Brexit, US-China Trade, FOMC Decision

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 1.3000 helps to strengthen the bullish prospect. Next short-term resistance is up at 1.3175.

• R2 1.3258 – 12Oct high – Strong
• R1 1.3219 – 25Jan high – Medium
• S1 1.3057 – 29Jan low – Medium
• S2 1.2944 – 23Jan low  – Strong

GBPUSD – fundamental overview

A victory for Theresa May in parliament, with the PM heading back to negotiate with the EU, to see if she can get those further assurances on the Irish backstop. But in reality, we don’t think much has changed, as we were always in a place where the PM would likely get the support needed if further assurances on the backstop were guaranteed. The move has us still waiting to see if these assurances can be given. The trouble is, the EU hasn’t been prepared to make such assurances and it begs the question what actually might change now. However, as we’ve been highlighting, it does appear as though the worst case scenario of a no-deal Brexit is increasingly unlikely and if the PM can’t make any progress, a delay in the triggering of Article 50 could be what lies ahead. The market will continue to digest headlines in the aftermath of this vote, while also positioning for the always anticipated FOMC event risk. On the data front, we get UK consumer credit and net lending, followed up with US ADP employment and pending home sales.

GBPUSD – Technical charts in detail

USDJPY – technical overview

The major pair is in the process of consolidating the latest round of declines within a bigger picture downtrend. 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 110.48 – 31Dec high  – Strong
• R1 110.01 – 23Jan high – Medium
• S1 109.06 – 18Jan low – Strong
• S2 107.77 – 10Jan low – Medium

USDJPY – fundamental overview

The Yen isn’t accustomed to reacting to Japanese data and today has been no exception after Japan retail sales came in above forecast. The major pair will continue to track along with risk sentiment. After benefiting from a healthy rebound in stocks this month, the market could be getting ready to roll back over again. We don’t see equities holding up in the aftermath of the end of the US government shutdown and continue to see risk assets exposed to the realities of exhausted monetary policy and government stimulus post 2008 financial markets crisis. Looking ahead, the FOMC decision is the big risk for the day, though the market will also be monitoring the US-China trade talks and any additional headlines out from the Brexit front, as they relate to global sentiment. On the data front, we get US ADP employment and pending home sales.

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 – Strong
• R1 1.1400 – Figure – Medium
• S1 1.1200 – Psychological – 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 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 0.7236 – 11Jan high – Strong
• R1 0.7205 – 28Jan – Medium
• S1 0.7138 – 29Jan low – Medium
• S2 0.7076 – 25Jan low – Strong

AUDUSD – fundamental overview

RBA Harper had provided some support for Aussie early this week when he talked about the next rate move being a hike. The central banker got some more confirmation of this outlook earlier today, with Aussie CPI coming in well above forecast. This has resulted in some early outperformance in the Australian Dollar. Overall, the Australian Dollar continues to hold up well into dips, with the currency also getting some help from a wave of renewed US Dollar selling on the back of a repricing of Fed expectations and soft Dollar US administration trade policy. Still, we continue to see risk assets vulnerable to these realities, which could offset Aussie demand from US Dollar selling. Looking ahead, the market will be focused on the headlines out from the US-China trade talk front, while also getting set for the FOMC policy decision. On the data front, we get US ADP employment and pending home sales.

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 1.3376– 24Jan high – Strong
• R1 1.3286 – 28Jan high – Medium
• S1 1.3204 – 28Jan low – Medium
• S2 1.3181 – 9Jan low – Strong

USDCAD – fundamental overview

The Loonie has put in an impressive recovery run off the 2018 low against the Buck, getting a big boost from a recovery in the price of OIL, a more balanced Bank of Canada outlook and renewed selling of the US Dollar on the back of a repricing of Fed expectations and soft Dollar US administration trade policy. At the same time, these same drivers have the ability to offset Loonie demand, if accompanied by a selloff in global equities. Looking at today’s calendar, absence of first tier data out of Canada will leave the market focused on OIL prices, US-China trade talks, US ADP employment, pending home sales and the highly anticipated FOMC event risk.

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 0.6881 – 18Dec high – Strong
• R1 0.6873– 28Jan high – Medium
• S1 0.6816 – 29Jan low – Medium
• S2 0.6743 – 23Jan low – Strong

NZDUSD – fundamental overview

Cross related demand for Aussie has prevented the New Zealand Dollar from a bigger rally on Wednesday, though Kiwi has managed to trade higher against the Buck. The source of the cross related flow comes from a hotter than expected Aussie CPI reading that has fueled Aussie demand. But overall, the New Zealand Dollar has been holding up well in recent weeks, despite risk off themes in the air. A lot of this demand has come from a rebound in equities and renewed broad based selling of the US Dollar on a repricing of Fed expectations. Still, Kiwi faces headwinds from risk off flow, which we see as a distinct possibility, with risk assets vulnerable to the realities of exhausted monetary policy accommodation and government stimulus post 2008 crisis. Risk assets will be a lot more vulnerable if trade talks between the US and China deteriorate. Looking ahead, the market will be focused on the headlines out from the US-China trade talk front, while also getting set for the FOMC policy decision. On the data front, we get US ADP employment and pending home sales.

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 – 12Dec high – Strong
• R1 2676 – 18Jan high – Medium
• S1 2613 – 23Jan low – Medium
• S2 2560 – 10Jan 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. The latest push through 1300 strengthens the outlook.

• R2 1375– 2016 high – Very Strong
• R1 1326– 11May high – Strong
• S1 1277 – 4Jan low – Medium
• S2 1233 – 14Dec 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

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 – 29Nov high – Strong
• R1 4,380 – 24Dec high – Strong
• S1 3,400– Round number –Medium
• S2 3,212 – 15Dec/2018 low  – 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 – Psychological – Medium
• R1 167 – Previous Support – Strong
• S1 100 – Psychological – Medium
• S2 83 – 7Dec/2018 low  – 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 between $50 and $100.