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AUDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Australian Dollar: NeutralThe Australian Dollar finds itself torn between conflicting forces as year-end liquidation on trends dominating markets in 2014 gathers momentum. Swelling risk appetite – embodied by a relentless push upward by the S&P 500 – and a firming US Dollar have been defining themes in the past year. Profit-taking on these trades ahead of the transition to 2015 has produced a parallel downturn in the greenback and the benchmark stock index.
This dynamic carries conflicting implications for AUDUSD. On one hand, the prices are being offered support by a market-wide unwinding of long-USD exposure. On the other, the shedding of risk-on exposure is putting downward pressure on the sentiment-geared Aussie Dollar. Not surprisingly, this produced relative standstill, with prices locked in a narrow range and waiting for guidance even as notable reversals are recorded elsewhere in the anti-USD space.
A shift in the relative monetary policy outlook may break the deadlock in the week ahead. Shifting expectations over recent weeks have delivered a priced-in G10 forecast that sees the RBA as one of the most dovish central banks in 2015. Indeed, with OIS rates implying at least one interest rate cut in the coming 12 months, the Australian monetary authority leads on the conventional policy easing front. Only the BOJ and the ECB may edge out Glenn Stevens and company for the most-dovish crown, and then only via expansions of non-standard measures.
This stands in stark contrast with the policy trajectory at the Federal Reserve. Markets are betting on at least one rate hike in 2015 and have been flirting with the possibility that US officials will be able to squeeze in two of them before year-end. US economic news-flow appears to be gathering steam relative to consensus forecasts once again. Data from Citigroup suggests that, on the whole, realized outcomes are now outstripping expected ones by the widest margin since mid-September. This has already encouraged markets to bet on the sooner arrival of the first post-QE rate hike. Next week’s FOMC policy announcement – this time complete with an updated set of economic projections and press conference from Chair Janet Yellen – may see the timeline shorten further.
On the domestic front, minutes from December’s RBA meeting will be in the spotlight. The markets were not meaningfully swayed against betting on a 2015 rate cut by the neutral statement that emerged out of that sit-down. This suggests that anything but a convincing hawkish rhetorical shift – an outcome that seems overwhelmingly unlikely even on a relative basis – will keep bets on a 25-75 basis point pro-USD move in the policy spread comfortably in place. Taken together with guidance from the Fed, that may tip the scales to produce a bearish break out of consolidation for the Aussie.
GOLD (XAUUSD) Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: NeutralGold prices are markedly higher this week with the precious metal rallying 2.5% to trade at $1222 ahead of the New York close on Friday. The advance comes amid a turbulent week for broader risk assets with global equity markets selling off sharply on global growth concerns. Weakness in the US Dollar and falling crude prices have further impacted risk appetite with gold well supported as investors sought alternative stores of wealth. Despite the gains however, prices continue to hold below a key resistance threshold with the near-term risk weighted to the downside heading into next week.
It was a rough week for equities with the SPX off more than 2.70% on the week as growing political uncertainty in Greece and concerns over the weakening outlook for global growth sparked a wave of profit taking. The accompanied sell off in crude prices, which hit lows not seen since 2009 on Friday, have continued to weigh on broader market sentiment, with gold catching a bid early in the week.
Looking ahead to next week, US economic data comes back into focus with the November Consumer Price Index and the highly anticipated FOMC policy decision on Wednesday. As officials anticipate weaker energy prices to boost disposable incomes for U.S. households, the recent pickup in job/wage growth may embolden the committee to take a more hawkish stance on monetary policy with speculation circulating that the central bank may look to remove the “considerable time period” language as it pertains to interest rates. Should the subsequent presser and updated growth projection show a more upbeat assessment, gold could come under pressure as investors begin to bring forward interest rate expectations. That said, the trade remains vulnerable near-term just below key resistance.
From a technical standpoint, gold has now pared 50% of the decline off the July high with the move into the $1237 target we noted last week . This level converges with a median line dating back to August 2013 and near-term the risk remains weighted to the downside while below this threshold. A breach above targets subsequent targets at $1248 and a key resistance range at $1262/68. Interim support rests at $1206 and $1196 with only a move sub-$1179/80 shifting the broader focus back to the short-side. Bottom line: longs at risk near-term sub $1237 with a pullback likely to offer more favorable long-entries lower down. A breach of the highs keeps the topside bias in play with such a scenario eyeing targets into the 200-day moving average.
Gold forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The gold markets rose during the course of the week as you can see, testing the $1250 level. That being the case, we think that the market could run into a significant amount resistance here, but we do not have the right setup to start selling yet. Ultimately, we think that this market will test the $1150 level given enough time, so at this point time we are not necessarily excited about buying gold. However, we recognize that if we get at least a daily close above the $1250 level we could start buying.
USD/JPY forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The USD/JPY pair fell during most of the week, slicing down to the 118 level. With that being the case, we ended up finding support in that general vicinity, and we believe that the markets will continue to find buyers at lower levels. We think that the 115 level is the “floor” at the moment, and we are looking for supportive candles in order to start buying again. We have absolutely no interest in selling this pair, and believe that just simply being patient is the way to find buying opportunities again and again.
USD/CAD forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The USD/CAD pair initially fell during the course of the week, but then shot through the resistance at the 1.15 level in order to continue to show serious strength. With that, the market looks as if it’s ready to continue going on its next leg up, and that pullbacks should offer value in the US dollar. The 1.13 level should be massively supportive, so we do not believe that the market will fall below there. Ultimately, we believe that this market will then head to the 1.20 level given enough time.
NZD/USD forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The NZD/USD pair broke higher during the course of the week, as we found a bit of support below. However, there is still a significant amount of resistance above, at the 0.80 handle, and with that we feel that the sellers will step in sooner or later. We have no interest in buying this pair, as the Royal Bank of New Zealand continues to work against the value the Kiwi dollar going forward, and as a result we feel the market will ultimately go to the 0.75 handle.
GBP/USD forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The GBP/USD pair broke higher during the course of the week, testing the 1.57 region. The fact that we done so far into the previous two shooting stars tells us that we could in fact see continuation as we have certainly seen quite a bit of pressure put on the resistance. However, we believe that the market should offer selling opportunities at higher levels. We are especially keen on selling at the 1.60 handle, as it should continue to be important based upon previous support, and now what we believe to be future resistance.
EUR/USD forecast for the week of December 15, 2014, Technical Analysis (based on fxempire article)
The EUR/USD pair broke higher during the course of the week, but as you can see struggled at the 1.25 handle. This is an area that has been resistive in the past, so it makes sense that we would run into resistance again. We believe that the downtrend is most certainly still in effect, but we do not have a resistant candle to start selling yet. Because of this, we are on the sidelines as far as longer-term trades are concerned, but we certainly wouldn’t be interested in buying this market.
After all, we are heading towards the end of the year, and the liquidity will all but disappear. With that, we think that short-term traders only can be bothered to be in this marketplace, and that sudden erratic corrections can occur at any time. I have a yellow box drawn on the chart which for me signifies when the trend changes. If we get above there, extensively the 1.30 handle, we could see the market go much higher. Probably to the 1.135 level would be the next target at that point time, but it takes a lot for that to happen in our opinion.
More than likely, the market will probably do very little over the next couple of weeks, at least as far as anything along the lines of a substantial move. Ultimately, the market could bounce a bit from here and offer a selling opportunity but we would need to see the resistive candle form in order to do so. Perhaps we may get a little bit of a late December surprise, but ultimately we feel that this market is going to continue going lower once the liquidity returns the marketplace.
Looking at the longer-term charts, we believe that the 1.2050 level is the target given enough time, and as a result we are not interested in buying under any circumstances, even though we do recognize that a bit of a bounce could happen. We believe that 2015 will be very hard on the Euro as well.
EUR/USD Weekly Outlook (based on investing actionforex article)
EUR/USD's rebounded last week indicated short term bottoming at 1.2246. Further recovery could be seen back to 1.2599 resistance. Considering bullish convergence condition in daily MACD, break of 1.2599 will be the first sign of medium term bottoming and bring stronger rebound to 1.2886 key resistance next. On the downside, break of 1.2246 is needed to confirm fall resumption. Otherwise, we'd expect more corrective trading ahead.
In the bigger picture, overall price actions from 1.6039 long term top is viewed as a corrective pattern. Fall from 1.3993 is tentatively viewed as the third leg of such pattern and should target 1.1875 low and below. On the upside, break of 1.2886 resistance will bring some consolidations first before staging another decline.
In the long term picture, EUR/USD turned into a long term consolidation pattern since reaching 1.6039 in 2008. Such consolidation is still in progress. And break of 1.2042 will likely pave the way to 61.8% retracement of 0.8223 to 1.6039 at 1.1209. Before that, EUR/USD would continue to engage in sideway trading between 1.1875 and 1.5143 in medium term.
Forex - Weekly outlook: December 15 - 19
The dollar gained ground against the euro on Friday following the release of strong U.S. economic data and surged to more than five year highs against the commodity-exposed Canadian dollar as oil prices continued to drop.
EUR/USD was up 0.44% to 1.2461 in late trade. The dollar was boosted after data showing U.S. consumer sentiment rose to an almost eight-year high in December.
The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7. Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.
The data underlined expectations for a hike in U.S. interest rates by the Federal Reserve next year.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day. On Monday the index rose to a five year high of 89.53.
The dollar also pushed higher against the yen, with USD/JPY at 118.77 in late trade, off lows of 118.05.
Elsewhere, the Canadian dollar fell to five-and-a-half year lows, with USD/CAD hitting highs of 1.1590, before easing back to 1.1578 in late trade.
Oil prices dropped to their lowest level in five years on Friday after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months.
Canada is a major oil exporter and the currency's sensitivity to crude prices has intensified as prices continued to tumble.
The Russian ruble fell to record lows against the dollar on Friday and the Norwegian krone fell to 11-year lows after rate hikes by both countries central banks on Thursday failed to offset the selling pressure brought to bear by the continued decline in oil prices.
USD/RUB jumped 3.23% to 58.20 late Friday while USD/NOK was up 0.98% to settle at 7.36 after hitting highs of 7.39 earlier, the most since September 2003.
In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise. Japan’s central bank is also to hold a policy setting meeting next week. The euro zone is to produce what will be closely watched reports on private sector activity.
Monday, December 15
- Japan is to publish reports on the Tankan manufacturing and non-manufacturing index.
- Switzerland is to publish data on producer price inflation.
- In the euro zone, Germany’s Bundesbank is to publish its monthly report.
- The U.K. is to release private sector data on industrial order expectations.
- Later Monday, the U.S. is to release reports on manufacturing activity in the New York region and industrial production.
Tuesday, December 16- The Reserve Bank of Australia is to publish the minutes
of its latest policy meeting, which contain valuable insights into
economic conditions from the bank’s perspective.
- China is to publish the preliminary reading of its HSBC manufacturing index.
- In
the U.K., the Bank of England is to publish its financial stability
report. BoE Governor Mark Carney is to hold a press conference about the
report.
- The U.K. is also to release data on consumer inflation, which accounts for the majority of overall inflation.
- The
euro zone is to publish preliminary data on private sector activity,
while Germany and France are to also to publish data on private sector
growth.
- The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
- Canada is to produce data on manufacturing sales and foreign securities purchases.
- The U.S. is to publish reports on building permits and housing starts.
- Later in the day, New Zealand is to release data on its current account.
Wednesday, December 17- Japan is to publish a report on its trade balance.
- The
U.K. is to release data on the change in the number of people employed,
the unemployment rate and average earnings. In addition, the BoE is to
publish the minutes of its latest policy meeting.
- The euro zone is to produce revised data on consumer price inflation.
- Canada is to publish a report on wholesale sales.
- The
U.S. is to release data on consumer inflation and the current account.
Later Wednesday, the Federal Reserve is to publish its rate statement
and economic projections for the next two years. Fed Chair Janet Yellen
is to hold what will be a closely watched press conference.
- New
Zealand is to release data on gross domestic product, the broadest
indicator of economic activity and the leading measure of the economy’s
health.
Thursday, December 18- Switzerland is to report on its trade balance.
- The Ifo Institute is to release a report on German business climate.
- The
U.K. is to release data on retail sales, the government measure of
consumer spending, which accounts for the majority of overall economic
activity.
- The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.
Friday, December 19