BOE Stress Tests, US Data, Fed Powell

GBPUSD – technical overview

On a medium to longer term basis, the outlook is still looking constructive off the +30 year low from 2016, with a higher low sought ahead of the next major upside extension back towards and through the current 2018 high. Shorter-term however, the market is threatening a possible break to another fresh 2018 low. If the market breaks down below the yearly low, it will open possibility for a measured move extension into the 1.2000s. Right now, a break back above the weekly high at 1.3000 would be required to alleviate immediate downside pressure.

• R2 1.3073 – 14Nov high – Strong
• R1 1.2928 – 22Nov high – Medium
• S1 1.2724 – 15Nov low – Medium
• S2 1.2662 – 15Aug low  – Strong

GBPUSD – fundamental overview

President Trump didn't do the Pound any favours on Tuesday, after expressing his critique of the UK's end of Theresa May's deal, while warning it could also compromise trade relations between the US and UK. Broad based end of month Dollar demand served as an additional weight, with the Cable rate gravitating back down towards the 2018 low. Theresa May is now faced with the tough task of getting her deal pushed through Parliament, with the latest news of MPs free to vote on a series of potential changes to the PM's agreement with the EU. These changes include calls for a second referendum or a completely different deal. Theresa May will want to put this story to rest and get on with the task at hand, which is to keep pressing on that it is the current deal or no deal at all. Looking ahead, as far as the calendar goes, we get the BOE financial stability report and stress test results, along with US data that includes GDP, trade, and new home sales. Fed Powell is also on the calendar late in the day.

GBPUSD - Technical charts in detail

USDJPY – technical overview

Rallies continue to be very well capped on a medium-term basis, with the outlook still favouring lower tops and lower lows. Look for yet another topside failure ahead of 114.00, in favour of the next major downside extension towards key support around 109.75. Ultimately, only a break back above 114.75 would negate the bearish outlook.

• R2 114.22 – 12Nov high  – Strong
• R1 114.00 – Figure – Medium
• S1 113.00 – Figure – Medium
• S2 112.31 – 20Nov low – Strong

USDJPY – fundamental overview

The major pair has made another run to the topside, with Tuesday's rally attributed to broad based end of month US Dollar demand. A recovery in US equities was also seen supporting the move. However, overall, risk sentiment is looking a lot shakier into year end and this in conjunction with a US administration still very much committed to soft Dollar protectionist measures, by way of tariffs, should inspire continued offers into rallies up into the 114.00 area.  Looking ahead, we get US data that includes GDP, trade, and new home sales. Fed Powell is also on the calendar late in the day.

EURCHF – technical overview

The market has been in the process of consolidating off the 2018 low, which coincided with critical support in the 1.1200 area. However, at this stage, there is no clear directional bias, with the price action deferring to a neutral state. Back above 1.1500 would get some bullish momentum going for a push to 1.2000, while back below 1.1200 would be quite bearish.

• R2 1.1435– 16Nov high – Strong
• R1 1.1359 – 22Nov high – Medium
• S1 1.1282 – 28Sep low– Medium
• S2 1.1224– 18Sep low – Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation between now and year end, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.

AUDUSD – technical overview

Technical studies have been turning back up from stretched medium term readings, with the latest break back above 0.7300 suggesting a meaningful base could be in the process of carving out. This puts the shorter-term pressure back on the topside, with the focus on a push to the psychological barrier at 0.7500. A drop below 0.7165 would be required to shift the focus back on the downside.

• R2 0.7382 – 21Nov high – Strong
• R1 0.7339 – 16Nov high – Medium
• S1 0.7203 – 20Nov low – Medium
• S2 0.7165 – 13Nov low – Strong

AUDUSD – fundamental overview

Aussie has done a good job holding up into the midweek, despite more fire around global trade, after President Trump talked about the next round of tariffs on China. Overall, while the Australian Dollar has received a nice boost off multi-month lows on the back of renewed broad based US Dollar declines and some better data out of Australia, the currency is still finding offers into rallies, as this downside risk associated with China is expected to weigh on the correlated currency. As far as the calendar goes for the remainder of the day, we get US data that includes GDP, trade, and new home sales. Fed Powell is also on the calendar late in the day.

USDCAD – technical overview

The market has been consistently sold into rallies since topping out in June, which could still invite a deeper decline before the next upside extension gets underway. Still, look for any weakness to be well supported, with only a break back below 1.2700 to negate the bigger picture constructive outlook.

• R2 1.3387 – 27Jun/2018 high – Strong
• R1 1.3329 - 27Nov high – Medium
• S1 1.3200 – Figure– Medium
• S2 1.3128 – 16Nov low – Strong

USDCAD – fundamental overview

The price of OIL has fallen some 35% after rallying to its highest levels since 2014 back in October. This has weighed on the Loonie quite a bit, though the Canadian Dollar did get some relief from last Friday's hotter Canada inflation readings and solid Canada retail sales showing. Setbacks in the Loonie have also been contained given offsetting broad based US Dollar bearish flow in the market, on the back of less hawkish Fed speak and reports the Fed may be considering a pause. Looking ahead, there is no data on the Canada docket on Monday. US releases feature GDP, trade, and new home sales. Fed Powell is also on the calendar late in the day.

NZDUSD – technical overview

The market has been in the process of recovering out from +2.5 year lows and is looking to extend the correction following the latest break back above consolidation resistance around 0.6725. This sets the stage for a push that could extend back towards the psychological barrier at 0.7000 before the market considers the legitimacy of the recovery and prospect for a more significant bullish structural shift or bearish resumption.

• R2 0.6884 – 16Nov high – Strong
• R1 0.6821 – 23Nov high – Medium
• S1 0.6752 – 14Nov low – Medium
• S2 0.6707 – 12Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been supported this week, despite softer local data, with the demand coming from renewed bids in US equities, which have helped to prop the correlated commodity currency. We've also seen some Wednesday demand after the RBNZ announced it would be loosening its mortgage lending restrictions in 2019, which could be eased further over the next few years if bank lending standards were maintained. Still, with the US administration looking fully prepared to march ahead with additional tariffs on China, the risk of deterioration in global sentiment runs high, which should weigh on the correlated Kiwi into rallies. As far as the calendar goes for the remainder of the day, we get US releases that feature GDP, trade, and new home sales. Fed Powell is also on the calendar late in the day.

US SPX 500 – technical overview

A market that has been extended on the monthly chart is at risk for a major correction, with the possibility for a massive topping formation. Any rallies should now continue to be very well capped ahead of 3000, in favour of renewed weakness back below the 2530 area yearly low (neckline) and towards a retest of strong longer-term resistance turned support in the form of the 2015 high at 2140. Only a weekly close above 3000 would negate the outlook.

• R2 2824 – 17Oct high – Strong
• R1 2700 – Figure – Medium
• S1 2603 – 29Oct low – Strong
• S2 2594 – 3May low – Medium

US SPX 500 – fundamental overview

Investor immunity to downside risk is not as strong these days. The combination of Fed policy normalisation, US protectionism, ongoing White House drama and geopolitical tension are all warning of capitulation ahead, despite this latest run to record highs. The Fed has also finally acknowledged inflation no longer running below target in 2018, something that could very well result in even less attractive equity market valuations given the implication on rates. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as this could be something that inspires a more aggressive decline in the fourth quarter.

GOLD (SPOT) – technical overview

The market has been showing signs of wanting to turn back up after establishing back above the daily Ichimoku chart. There are also signs that we could be seeing the formation of a more significant medium to longer-term structural shift that would be confirmed if this latest recovery can extend back through big resistance in the form of the 2016 high at 1375. Look for setbacks to be well supported ahead of 1200, with only a close back below 1150 to compromise the constructive outlook. A daily close above 1250 will strengthen the outlook.

• R2 1266 – 9Jul high – Strong
• R1 1244 – 26Oct high – Medium
• S1 1196 – 13Nov low – Medium
• S2 1160 – 16Aug/2018 low  – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and trade war threats. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

BTCUSD – technical overview

An extended period of range contraction has come to an end, with the market breaking down below the apex of a massive triangle formation in 2018. The decline has resulted in fresh yearly lows and warns of a deeper setbacks that could accelerate to the September 2017 low at 2,975. At this stage, it would take a break back above the October peak around 7,700 to take the pressure off the downside. However, daily studies are violently extended and a period of correction or consolidation is expected before the market extends lower towards that September 2017 low. Rallies should be well capped below 6,000.

• R2 5,740 – 18Nov high – Strong
• R1 4,780 – 21Nov high – Medium
• S1 3,655– 25Nov/2018 low –Medium
• S2 3,500 – Psychological  – Strong

BTCUSD – fundamental overview

Bitcoin is facing intense headwinds from broader risk liquidation themes and has sunk to fresh 2018 lows. The cryptocurrency has already been struggling to find its place in 2018, with the decentralised technology space still very young and yet to fully prove concept. The current backdrop of global sentiment deterioration only makes things more challenging in the space and we are seeing investors head for the exits as a result. This could open a bigger drop below $3,000 before the market looks for stability. Still, overall, the cryptocurrency and the technology it rests on continue to show a lot of potential looking out and we expect the market will regain composure once this sell-off plays out.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market remains under pressure in 2018, extending its run of intense declines to fresh 2018 lows into the 100 area. Medium term studies are however stretched, which could warn of the start to a correction. Still, it would take a break back above 200 right now to take the pressure off the downside. The next major downside extension target comes in at a 75, a measured move extension target following a recent $90 consolidation between 165 and 255.

• R2 155 – 20Nov high – Strong
• R1 142 – 21Nov high – Medium
• S1 103 – 25Nov/2018 low – Medium
• S2 75 – Measured Move  – Strong

ETHUSD – fundamental overview

Overall, we've seen quite a bit of weakness in the price of Ether in 2018 and there's still legitimate risk for deeper setbacks below $100, given technical hurdles within the protocol, ongoing regulatory challenges and a global macro backdrop exposing risk correlated projects on the Ethereum blockchain. Monetary policy normalisations around the globe and an anticipated reduction in global risk appetite are placing a tremendous strain on ERC20 projects that have yet to even produce proper use cases and proof of concept. At the same time, longer term prospects are looking quite bright and we expect significant demand will emerge well ahead of $50.