Brexit headlines work back into the spotlight

GBPUSD – technical overview

We 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 and recover back through the September 2018 peak at 1.3300. The recent break back above short-term resistance at 1.2815 helps to strengthen the bullish prospect. Next short-term resistance is up at 1.2928.

• R2 1.2928 â€“ 22Nov high – Strong
• R1 1.2866 â€“11Jan high – Medium
• S1 1.2800 â€“ Figure – Medium
• S2 1.2707 â€“ 8Jan low  â€“ Strong

GBPUSD – fundamental overview

We’re into what could be a volatile week for the Pound as it gets ready to take in the next steps with respect to the Brexit process. The PM is still pushing hard to make a deal work when voted on Tuesday, with Theresa May reportedly more likely to block Brexit from happening if her deal is voted down, rather than to allow a disorderly no deal Brexit which by most accounts would be disastrous. If the deal is voted down, there will be another vote next week on the PM’s plan B. Many are now expecting a delayed Brexit out to July, though the Labour leader has said he would be tabling a vote of no confidence if May’s deal does not go through. There is no economic data on the Monday calendar.

GBPUSD – Technical charts in detail

USDJPY – technical overview

Setbacks have intensified as the market continues to confirm the bearish outlook since stalling out above 114.00 in early October. Look for any recovery rallies to be well capped ahead of 111.00 in favour of the next major downside extension below the 104.63, 2018 low. This would expose a very important psychological barrier at 100.00 further down.

• R2 109.73 â€“ 2Jan high  – Strong
• R1 109.09 â€“ 8Jan high – Medium
• S1 107.52 â€“ 4Jan low – Strong
• S2 107.00 â€“ Figure – Medium

USDJPY – fundamental overview

Japan was out on holiday Monday, making for some thinner trade. Overall, optimism around the latest trade talks between the US and China have faded after nothing came of last week’s meet, while investors are not getting the follow through in stocks they might have wanted to see after last week’s Fed Minutes and subsequent Fed speak confirmed the Fed’s reconsideration of policy. Meanwhile, evidence of a slowdown in China continues to present,as reflected in the economic data. All of this warns of additional Yen demand on traditional correlations, something that was recently echoed by former senior BOJ official Kazuo Momma, who said ‘there’s a good chance the Yen will strengthen to 100 against the Dollar in the coming months. Looking ahead, Monday’s economic calendar is empty.

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 1.1185 would be quite bearish.

• R2 1.1435– 16Nov high â€“ Strong
• R1 1.1359 â€“ 22Nov high – Medium
• S1 1.1200 â€“ Psychological – Medium
• S2 1.1185– 7Sep/2018 low â€“ 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 in 2019, 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 the recent breakdown below the 2016 low, inability to establish below that low (around 0.6825), will keep the market from wanting to get overly bearish and could even warn of some form of a longer-term base. However, a drop back below the 2016 low again, would expose deeper setbacks towards the 2008 low around 0.6000. As far as the topside goes,the market would need to break back above 0.7400 to force a bullish shift in the structure.

• R2 0.7300 â€“ Figure – Medium
• R1 0.7247 â€“ 13Dec high – Strong
• S1 0.7147 â€“ 10Jan low â€“ Medium
• S2 0.7110 â€“ 7Jan low â€“ Strong

AUDUSD – fundamental overview

Aussie has held up quite well into dips, with most of the demand coming from a broad based liquidation in USD longs. A possible Fed pause, ongoing drama at the White House and worry about US administration protectionism are all USD bearish drivers, while some better than expected data out of Australia last week has also helped to prop the commodity currency. Still, a concurrent round of selling in global equities and deterioration in risk sentiment are expected to keep Aussie from running up too much, especially with a lot of this risk off flow coming from worry around the outlook from China, in light of global trade and a round of softer economic data, mostly recently in the form of trade. There is no data of note for the remainder of the day.

USDCAD – technical overview

A period of intense correction has kicked in after a run to its highest levels since May 2017. Overall, the structure remains constructive, with dips expected to be well supported ahead of 1.3000 for renewed upside. Only back below the psychological barrier would compromise this view.

• R2 1.3390– 7Jan high â€“ Strong
• R1 1.3323 â€“ 8Jan high – Medium
• S1 1.3180 â€“ 9Jan low – Medium
• S2 1.3161 â€“ 3Dec low â€“ Strong

USDCAD – fundamental overview

The Bank of Canada was out last week leaving rates on hold, while citing the impact of lower oil. Still, the central bank balanced things out, with its expressed view that a slowdown in economic activity was expected to be temporary. Oil’s recovery from the dump we had seen in recent weeks has helped to reinforce the BoC’s view. Meanwhile, broad based selling of the US Dollar has been another major contributing factor to the recent run of Loonie gains. The US Dollar has been sold on a combination of factors that include a less hawkish Fed, the US government impasse and soft Dollar US protectionism. There is no economic data of note out on Monday.

NZDUSD – technical overview

While the bigger picture outlook still shows the market in a downtrend, as per the weekly chart, there’s a case to be made for a meaningful low in place at 0.6425. As such, look for the latest setbacks to be well supported ahead of 0.6500 in anticipation of additional upside, with only a break back below 0.6500 to put the focus back on the multi-month low from October at 0.6425. A break back above 0.6970 will strengthen the constructive outlook.

• R2 0.6880 â€“ 18Dec high – Strong
• R1 0.6850– Mid-Figure – Medium
• S1 0.6708 â€“ 8Jan low â€“ Medium
• S2 0.6672 â€“ 4Jan low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar held up relatively well in recent weeks. The commodity currency is benefitting from a less hawkish Fed outlook, ongoing White House drama, and soft Dollar protectionist US administration policy. It’s also worth noting the most recent positive GDT auction result, something that gives the New Zealand Dollar another reason to be feeling good. Still, risk liquidation themes are a concern to a risk correlated commodity currency and after nothing has come of the latest US-China trade talks and China economic data has been soft (see latest trade data), offsetting bearish flow is to be expected. There is no economic data of note out on Monday.

US SPX 500 – technical overview

There have been legitimate signs of a major longer term top, with deeper setbacks projected in the months ahead. Any rallies should now continue to be very well capped ahead of 2800, in favour of renewed weakness that targets an eventual retest of strong longer-term resistance turned support in the form of the 2015 high at 2140. The projection is based off a measured move extension derived from the previous 2018 low from February to the record high move.

• R2 2688 â€“ 12Oct high â€“ Strong
• R1 2600 â€“ 10Jan high – Medium
• S1 2437 â€“ 4Jan low â€“ Medium
• S2 2339 â€“ 24Dec/2018 low – Strong

US SPX 500 – fundamental overview

Investor immunity to downside risk is not as strong into 2019. The lag effect of Fed policy normalisation, US protectionism, ongoing White House drama and geopolitical tension are all warning of deeper setbacks ahead. The Fed has also finally acknowledged inflation no longer running below target, something that could very well result in even less attractive equity market valuations this year, given the implication on rates. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that will continue to stress the market in 2019.

GOLD (SPOT) – technical overview

There are 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 1200 to compromise the constructive outlook. Next key resistance comes in at the 1300 psychological barrier.

• R2 1310 â€“ 14Jun high – Strong
• R1 1300– Psychological – Medium
• S1 1276 â€“ 4Jan low â€“ Medium
• S2 1233 â€“ 14Dec low â€“ 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

At this stage, any upside moves are classified as corrective ahead of what could be the next downside extension and bearish continuation. It would take a break back above previous support in the 6,000 area to take the pressure off the downside. Next critical support comes in the form of the July and September 2017 lows, around 2,000 and 2,975 respectively.

• R2 4,480 â€“ 29Nov high – Strong
• R1 4,380 â€“ 24Dec high – Strong
• S1 3,545– 18Dec low –Medium
• S2 3,212 â€“ 15Dec/2018 low  â€“ Strong

BTCUSD – fundamental overview

Bitcoin has just gone through a tough 2018, with the cryptocurrency suffering on a number of fronts. 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 over the medium to longer term.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

The latest recovery rally has stalled out into a meaningful previous support zone, to keep the pressure on the downside, with risk for a bearish continuation to next critical support in the 50-75 area. At this point, it would take a sustained break back above 167 to take the immediate pressure off the downside.

• R2 200 â€“ Psychological – Medium
• R1 167 â€“ Previous Support – Strong
• S1 116 â€“ 14Jan low â€“ Medium
• S2 83 â€“ 7Dec/2018 low  â€“ Strong

ETHUSD – fundamental overview

We’re coming off a year of dramatic weakness in the price of Ether in 2018 and the cryptocurrency continues to face headwinds into 2019. Ongoing regulatory challenges and a global economic downturn are some of those headwinds that need to be considered. At the same time, longer term prospects are looking quite bright and valuations are increasingly attractive. There is a lot of demand for Ether that has been reported below 100 and ahead of 50.