Looking Ahead to A Stacked First Week of December

GBPUSD – technical overview

The market continues to show signs of topping off the 2015 peak at 1.5930, putting in a series of lower tops. The latest topside failure has stalled ahead of 1.5400 with a fresh lower top sought at 1.5336 ahead of the next major downside extension below critical psychological barriers at 1.5000 and towards medium-term support in the form of the 2015 low at 1.4566. At this point, look for intraday rallies to be well capped ahead of 1.5300.

• R2 1.5196 – 23Nov high – Strong
• R1 1.5156 – 24Nov high – Medium
• S1 1.5054 – 24Nov low  – Medium
• S2 1.5000 – Psychological – Strong

GBPUSD – fundamental overview

The market has been trading on lower volume into the end of week, with a quiet economic calendar and US Thanksgiving holiday inspiring the lack of volatility. Still, the Pound remains under pressure against the Buck, with this week’s dovish comments from BOE Carney and Haldane weighing on GBP sentiment. It seems the Bank of England is in no rush to think about raising rates despite the impending US rate rise, and this had fueled some GBP underperformance. Looking ahead, more thin trade is to be expected on Friday, though the market will have some data to chew on, in the form of the second estimate of Q3 UK GDP.

USDJPY – technical overview

A period of multi-week consolidation has finally been broken, with the market clearing key resistance at 121.74 and surging into the mid-123.00s thus far. However, gains have stalled out for now around the 78.6% fib retrace off of the yearly high to August low move, and the market will need to establish a daily close above 123.61 to strengthen the case for a more meaningful bullish resumption and full retracement back to the 125.85 peak. Inability to establish above 123.61 could open the door for the formation of a lower top and renewed downside pressure. A daily close below 122.00 will strengthen this prospect.

• R2 123.76 – 18Nov high – Medium
• R1 122.96 – 24Nov high – Strong
• S1 122.23 – 16Nov low – Strong
• S2 121.63 – 6Nov low – Medium

USDJPY – fundamental overview

The major pair remains confined to tight trade in thin conditions brought on by a light economic calendar and US Thanksgiving holiday. Overall, there seems to be a bit of a battle going on at current levels, with the US Dollar supported on yield differential flows, as the Fed prepares to hike, while the Yen finds offsetting demand and flight to safety flow. Interestingly enough, the release of softer than expected Japan inflation data hasn’t done much to weigh on the Yen, with the market unwilling to commit in any direction just yet. Dealers do however cite plenty of sell-stops below 122.20 and 122.00.

EURCHF – technical overview

The market has entered a period of multi-week consolidation following an impressive recovery earlier in the year. At this point, the recovery structure remains intact, with only a break back below 1.0714 to compromise. As such, look for setbacks to continue to be well supported ahead of 1.0714 in favour of the next major upside extension through 1.1050 and towards 1.1200 further up.

• R2 1.1050 – 11Sep high – Strong
• R1 1.0900 – 19Nov high – Medium
• S1 1.0755 – 12Nov low – Medium
• S2 1.0714 – 19Aug low – Strong

EURCHF – fundamental overview

The SNB continues to advertise its strategy of weakening the Franc, with SNB Maechler out last week saying “the Swiss National Bank has an eye on the actions of euro-area policy makers and will keep all options open in its bid to combat the strong franc.” SNB Jordan has also reminded the market this month that the central bank remains committed to a policy directed at weakening an overvalued local currency. Thus overall, despite ECB dovishness, setbacks in the EURCHF rate have been well supported, with the market choosing to prioritize the SNB’s policy commitment. Dealers do however cite decent sell-stops below 1.0700 and if this level is taken out, it could open the door for an intense acceleration of declines.

AUDUSD – technical overview

The market continues to show signs of topping out in favour of a resumption of the broader underlying downtrend, with a fresh medium-term lower top sought out at the recent 0.7382 high. Intraday rallies should continue to be well capped, with deeper setbacks projected in the sessions ahead back towards the recent multi-year base just shy of 0.6900. At this point, only a daily close back above 0.7400 would threaten the bearish outlook.

• R2 0.7382 – 12Oct high – Strong
• R1 0.7283 – 25Nov high – Medium
• S1 0.7159 – 23Nov low – Medium
• S2 0.7102 – 19Nov low – Strong

AUDUSD – fundamental overview

While the latest round of Aussie Q3 capex data came in much weaker than expected and has weighed on the Australian Dollar over the past few sessions, comments from RBA Stevens hinting the RBA will remain on hold when it meets next Tuesday, have kept Aussie somewhat supported. Still, the capex debacle has created a good deal of worry this week and could contribute to a more dovish RBA tone.

USDCAD – technical overview

The market is focused back on the topside after recently being well supported in the 1.2800 area, with the latest recovery strengthening the case for a bullish continuation to fresh multi-year highs beyond the recent 11-year peak from September at 1.3457. Any setbacks from here should ideally be propped above 1.3000 on a daily close basis, though ultimately, only a break below 1.2800 would force a shift in the constructive outlook.

• R2 1.3457 – 29Sep/2015 high – Strong
• R1 1.3378 – 24Nov high – Medium
• S1 1.3247 – 19Nov low – Medium
• S2 1.3225 – 12Nov low – Strong

USDCAD – fundamental overview

The Canadian Dollar came back under some pressure in a very light Thursday session brought on by the US Thanksgiving holiday and lack of data out of Canada. Still, the pullback in OIL prices was enough to influence direction, with the correlated Loonie dropping back towards its recent 11-year low from September. Looking ahead, today’s calendar features second-tier Canada data in the form of industrial product and raw materials prices. But with the US still mostly out for holiday, the focus will quickly shift to next week’s Bank of Canada decision and US NFPs.

NZDUSD – technical overview

The impressive rally out from recent multi-year lows has finally stalled out after being well capped ahead of 0.6900. From here, look for the formation of a meaningful lower top, in favour of an acceleration to the downside and bearish resumption to fresh multi-year lows. Ultimately, only a daily close above 0.7000 will negate and potentially force a shift in the structure.

• R2 0.6625 – 6Nov high– Strong
• R1 0.6606 – 20Nov high – Medium
• S1 0.6493 – 23Nov low – Medium
• S2 0.6465 – 19Nov low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been benefitting in recent trade from a round of profit taking on long US Dollar positions in light end of week trade, and some cross related demand after Aussie capex came in much weaker than expected this week. Still, gains have been tempered by the more prominent theme of monetary policy divergence, with the Fed on the verge of raising rates in December, while the RBNZ could very well move in the opposite direction with another rate cut. Looking ahead, not much is to be expected on Friday, with most US market participants out on holiday and the economic calendar exceptionally thin. The focus will shift to next week’s end of month flows and US NFPs.

US SPX 500 – technical overview

Signs of potential exhaustion following an impressive recovery rally off the August lows. The market has stalled out above 2100, shy of the 2137 record peak from earlier this year, with the latest break back below 2070 strengthening the case for some form of a lower top and additional setbacks ahead. Look for a daily close below 2000 to confirm and accelerate, while back above 2117 negates and exposes a direct retest of the record high.

• R2 2117.00 – 3Nov high – Strong
• R1 2104.00 – 9Nov high – Medium
• S1 2068.00 – 24Nov low – Medium
• S2 2003.00 – 16Nov low – Strong

US SPX 500 – fundamental overview

US equities have once again managed to mount an impressive recovery, with this market seemingly supported at every turn. Solid US economic data and hawkish Fed commentary solidifying prospects for a December rate hike have failed to have any meaningful impact on the market. The price action is somewhat perplexing given the negative risk implication of higher rates in the US, though it seems market participants are finding comfort in the fact that the Fed has made it abundantly clear its path to normalisation will be painfully slow and gradual. Not much expected in the way of movement on Friday, with most of the US market still out for the Thanksgiving holiday.

GOLD (SPOT) – technical overview

The market has come back under intensified pressure over the past several days, with the recent break below 1100 opening an acceleration to fresh yearly and multi-year lows. However, daily studies are looking stretched and the market could be poised for a corrective bounce in the sessions ahead. Still, the market will need to establish back above 1100 to take the immediate pressure off the downside. A daily close below 1050 would expose deeper setbacks towards major psychological barriers at 1000.

• R2 1112.00 – 5Nov high – Strong
• R1 1098.00 – 16Nov high – Medium
• S1 1065.00 – 18Nov/2015 low – Medium
• S2 1000.00 – Psychological – Very Strong

GOLD (SPOT) – fundamental overview

GOLD has come back under intense pressure in recent days, dropping to fresh multi-year lows, as the market ramps up expectations for a December Fed liftoff and more aggressively buys US Dollars. Still, despite the US Dollar demand, GOLD is expected to find solid support into this latest dip, given the struggling global economy and uncertainty in the air, particularly now that accommodative central bank policies are so extended and additional stimulatory options are limited. Longer term macro players have also been accumulating the metal as a hedge against an overinflated equity market that could be on the verge of a major capitulation. Dealers cite sell-stops below 1050 and buy stops above 1100.

Feature – technical overview

USDZAR has broken to yet another fresh record high, with the market taking out the previous September peak, opening the door for the next major upside extension. From here, look for the rally to extend towards psychological barriers at 14.5000 in the sessions ahead, while any setbacks should be very well supported ahead of 13.5000. Ultimately however, only back below 13.0120 would negate the highly constructive outlook.

• R2 15.0000 – Psychological – Strong
• R1 14.4415 –16Nov/Record – Strong
• S1 13.8920 – 20Nov low – Medium
• S2 13.8620 – 5Nov low – Strong

Feature – fundamental overview

Last week’s surprise move from the SARB to raise rates may have helped the Rand temporarily recover from record lows, though ultimately, it is going to take a lot more from the SARB and local economy if the currency wants to truly avoid further declines. The combination of rising South African inflation, with a struggling economy, declining commodities prices and Federal Reserve on the verge of raising rates, is not a pretty combination for the Rand, and this should continue to pressure the emerging market currency, despite the latest tightening. Certainly, this week’s softer than expected South African GDP and hotter PPI have done nothing to help the Rand’s cause. While hotter inflation could be supportive of a currency on tighter policy implications, it can also be currency bearish when the central bank doesn’t have the luxury of offsetting inflation with a rate hike, when policy is already tight and the local economy is struggling.