Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts

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1 Get Global FX Insights via - click here Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts Trying to Make Some Sense of It All Wake-up Call It's been an interesting 24 hours with the market reacting to Trump but doing so in a way that was not anticipated by most. But perhaps it's fitting to see the market surprise after the election did the same. US initial jobless claims ahead. Technical highlights Daily Video EURUSD Downtrend still intact GBPUSD Looking for lower top USDJPY Bullish break above EURCHF Breakdown below range AUDUSD Can t hold above USDCAD Eyes push through NZDUSD Signs of major top off highs US SPX 500 Additional upside limited GOLD (spot) Looking to retest 2016 peak Feature USDMXN Highly constructive Fundamental highlights EURUSD Euro under pressure as Fed odds hold up GBPUSD Trump win could make for softer Brexit USDJPY Yen hit on sentiment uptick and Fed bets EURCHF SNB policy strategy looks vulnerable AUDUSD Aussie holds up on improved global appetite USDCAD Loonie caught between diverging flow NZDUSD Kiwi sells off on intervention, easing talk US SPX 500 Trump rally not to be trusted by investors GOLD (spot) Macro players continue to buy dips Feature USDMXN Banxico holding off for now Five day performance v. US dollar Suggested reading Investors, Look Before You Jump, C. Langner, Bloomberg (November 9, 2016) An Agenda for Global Fiscal Activism, J. O Neill, Project Syndicate (November 3, 2016) Page 1 of 12

2 EURUSD technical overview Some violent whipsaw trade, but overall, no material levels breached and the market remains confined to the broader downtrend. At this point, a break below will open the next major downside extension into the s, while only back above would negate the bearish structure. Still, while the market holds above , scope exists for more choppy consolidation trade. R Day SMA Strong R Psychological Medium S Nov low Medium S Oct low Strong EURUSD fundamental overview The Euro is coming off a dramatic session which saw violent whipsaw trade. The market was shocked higher on news of the Trump victory but then collapsed after many were comforted by Trump s conciliatory comments on the economy and trade. This helped to push Fed odds back up, which in turn opened the Euro weakness as yield differentials with the US came back into play. But there has been plenty of ECB tapering speculation that could keep the market supported down towards the are range lows, while we could also see some more choppy consolidation as the market tries to regain composure after the wild swings from Wednesday. Looking ahead, US initial jobless claims is the only notable standout on the calendar. Page 2 of 12

3 GBPUSD technical overview The market has broken out of a multi session consolidation off the multi-year low, which could now open the door for a more significant correction higher in the days ahead. Ultimately, there is room to run towards without compromising the intense downtrend, with a lower top sought out in favour of a bearish resumption back towards Only a weekly close above would compromise the structure. R Nov high Strong R Psychological Medium S Nov low Medium S Nov low Strong GBPUSD fundamental overview Though the Pound was up only marginally on Wednesday, the fact that it was up against the Buck was a big deal, given the massive selling in the other major currencies. Sterling s outperformance was largely attributed to a kinder outlook for Brexit on account of the Trump administration most likely better aligning with the goals of the UK s new direction. Still, softer UK trade and the broad USD gains against the Buck did have a weighing impact and with Fed rate hike odds back up, there is additional risk for Cable declines going forward. Looking ahead, US initial jobless claims is the only notable standout. Page 3 of 12

4 USDJPY technical overview A memorable bullish outside day on Wednesday, with the pair initially pulling back dramatically before surging higher to clear the multi-day range high at This resulted in a bullish outside day consuming the previous 27 daily ranges and should now set the stage for the next major upside extension towards next key resistance at in the days ahead. Any setbacks from here should be very well supported above R Jul high Strong R Nov high Medium S Nov low Medium S Nov low Strong USDJPY fundamental overview One of the nastiest price action showings in this major pair on Wednesday, with the violent swings enough to make anyone feel sick. Initially, the news of the Trump victory opened a sharp decline with the pair looking like it would easily retest the 2016 low down at But the risk off trade wouldn t last for more than a few hours, with the market quickly finding comfort in Trump s speech and Fed odds racing back up to signal a hike in December. And so, the combination of risk on trade and the likelihood for a Fed hike was enough to open an intense bullish move, with the major pair clearing multi-session highs beyond Looking ahead, the market will continue to try and make sense of the price action, while also taking in US initial jobless claims. Page 4 of 12

5 EURCHF technical overview The recent break below warns the market could be getting set to deviate from what had been a well defined range between and Look for a daily close below to strengthen the outlook and open the door for an acceleration of declines towards the 2016 low at further down. At the same time, a daily close back above would take the pressure off the downside and suggest the market is once again looking settle back into the range. R Oct high Medium R Nov high Strong S Nov low Medium S Jun/2016 low Strong EURCHF fundamental overview The SNB has unquestionably had a difficult time this week with the central bank forced to contend with an intense 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, when risk comes back, the Franc is still appreciating which is a major headache for the SNB and ultimately, could open more unwanted appreciation in the Franc. Page 5 of 12

6 AUDUSD technical overview The market has struggled on rallies above and this suggests the rate could be looking to carve a lower top below the 2016 high at in favour of the next major downside extension. Look for a break back below to strengthen this outlook and accelerate declines towards in the days ahead. Ultimately, only a daily close back above will negate the bearish outlook and invite a retest of the 2016 highs. R Nov high Strong R Figure Medium S Nov low Medium S Oct low Strong AUDUSD fundamental overview The Australian Dollar has done a good job holding up this week, despite Wednesday s intense bout of US Dollar buying against the major currencies. It seems any negative Aussie flow from an expectation the Fed will still go ahead and hike rates, even with Trump at the helm, has been offset by the intense flow back into risk assets, with equity prices soaring and in turn helping to prop the risk correlated Aussie. Still, Aussie has had a very hard time on rallies above and with the RBA still open to additional accommodation, additional Aussie upside should be limited. Earlier today, Aussie home loan and investment lending data was solid, while consumer inflation expectations pulled back. Looking ahead, we get US initial jobless claims. Page 6 of 12

7 USDCAD technical overview This market looks to be in the process of carving out a longer-term base off the , 2016 low. Look for any additional weakness to be supported ahead of in favour of the next major upside extension towards a measured move objective into the area. Ultimately, only back below would delay the constructive outlook. R Feb high Strong R Nov high Medium S Figure Medium S Nov low Strong USDCAD fundamental overview The Canadian Dollar hasn t done all that much of late, with the Loonie mostly caught between flows. While the news of the Trump victory was unsettling for the Canadian Dollar on the prospective implications on trade deals with the US, the intense risk on trade that followed was offsetting, with commodity and risk correlated FX benefitting from this price action. Still, with the US on schedule to hike rates and with plenty of uncertainty around the Trump administration, the Canadian Dollar should continue to find good offers on any rallies. Looking ahead, we get some Canada housing data and US initial jobless claims. Page 7 of 12

8 NZDUSD technical overview The pressure has shifted back to the downside with the market now expected to be very well capped on rallies. Look for a fresh lower top at in favour of the next major downside extension below and towards medium-term support at further down. R Nov high Strong R Nov high Medium S Nov low Medium S Nov low Strong NZDUSD fundamental overview The New Zealand Dollar has come under pressure on Thursday after mostly trading sideways amidst some wild post US election Wednesday price action. The risk on flow that followed the Trump victory had been supportive of the correlated Kiwi, though the RBNZ decision has since weighed. The RBNZ went ahead and cut rates 25bps to 1.75% as expected, but intervention talk from RBNZ Wheeler and McDermott, along with talk of being open to additional easing from McDermott, was enough to fuel this latest round of declines. Looking ahead, US initial jobless claims is the only notable standout. Page 8 of 12

9 US SPX 500 technical overview Signs of a potential top after the market recently broke below critical support at This now opens the door for a meaningful period of weakness exposing a more pronounced decline towards the June base at As such, look for this latest intense rally be well capped ahead of 2180, with only a daily close back above this level to compromise the newly adopted bearish outlook and expose fresh record highs. R Aug/Record high Strong R Sep low Medium S Nov high Medium S Psychological Strong US SPX 500 fundamental overview US election risk is dominating flow at the moment with stocks shockingly surging back to record highs despite Donald Trump emerging as the next President of the United States. But overall, once the election volatility is out of the way, the market will need to once again think about the bigger, more worrying issue at hand, which is an exhaustion of global monetary policy tools and an inability for central banks to continue to support and stimulate the global economy. This leaves financial markets vulnerable to any shocks and exposed to intense periods of additional risk liquidation going forward. Page 9 of 12

10 GOLD (SPOT) technical overview Despite a major setback in October, the overall structure remains highly constructive with the market in the process of carving out a longer-term base. Look for any weakness to be very well supported above 1240, with only a close back below this level to delay the bullish outlook and give reason for pause. Back above 1300 strengthens the outlook and should accelerate gains towards a retest of the 2016 peak at R Jul/2016 high Strong R Nov high Medium S Nov low Medium S Oct low Strong GOLD (SPOT) fundamental overview Overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy, extended global equities, systemic risk and a bet that record low inflation will eventually start to turn up. 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. Page 10 of 12

11 Feature technical overview USDMXN has raced to a fresh record high with the market surging through critical psychological barriers at The break to new highs now opens the door for a measured move upside extension towards in the days ahead, following a period of consolidation roughly between and At this point, only back below would compromise the highly constructive outlook. R Measured Move Strong R Nov/Record High Medium S Nov high Medium S Nov low Strong Feature fundamental overview The danger of a Trump Presidency to the Mexican economy has become a reality, with Trump emerging victorious in Wednesday s US election. This has opened a dramatic +8% collapse in the Peso, with the currency sinking to a fresh record low against the Buck. This will make the Banxico s job extremely difficult going forward, with many expecting the central bank to quickly announce as much as a 100 basis point rate hike. And while a hike of this magnitude may slow the pace of the Peso depreciation, it will also act as a major strain on the local economy and Mexico s growth prospects. Still, for now, the Banxico has preferred to hold off making any immediate decisions and this has proven effective, with the central bank getting some help from the surprising surge in risk assets which is supportive of the emerging market FX bloc. Page 11 of 12

12 Any opinions, news, research, analyses, prices or other information ("information") contained on this document, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Exchange has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry. LMAX Exchange will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Exchange does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Exchange or any other FX, Spread Betting and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately. LMAX Exchange will clearly identify and mark any content it publishes or that is approved by LMAX Exchange. FX and CFDs are leveraged products that can result in losses exceeding your deposit. They are not suitable for everyone so please ensure you fully understand the risks involved. The information on this website is not directed at residents of the United States of America, Australia (we will only deal with Australian clients who are wholesale clients as defined under the Corporations Act 2001), Canada (although we may deal with Canadian residents who meet the Permitted Client criteria), Singapore or any other jurisdiction where FX trading and/or CFD trading is restricted or prohibited by local laws or regulations. LMAX Limited operates a multilateral trading facility. LMAX Limited is authorised and regulated by the Financial Conduct Authority (firm registration number ) and is a company registered in England and Wales (number ). Our registered address is Yellow Building, 1A Nicholas Road, London, W11 4AN. Page 12 of 12

Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts

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