Forex News and Events
Equities higher as financial markets reopen
Financial markets are slowly waking up and starting 2017 on a firm footing as traders returned to their desks. Asian equities opened in positive territory this morning with the Shanghai Composite and Shenzhen Composite rising 1.04% and 0.86% respectively. Hong Kong’s Hang Seng was up 0.61%, while in Australia the ASX rose 1.19%. We will have to wait until tomorrow to see Japanese markets reopening. Equity markets across the continent are also climbing higher amid the positive lead from Asia.
In the FX market, the US dollar recovered partially from New Year Eve’s sell-off as the dollar index moved above the 103 threshold in the early European session. We remain cautious on further dollar strength as we jump into 2017 as most of last month’s rally was fuelled by Trump’s strong growth rhetoric.
Equities are up, the dollar is up and… gold is up, which suggests that investors are sleeping as well. Indeed, in spite of rallying 3.8% during the first half of December, the dollar index lost almost half of those gains during the final days of the year. During the same period, the yellow metal surged 3% to $1,150 an ounce. Even though it remains unlikely that gold will continue to rally in the short-term, investors always run to gold when uncertainty is rising, especially when equity gain rallies have been exclusively fuelled by bullish speculation, while fundamentals remained hesitant.
Reloading pound position may become trade of the year
According to The Times, UK Prime Minister Theresa May should trigger Article 50 in March and will likely be on the agenda of the next European Summit that will be held in March. This information has not yet been confirmed, however this morning the GBP/USD is below 1.2300.
The British government continues to await the Supreme Court’s decision on whether or not the Parliament must vote on the triggering of the Article 50. In our view, a parliamentary vote will certainly go against the referendum vote. Such a decision would nonetheless be in favour of European nationalists as their popularity increases as much as people become bypassed by institutions.
We are dubious of the information supplied by The Times until it is officially announced. Financial markets, are not disturbed and are still anticipating a Brexit, which is why we believe that the trade of the year may be reloading the pound position.
Crude Oil - Consolidating Below Resistance
The Risk Today
EUR/USD is pushing higher but remains below 1.0500. The pair has bounced back from hourly support at 1.0367 (15/12/2016 low). Hourly resistance can be found at 1.0499 (22/12/2016 high). Stronger resistance is given at 1.0670 (14/12/2016 high). Expected to see continued very short-term increase. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.
GBP/USD is trading below former uptrend channel. Strong support at 1.2302 (18/11/2016 low) has been broken while resistance lies at 1.2509 (16/12/2016 high). The technical structure suggests further weakness. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
USD/JPY's is increasing again. The pair is heading towards the 120.00 level. Hourly support can be found at 116.05 (30/12/2016 low). Stronger support lies at 114.74 (12/12/2016 low). The technical structure suggests further strengthening. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF is consolidating and remains above 1.0200 which seems a solid base. Hourly resistance is given at 1.0344 (15/12/2016 high). Key support is given at the parity. Expected to further consolidate above 1.0200. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.
Resistance and Support:
