31 / 10 / 2016 | Technical Analysis

GBP/AUD forming a pennant, AUD/USD creates triangle

We have a pennant emerging on GBP/AUD although this is threatening a breakout on the downside whilst it’s in the process of forming. As we noted last week, sentiment was building to back short GBP positions, despite the currency appearing rather oversold.



Looking over the longer term, there’s an asymmetrical triangle in AUD/USD that is nearing completion. Any signs of wavering from the Fed over that rate hike could well result in the breakout being on the upside. 



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view
 
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31 / 10 / 2016 | Market News

Pending US presidential election may favour majors

We’re looking at a rather quiet start to the week for the major currency pairs with little in the way of fresh direction emerging overnight. The prospect of the final week’s campaigning for the US Presidential Election ending up as an increasingly complex affair has the potential to subdue markets, although at the same time may well end up favouring the safe havens – JPY, EUR and even GBP could find some love here as a result.
 
A big shortfall in German retail sales for September – down 1.4% against an expected gain of 0.2% - has surprisingly failed to unsettle the common currency, at least so far. This certainly isn’t an insignificant print and given the ECB’s battle to put some inflation back into the trading bloc’s economy, any further disappointment from the Eurozone – such as the release of October CPI and Q3 GDP data later this morning – really should be expected to open up downside pressures on EUR crosses.
 
Again with a central bank inflation dilemma in mind, the US personal spending number for September will be worth watching. Expectations are for a decent month-on-month jump here and again this would play very much to the Federal Reserve rate hawks. However, given the uncertainty that is now looming over the Presidential Election, a run of weak data could compound fears and start to raise questions over whether a rate hike will be possible before the year is out. On the basis that greenback has rallied significantly as a result of this being seen as nailed on, the downside exposure cannot be understated.
 
Oil is also worthy of note with weekend talks in Vienna between Opec and non-member producer nations perhaps not being quite as fruitful as had been hoped for. Although Russia remains on track to back the deal, Opec members are steadily lining up to ask for their own exemptions from the cuts. WTI Crude is already around the $48.50 mark and concern over a meaningful deal being established at the main summit at the end of next month will only serve to weaken prices further.
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28 / 10 / 2016 | Technical Analysis

EUR/JPY Uptrend Breaking Resistances

EUR/JPY has now comprehensively broken out of the ascending triangle we have been following this week, and is now shaping up for challenges of the resistance levels at 115.90 and 116.40.



As noted, there’s no shortage of suggestions that Cable is in technically oversold territory but we have an interesting descending triangle forming. Any sustained break below 1.21 would leave the pair looking rather exposed on the downside.


Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view
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28 / 10 / 2016 | Market News

GBP/USD Spikes Following Strong GDP Data

Earlier in the week we were generally lacking in direction for many currency pairs, but there has been something of a turn-around over the last few hours with volatility coming back into play, GBP/USD has certainly caught my eye with the market failing to get excited over the flash GDP reading that sketched an upbeat picture for the UK economy in the wake of the EU referendum. Technically the pair looks oversold but given the muted reaction there’s no shortage of chatter that we could yet see a sustained move below 1.2000 – and that’s despite Mark Carney stressing that further rate cuts now look unlikely.
 
USDJPY also stands out with the pair having made a sustained break above 105 in overnight trade – and this is despite a run of Japanese economic data that has been at least as good - if indeed not better - than expected. However with US economic data continuing to impress there’s little love being found for the Yen and with a Federal Reserve rate hike increasingly likely, the traffic here seems set to remain one-way.
 
Looking towards the weekend break, Eurozone CPI data is due at 1pm BST and a comparatively punchy 0.8% is being forecast. The ECB will take some solace if a managed reading along these lines is posted – getting some inflation back into the economy will certainly be welcomed and a relatively strong Euro certainly isn’t helping here. If we see a reading above 1% then the common currency may be ready to find further support against most crosses – although EUR/USD could still struggle.
 
US Q3 GDP is also on the cards for 1.30pm BST and is tipped to make a meaningful jump higher, with the annualised rate set to rise from 1.4% to 2.5%. With a move of this magnitude on the table, the risk may well be more on a modest shortfall tripping up this recent run of dollar strength. DXY is still making a longer term play towards that 100 level – something that could yet have deep political connotations, too. 
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27 / 10 / 2016 | Technical Analysis

EUR/JPY threatens breakout on the upside, oil contracts dipping

Yesterday’s ascending triangle on EUR/JPY held and is starting to threaten a meaningful breakout on the upside.


There’s a channel down formed on the Oil contracts although a rebound off the lows last night does seem to be paving the way for a break higher. Retaking the psychologically significant $50/barrel level is the next big challenge. 


Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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27 / 10 / 2016 | Market News

Prospect for RBA rate cuts, US durable goods slated for release

It’s been another relatively muted few hours for the major currency crosses although movements on AUD/USD do stand out, with yesterday’s inflation inspired gains now having been completely eroded. There’s still the prospect of fresh RBA rate cuts here, whilst looking into the New Year, slowing demand for commodities from China is also expected to take a toll. Add to this the impact of an increasingly hawkish Federal Reserve and the potential does seem to be weighted on the downside here.
 
The flash UK GDP reading for Q3 is due to be released this morning at 9.30am BST, so that’s covering the first quarter since the Brexit referendum. Expectations are for a print of 2.1% - something that will likely be cheered by the pro-Brexit camp, although critically we need to bear in mind that fundamentally nothing has changed yet. With the pound struggling to recover from recent lows, even a modestly worse than expected figure would probably have only a limited impact.
 
US durable goods orders are slated for release at 1.30pm BST and again there’s a real risk of contraction being reported here. That said, what we’ve seen of late has been a steady stream of typically better than expected economic data out of the US, which will be giving the Fed the final bits of confidence that hiking rates now will just take enough heat out of the economy to keep inflation in check. That said, we’ve still got the Presidential election result to contend with and given the dollar’s recent run of strength any shortfall could quickly open up some downside for the greenback.
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26 / 10 / 2016 | Market News

Strong CPI Figures boost AUD/USD, sellers up to 0.7700

The big overnight story on the major currency crosses is by all accounts the jump higher we saw for the Aussie dollar in the wake of hotter than expected inflation data. AUD/USD rallied from 0.7650 to 0.7700 as a result, although there is some chatter that this could be overstated. Yes, this reading is significant, but whether it’s sufficient to deter the RBA from making another rate cut is debatable.
 
BBA mortgage approvals from the UK may offer some temporary direction for the pound this morning, although any attempt to cool the property market can be achieved using somewhat more subtle means than an outright shift in monetary policy. As such any reaction to the data could well prove to be rather short-lived.
 
We have another raft of data from the US later in the session including services PMI, trade balance and new home sales. That Fed rate hike is looking to be as good as nailed on for December, but this is more about the pace of policy tightening in 2017. Clearly we still have the result of the Presidential election to contend with, but with the polls continuing to paint an increasingly positive picture for Clinton, this shouldn’t provide too much of a distraction. 
 
Crude oil is also worth watching – US front month WTI has lost its grip on the $50 level as fears mount that the proposed Opec production cuts won’t be implemented as planned and with expectations being that we will see a build in stocks when the inventory data is released later in the session, downside pressures could continue to mount here. 
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26 / 10 / 2016 | Technical Analysis

EUR/JPY retreats to last week’s lows

We have an ascending triangle forming on EUR/JPY although a breakout on the downside is being threatened, which would open up the way for a retreat to last week’s lows around 112.60
 


We have a bearish pennant in play on USDZAR with a breakout on the downside already emerging. This would pave the way for a return to fresh lows for the year sub 13.200.


 
Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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25 / 10 / 2016 | Technical Analysis

GBP/USD pennant continues, USD/JPY on an up trend

The pennant we highlighted in yesterday’s GBP/USD pair continues to form and remains one to watch for a break out. 1.2250 also seems to be establishing itself as a meaningful resistance level, although volumes remain thoroughly depressed on the pair, too. Assuming we see nothing before 3pm then the consumer confidence print could well act as a trigger – especially if there’s a meaningful miss in the data.



Although USD/JPY is currently in an uptrend, looking at the bigger picture, we are about half-way through a reversal of the gains posted between late 2011 and summer 2015. The 50% retracement level sits around 99 and this has provided some meaningful support over the last few months. On the basis the pair is being backed by some meaningful tailwinds, the 38.2% Fibonacci retracement around 106.35 certainly seems worth watching as the next target.



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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25 / 10 / 2016 | Market News

Decreased volatility creates pressure for major currency pairs

A relative lack of data over the last 24hours has seen volatility evaporate from a number of key pairs. EURGBP and EURUSD have both traded in narrow 30pip channels, whilst the brief dip we saw in USDCAD came in the wake of comments from Canada’s central bank over the nation’s interest rate outlook – although a quick clarification served to largely correct this. We do however have a trend established on USDJPY, although this seems to be about the prospect of another miss in terms of Japanese inflation being priced in ahead of the event.
 
Looking ahead, the fundamentals remain very thin on the ground in this morning’s European session, so again volatility is likely to prove difficult to find. Later in the day we do have speeches from both Mark Carney at 3.35pm BST and Mario Draghi at 4.30pm BST so these will be under some scrutiny. Given the lack of activity, the reaction here could be pronounced - even if it is rather short-lived.
 
Data out of the US this afternoon is relatively low level although we do have a consumer confidence indicator at 3pm BST. This is tipped to drop from 104.1 last month to 101 for October, so the greater risk here could be on the downside. Certainly anything below 100 could knock dollar strength as it has the potential to just raise a modicum of doubt – which will probably be rather short-lived - over a December hike from the Fed.
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