Tuesday, 27 December 2016 08:03

Strategic Report, 2016 Newsletter 52

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Published in Strategic Report


Technical Analysis



The world’s most traded currency – the EUR/USD pair – is moving lower, -1.34% so far this month, and is ready to snap the third negative month in a row. The euro dropped to its lowest since January 2003 against the greenback and met the 1.0352 price level.


The single currency managed to surpass the 1.0500 strong psychological barrier, however, the pair had a rebound on it and stuck below the latter level. As this period is very quiet for the marker, the common currency will continue developing sideways within the 1.0352 – 1.0500 significant zone. The next level to watch is the lower band or the upper band of the consolidation area. The RSI indicator is flattening while it is still moving in a negative territory. Also, the MACD indicator crossed its trigger line to the upside but is holding below the zero line. Looking ahead to the coming year, we hope to see a rally in the pair between 1.0500 and 1.0600. Otherwise, if there is a break below the fresh 14-year low the price will slip until the 1.0200 support level.





Sterling continued to trade lower versus the U.S. dollar for the third negative week in a row and plummeted more than 3.5%. The GBP/USD pair recorded a fresh almost 2-month low and challenged the 1.2230 strong support level.


Last week, it was a light week in terms of U.K. data and as we mentioned in a previous analysis, the cable’s weakness can be attributed to ongoing concerns about Brexit. Now, the pair is developing near the 1.2280 price level as it gets stuck below the 1.2310 resistance barrier. During this week, we expect a quiet market due to holidays, so the price will continue developing with some weak momentum. If the pair slips below the 1.2230 support obstacle, it will open the way for the 1.2200 critical level. Otherwise, an upward penetration of the 1.2310 resistance level, will expose the pair towards 1.2390. Technical indicators are following a negative path while RSI is moving slightly above the 30 level with some weak and MACD is holding above from its trigger line.




Last week it was a quiet trading week for the U.S. dollar versus the Japanese yen as it is consolidating within the 116.50 – 118.65 strong area after the rebound on the previous 11-month high. The USD/JPY pair seems virtually unchanged and for the next days we are waiting to continue developing within the referred area.


From the technical point of view, on the daily chart, the pair opened with a gap to the downside during yesterday’s session and now is trying to recover the lost ground, however, the price is moving with very low volatility. Currently, the pair is trading slightly below the 50-SMA on the 4-hour chart which seems to be a strong return point for the bears until the 116.50 barrier. Although, if the price plunges below the lower boundary of the sideways channel, it will open the door for a retest of the 114.80 key level. On the other side, a break above the 118.65 will expose the pair at the 120.00 strong critical level. Technical indicators are endorsing the downward movement as both are moving lower. The RSI is moving below its 70 level and is sloping downwards, while the MACD is in the positive territory, below its trigger line.



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The FTSE100 index edged sharply higher over this month and surged more than 4% following the strong support that found on the 100-weekly SMA which overlaps with the 6510 barrier. The price continues the aggressive rally to the upside, despite the ongoing concerns about Brexit


On the medium-term timeframe, the three SMAs are pointing upwards while the 50 is approaching the other two. In the next sessions, a bullish crossover will create while the price is developing well above them. Going to the daily chart, the price had a rebound on the 6650 barrier which is near the 50 and 100 SMAs. The next level to watch is the 7130 resistance level, if there is a penetration to the upside of the 7065 strong obstacle. Technical indicators are confirming the recent bullish attitude as both are following a positive path. The Relative Strength Index (RSI) is rising and is approaching the 70 level whilst the MACD oscillator lies above its trigger and zero lines. 




Oil prices are trading sideways pre-New Year holiday trading session with markets adopting a wait-and-see stance less than a week before the first output cut deal agreed between OPEC and non-OPEC member in 15 years is scheduled to start.


The West Texas Intermediate (WTI) crude oil is looking bullish in the short-term timeframe, as well as, on the medium-term chart. The oil is creating an aggressive rally to the upside following the strong bounce off the 100-weekly SMA and is printing the second positive month in a row. The price is still developing in an ascending trend as it is trading well above the three SMAs (50-SMA, 100-SMA and 200-SMAs) on the daily chart, while the technical indicators lie on the positive territory. The RSI indicator is pointing upwards whilst the MACD oscillator holds below its trigger line and above the zero line. So, if the price surpasses the $54.00 strong psychological resistance barrier it will move towards the $55.25 level.



6. XAU/USD Weekly Outlook


The yellow metal is creating an aggressive sell-off since October as it slipped more than 13% and is recording the third red consecutive month. The XAU/USD affected from the U.S. dollar sharp rally to the upside during the previous weeks, as well as, from its weak momentum over the last days due to holidays.


On the daily chart, the three SMAs (50-SMA, 100-SMA and 200-SMA) are sloping downwards with strong momentum while the technical indicators are following a negative path. The Relative Strength Index (RSI) is pointing upwards while the MACD oscillator crossed its trigger line to the upside and is moving higher. If the price penetrates to the upside the $1,1140 resistance obstacle, it will open the door for a retest of the critical level at $1.165. Otherwise, a break below the $1,122 will drive the price towards the $1,072 barrier.




The Easy Jet (EZJ:LSE) is trading within a symmetrical triangle over the last three months after the sharp sell-off in June. The price opened with a gap to the downside and failed to recover it as it is developing near the $1031 price level.


The technical structure suggests further upside movement and a penetration of the upper band of the pattern. The price now is trading slightly below the latter level, however, it surpassed the 100-SMA on the daily chart. A break above the descending trend line will expose the price towards the $1110 strong resistance level. On the other hand, the stock may find a strong obstacle for the bulls and return back to the $960 support barrier. Technical indicators are moving in a positive area with some weak momentum. The RSI indicator is flattening above the 50 level while the MACD oscillator holds above both, its trigger and zero lines.


FX Weekly Market Preview

Weekly Outlook: December 27 - 30; Market Quiet Amid Holidays

During last week the sterling continued to lose ground against the majors due to the ongoing Brexit concerns, more than 1.8% against the buck. The greenback bolstered from Yellen’s speech at the beginning of the week, as she appeared optimistic for the improvement in the labour market and the economy in general but later it slipped from its 14-year high against the G10 basket. Though, it managed to end the week higher against the G10 currencies as the GDP for the third quarter surprised positively. The U.S. economy grew by 3.5% annualized in Q3, the second upward revise for the preliminary figure of 3.2% and 2.9%.

Additionally, since last week the sterling plunged against all the G10 currencies due to the uncertainty that exists over Brexit. The British pound fell especially against the Swedish Krona and dropped more than 3% while the GBP/USD pair created a fresh almost 2-month low. The greenback continues its upward rally and shored up versus all the G10 basket, except the Swedish Krona.

Given the holidays due to Christmas and New Year celebrations, started last week and going on until the first week January, – the action may be somewhat limited over the next few sessions. The rest of the week we have smattering low level data coming out from various countries, that we don’t expect to trigger significant volatility in the market. You can find below the schedule of the public holidays of the major markets.

Today, the London Stock Exchange will be closed due to Boxing day (observed). Additionally, today is a public holiday for the three commodity countries, Australia, Canada and New Zealand. In U.S., the final consumer confidence for December will be released, as well as the S&P/Case-Shiller Home Price Indices for October. Federal Reserve Bank of Dallas and Richmond will release its monthly surveys regarding factory activity in their states in December. Overnight, Japanese preliminary figure for the industrial production of November is expected.

On Wednesday morning, the U.K. BBA mortgage approvals in December are expected to be released and later in the day, the respective indicator for U.S., MBA mortgage applications for the week to December 25 will be out as well. In the U.S., we expect also the pending home sales for November and API weekly crude oil stock. During the night, Bank of Japan will publish its Summary of Opinions report with its projections for the inflation and economic growth.

On Thursday morning, Eurozone’s private loans for November and M3 money supply are expected. In the U.S., the weekly jobless claims are set to come out. The preliminary wholesale inventories and the goods trade balance, both for November, will be released.

On Friday, no major economic indicators or speeches are scheduled. The London Stock Exchange will close process commences from 12:30 GMT due to New Year’s Eve celebrations.

Here's to a happy and healthy 2017, and all the best from the JFD Research team!

May this Christmas bring you all the love and luck in the world! Merry Christmas and a Happy New Year!

There's much we are looking forward to bringing to you in 2017, which you will be able to find on JFD Research website – stay tuned.


MarketHolidays2016 17


Weekly Economic Calendar

Date GMT Event Importance Forecast Previous
24/01/17 N/A UK GBP EU Membership Court Ruling 4 - -
25/01/17 00:30 AU AUD Consumer Price Index (yoy) (Q4) 3 1.6% 1.3%
25/01/17 00:30 AU AUD RBA Trimmed Mean CPI (qoq) (Q4) 3 0.5% 0.4%
25/01/17 09:00 DE EUR IFO - Current Assessment (Jan) 2 117.0 116.6
25/01/17 21:45 NZ NZD Consumer Price Index (yoy) (Q4) 3 - 0.4%
26/01/17 09:30 UK GBP Gross Domestic Product (yoy) (Q4) (P) 3 2.1% 2.2%
26/01/17 14:45 US USD Markit Services PMI (Jan) (P) 2 - 53.9
27/01/17 13:30 US USD Gross Domestic Product Price Index (Q4) (P) 2 2.1% 1.4%

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