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January 24, 2017

BY FX Research Analyst Matthew Ashley

Is a Recovery on the Cards for the EURCAD?

For those watching the exotic crosses out there, the EURCAD is flirting with some fairly sizable upside potential which could be realised moving forward. Specifically, we might see the pair reach back towards November’s highs if the currently forecasted chart pattern comes to pass. As shown on the below daily chart, the past few months of price action is tracing out a relatively faithful double bottom structure. Moreover, the pair now rests firmly at the neckline of this pattern which means a breakout could be only a handful of sessions away. However, there are certain technical factors which are currently proving to be somewhat of an impediment and are worth taking into account. Most notably, the 100 day moving average is clearly exerting some downward pressure on the EURCAD which resulted in a shooting star candle during Monday’s session. Ordinarily, such a candle combined with the dynamic resistance provided by the 100 day EMA would be a fairly patent bellwether of a change in momentum for the pair. Fortunately for the bulls however, there is some evidence that the forecasted breakout should still be on the cards. Indeed, the recent shift in the Parabolic SAR bias coupled with an equally bullish 12 and 20 day EMA configuration would tend to suggest that the 38.2% Fibonacci level can be breached. Furthermore, the relative neutrality of the RSI oscillator leaves considerable room for the EURCAD to climb prior to becoming overbought. If the pair does manage to gather the requisite momentum to push above the 1.4271 handle, the resulting rally could be as high as the 1.4951 mark. Its remains worth noting however, this rally will likely be more sedate than the rather precipitous plunge to the recent bottoms as the driving force behind the slip was largely a symptom of the post-Brexit uptick in market uncertainty. In the absence of similarly buoyant fundamental forces, we could be waiting well into late March for the full upside potential to be realised. Ultimately, EU-centric news is likely to be more important in helping this forecast eventuate but don’t neglect he Canadian side of things. What’s more, news relating to the Brexit negotiations will be pivotal in allowing the EUR to appreciate so significantly against the CAD and it should be monitored religiously as a result. This being said, there is still a strong technical argument for some extended gains which will leave the pair predisposed to move higher over the coming weeks, even in the absence of a fundamental upset. 

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January 24, 2017

BY FX Research Analyst Matthew Ashley

Intra-Day Technical Report

Tuesday 24th of January 2017 00:00 GMTEUR/USD: BullishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bullish

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January 23, 2017

BY FX Research Analyst Matthew Ashley

Kiwi Dollar Poised to End its Downtrend

The Kiwi Dollar was broadly bullish last week and, as a result, it could be primed to extend gains moving ahead. Taking a look from both the fundamental and technical perspectives, momentum could finally bring the pair out of its bearish channel structure which will surely not have gone unnoticed by the bulls. Starting with last week’s performance, the Kiwi Dollar had a net gain but not before it was beset by some strong swings and volatility. In particular, the currency pair benefitted from a strong sentiment swing against the US Dollar early in the week which buoyed most of the cross pairs. However, the pair came under increasing pressure as the US Federal Reserve Chair Yellen again did the media rounds suggesting that near term rate hikes were likely, although data dependent. Subsequently, the pair declined and gave back most of the earlier gains. Additionally, an NZ Building Consents results of -9.2% added to the malaise and the pair closed the week out around the 0.7165 mark a gain of just 45 pips. From a technical perspective, the drive of recent price action has taken the NZD above the 100 day EMA and likely returned it to a short-term bullish footing. However, the pair will need to breach resistance at 0.7237 to cement any further upside gains and retain its bullishness. Currently, the RSI Oscillator is quite close to overbought territory which may suggest that a period of moderation could be ahead. Moreover, the bearish channel yet remains intact which could further limit upsides. Regardless, our initial bias is cautiously on the upside for the week ahead. Speaking of the week ahead, the main fundamental event on the horizon is the quarterly NZ CPI statistics which previously came in at 0.3% but may indeed show additional gains from the prior quarter. There is building inflationary pressure within the New Zealand economy with continual falls with unemployment now residing below the natural rate. Subsequently, there is very likely to be a strong CPI result which could provide some further bullishness for the pair. However, there is also plenty of US data due out, which could spoil the party, with the primary focus likely to be the Advance GDP and consumer sentiment figures. Ultimately, with the first week of Trump’s presidency coming up, volatility and headline risks should be fairly abundant. As result, technical and fundamental forecasts will be somewhat at risk of being invalidated by any unexpected developments. However, in the absence of any major upsets, modest gains should be netted by the Kiwi Dollar once again this week which will be welcome news for the bulls out there. 

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January 23, 2017

BY Senior Market Strategist Steven Knight

Will the USDJPY Continue to Rally in the Week Ahead?

The USDJPY had a relatively strong week as price action broke above the 50EMA to close the week out around the 114.60 mark. Much of the move was fuelled by a negative Japanese Core Machinery Orders result which fell sharply by -5.1% m/m. Subsequently, the pair rallied as the market increasingly prices in the forward chances of a rate hike which saw the USDJPY closing around 114.60. Subsequently, let’s analyse last week’s events with a view to predicting the pair’s likely trend direction in the week ahead.   The USDJPY provided a relatively strong performance last week as the pair was buoyed by a negative Japanese Core Machinery Orders result which fell by -5.1% m/m. In addition, the Fed’s Janet Yellen was out in force throughout the week setting expectations of a near term rate hike from the central bank. In particular, the Fed Chair suggested that the rate hike path remained on course but that the bank, would of course, take a data dependant view. This rhetoric sent the pair soaring and price action subsequently breached the 50EMA to close the week around the 114.60 mark.The week ahead is going to be fairly busy for the pair as the JPY Trade Balance and CPI figures fall due. In particular, the CPI result is likely to be closely watched given the fairly lacklustre historical Japanese inflation results. However, the last inflation return did show a 0.5% y/y gain which is at least something considering the amount of QE injected into the economy. In contrast, a string of US economic results are due out with the Advance GQP figures likely to provide the most trend direction throughout the week.  From a technical perspective, price action’s recent breach of the 50EMA is a positive signal which is also reflected in the RSI Oscillators trend direction. The rebound from 112.56 subsequently suggests that the pair’s short term decline may have ended and our subsequent initial bias for the week ahead is therefore cautiously bullish. Support is currently in place for the pair at 114.52, 112.51, and 111.32. Resistance exists on the upside at 115.64, 118.67, and 121.70.  Ultimately, the week ahead is likely to be highly focussed upon the US economic data so a raft of robust, or on-target, results will see the greenback continue to appreciate against the Yen. Subsequently, the likelihood is that both fundamental and technical factors will conspire to continue the pair’s rally over the next few days. 

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January 20, 2017

BY FX Research Analyst Matthew Ashley

EUR Technical Forecast Remains Intact Despite a Volatile Week

After having a rather torrid week, it’s worth having a check up on the long-term technical forecast for the EUR which was discussed last week. Specifically, given the large sentiment swings experienced by the pair, the corrective ABCD wave pattern could have been compromised which could limit the upside moving ahead. Looking first at the daily chart, despite the last week or so of volatility, the actually EUR remains broadly in line with the forecasted “A” leg of the ABCD wave. Indeed, the recent spate of sentiment swings has kept the pair traveling towards its inflection point around the 1.0770 mark which should be reached within the next few sessions. As for the technical signals indicating that the pair retains the momentum to actually complete the current leg, there are more than a few. Namely, the Parabolic SAR remains suggestive of continued bullish momentum, as do the 12 and 20 day moving averages. What’s more, the MACD and RSI oscillators are bullish, and neutral respectively, which indicates that the EUR should still be inclined to rally further. Additionally, the current position of the 100 day EMA remains consistent with earlier forecasts which should encourage leg “B” to form at the correct juncture. Due to this dynamic resistance, we should see the requisite reversal even if fundamental upsets do occur over the coming sessions. However, the transition of the stochastics into an overbought status will also be beginning to encourage the bears to wade back into the fray moving ahead. From a fundamental perspective, it might at first seem unlikely that we can expect to see the USD weaken substantially given the Fed’s incessant reminders that rates will be raised in 2017. However, much of this rhetoric has now been priced in and announcements from the central bank are beginning to lose their bite. Moreover, the ultimate destination of the ABCD wave would actually be consistent with the process of normalising US rates so the forecast should stand moving ahead. Ultimately, we can’t discount the impact of the change in the US administration which could result in a rather bumpy few weeks. As a result, we could see further wide swings in price which could obfuscate the ABCD wave. Additionally, the unfolding Brexit drama will likely compound this volatility which could contribute to any potential confusion. However, on the balance of things, there remains a strong chance of this pattern occurring and it is worth following moving ahead. 

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January 20, 2017

BY Senior Market Strategist Steven Knight

Australian Labour Market Remains Fragile

The Australian economy took another hit overnight as the latest round of Unemployment Rate data suggested that the benchmark rose to 5.8%, the third consecutive monthly rise. Subsequently, many are now questioning the fragility of the labour market despite December showing a 13,500 net gain in jobs.In addition, the recent job gains have been relatively concentrated within certain states, such as Victoria, which highlights some of the problems that the Australian Government is having in managing states within different stages of the business cycle. As the mining boom winds down employment levels are also falling within the commodity dependant northern regions. This poses a challenge to fiscal and monetary policy as they seek to balance a two speed economy.  However, it’s certainly not all bad news for the Aussie economy despite the seemingly poor unemployment result. Specifically, most of the pressure for the hike comes not from structural unemployment but rather a rise in the participation rate as more enter the workforce seeking employment. Additionally, there has been an increase in the overall level of fulltime, over part-time employment, which is also encouraging. Regardless, there still remains plenty of spare capacity within the economy which will need to be ironed out in the near future and the outlook for the labour market remains uncertain. This is especially the case given that the recent trend of 2014-2015 of employment gains appears to have definitely been broken. In the medium term this could complicate both economic growth and inflation prospects.  Ultimately, the uptick in the unemployment rate isn’t yet signalling a problem for the Australian economy, rather a slowing of growth and a rising participation rate which was relatively evident in the final quarter of 2016. Regardless, the rate still remains within an acceptable historical level so we are not yet at the point of declaring a deteriorating labour market but it certainly bears watching for any further fragility.

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January 20, 2017

BY FX Research Analyst Matthew Ashley

Intra-Day Technical Report

Friday 20th of January 2017 00:00 GMTEUR/USD: BullishGBP/USD: BullishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bearish

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January 19, 2017

BY FX Research Analyst Matthew Ashley

The Cable Could Cede the Rest of Tuesday’s Gains Moving Ahead

Downside risks remain in place for the Cable moving ahead and the pair is currently on course to test the lower boundary of its consolidation structure. Specifically, recent price action seems to have confirmed the overall bearish wedge pattern and, as a result, we could see a slide back below the 1.20 handle within a few sessions. Taking a closer look at the wedge pattern, the structure seems fairly robust and has had both the upside and downside constraints tested at least twice each over the past number of weeks. As a result, we expect to see the pattern remain intact for a little while longer yet, especially given that it withstood the fallout out of Theresa May’s Brexit remarks. However, due to the prior session’s swing back to the greenback, the GBPUSD is in fairly neutral territory which leaves both some upside and downside potential on offer. Exactly which constraint of the wedge will now be tested is far from clear but there are a number of factors intimating that losses should extend as the week winds down. Firstly, the daily EMA retains its persistently bearish bias which will no doubt be limiting the willingness of the bulls to wade back into the fray and also encouraging further selling pressure. Indeed, it seems that the only reason that yesterday’s tumble didn’t entirely erase the rally following Theresa May’s speech was the unexpected fall in the UK Claimant Count of around 10.1K. Secondly, if we look at a shorter time frame chart it becomes apparent that the MACD oscillator is very much indicative of further slides lower. Whilst not shown, the H4 chart’s MACD is currently in the process of completing a signal line crossover which would shift the reading’s bias from bullish to bearish. Combined with the overall pessimism surrounding the Cable, a retracement back to around or below the 1.20 handle seems to be the most likely outcome for the embattled pair. However, we do still expect the lower constraint of the wedge to hold and, therefore, we are also likely to encounter a reversal as the pair challenges the integrity of the structure. Ultimately, there will be some headline risk coming down the line due to the Trump inauguration and this could provide a near-term boost to the pair. As a result, it will pay to have half an eye on the proceedings as well as the more traditional economic indicator releases. However, any near-term uptick in buying pressure should be short-lived as it will take a major fundamental shift to buck the Cable’s long-term bias. 

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January 19, 2017

BY Senior Market Strategist Steven Knight

Is UK Consumer Spending Slowing Down?

The composition of the United Kingdom’s GDP growth has been sliding towards more consumer focused consumption rather than exports over the past few years. In fact, growth in consumer credit has been a relatively poignant aspect of the UK’s recent growth figures. Even with the looming spectre of a Brexit, household borrowing has grown by over 4% in 2016. However, the party could be about to come to an end as a weakening Pound could post an obstacle to the consumer sector as the price of imports start to climb.   In fact, there has been a relatively consistent Cable depreciation over the past 12 months as the market comes to grips with the uncertainty that surrounds the UK’s exit from the European Union. Subsequently, we have seen the currency crash from highs around the 1.4500 level back to its current doldrums at 1.23-1.24. This has had a definite effect upon the import prices of goods and been noted in slowing household consumption and a rise in consumer price inflation.Source: BloombergSubsequently, consumers are currently facing the unenviable position of rising import prices, and underlying inflation, with the potential for near term interest rate rises. In fact, the next Bank of England’s monetary policy meeting could be an interesting one given the falling levels of unemployment and rising inflationary pressures. These same pressures have also caused the IMF to recently upgrade the UK’s GDP growth outlook to 1.5% (1.1% prev) which is a significant revision especially given the pending Brexit.  Ultimately, a consumer led slowdown is relatively likely but will in all probability be tempered by the rising prices and falling unemployment levels that currently exist within the UK. In all likelihood, we are likely to see the Bank of England act on the official bank rate in the very near future, despite some of the volatility within inflation and output channels, which would ultimately have a strengthening effect upon the Cable. Subsequently, the consumer party isn’t quite over yet but we may see some slowing and subsequent GDP composition changes in the coming quarter.  

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January 19, 2017

BY FX Research Analyst Matthew Ashley

Intra-Day Technical Report

Thursday 19th of January 2017 00:00 GMTEUR/USD: BullishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BearishCrude Oil: Bullish

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January 18, 2017

BY FX Research Analyst Matthew Ashley

USDCHF Ready to Rise but not for Long

Despite the prior session’s rather spectacular tumble, the Swissy could be readying itself for another push higher within the coming weeks. This would largely be the result of the chart pattern that we have been tracking for the last month. However, if this rally does come to pass it could suggest that there are some very substantial downside risks moving ahead. First and foremost, the long-term pattern that has reared its head again is, in fact, a head and shoulders pattern. The structure that began to form last month has just become more convincingly confirmed which is due, in part, to a sharp slip back towards the neckline. As result of this, we are already seeing buying pressure beginning to build as the current session opens. This neckline is expected to hold firm moving forward for a number of reasons but two key factors stand out. Firstly, the current position of the 100 day EMA should be generating a significant degree of dynamic support which will be preventing the bears from flexing their muscles any further. Secondly, the stochastics are well and truly in oversold territory which will play a role in recruiting the bulls and, hopefully, inspiring a rather steep reversal.  The move to form the right-hand shoulder of this pattern should run short on momentum around the 1.02 handle. This point would approximately coincide with both the peak of the left shoulder and also a historical high. Combined, these two sources of resistance should prove more than capable of impeding any attempts to keep the USDCHF tracking higher. If we do see this second shoulder take shape, the implications could be quite significant for this pair. As shown above, the resulting plunge from a head and shoulders structure would effectively erase the post-US Election rally. From a fundamental perspective, there are already some forecasts beginning to argue that this could very well be the case for many of the past month’s winners. Therefore, the fall back to below parity might be slightly more likely than we would expect in more stable market conditions. 

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January 18, 2017

BY Senior Market Strategist Steven Knight

Is Silver About to Downshift?

  Silver has had a relatively strong few weeks with the embattled metal climbing back out of the doldrums to form new weekly highs around the $17.17 mark. However, despite the concerted rally price action is nearing a critical juncture that could see it under pressure in the coming session.   A cursory review of the technical indicators for the precious metal clearly highlights the current juncture that the pair faces. The recent rally has taken price action towards a relatively robust area of resistance that could potentially spoil the bull’s current plans. In addition, the RSI Oscillator is also firmly within oversold territory suggesting that there is building pressure for a downside correction. The stochastic oscillator also supports the contention that a potential pullback could be afoot.   Subsequently, the most likely scenario for the next few days is a failed breach of resistance, at the $17.22 mark, which is then followed by a relatively rapid pullback towards support at $16.55. However, given some of the volatility currently sweeping global markets the road lower could be relatively rocky indeed.Fundamentally, there is still plenty of demand for physical silver in both the bullion and industrial markets. However, much of the recent demand increases has not flown through to the derivative markets and we are still seeing silver, and gold for that matter, at historically depressed prices given the overall expansion in the underlying money supply.   Ultimately, the metal is likely to return to its long term bearish trend in the coming session as the pair fails to assail the near term resistance. Given the extent of the RSI Oscillator’s overbought status the likely move over the next 24 hours is down and it’s probable that the metal will continue to move lower until it reaches support around the $16.55 mark. Subsequently, keep a close watch on the metal for short opportunities in the near term.

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January 18, 2017

BY FX Research Analyst Matthew Ashley

Intra-Day Technical Report

Wednesday 18th of January 2017 00:00 GMTEUR/USD: BullishGBP/USD: BearishAUD/USD: BearishUSD/JPY: BullishGold: BearishCrude Oil: Bullish

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January 17, 2017

BY FX Research Analyst Matthew Ashley

USDJPY Moderating as the Markets Brace for Volatility

The Dollar-Yen’s recent stretch of gains is looking somewhat under threat moving ahead but the oscillating nature of the USDJPY’s descent gives traders some solid range-trading opportunities. Indeed, the pair should be making a surge higher prior to resuming its overall downtrend which is currently resulting from an uptick in a number of volatility indicators. As demonstrated below, over the past number of days the USDJPY has challenged the 113.62 support twice in a pattern that looks quite distinctly like a double bottom structure. If the pattern completes, we should see the pair begin to recover fairly strongly by week’s end which should bring the USDJPY back to around the 115.74 level. Whilst a near-term reversal such as this would be at odds with the EMA bias on both the daily and H4 charts, the oversold daily stochastics should facilitate the near-term reversal. Moreover, whilst ordinarily we would expect the combination of the double bottom and the stochastics to inspire a slightly larger correction than that shown above, in this instance, the constraint of the bearish channel will be severely capping upside potential.  In addition to the channel, the present placement of the 100 period EMA, shown on the H4 chart, will be providing some stiff opposition to any attempts to buck the newly forming downtrend. As a result of this, a subsequent reversal around this 61.8% Fibonacci level is forecasted for the pair which offers yet another chance to capitalise on the oscillating nature of the downtrend. Specifically, once it has resumed its decline, we can expect to see some fairly decent losses given the bearish bias of both the daily Parabolic SAR and the daily moving averages. However, support will likely kick in around the 111.00 handle as the 100 day EMA makes its presence known and this could result in the beginning of a ranging phase. Ultimately, we could see losses extend beyond this point given the Yen’s safe haven status and the recent uptick in implied volatility. However, we also can’t discount the probability of the Trump effect continuing to bid up the USD as the IMF has recently upgraded US GDP estimates a result of his proposed policies. Therefore, on the balance of things, moderating back to the 111.00 handle seems like the most likely outcome until the Trump presidency is in full swing. 

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January 17, 2017

BY FX Research Analyst Matthew Ashley

Intra-Day Technical Report

Tuesday 17th of January 2017 00:00 GMTEUR/USD: BearishGBP/USD: BearishAUD/USD: BullishUSD/JPY: BearishGold: BullishCrude Oil: Bullish

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