USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: Bullish
The outcome of Japan’s snap election passed without making much noise in the financial markets last week as expected.
The LDP sailed to an easy victory and secured the super-majority it
needed to ensure the continuity of “Abenomics”, at least through the
near to medium term.
With the last Bank of Japan policy meeting of the
year also behind them, investors have been left with external forces as
the foremost driver of Japanese Yen price action. Seasonal capital flows
stand out as the most potent potential driver on this front and may
drive the unit higher in the final weeks of 2014.
Swelling risk appetite – embodied by a relentless push upward by US share prices – was a defining feature of the macro landscape over the past year. This
seemed to reflect a response to Fed monetary policy: the steady QE
tapering process defined a clear window in which policymakers would not
The landscape probably won’t look as rosy in 2015.
While the precise timing of liftoff for the Fed policy rate is a matter
of debate, the commencement of stimulus withdrawal at some point in the
year ahead seems to be a given. The prospect of higher borrowing costs
may fuel liquidation of exposure reliant on cheap QE-based funding as
market participants lock in year-end performance ahead of tougher times
For currency markets, such a scenario may take the
form of an exodus from carry trades, which are usually funded in terms
of the perennially low-yielding Japanese unit. That would imply a wave
of covering on short-Yen positions, pushing prices higher.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Pound: Bullish
The British Pound traded higher versus all G10 counterparts save the US Dollar and Japanese Yen. Why might it continue higher through the foreseeable future?
There’s relatively little in the way of foreseeable
economic event risk out of the UK next week, and that may in fact play
in the domestic currency’s favor. It was only two weeks ago when GBP/USD volatility prices traded to multi-year peaks, and a negative correlation between vols and the GBP
helped explain why it fell sharply on clear uncertainty. Yet in a
remarkable shift in sentiment, the Sterling now boasts the lowest
volatility prices of any G10 currency. If correlations hold firm, this
may be enough of a reason for continued appreciation.
A key exception comes from final revisions to Q2
Gross Domestic Product growth numbers due Tuesday, but surprises are
relatively unlikely and only a big miss would force important GBP
volatility. Beyond that, traders will keep an eye on the usual slew of
early-month US economic event risk—especially the end-of-week US Nonfarm
With the Scottish Independence Referendum now past,
the UK currency can return to basics and trade off of traditional
fundamental factors. Credit Suisse Overnight Index Swaps show that the
Bank of England will raise benchmark interest rates by approximately
0.50 percentage points in the coming 12 months. This may not seem like
much, but it is only second to the US Federal Reserve (and US Dollar) at
The clear divergence in growth and yield
expectations between the UK and other major economies leaves the GBP in
the position of strength. And though an obvious US Dollar uptrend makes
us reluctant to buy into GBPUSD weakness, we believe the UK currency
could trade higher through the coming week and perhaps month.
DAX forecast for the week of December 22, Technical Analysis
The DAX fell down to the €9200 level, but as you can see found enough
support below in order to push the market higher. We ended up testing
the €9900 level but pulled back slightly from there in order to form a
hammer. We need to break above the €10,100 level to get a longer-term
buy-and-hold type of signal, and we do think that it’s coming sooner or
later. With that, we are bullish but we recognize that we need a little
bit of work to be done first before putting any money into this
Gold forecast for the week of December 22, 2014, Technical Analysis
The gold markets fell during the course of the week, breaking below the
$1200 level. Because of this, it appears of the market is ready to go
lower, perhaps heading to the 1150 or even 1140 below there. That being
the case, we are still bearish of this market and we believe that the
1250 level above is in fact a massively resistive. Ultimately, the US
dollar should continue to strengthen, and that should continue to put a
bit of pressure on the gold markets on the whole as it works against
USD/JPY forecast for the week of December 22, 2014, Technical Analysis
With this being Christmas week, we don’t expect much out of this pair
but we do recognize that the hammer that form for the previous week of
course means that there is plenty of support. With that, we are not
placing any long-term trades but we do recognize that pullback should
represent value in the US dollar, giving us an opportunity to go long of
a market that quite frankly should continue to go long. The meantime,
we feel that selling is completely out of the question when it comes to
the USD/JPY pair, and as a result we won’t.
USD/CAD forecast for the week of December 22, 2014, Technical Analysis
The USD/CAD pair tried to break higher during the course of the week,
but as you can see struggled once we get above the 1.16 level. The
resulting candle is a shooting star, and as a result we would not be
surprise at all to see some type of pullback. With that being the case,
we feel that that pullback should represent value in the US dollar, and
have buyers stepping back into this marketplace given enough time. We
think that a little bit of profit taking may happen in the short-term,
but ultimately the long-term uptrend should continue
NZD/USD forecast for the week of December 22, 2014, Technical Analysis
The NZD/USD pair went back and forth during the course of the week, but
ultimately finished fairly flat. With that being the case, we feel that
the market will continue to bang around in this general vicinity and
with this week being Christmas, we don’t really anticipate much in the
way of large moves. However, we recognize that any rally in this market
should be a selling opportunity and should continue to be so. We think
that the market will ultimately go down to the 0.75 handle, which is the
next large round number.
EUR/USD Approaching Major Monthly Support (based on investing article)
Below is a monthly chart of the EUR/USD.
On it we can see that price is approaching, once again, the 50%
retracement of the enormous leg up from the euro's inception around the
turn of the millennium to its 2008 highs.
A break below the June 2010 low of 1.1875 could be another key sign of sustainable US dollar strength.Below is the aforementioned monthly chart,but with some trendlines
added. There may be some opportunities for traders to buy at the bottom
trendline and sell at the top trendline. Breakouts of the trendlines
could signal the direction of the trend for years to come.