ECB Minutes and Fed Speak

GBPUSD – technical overview

The latest round of setbacks have stalled out just shy of major psychological barriers at 1.2000 and ahead of the critical +30 year low from October 2016 at 1.1840. Wednesday’s impressive bullish outside day performance could now set the stage for a more significant corrective rally towards 1.2500. But overall, while the market holds below 1.2800, the downtrend remains firmly intact.

• R2 1.2433 – 5Jan high – Strong
• R1 1.2272 – 11Jan high – Medium
• S1 1.2107 – 10Jan low – Medium
• S2 1.2038 – 11Jan low – Strong

GBPUSD – fundamental overview

Wednesday was a wild day for the Pound which initially came crashing down on discouraging UK trade data and pre-Trump enthusiasm, before reversing course sharply after the President-elect’s press conference. Trump’s failure to make and mention of taxes, deregulation or fiscal stimulus was the driving force behind the Pound’s jump into the end of the day as many Dollar bulls reconsidered long exposure and the Trump trade. Still, with the Brexit overhang not going away, it seems any upside could continue to be met with formidable sell interest. Looking ahead, we get US initial jobless claims and a wave of Fed speak featuring Harker, Evans, Lockhart, Bullard, Kaplan and Yellen.

USDJPY – technical overview

Daily studies are now unwinding from stretched levels which suggests additional upside could be limited in favour of a more significant healthy corrective pullback. The recent bearish break below 116.00 confirms and could open a deeper drop towards 112.00. But ultimately, any setbacks are expected to be well supported ahead of 110.00 in favour of that next higher low and bullish resumption towards 120.00.

• R2 116.87 – 11Jan high – Strong
• R1 115.51 – 12Jan high – Medium
• S1 114.24 – 6Jan low – Medium
• S2 112.87 – 5Dec low – Strong

USDJPY – fundamental overview

The major pair continues to extend its correction lower into Thursday, with this latest round of setbacks coming from broad based US Dollar selling in the aftermath of the President-elect’s press conference. Trump’s failure to talk about taxes, deregulation and fiscal stimulus was a major let down for Dollar bulls, opening the door for some players to reconsider their long US Dollar exposure. Looking ahead, we get US initial jobless claims and a wave of Fed speak featuring Harker, Evans, Lockhart, Bullard, Kaplan and Yellen.

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 market has entered a healthy corrective phase after setbacks stalled shy of key medium-term support at 0.7145 in late December. Still, overall, the broader downtrend remains intact, with only a break and daily close back above 0.7525 to compromise this outlook. Look for a fresh lower top over the coming sessions ahead of renewed downside.

• R2 0.7525 – 14Dec high – Strong
• R1 0.7500 – Psychological– Medium
• S1 0.7430 – 12Jan low – Medium
• S2 0.7353 – 11Jan low – Strong

AUDUSD – fundamental overview

The Australian Dollar was a big winner in Wednesday trade, outperforming across the board on impressive performance in the base metals. Of course, the commodity currency also got a major lift from the broad based wave of US Dollar selling after Trump let USD bulls down in his press conference, failing to touch on some of the major campaign topics of taxes, deregulation or fiscal stimulus. Looking ahead, we get US initial jobless claims and a wave of Fed speak featuring Harker, Evans, Lockhart, Bullard, Kaplan and Yellen.

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 above 1.3081 in favour of the next major upside extension towards a measured move objective into the 1.4000 area. Ultimately, only a daily close back below 1.3081 would delay the constructive outlook.

• R2 1.3295 – 11Jan high – Strong
• R1 1.3186 – 12Jan high – Medium
• S1 1.3100 – Figure – Medium
• S2 1.3081 – 14Dec low – Strong

USDCAD – fundamental overview

The latest recovery in the price of OIL certainly has been a big help to the Canadian Dollar, with the Loonie rallying back towards its December high against the Buck. Of course, the broad based selling in the US Dollar post Trump presser has also contributed to Canadian Dollar gains. Looking ahead, we get some Canada housing data, US initial jobless claims and wave of Fed speak from Harker, Evans, Lockhart, Bullard, Kaplan and Yellen.

NZDUSD – technical overview

Despite this latest correction, the overall pressure remains on the downside with the market expected to be very well capped on rallies ahead of 0.7200. A recent break below 0.6972 confirms a lower top at 0.7239, opening the next major downside extension towards medium-term support at 0.6676.

• R2 0.7239 – 14Dec high – Strong
• R1 0.7100 – Figure – Medium
• S1 0.6949 – 9Jan low – Medium
• S2 0.6862 – 26Dec low– Strong

NZDUSD – fundamental overview

The New Zealand Dollar hasn’t really been bothered by the December ANZ commodity price which came in a good deal lower than the previous print. Instead, this currency is tracking with the rest of the currency market, benefitting from the post Trump press conference US Dollar selloff and rallying commodities prices. Looking ahead, we get US initial jobless claims and a wave of Fed speak featuring Harker, Evans, Lockhart, Bullard, Kaplan and Yellen.

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 2180 to once again encourage the possibility for a significant bearish structural shift. Next resistance comes in at 2300, while initial support comes in at 2232, with a break below to take the immediate pressure off the topside.

• R2 2300.00 – Psychological – Strong
• R1 2282.00 – 6Jan/Record high – Medium
• S1 2232.00 – 30Dec low – Strong
• 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. Last Friday’s uptick in hourly earnings and another round of hawkish Fed speak, with some officials even warning of the possibility for more than three hikes this year, should be a concern to investors. Looking ahead, investors will get more insight from the Fed, with Harker, Evans, Lockhart, Bullard, Kaplan and Yellen all due.

GOLD (SPOT) – technical overview

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. A daily close above 1200 will strengthen the bullish shift in structure and open the door for a push back towards the 2016 peak at 1375. Only below 1120 negates.

• R2 1221.10 – 22Nov high – Strong
• R1 1200.00 – Psychological – Strong
• S1 1162.95 – 5Jan low – Medium
• S2 1122.75 – 15Dec low  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players continues to emerge on dips despite an intense round of setbacks in late 2016, 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, 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

USDTRY has exploded to the topside, with the market extending its violent run of fresh record highs, closing in on critical psychological barriers at 4.0000. The parabolic price action does however warn of some form of an intense corrective pullback around the corner to allow for severely stretched studies to unwind. The market is highly extended across all three major time frames, with the daily weekly and monthly charts severely overbought. A break and close back below 3.7000 is required to take the immediate pressure off the topside.

• R2 4.0000 – Psychological – Strong
• R1 3.9410 – 11Jan/Record High – Medium
• S1 3.7830 – 11Jan low – Medium
• S2 3.7075 – 10Jan low – Strong

Feature – fundamental overview

The Turkish Lira has been in an absolute freefall these past several months, with the currency’s declines accelerating dramatically in early 2017 to fresh record lows. Political instability, terrorist activity and an already vulnerable Turkish economy have contributed to the declines, while on the other side, the Lira isn’t getting any help from the US Dollar, which has been driving higher on favourable interest rate differentials. Attempts to calm the market have done nothing to slow the depreciation thus far after the CBRT announced a 50bp cut to reserve requirements across all maturities and reduced interbank borrowing limits. But the CBRT has also said that market developments will be closely watched with additional steps to be taken if necessary.