Analyst Opinion

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March 28, 2017

BY FX Research Analyst Matthew Ashley

Has the Silver Rally Done its Dash or is More Still to Come?

Silver’s long-term uptrend may be due for a spell of moderation moving ahead as the metal prepares to make a final push higher in the coming weeks. Specifically, the combination of a number of technical forces is beginning to put pressure on silver prices, even if the general bias remains long-term bullish. Firstly, if we take a look at the daily chart a few things become readily apparent. For one, the combination of the declining trend line and some highly oversold stochastic readings are practically begging for a reversal in the coming sessions. However, it’s also clear that this reversal will likely be short-lived and more of a moderating movement than a serious change in momentum. As a result, any near-term losses should be capped by the 23.6% Fibonacci level at around the 17.791 handle and the uptrend should resume around this point.All this being said, what exactly is the evidence supporting continued bullishness over the coming weeks? Primarily, we would look to the fairly convincing ABCD wave that is becoming clearer on the above daily chart to support the argument for additional gains in silver prices. However, we can also see that the EMA bias and the MACD signal line crossover are supportive of this forecast which should see the metal pushing the 19.00 handle moving ahead. Gains beyond this price currently seem unlikely, given the robust zone of resistance present around this handle.From a fundamental perspective, we have even greater reason to suspect that the uptrend will remain in place after a short period of moderation. Unsurprisingly, this has everything to do with Trump and the uncertainty his administration presents for the US. Indeed, only yesterday the Fed’s Evans spoke on how the recent failure of the GOP’s Healthcare bill demonstrates rising uncertainty and political risk in the US. As one would expect, growing unease over the stability of the world’s largest economy and military power has been a key driver of safe haven investment prices over the past weeks and this momentum doesn’t look like its ready to evaporate anytime soon. Ultimately, the agreement of both the technical and fundamental forecasts discussed above present a fairly strong argument for a near-term slip followed by a resumption of the uptrend. In particular, the presence of the ABCD wave and the ongoing turmoil of the Trump presidency should be the two key drivers informing the metal’s movement and both should be monitored closely. 

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March 28, 2017

BY Senior Market Strategist Steven Knight

AUDUSD Stuck Within a Consolidation Pattern

The past few days has seen the AUDUSD continue to trend in largely a sideways manner within a relatively tight 50 pip range. Subsequently, there has been little in the way of a defined trend and the pair remains meandering around 50% of the March move at 0.7619. However, there is likely to be a breakout in the coming week given that there are some key economic events pending that may, finally, fuel a move for the Aussie.   In particular, the AU HIA New Home Sales figures are likely to be watched closely given the current precariousness of the Australian property market. There have been some indications of a slowdown over the past few months and the large lending institutions are certainly skittish about their exposure. Subsequently, we may see the impact of restricted credit flowing through the new home sales figures. A significant miss could see the pair under pressure as the market takes a negative short term view of the Aussie.   Also, there is plenty of scope for volatility on the greenback side of the fence in the days ahead. The U.S. Final FDP and Unemployment Claims figures are due out Thursday and are likely to fuel a revaluation for the USD. In particular, a jobless claims result below the forecasted 245k could be just the thing the greenback needs to rally against most of the cross pairs. This is a fairly realistic scenario and could additionally bring about a needed breakdown for the Aussie.From the technical perspective, price action is now trending lower, within its consolidative range, towards a key support zone at 0.7605. This is a major downside hurdle for the pair, representing the low from February, and will need to be breached to signal the commencement of a pullback. In addition, the RSI Oscillator is also trending lower, within neutral territory, indicating that there is still plenty of room to move on the downside.  Ultimately, it remains to be seen which direction the pair will break in the near term but the reality is that break it must. The consolidative pattern has lasted for a significant period of time at the 50% of March level and a breakout is now all but inevitable. However, the evidence is suggesting that we are likely to see a downside move, especially given the presently high valuation for the Aussie. Subsequently, keep a keen watch on the pair over the next few days as a move through support at 0.7605 could signal the start of a sharp depreciatory phase.

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March 28, 2017

BY FX Research Analyst Anna Gushchina

Intra-Day Technical Report

Tuesday 28th of March 2017 00:00 GMTEUR/USD: BullishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bearish

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March 27, 2017

BY FX Analyst Matthew Ashley

What’s up Next for the AUD?

The AUDUSD has reached a bit of an impasse as a result of last week’s tumble which now raises the question of what is next on the agenda. Consequently, it may be worth taking a look at what brought the pair to where it is now and what might be fuelling either the potential recovery or extension of the recent downtrend.   Starting with last week’s performance, the Aussie Dollar was initially looking fairly bullish last week as it surged higher in response to the political risks sparked by the ongoing ‘Trumpcare’ fiasco.  However, this buying pressure was short-lived as it brought the pair into conflict with the descending trend line around the 0.7732 handle. Importantly, this proved to be a reversal point that slapped the pair sharply lower in short order. However, these losses continued to be realised as the fundamental bias began to favour the USD. Notably, the pair had another big slide in response to an uptick in the US New Home Sales figure to 592K m/m. On the technical front, as mentioned, the AUD is now at a bit of a crossroads which could see either a mild recovery or further losses this week. Which of the two outcomes occurs is largely predicated on whether or not the pair breaks through the 50.0% Fibonacci level around the 0.7609 mark. If we do see the level broken, the MACD signal line crossover will complete which could mean losses extend back to the 0.7562 mark before the 100 day EMA provides some support. However, if the retracement holds, the generally bullish EMA bias could see the AUD move to recover some of last week’s losses. As for what lies ahead on the news front, the first half of the week will largely focus on the usual slew of US data and some scheduled comments from a number of Fed members. Conversely, the second half of the week will be slightly more Australian news focused as the HIA New Home Sales and Job Vacancies are due out on Thursday.  Although, it is worth mentioning that the US Final GDP figure is also due on Thursday which could either compound or mitigate the effect of the two Australian results, dependent on whether or not the 2.0% q/q uptick is realised. Ultimately, it’s worth keeping an eye on this pair as it has the potential to please both the bulls and the bears out there. However, remember to pay close attention to both the fundamentals and that 50.0% Fibonacci retracement as these will be key in catching either the rebound or the fresh breakout and subsequent downside risk.  

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March 27, 2017

BY Senior Market Strategist Steven Knight

USDJPY Faces a Critical Support Zone as 1.10 Handle Now in Focus

The past week has been highly negative for the USDJPY as s sentiment swing, against the U.S. Dollar, has been in progress following some upset expectations around potential Fed rate hikes. Subsequently, the pair has plumbed new depths as a determined depreciation has sent the pair reeling towards the 1.10 handle. Subsequently, we review the major events of last week with and discuss some of the key points that are likely to impact the pair’s valuations in the week ahead.   The USDJPY slid sharply lower throughout most of last week as the pair was beset by a broadly negative greenback sentiment swing. The change in sentiment is largely due to shifting goal posts around future FOMC rate hikes with little in the way of hawkish rhetoric from the Fed last week. Subsequently, net greenback short positions are increasing which led to significant selling of the USDJPY late into the week’s session. This saw the pair take out some key support zones and enter the close sharply under pressure around the 110.61 mark.   The week ahead is likely to be critical for the pair with the key 110.00 support level looming and the bears waiting in the wings. The market’s key focus for the coming week is likely to be the Japanese CPI and U.S. Jobless Claims. In particular, the U.S. Unemployment Claims figures are likely to be closely watched by traders as they grapple with the Fed’s potential direction on rate hikes in the coming months. Most economists have the result coming in around the 245k mark but a miss could see some significant selling pressure on the pair and put the 110.00 handle in focus.   From a technical perspective, the pair’s recent collapse seems to suggest that a corrective phase is in progress and is yet to complete. The pair has plumbed some key lows but we are yet to see some sharp follow through selling. Regardless, the bears are firmly in control and the coming week is likely to open with plenty of short selling. Support is currently in place for the pair at 110.40, 109.08, and 107.62. Resistance exists on the upside at 111.87, 113.28, and 114.40.   Ultimately, it would appear that the bears aren’t going anywhere soon as we move into the Asian trading session. This is especially the case given the both technical and fundamental factors suggest that the decline is not yet over for the pair. Subsequently, keep a close watch in the coming days as a breach of the key 110.00 handle could signal a recommencement of the sharp falls.

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March 24, 2017

BY Senior Market Strategist Steven Knight

Cable Loses its Upside Momentum Despite Surprising Retail Sales Result

The U.K managed to surprise everyone overnight as the latest round of retail sales proved highly robust, coming in well above estimates at 3.7% y/y. Subsequently, the pair rallied around 60 pips, before running into some stiff resistance at 1.2530, and now sits at a precarious position. The initial indications this morning aren’t necessarily positive so we could see a bearish move for the pair over the next few sessions.   In particular, the charts are relatively illuminating for the Cable especially given the sharp run up that has occurred over the past month. However, price action has definitely run into a sharp area of resistance at 1.2530, and momentum has now stalled largely leaving the pair exposed with little fundamental news left in the trading week. In addition, the RSI Oscillator is nearing overbought levels and the pressure is building for either a downside correction, or a period of sideways consolidation.  However, at the time of writing, price action is still above the 100 day MA which lends a little credence to another challenge to resistance. However, most of the other indicators are suggesting a return to the mean given that the pair, on the daily time frame, is very definitely trending between the 1.20 and 1.26 handles. This may especially be the case given that the RSI Oscillator is nearing overbought levels.   In addition, the pair is fundamentally exposed as we head into the final few trading sessions of the week given the lack of UK economic data due for release. Subsequently, the market is likely to be primarily focusing upon the U.S. Durable Goods Orders and Markit Flash Manufacturing PMI.  In particular, the Markit Flash Manufacturing PMI is expected to provide a strong result at 54.2 and is likely to provide some buoyancy to the greenback.   Ultimately, the time has come for a pullback from the Cable given all of the above mentioned factors. Subsequently, expect to see the venerable pair trading below the 1.25 handle with a likely range somewhere around the 1.2430 mark in the days ahead.

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March 24, 2017

BY FX Research Analyst Anna Gushchina

Intra-Day Technical Report

Friday 24th of March 2017 00:00 GMTEUR/USD: BearishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BearishCrude Oil: Bearish

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March 23, 2017

BY FX Analyst Matthew Ashley

Oil Looks Set to Stage a Mild Comeback

Oil prices look to have finally found a bottom, potentially even two of them, which could see buying pressure mount in the coming sessions. Additionally, a number of other technical instruments are signalling that a reversal is on the way which comes as little surprise given the presence of the ascending trend line. First and foremost, as mentioned above, there seems to be a double bottom forming up on the daily chart which indicates selling pressure may be running thin. To some extent, this will a result of oil moving into oversold territory as is made clear by the stochastic oscillator. However, the impending MACD signal line crossover is also suggestive of a near-term change in momentum.   Aside from these near-term technical readings, the long-term trend line provides what is probably the strongest argument for a reversal. As is shown above, the commodity is drawing fairly close to the ascending line which will certainly have the bears worried. Indeed, their inability to push substantially below this level is evident in the long shadows of the two candles that form the troughs of the depicted double bottom structure.   Although, given the shift in the EMA bias to bearish, gains could be fairly muted for oil which might mean we instead see it drift lazily higher rather than reversing sharply as forecasted. The main counter argument to this would be the mere fact that the commodity is now below the $50 handle, a handle that has only recently been priced in as the medium to long-term average. However, the neckline of the double bottom is also relatively shallow which makes it a fairly achievable zone to break through, meaning, sparking a rally typical of the double bottom pattern will be relatively easy.   Once an upswing has taken hold, we expect gains to extend to, at most, the 51.55 handle. This price is somewhat shy of what would generally be forecasted for a chart pattern such as this, however, there is some reason to doubt the overall strength of the rally. Firstly, the 100 day moving average is likely to be a source of dynamic resistance which will begin to cap upsides around the 50.70 mark. This being said, the real challenge will be in overcoming the 50.0% Fibonacci level around the 51.55 level as it also coincides with a number of historical reversal points. Ultimately, yesterday’s 4.95M build in US Crude Oil Inventories could delay the forecasted uptrend for a few sessions. Although, the fact that such a build barely managed to push the commodity lower could also be taken as a sign that it is ready to surge higher when fundamentals stop weighing it down. However, also stay on the lookout for any developments from OPEC as the cartel is likely to have something in the wings to re-float oil prices going forward which would suit this technical forecast just fine. 

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March 23, 2017

BY FX Research Analyst Anna Gushchina

Intra-Day Technical Report

Thursday 23rd of March 2017 00:00 GMTEUR/USD: BearishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bearish

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March 22, 2017

BY FX Analyst Matthew Ashley

Mixed Technical Forecast for the EURGBP Amid Brexit Fears

In light of the escalating political tension between the EU and the UK, it may be worth taking a look at the EURGBP’s technical forecast in order to get a better feel of what could be next for the pair. Furthermore, we may need to take a look at what is due out on the economic data front in order to avoid being caught out by any rouge releases.  First and foremost, the medium-term outlook for the EURGBP looks to be moderately bullish, even if we are expecting some additional near-term downsides. Specifically, it currently looks as though we are mid-way through a corrective ABC pattern in the wake of the rather torrid downtrend which started late last year. As a result, we should see losses extend to the 0.8585 mark over the coming sessions before buying pressure returns to push the pair up to the 0.8879 level. The argument for a near-term slip is supported by a number of technical instruments including, but not limited to, the Parabolic SAR and the MACD oscillator. More precisely, the Parabolic SAR retains its bearish bias whilst the recent signal line crossover on the MACD oscillator is suggestive of further downside risk. Moreover, it is expected that the turning point around the 0.8585 level eventuates as this coincides with the 100 day moving average which should provide dynamic support. Although, depending on fundamentals, the pair could test the long-term ascending trend line before reversing. Once we have seen the EURGBP end its decline, the ensuing rally could lead to some sizable gains for the recently embattled pair. Such a rally is forecasted not only as a result of the ABC wave but also due to the EMA bias and the long-term ascending trend line, shown above. However, as is also made clear in the above chart, the uptrend will run into trouble around the 0.8879 mark. Largely, we expect to see resistance hold here due to the presence of the 61.8% Fibonacci level and some rather robust historical resistance.  From a fundamental perspective, the main risk events for the EURGBP in the week ahead will come from the UK data. Notably, the bevy of retail sales figures due out could spark some solid buying and selling pressure which could either help or hinder the technical forecast. However, on the less tangible or measurable news front, anything to do with Brexit is also likely to be weighing on one or both sides of this pair. Furthermore, the seemingly escalating tension between the EU and the UK, specifically regarding the tug of war over London’s financial industry, could impact the EURGBP substantially so keep an eye out for any developments in the saga.  Ultimately, the bias remains near-term bearish and medium-term bullish for this pair regardless of fundamental interference. Notably, the combination of a number of technical readings and the influence of the long-term trend line seem to be in agreement with this assessment. As a result, expect to see the bears run low on momentum as they approach the terminus of the B leg and keep an eye out for the eventual return of the bulls currently in the wings.   

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March 22, 2017

BY Senior Market Strategist Steven Knight

UK Inflation Figures Stoke Speculation of Rate Hikes

The latest round of U.K. CPI figures have proved a surprise to the market as rising food and energy prices have pushed the key inflation metric to 2.3% y/y. The result far exceeds the expected 2.1% gain and now places the metric well above the 2.00% range desired by the Bank of England (BoE). The result is the strongest seen in many years and now places increasing the pressure on the BoE to act on interest rates in the medium term.   The immediate response from the release of the inflation data was a sharp rise in the value of the Pound against most of the cross pairs. The Cable rose to a high of 1.2475, breaking through the 100EMA, which suggests that we could see prices creeping back above the key 1.25 handle in the near term. Much of the bullish activity is due to rising speculation that the Bank of England is going to have to raise rates to fight of the growing inflationary pressures in the short run.   However, the one metric that is still lagging behind is wage growth as the latest figures show stagnation in this regard. In fact, despite unemployment falling to its lowest levels in over 30 years, wage gains have slowed and real pay rates have started to slip. Subsequently, inflationary pressures and the requisite cycle of interest rate rises are likely to be unwelcome news to the vast majority of Britons.   Regardless, the reality is that the central bank will view the latest CPI result as a stark warning of the building inflationary pressures within the economy. Although the historically low Pound has certainly had an impact on import prices and purchasing parity it has largely been the global rise in crude oil prices that has led to the recent rises in both food and the CPI. Subsequently, many professional economists are now forecasting inflation to rise to 3% within the U.K. over the coming months. This is something that will be relatively unpalatable to the central bank and could spur action sooner, rather than later.   Ultimately, given the historically low official bank rate, the BoE was always going to have to act to counteract inflation eventually. Unfortunately, the decisive moment has arrived and the central bank is likely taking notice of the rising pressures. The monetary policy committee is not due to meet again until the middle of May but the meeting is set to be a ‘live’ event and there is a very real risk of a 25bps hike to rates, especially if the CPI figures keep rising in the near term.

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March 22, 2017

BY FX Research Analyst Anna Gushchina

Intra-Day Technical Report

Wednesday 22nd of March 2017 00:00 GMTEUR/USD: BullishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bearish

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March 21, 2017

BY FX Research Analyst Matthew Ashley

Aussie Dollar Prepares For a Shift In Bias

Despite a rather spectacular recovery last week, the Aussie Dollar could be on the cusp or resuming its recent downtrend. If such a reversal does occur, losses could be fairly substantial and might extend back to the 0.76 handle and beyond.  However, given just how bullish the pair has been over the past few months, we might need to take closer look at just why the technical bias seems to be shifting. Firstly, even at a glance it seems to be fairly obvious that the AUD is battling against a long-term descending trend line and a historical zone of resistance. Even by itself, this trend line hints that upsides are likely to be severely capped and this could prove to be the end of the post-FOMC rally. Only adding to the resistance is the pair’s overbought status on the stochastic oscillator which, whilst not shown, is still highly influential. Aside from these more obvious signals, there is another technical argument that is highly suggestive of a decline moving forward. Namely, both the MACD and RSI oscillator are in agreement that a regular divergence is becoming apparent on both the daily, H4, and H1 charts. Typically, such a divergence indicates that underlying bearishness is about to come to a head and the bulls are totally exhausted. When combined with the overbought readings and the trend line, further bullishness now seems like a fairly remote prospect. As a result of this shift in bias, we now expect to see the pair begin to retrace to around the 0.7609 mark before the return of any bullish sentiment. At this price, both the 50.0% Fibonacci level and the 100 day moving average will be providing some stiff support which could prove difficult to break through. Due to this impasse, we should then see the bulls mount a solid recovery which could inspire another rally in the medium-term, testing the trend line at around the 0.77 handle. Ultimately, we may have to wait for the fundamentals bias to mirror the technical bias before any serious downsides are realised. Specifically, we might need to rely on either stronger US data or some particularly hawkish remarks from Yellen. However, the predisposition of the pair to take a dive is worth keeping in mind as it could see greater losses occur than would normally be expected. In short, it’s no longer just volatility on the rise but also downside risk for the AUD.    

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March 21, 2017

BY FX Research Analyst Anna Gushchina

Intra-Day Technical Report

Tuesday21st of March 2017 00:00 GMTEUR/USD: BearishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BullishGold: BullishCrude Oil: Bearish

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March 20, 2017

BY FX Analyst Matthew Ashley

OCR in Focus For an Indecisive Kiwi Dollar This Week

The Kiwi Dollar finally began to stage a bit of a comeback last week which now begs the question, what’s next for the embattled pair? To answer this, it’s worth taking a quick look at what actually drove last week’s price action and what the technical bias could have to say about the week to come. Starting with the week that was, the Kiwi Dollar ended last week much where one would expect given the rather strong reaction to the Fed’s decision to raise rates whilst also not offering a strong hawkish outlook moving ahead. However, things weren’t all smooth sailing as things progressed and the NZ GDP figures came in at 2.7% y/y and 0.4% m/m, both of these being short of expectations. Initially, this saw the NZD slip back below the 0.70 handle before it found its footing again which had some worried that the FOMC gains would be short-lived. Luckily, the pair recouped these losses as the US Unemployment Claims put a dampener on USD sentiment as the week began to wind down.  As for the technical readings, the NZDUSD now has an overall bearish bias but a solid zone of support could help to limit losses and lead to a neutral week. Specifically, the 12, 20, and 100 day moving averages are in a highly bearish configuration which will be helping to encourage selling. Conversely, the pair has also peaked at a historical zone of resistance which could limit its ability to push higher. Meanwhile, the parabolic SAR has inverted to bullish and the current support has proven to be a robust low on multiple prior occasions. As for the impending fundamental news, the key development to keep an eye on will be the RBNZ’s announcement of the OCR. Currently, expectations are that the rate is held steady as the bank has proven reluctant to alter monetary policy. However, chances of a hike have been improving due to the admittedly slow, yet still notable, recovery of dairy prices. Moreover, the NZ government is coming under increasing pressure to cool off the red-hot housing market which could mean that Wheeler has a bit of a greenlight to follow the US example and tighten policy. Ultimately, we should see the Kiwi Dollar range this week, likely, between the 0.6982 and 0.7047 levels. However, as mentioned above, don’t discount the chances or a surprise breakout to the upside if the RBNZ decides to have a surprise rate hike. This being said, in the wake of last week, the central bank could be taking a rather cautious approach that might also be dependent on the GDT numbers released immediately before the OCR announcement. 

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