Risk Appetite Deteriorating into Weekend

GBPUSD – technical overview

The latest breakdown below 1.2660 has opened the door for a bearish continuation that could ultimately invite a retest of the +30 year low from October 2016 at 1.1840. However, at this stage, we still view the pullback in 2018 as a correction within a developing uptrend off the 2016 low and will be looking for a higher low to carve out well ahead of 1.1840, in favour of a push back to the topside. For this to play out, the market will ideally need to hold above some meaningful support in the 1.2300s. The 78.6% fib retrace off the major 2016 high to low move, which comes in at 1.2385 is the next big level below. A break back above 1.2760 will now be required to take the immediate pressure off the downside.

• R2 1.2850 – 29Nov high – Strong
• R1 1.2760 – 10Dec high – Medium
• S1 1.2478 – 12Dec/2018 low – Medium
• S2 1.2385 – 78.6% of 2016-2018  – Strong

GBPUSD – fundamental overview

Politics aside, if there’s a good job to be awarded, it should definitely go to Theresa May for her ability to hang in these past few weeks, in the face of tremendous opposition, while contending with what many believe to be an impossible situation. The UK PM has survived a no confidence vote this week and is now hard at work, trying to get those additional reassurances needed from the EU, so that she can present a passable deal to her government. For the moment, mild optimism has worked its way back into the Pound, with the currency recovering from fresh 2018 lows against the Buck below 1.2500. Looking at the calendar, we get a batch of US data that features retail sales, industrial production and business inventories.

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 the next major downside extension towards critical support around 109.75. Ultimately, only a break back above 114.75 would negate the bearish outlook. Below 111.38 strengthens the bearish outlook.

• R2 114.22 – 12Nov high  – Strong
• R1 113.72 – 13Dec high – Medium
• S1 112.25 – 10Dec low – Medium
• S2 111.38 – 26Oct low – Strong

USDJPY – fundamental overview

The major pair is correlating with the bigger picture drivers, with US Dollar yield differentials and risk sentiment dictating the flow. Renewed downside pressure in the US equities market has been capping USDJPY in recent weeks, while an expectation the Fed could deviate from a more hawkish course in 2019 is also weighing. There has been some demand this week, as US equities attempt to recover on positive news out from the US-China trade front, though ultimately, the picture hasn't changed and the market should continue to struggle on attempts to the topside. Earlier today, the BOJ’s Tankan survey produced a weakened outlook and could be adding to Friday downside pressure as well. Looking at the calendar, we get a batch of US data that features retail sales, industrial production and business inventories.

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 1.1224 – 18Sep low– Medium
• S2 1.1185– 7Sep/2018 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

Despite shorter term setbacks, medium-term technical studies have been turning back up, with the recent 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 dips expected to be supported ahead of 0.7100 for a push to the psychological barrier at 0.7500. A drop below 0.7100 would be required to negate the bottoming outlook.

• R2 0.7394 – 4Dec high – Strong
• R1 0.7274 – 6Dec high – Medium
• S1 0.7165 – 13Nov low – Medium
• S2 0.7123 – 30Oct high – Strong

AUDUSD – fundamental overview

While the Australian Dollar has been contending with risk off flow into the end of the week, with any news of a more encouraging outlook on the US-China trade front fading into the background. The early Friday release of mostly softer than expected data out of China has soured the tone even more, with a round of profit taking kicking in as Aussie pulls back from recent recovery highs. Looking at the calendar, we get a batch of US data that features retail sales, industrial production and business inventories.

USDCAD – technical overview

The market has been consistently sold into rallies ahead of 1.3500, 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 1.3500 – Psychological – Strong
• R1 1.3445 - 6Dec/2018 high – Medium
• S1 1.3253 – 5Dec low – Medium
• S2 1.3161 – 3Dec low – Strong

USDCAD – fundamental overview

The Canadian Dollar has come under a lot of pressure over the past several weeks on the back of a massive slide in the price of OIL. The commodity has since stabilised, though the setbacks are worrying and have continued to weigh on the Loonie. Meanwhile, a deterioration in risk sentiment into the end of the week poses additional downside risk to the Loonie. There has been some renewed downside pressure in the US Dollar on the expectation the Fed will look to pause in 2019, which has mitigated the Loonie's decline somewhat. Looking ahead, absence of first tier data out of Canada on Friday leaves the focus on US releases that feature retail sales, industrial production and business inventories.

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 back above the psychological barrier at 0.7000. Look for setbacks to be supported above 0.6700 on a close basis, with only a daily close back below the figure to negate the recovery outlook.

• R2 0.7000 – Psychological – Strong
• R1 0.6970 – 4Dec high – Medium
• S1 0.6754 – 27Nov low – Medium
• S2 0.6707 – 12Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is having a tougher go of it on Friday, with the currency already hit on softer China data and a concurrent wave of risk off flow, but also contending with some Kiwi bearish news on the local front. The RBNZ has announced it is proposing to raise the amount of high quality capital that banks must hold, which could strip away 70% of the banking sector's expected profits over a 5 year transition period. Looking at the calendar, we get a batch of US data that features retail sales, industrial production and business inventories.

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 2584 – 10Dec low – Strong
• S2 2533 – 6Feb/2018 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 into 2019, 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 on the daily 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 1251 – 10Dec 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 previous support in the 6,000 area to take the pressure off the downside.

• R2 5,050 – 20Nov high – Strong
• R1 4,480 – 29Nov high – Strong
• S1 3,274– 7Dec/2018 low –Medium
• S2 2,975 – Sep 2017 low  – Very 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 below 100. 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 165 – Previous Support – Strong
• R1 128 – 28Nov high – Strong
• S1 83 – 7Dec/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.