significant healthy corrective pullback. Thursday’s bearish break below 116.00 confirms and could open a deeper drop towards 114.00. But ultimately, any setbacks are expected to be well supported ahead of 110.00 in favour of that next higher low and bullish resumption towards 120.00.

• R2 118.67 – 15Dec high – Strong
• R1 117.43 – 5Jan high – Medium
• S1 115.58 – 5Jan low – Medium
• S2 114.74 – 13Dec high – Strong

USDJPY – fundamental overview

Finally seeing a bit of demand for the Yen after the major currency had taken a big hit in late 2016. At this point, the Yen gains are mostly viewed as nothing more than short-term, with the price action driven off broad based profit taking on US Dollar longs. The market had been selling US Dollars ahead of Wednesday’s FOMC Minutes and continued to sell after the Minutes contained a little more uncertainty from Fed officials than had been priced. Looking ahead, we get US initial jobless claims, ADP employment and ISM non manufacturing. Of course, all of this comes ahead of Friday's more anticipated monthly employment report out of the US.

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 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 1.0900 – 8Dec high – Strong
• R1 1.0799 – 9Dec high – Strong
• S1 1.0650 – Mid-Figure – 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. 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.

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. At this point, look for the current rally to be well capped ahead of 0.7500. Only back above 0.7525 delays the bearish outlook.

• R2 0.7371 – 1Dec low – Strong
• R1 0.7330 – 4Jan high– Medium
• S1 0.7273 – 5Jan low – Medium
• S2 0.7160 – 26Dec low – Strong

AUDUSD – fundamental overview

Upbeat Australia AIG PSI has helped to give an already bid Aussie an added boost into Thursday, with the currency putting in an impresive recovery in 2017, mostly on the back of broad based profit taking on US Dollar longs. The Aussie buying has also accelerated post Wednesday’s FOMC Minutes which although hawkish, contained a little more uncertainty than the market had been expecting. Looking ahead, we get US initial jobless claims, ADP employment and ISM non manufacturing. Of course, all of this comes ahead of Friday's more anticipated monthly employment report out of the US.

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 1.3081 in favour of the next major upside extension towards a measured move objective into the 1.4000 area. Ultimately, only back below 1.3081 would delay the constructive outlook.

• R2 1.3461 – 3Jan high – Strong
• R1 1.3400 – Figure – Medium
• S1 1.3255 – 5Jan low – Strong
• S2 1.3200 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar has been on fire over the past 24 hours, with the Loonie standing out as a major beneficiary from the broad based profit taking on long US Dollar exposure. While there has been nothing to speak of on the economic calendar out of Canada, it would seem an ongoing bid tone in the price of OIL and higher commodities prices have been helping to fuel this latest wave of demand. Of course, the added uncertainty in Wednesday’s FOMC Minutes has also contributed. Looking ahead, we get Canada industrial product and raw materials prices, US initial jobless claims, US ADP employment and US ISM non manufacturing. Still, the Loonie may not want to get too far ahead of itself with tomorrow’s double dose of monthly employment data due out of Canada and the US.

NZDUSD – technical overview

The overall pressure has shifted back to the downside with the market now expected to be very well capped on rallies ahead of 0.7200. The recent break below 0.6972 confirms a fresh lower top at 0.7239 opening the next major downside extension towards medium-term support at 0.6676.

• R2 0.7050 – 16Dec high – Strong
• R1 0.7029 – 5Jan high – Medium
• S1 0.6955 – 5Jan low – Medium
• S2 0.6862 – 26Dec low– Strong

NZDUSD – fundamental overview

The New Zealand Dollar has done a good job shrugging off this week’s disappointing GDT auction result, with the currency helped along by this latest wave of broad based profit taking on US Dollar longs. But overall, macro players are looking to take advantage of this Kiwi rally and will be ready to increase short exposure further up as the overarching theme of monetary policy divergence with the Fed and yield differentials ultimately weigh on the commodity currency. Looking ahead, we get US initial jobless claims, ADP employment and ISM non manufacturing. Of course, all of this comes ahead of Friday's more anticipated monthly employment report out of the US.

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 sustain gains beyond 2200 over the coming weeks. 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 significant 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 2215.00 – 30Nov high – Medium
• S2 2180.00 – 5Dec low– 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 and the Trump administration could bring in policies that threaten prospects for global 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 monetary policy around the rest of the globe is exhausted with very little left in the tank.

GOLD (SPOT) – technical overview

The market has bounced out from critical 1120 area support in the form of a 78.6% fib retracement off of the 2015-2016 low-high move, with the hold above this level keeping the longer-term basing outlook intact. Daily studies are confirming, looking more constructive after trading into oversold territory. A daily close above 1170 will confirm bullish shift in structure and open the door for a push back above 1200 in the sessions ahead. Only below 1120 negates.

• R2 1197.70 – 28Nov high – Strong
• R1 1188.10 – 5Dec high – Medium
• S1 1122.75 – 15Dec low – Medium
• S2 1120.00 – 78.6% Fib  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players continues to emerge on dips despite an intense round of setbacks in late 2016, 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, 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. Certainly this latest wave of US Dollar weakness has also been a major factor in the recovery.

Feature – technical overview

USDSGD has pushed up to a fresh multi-month high, taking this market to its highest levels since 2009. However, daily studies are starting to unwind from stretched levels which warns additional upside could be limited for now, in favour of a healthier corrective decline. Still, any setbacks should be well supported above 1.4000 in favour of the next higher low and bullish resumption.

• R2 1.4545 – 3Jan/2017 high – Strong
• R1 1.4407 – 5Jan high – Medium
• S1 1.4299 – 5Jan low – Medium
• S2 1.4148 – 8Dec low – Strong

Feature – fundamental overview

The Singapore Dollar is doing its very best to battle against additional declines. This week’s impressive Singapore GDP data, rumours of MAS intervention and some broad based profit taking on long US Dollar exposure have been helping to offset the intense bearish flows. The market has been using the less hawkish Fed Minutes as an added excuse to sell US Dollars. But ultimately, downside pressure on the local currency isn’t expected to fade away for any meaningful period of time as the market keeps its eye on solid US economic data, striking monetary policy divergence and prospects for slower emerging market growth when the new US administration takes over.