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

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Get Global FX Insights via email - click here Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts Yellen

The Japanese central bank also went ahead and upgraded its economic outlook though it cautioned this outlook was contingent on developments in the US. Overall, it feels like USDJPY 120.

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 Yellen Props Buck, BOJ On Hold Wake-up Call The Bank of Japan has come out early Tuesday leaving rates and monetary policy unchanged as expected. The Japanese central bank also went ahead and upgraded its economic outlook though it cautioned this outlook was contingent on developments in the US. Overall, it feels like USDJPY is still on the cards before year end. Technical highlights EURUSD Bearish consolidation GBPUSD Pressure on downside USDJPY Correction underway EURCHF Seen retesting key low AUDUSD Deeper setbacks ahead USDCAD Fresh push underway NZDUSD Room for bigger drop US SPX 500 Not ready to relent GOLD (spot) Attempting to base Feature USDSGD Strong uptrend Daily Video Fundamental highlights EURUSD Upbeat IFO readings fail to prop Euro GBPUSD Sturgeon threatens new referendum USDJPY BOJ unchanged, leaves policy on hold EURCHF SNB strategy coming under pressure AUDUSD Nothing new from the RBA Minutes USDCAD Loonie less interested in OIL price NZDUSD Kiwi looking for help from GDT auction US SPX 500 Stocks ignoring geopolitical risk GOLD (spot) Relationship with US Dollar to fade Feature USDSGD Talk of MAS intervention Five day performance v. US dollar Suggested reading Political Risk Is Moving to Asia, C. Langner, Bloomberg View (December 18, 2016) Morgan Stanley s Lessons from 2016, T. Durden, ZeroHedge (December 19, 2016) Page 1 of 12

2 EURUSD technical overview The major pair has finally broken down below the multi-year base from 2015, taking it to its lowest levels since Next key support comes in the form of a 1997 low at , below which exposes an immediate drop to parity. At this point, any rallies should be very well capped, with only a break back above to compromise the bearish outlook. R Dec high Strong R Figure Medium S Dec/2016 low Medium S August 1997 low Strong EURUSD fundamental overview The Euro hasn t been able to do much with corrective rallies, easily well capped into Tuesday ahead of Even the better batch of German IFO readings did little to help the single currency. It seems Yellen s latest comments on the strength of the US jobs market and signs of wage growth on the rise have been more than enough to offset any Euro bullishness, with the major pair once again threatening a drop to fresh multi-year lows. Looking ahead, German producer prices are the only notable standout on today s calendar. Page 2 of 12

3 GBPUSD technical overview The market has seen a sizable correction towards major resistance at over the past several days. Ultimately, however, while the market holds below , the downtrend remains intact and a lower top is sought out in favour of a bearish resumption back towards Only a weekly close above would compromise the structure. A daily close below will put the immediate pressure back on the downside. R Dec high Strong R Dec high Medium S Dec low Medium S Nov low Strong GBPUSD fundamental overview The Pound was a clear underperformer in Monday trade, with the UK currency coming under pressure on the back of news that Nicola Sturgeon would call for a new Scotland referendum to break away from the UK if access to the single market was no longer on the table. There were however solid bids into dips after PM May said the UK planned to match EU payments if it represented good value for money. But ultimately, it was Janet Yellen who kept a lid on Cable rallies after talking about the strong US jobs market and signs of a pickup in wage growth. Looking ahead, UK CBI retail sales is the only notable standout on the calendar. Page 3 of 12

4 USDJPY technical overview The major pair has seen an intense bullish shift in recent days, with the most recent break above exposing fresh upside towards next meaningful resistance in the 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 R Dec high Strong R Figure Medium S Dec low Medium S Dec high Strong USDJPY fundamental overview The Bank of Japan left rates and policy on hold as was widely expected, while at the same time upgrading its outlook. Still this upgrade was contingent on developments in the US which mitigated some of the initial desire for the market to trade into the Yen. But ultimately, even with a more upbeat outlook and speculation this could inspire a move towards policy tightening in Japan into 2017, the US Dollar remains king, with yield differentials continuing to favour the Buck. The Buck got another lift on Monday after Yellen commented on the strength of the jobs market and signs of a rise in wage growth. Looking ahead, the economic calendar is exceptionally thin and broader flow will dictate direction. Page 4 of 12

5 EURCHF technical overview A recent close below 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 At this point, a daily close back above would now be required to take the immediate pressure off the downside and suggest the market is once again looking settle back into the previous range. R Dec high Strong R Dec high Strong S Mid-Figure Medium S Jun/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, mostly recently on the back of December s dovishly perceived ECB decision. 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. Page 5 of 12

6 AUDUSD technical overview The latest break below is a significant development and now opens the door for deeper setbacks towards next key support at in the days ahead. At this point, look for any rallies to be well capped ahead of Only back above delays the bearish outlook. R Nov high Strong R Dec high Medium S Figure Medium S May low Strong AUDUSD fundamental overview Nothing new from the RBA Minutes on Tuesday with the central bank echoing its mantra that a strong Aussie could complicate the economic adjustment process. Other key highlights from the Minutes were that there was considerable uncertainty about the outlook for the labour market, inflation is expected to remain low for some time and Q3 GDP growth is expected to be weaker than forecast. Overall, the focus here is more on macro risks associated with China in 2017 and the threat of trade wars with the Trump administration coming into power. Of course, the focus is also on yield differentials with the US Dollar, which continue to tilt in the Dollar s favour. On Monday, Yellen gave the Buck an added boost after commenting on the strength of the jobs market and signs of rising wage growth. Looking ahead, the economic calendar is empty for the remainder of the day. 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 well 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 Figure Medium R Dec high Strong S Dec low Strong S Dec low Medium USDCAD fundamental overview The Canadian Dollar hasn t been too interested in supported OIL prices of late, with the Loonie coming back under intense pressure on the back of monetary policy divergence with the Fed and yield differentials that are heavily tilted in the US Dollar s favour. On Monday, Yellen helped to give the US Dollar another push after commenting on the strength of the labour market and signs of a pickup in wage growth. Looking ahead, Canada wholesale sales is the only notable standout on today s calendar. Page 7 of 12

8 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 The recent break below confirms a fresh lower top at opening the next major downside extension towards medium-term support at R Dec low Strong R Dec high Medium S Jun low Strong S Figure Strong NZDUSD fundamental overview The New Zealand Dollar has taken a big hit over the past week and is now the weakest amongst the developed currencies. Most of the Kiwi outflows have been coming from fear of protectionism in the US, worry over financial stability in China and declining commodities prices. Technically, we ve also seen an acceleration in selling following this most recent break back below psychological barriers at Looking ahead, much of Kiwi s Tuesday fate will rest on the results from the upcoming GDT auction which projects WMP prices to decline by 1%. Page 8 of 12

9 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 establish above 2200 on a monthly close basis. 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 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. R Psychological Strong R Dec/Record high Medium S Dec low Medium S Oct high 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 as reflected in Wednesday s decision. 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. Geopolitical risk is also back on the rise, though at the moment, stocks have ignored this latest wave of terror around the globe. Page 9 of 12

10 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 dropped into critical support in the form of a 78.6% fib retracement off of the low-high move, and a hold above this level will keep the basing outlook intact. Daily studies are also well overextended warning of a major reversal. R Nov high Strong R Dec high Medium S Dec low Medium S % Fib Strong GOLD (SPOT) fundamental overview GOLD has suffered quite a blow over the past few 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. Page 10 of 12

11 Feature technical overview USDSGD has pushed up to a fresh 2016 high, taking this market to its highest levels since 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 in favour of the next higher low and bullish resumption. R Figure Medium R Dec/2016 high Medium S Dec low Medium S Dec low Strong Feature fundamental overview Plenty of MAS intervention talk making the rounds on Tuesday after the Singapore Dollar declined yet again to a fresh multi-year low, but this time resulting in a piercing of the major psychological barrier in USDSGD at But overall, the market isn t really caring much about domestic fundamentals at the moment and continues to puts all of its focus on monetary policy divergence between the MAS and Fed and the impact this is having on yield differentials. Last week, we got strong NODX data out of Singapore and yet, the Singapore Dollar could only muster a very small rally. Dealers report very good demand into this Tuesday pullback. 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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