Back Into the Swing

GBPUSD – technical overview

The recent topside failure ahead of 1.2800 was a significant development as it confirmed the rebound from the +30 year low only corrective and kept the overall pressure on the downside. This has now opened a break back below internal support at 1.2300 which could pave the way for a retest of that 1.1840 critical base from October. Only back above 1.2800 forces a shift in the structure.

• R2 1.2500 – Psychological – Strong
• R1 1.2388 – 30Dec high – Medium
• S1 1.2201 – 28Dec low – Medium
• S2 1.2082 – 25Oct low – Strong

GBPUSD – fundamental overview

Fed policy divergence and fear over a hard Brexit are the things that have been weighing on the Pound into 2017 and should continue to do so in the lead up to the March Article 50 trigger date. In the interim, the market will start to focus back on the economic data. Today, we get UK manufacturing PMIs, US construction spending and US IS manufacturing.

USDJPY – technical overview

The major pair has seen an intense bullish shift in recent days, with the most recent break above 110.00 exposing fresh upside towards next meaningful resistance in the 120.00 area. However, daily studies are looking stretched which suggests that additional upside could be limited in favour of a more significant healthy corrective pullback. But ultimately, any setbacks are expected to be well supported above previous resistance at 110.00.

• R2 118.67 – 15Dec high – Strong
• R1 118.00 – Figure – Medium
• S1 116.04 – 30Dec low – Medium
• S2 114.74 – 13Dec high – Strong

USDJPY – fundamental overview

Lighter trade for this major pair on Tuesday with Japan still out for the New Year holiday. Overall, the Yen remains under pressure on Fed policy divergence and an ongoing bid for global equities which is supportive of the risk correlated USDJPY. Dealers have been talking about a lot of demand with many buy siders targeting a quick move through 120.00 in early 2017. Looking ahead, US construction spending and ISM manufacturing stand out.

EURCHF – technical overview

A recent close below 1.0800 which had been defined as the bottom of a multi-week range strengthens the bearish outlook and opens the door for an acceleration of declines towards the 2016 low at 1.0624. At this point, a daily close back above 1.0900 would be required to take the immediate pressure off the downside and suggest the market is once again looking settle back into the previous range.

• R2 1.0900 – 8Dec high – Strong
• R1 1.0799 – 9Dec high – Strong
• S1 1.0650 – Mid-Figure – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB has unquestionably had a challenging time of late, with the central bank forced to contend with an ongoing wave of demand for the Swiss Franc. The central bank has been committed to its mandate of ensuring the Franc does not appreciate further through monetary policy and intervention tools. Though despite all efforts, the Franc continues to want to appreciate against the Euro. It seems the strategy has been to buy Euro when risk comes off and to do nothing when risk is back on and natural flows should be CHF bearish. But the trouble is, with risk on and global equities elevated, the Franc is still not depreciating as much as the SNB would probably like to see and if global risk sentiment deteriorates, it could invite a massive wave of demand for the Franc that the SNB will be unable to offset.

AUDUSD – technical overview

The latest break below 0.7400 is a significant development and now opens the door for deeper setbacks towards next key support at 0.7145. At this point, look for any rallies to be well capped ahead of 0.7500. Only back above 0.7525 delays the bearish outlook.

• R2 0.7313 – 19Dec high – Strong
• R1 0.7247 – 30Dec high– Medium
• S1 0.7160 – 26Dec low – Medium
• S2 0.7145 – 24May low – Strong

AUDUSD – fundamental overview

The beleaguered Australian Dollar has been better bid into 2017, with the currency benefitting from a solid bout of early Tuesday data in the form of manufacturing prints out of both Australian and China. Overall however, this is a currency with limited upside prospects given all of the global uncertainty and Fed policy divergence. Looking ahead, US construction spending and US ISM manufacturing are the key standouts.

USDCAD – technical overview

This market looks to be in the process of carving out a longer-term base off the 1.2461, 2016 low. Look for any additional weakness to be supported well ahead of 1.3081 in favour of the next major upside extension towards a measured move objective into the 1.4000 area. Ultimately, only back below 1.3081 would delay the constructive outlook.

• R2 1.3599 – 28Dec high – Strong
• R1 1.3500 – Psychological – Medium
• S1 1.3385 – 2Jan low – Medium
• S2 1.3358 – 21Dec low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been under pressure for the most part with Fed policy divergence the main driver of Loonie weakness. However, the combination of a wave of broad based profit taking on US Dollar longs into 2017 and an ongoing bid for the price of OIL have helped to offset additional Loonie weakness, with the Canadian Dollar recovering. Still, any Canadian Dollar upside should be limited as the Fed policy divergence theme is ultimately expected to trump the other drivers. Looking ahead, we get Canada manufacturing PMIs, US construction spending and US ISM manufacturing.

NZDUSD – technical overview

The overall pressure has shifted back to the downside with the market now expected to be very well capped on rallies ahead of 0.7200. The recent break below 0.6972 confirms a fresh lower top at 0.7239 opening the next major downside extension towards medium-term support at 0.6676.

• R2 0.6990 – 19Dec low – Strong
• R1 0.6979 – 30Dec high – Medium
• S1 0.6862 – 26Dec low – Strong
• S2 0.6800 – Figure– Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been enjoying a nice recovery into 2017 on the back of this wave of broad based profit taking on USD longs. However, the more pressing theme of Fed policy divergence is not going to go away anytime soon and this should continue to keep the commodity currency well capped into rallies. Looking ahead, we should expect some volatility from the today’s GDT auction result, with the market also taking in US construction spending and US ISM manufacturing.

US SPX 500 – technical overview

While this latest surge back to a fresh record high could compromise what has been the possibility for a toppish structure, the risk is still tilted to the downside if the market fails to sustain gains beyond 2200 over the coming weeks. But ultimately, at this point, any topside failure will also need to be met with a break back below 2100 to once again encourage the possibility for a significant bearish structural shift. Next resistance comes in at 2300, while initial support comes in at 2180, with a break below to take the immediate pressure off the topside.

• R2 2300.00 – Psychological – Strong
• R1 2278.00 – 13Dec/Record high – Medium
• S1 2215.00 – 30Nov high – Medium
• S2 2180.00 – 5Dec low– Strong

US SPX 500 – fundamental overview

The ongoing support for US equities has been more than impressive, particularly at a time when the Fed is embarking on a more hawkish path to policy normalisation and the Trump administration could bring in policies that threaten prospects for global growth. This leaves financial markets vulnerable to any shocks and exposed to intense periods of additional risk liquidation going forward, especially at a time when monetary policy around the rest of the globe is exhausted with very little left in the tank.

GOLD (SPOT) – technical overview

Setbacks in this market have been extreme over the past few weeks, with the weakness potentially compromising any possibility for a longer term base. But the market has bounced out from critical 1120 area support in the form of a 78.6% fib retracement off of the 2015-2016 low-high move, with the hold above this level keeping the longer-term basing outlook intact. Daily studies are confirming, looking more constructive after trading into oversold territory.

• R2 1197.70 – 28Nov high – Strong
• R1 1165.90 – 12Dec high – Medium
• S1 1122.75 – 15Dec low – Medium
• S2 1120.00 – 78.6% Fib  – Strong

GOLD (SPOT) – fundamental overview

GOLD has suffered quite a blow over the past several weeks, with the yellow metal unable to ignore the intense rotation into the US Dollar. However, solid demand from medium and longer-term players continues to emerge on dips despite the setbacks, with these players more concerned about the limitations of exhausted monetary policy, extended global equities, systemic risk and a bet that record low inflation will turn up even faster in a Trump presidency. All of this will almost certainly continue to keep the commodity in demand, even if the Buck is propped, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDSGD has pushed up to a fresh 2016 high, taking this market to its highest levels since 2009. However, daily studies are starting to look a little stretched which warns additional upside could be limited for now, in favour of a healthy corrective decline. Still, any setbacks should be well supported above 1.4000 in favour of the next higher low and bullish resumption.

• R2 1.4600 – Figure – Medium
• R1 1.4536 – 28Dec/2016 high – Medium
• S1 1.4409 – 21Dec low – Medium
• S2 1.4148 – 8Dec low – Strong

Feature – fundamental overview

The Singapore Dollar is welcoming 2017 with open arms as it gets an immediate wave of relief from a much better than expected Q4 GDP reading. The strong data came from impressive manufacturing and services output components. The Singapore Dollar has also been getting an added boost on this broad based wave of profit taking on US Dollar longs. But ultimately, downside pressure on the local currency isn’t expected to fade away for any meaningful period of time as the market keeps its eye on striking monetary policy divergence with the Fed and the prospects for slower emerging market growth when the new US administration takes over.