Gold – Daily Chart

A daily close above the 1260.60/1272.56 resistance area could lead to a rise to 1327.90/1375.37

The rally off the December low has taken the gold price right into the 260.60/1272.56 resistance area which is made up of the December peak, the 2013-14 downtrend line and the August low.
This resistance zone will be key for the next couple of months’ trend. A daily close above it will open the way up for the area seen between the 200 day moving average at 1321.36, the July peak at 1349.31 and the mid-September and October highs at 1362.23/1375.37 to be reached.
Should the gold price be rejected by resistance at 1260.60/1272.56, a retest of the 1225.00/1211.57 (early December low) looks to be on the cards. At present we do not expect a low below the December trough at 1184.23 to be made, though.
Should this be the case and the 1180.04 2013 low give way, the 1156.55/1154.72 July 2010 low and the 61.8% Fibonacci retracement of the 2008-11 rise will be targeted.
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S&P GSCI Total Return Index

Complex divergence of the daily RSI reflected a loss of downside momentum, market upside corrective

The S&P GSCI Total Return Index as suspected has not maintained its initial break of the 2009-2014 uptrend. The recent 6 month low was not confirmed by the daily RSI and we are currently seeing a small corrective rebound.
Rallies should find initial resistance at 4732 (23.6% retracement of the move down from the August high) and potentially 4790/4805, the 200 day ma and the 38.2% retracement of the same move. We would expect to see the market struggle here – however its should be noted that the current Elliott wave count on the 2450 minute chart is implying a slightly deeper retracement (4820/45).
A close below 4615 (recent low) would be negative and target initially the 4493.50 2013 low. Failure here will target 4442/47, the 50% retracement of the move from the 2009 low to the 2011 high and the 78.6% retracement of the move from 2012. This represents our medium term downside target.
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Chart Watch – Important Technical Support And Resistance Zones

EUR/USD, EUR/GBP, EUR/JPY, EUR/CHF, EUR/AUD, EUR/BRL, EUR/CAD, EUR/CZK, EUR/HUF, EUR/MXN, EUR/NOK, EUR/NZD, EUR/PLN, EUR/RON, EUR/RUB, EUR/SEK, EUR/TRY, EUR/ZAR
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High beta EM currencies hitting a BRIC wall?

Markets will now focus on idiosyncratic policy responses by national central banks.

Since the beginning of the year markets have treated higher beta EM currencies, in particular TRY and ZAR, with a high degree of suspicion. In part this is merely a continuation of a trend from last summer, but nonetheless the weakness seen so far this year is disconcerting. Further weakness comes despite modest falls in US yields following Fed tapering in December. Thus far it is clear that markets are not following previous patterns of announcement effect vs. implementation effect of QE policies (where asset prices moved before QE programmes were actually implemented). Lower beta EM currencies however have fared reasonably well during this period; therefore we cannot consider current price action as being part of generic EM weakness but rather weakness that is specific to the higher beta complex. To improve the situation, it requires either i) a significant fall in US yields or ii) idiosyncratic policy responses by national central banks.
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EUR/PLN – Daily Chart

Continues to hover above its December 4.1283 low which should continue to underpin

EUR/PLN’s bounce off last week’s low at 4.1387 has the 55 day moving average at 4.1771 in sight.
While the currency pair remains above the December trough at 4.1283 we will retain our medium term neutral outlook.
Only if a daily close below 4.1283 were to be made, would we change our medium term outlook to a bearish one with the 4.0928 April 2013 low and probably also the 4.0541/4.0284 August and December 2012 lows being back in the picture.
Resistance is seen between the 55 day moving average at 4.1771 and the current January high at 4.1926 and also between the 2013-14 resistance line and the 200 day moving average at 4.2002/98.
We continue to keep a neutral view.
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Commodity Spotlight

Outlook 2014: Bottoming with subsequent recovery

Following the renewed decline of broad commodity indices in 2013, we forecast a general bottoming for the first half of 2014 and a price rise, particularly in base and precious metals, by year-end. At the same time, we see only little upside potential in crude oil and most agricultural commodities. The differentiation within the commodity sector, i.e. the differences in price movements, should thus remain considerable. This is because alongside factors relevant to all commodity markets, such as economic developments in China, investor behaviour and central bank policy, sector-specific factors above all will come to the fore.
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NZD/USD – Daily Chart

The .8408/37 resistance area has been tested but caps at present; a top could still be formed

NZD/USD’s bounce off its .8117 late December low has so far taken it to .8432, to right within the .8408/37 resistance area, made up of the September/November highs.
We still believe that this resistance area will cap the currency pair and thus retain our neutral forecast.
In case of a daily close above .8437 being made, however, we will have to allow for the .8500 region and the October peak at .8545 to be revisited.
We believe that Australian Dollar weakness will continue and that short term New Zealand strength is likely to fizzle out within the next few days because AUD/NZD is approaching major support (please see pages 7&8).
While no daily chart close above .8437 is being made the 55 day moving average at .8250 and the five month support line at .8173 will be targeted on a fall through the .8336/19 support area which is being tested at present.
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BOE Canadian Dollar TWI

Has completed a top and fallen into 3 year lows.

The Canadian Dollar is also set to see some weakness throughout 2014. At the end of last year we saw the Trade weighted index complete a 3 year top pattern, which suggests that the market is likely to come under increasing downside pressure in 2014.
We would allow for losses towards the 12 year support line, this is currently located at 99.08, but by June 2014 is at approximately 100. We will look for losses towards this trendline, although it should be noted this represents a minimum downside target. From current levels of 104.30, this would see a decline of approximately 4.3%
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S&P GSCI Total Return Index

Market has eroded the 2009-2014 uptrend.

The S&P GSCI Total Return Index has eroded the 2009-2014 uptrend at 4686 and we have seen a weekly close below here. The market has charted a new 6 month low, but this has been accompanied by a complex divergence of the daily RSI, this reflects a loss of downside momentum and we would expect to see a a short term corrective rebound.
Rallies should find initial resistance at 4732 (23.6% retracement of the move down from the August high) and potentially 4794/4805, the 200 day ma and the 38.2% retracement of the same move.
A close below 4615 would be negative and target initially the 4493.50 2013 low. Failure here will target 4442/47, the 50% retracement of the move from the 2009 low to the 2011 high and the 78.6% retracement of the move from 2012. This represents our medium term downside target.

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USD: Will 2014 finally be the greenback’s year?

Tapering, increasing real yields and positioning all argue for a stronger USD in 2014.

Believe it or not 2013 was actually not a bad year as far as the USD was concerned. The USD finished 2013 having made significant gains against higher yielding currencies within the G10 complex whilst at the same time making gains against a majority of emerging market currencies. However, consensus trades such as long USD-CHF and short EUR-USD did not fare as expected.
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Gold – Daily Chart

A daily close above the 1268.28/1272.56 resistance area could lead to a rise to 1327.90/1375.37

The rally off the December low in the gold price is ongoing and getting ever closer to the key resistance area at 1268.28/1272.56. It consists of the December peak, the 2013-14 downtrend line and the August low.
This resistance zone will be key for the next couple of months’ trend. A daily close above it will open the way up for the area seen between the 200 day moving average at 1327.90, the July peak at 1349.31 and the mid-September and October highs at 1362.23/1375.37 to be reached.
Should the gold price be rejected by resistance at 1268.28/1272.56, a retest of the 1225.00/1211.57 (early December low) looks to be on the cards. At present we do not expect a low below the December trough at 1184.23 to be made, though.
Should this be the case and the 1180.04 2013 low give way, the 1156.55/1154.72 July 2010 low and the 61.8% Fibonacci retracement of the 2008-11 rise will be targeted.
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EUR/PLN – Daily Chart

Drops back towards its December 4.1283 low which should continue to underpin

EUR/PLN’s post non-farm payroll data decline has practically taken it back to the September low at 4.1443 around which it tries to stabilise.
While the currency pair remains above the next lower December trough at 4.1283 we will retain our medium term neutral outlook.
Only if a daily close below 4.1283 were to be made, would we change our medium term outlook to a bearish one with the 4.0928 April 2013 low and probably also the 4.0541/4.0284 August and December 2012 lows being back in the picture.
Resistance is seen between the 55 day moving average at 4.1796 and Friday’s high at 4.1926 and also between the
2013-14 resistance line and the 200 day moving average at 4.2059/85.
For now we keep a neutral view.
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FX Week

Emirates NBD was the best forecaster of USD/JPY, USD/CAD and AUD/USD in 2013 according to the latest Q4 Bloomberg FX survey.

USD gives back early 2014 gains
After starting 2014 strongly the USD gave back some of its gains following the weaker than expected December US jobs report. Non-farm payrolls showed a rise of just 74k during the month, less than half what was expected and the lowest since 2011. Admittedly the unemployment rate fell to 6.7% from 7.0% but this was because of another reduction in the participation rate – an expression of subdued confidence on the part of the working population. However, the weak payrolls figures were depressed by poor weather and are eventually likely to either be revised or prove to be only a temporary slowdown.
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NZD/USD – Daily Chart

Remains sidelined between the December low at .8084 and the .8437 September high

NZD/USD’s bounce off its .8117 late December low has so far taken it to .8319 in early January. This high was made only marginally below the .8336 December peak.

While no daily chart close above .8336 is being made our short term outlook will be neutral.

A significant support zone is still seen at .8194/.8084 (200 day moving average, October low, July and August peaks and November as well as December troughs).

Should a drop through the .8084 low be seen, the psychological .8000 zone and then the .7911/.7683 region (200 week moving average and the June to August lows) will be back on the map.

We will retain our view of a top being formed as long as NZD/USD stays below the .8408/37 September/November highs. A daily close above .8336 would push the .8408/37 resistance area back to the fore, though.

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USD/CAD – Daily Chart

Break out of its recent consolidation is bullish but the 1.0850 level is key for the overall trend

Even though USD/CAD’s break out of its December consolidation range is bullish it faces stiff resistance around the 1.0850 mark, at least on the first test.

1.0850 is where the November 2009 and May 2010 highs were made.

Over the course of the next few weeks a multi-year high above the November 2009 and May 2010 high at 1.0850 is expected to be made, though, with the August 2009 peak at 1.1122 and the 50% retracement at 1.1238 then being targeted.

We will hold onto this bullish medium term outlook while USD/CAD trades above its late December low at 1.0500.

Support above this level can be seen along the one month support line at 1.0638, the 55 day moving average at 1.0563 and along the three month support line at 1.0550.

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S&P GSCI Total Return Index

Market has sold off to the 2009-2014 uptrend – this is at 4686

The S&P GSCI Total Return Index failed just ahead of the 4930/41, which was the 61.8% retracement and the high seen in October and sold off aggressively. Intraday rallies should hold 4770/90 ahead of further losses.

This sell off has already reached the 2009-2014 uptrend at 4686. A close below here and the 4630 recent low should be enough to trigger another leg lower.

A weekly close below 4630 would be very negative and target initially the 4493.50 2013 low. Failure here will target 4442/47, the 50% retracement of the move from the 2009 low to the 2011 high and the 78.6% retracement of the move from 2012. This represents our medium term downside target.

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EUR/PLN – Daily Chart

Bounces off the 2012-13 support line and remains sidelined above its December 4.1283 low

EUR/PLN is about to break through its five month resistance line at 4.1695 and the 55 day moving average at 4.1806 this week.

A rise above the next higher 4.1905 December 18 high will put the 200 day moving average and the 2013-14 resistance line at 4.2085/4.2115 back on the map.

While the currency pair remains below the next higher 4.2204/09 November high and the 38.2% Fibonacci retracement of the June-to-December decline but above its December trough at 4.1283 we will retain our medium term neutral outlook.

Only if a daily close below 4.1283 were to be made, would we change our medium term outlook to a bearish one with the 4.0928 April 2013 low and probably also the 4.0541/4.0284 August and December 2012 lows being back in the picture. For now we retain a neutral view.

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FX Week

Early 2014 sees returning signs of USD strength

The USD has strengthened during the first two trading days of the New Year, with optimism growing about the strength of the US economic recovery. The 10-year yield on US Treasuries reached above 3.0% at one stage last week, up from 1.80% a year ago, helped by buoyant US manufacturing data as well as strength in consumer confidence. Earlier in December the Fed announced that Quantitative Easing would begin to be tapered in January, and final Q3 GDP estimate was revised to 4.1% on an annualized basis, with signs that Q4 growth will also be quite firm. During the thin holiday period the USD/JPY rate rallied the most consistently, reaching as high as 105.50 at one point before settling back around the 105 level, which was our one-month forecast as of mid-December. At the end of last week, the USD had begun to improve against other currency pairs as well, with both EUR/USD and GBP/USD pulling back from highs of 1.3890 and 1.6605 respectively posted over the holiday period. Clearly the markets were still quite thin last week, so over interpreting such swings can be quite dangerous. Similarly, this week could also see some erratic moves, although we do believe that the firmer USD trend will continue in 2014, with even the EUR/USD beginning to participate more fully in it.

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