AUD/USD – recent low not confirmed, tighten up stops on shorts

AUD/USD is under pressure and the focus is on the .8848 August low. Our short term target remains the base of the base of a 2 year down channel at .8745 – this is expected to hold the initial test. We note that the daily RSI has yet to confirm the new low of .8883 and we would tighten up stops on shorts accordingly.

However longer term we are bearish and longer term targets are found at .8550 en route to .8068.

Intraday rallies should now struggle on rallies to .8975/.9000 and provided that the topside is capped by the .9140 resistance line, we will maintain an immediate negative bias.

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S&P GSCI Total Return Index

Market has failed ahead of the 50% retracement and is back under pressure.

The S&P GSCI Total Return Index failed just ahead of the 50% retracement of the move down from August, this is located at 4872. We view the high at 4846 as a corrective peak and look for the market to come under increasing downside pressure.
The market faces tougher resistance, which is located at 4930/41, which is the 61.8% retracement and the high seen in October. We look for this to hold the topside and provoke failure.
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Gold – Daily Chart

We expect to see further short term range trading and thus keep our neutral forecast

Gold remains sidelined and did bounce as expected last week before giving back most of last week’s gains.
We will retain our short term neutral view while it remains above the current December low at 1211.57 on a daily chart closing basis.
While this remains the case the 55 day moving average at 1283.79 and the 2013 downtrend line at 1301.70 may well be reached but should then cap.
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EUR/PLN – Daily Chart

Stays sidelined above the 78.6% Fibonacci retracement at 4.1523

EUR/PLN is still hovering above the 78.6% Fibonacci retracement of the April-to-June rise at 4.1523 but continues to be sidelined.
As long as 4.1523, the November low at 4.1517 and the 4.1443 September low underpin, further sideways trading remains on the cards. We will retain our short term slightly bearish view while the 200 day moving average at 4.2092 and the November peak at 4.2204 cap.
If bettered, the 50% retracement and the late September high at 4.2318/4.2403 could be reached, though.
Further range trading should be seen into year end with the currency pair expected to stay below the 4.3098 September high. As long as this is the case, the odds favour a retest of the September low at 4.1443 at some stage. Failure there on a weekly basis will mean that a top has been formed with the 200 week moving average at 4.1241 then being in focus.

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FX Week

Fate of QE in the balance

Approaching the final two weeks of the year the markets are still seeking an answer to the one unresolved issue that has dominated sentiment since the middle of it; the tapering of QE by the Fed. This issue will be the central one in FX markets in the coming days as the FOMC meets for the final time this year from Tuesday to Wednesday. Thinning liquidity will also add an element of volatility to the proceedings on top of other traditional seasonal factors.

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EUR/USD approaching major long term resistance at 1.38-1.40 which is expected to cap the topside

When thinking about our favourite trade for next year, it is clear that despite the fact that we consider the Australian Dollar the currency most likely to be the weakest in the G7 next year, the chart pattern which interests us the most is in fact the longer term chart for EUR/USD. There are a number of technical developments, which need to be highlighted on the longer term EUR/USD charts as they all suggest that the high at 1.3833 charted in October 2013 is likely to be a key intermediate turning point for the market (top).
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Commodity Spotlight Energy

Outlook for 2014: Energy prices remain in comfort zone

In 2014, the global oil market will remain amply supplied thanks to the sharp increase in non-OPEC oil production. US oil production should continue on its rapid upward trajectory. If crude oil from Libya and Iran were additionally to return to the market, OPEC would have to make cuts elsewhere in order to keep the oil market balanced. Unplanned supply outages and the geopolitical tensions in the Middle East argue against any significant slide in oil prices, so we expect to see an average Brent price of $106 per barrel in 2014. With demand high, we believe the diesel crack spread to be well-supported despite rising US exports. US natural gas remains detached and is likely to profit marginally from a recovery of the US economy. Coal should see increased demand, though plentiful supply will limit any rise in its price.

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FX Alpha

Diverging central bank policies

Diverging central bank policies. It is general market consensus that the Fed will end its QE3 programme next year. This is priced into the USD exchange rates. A step of this nature is unlikely to lead to massively lower EUR-USD prices. However, EUR-USD prices will probably be moderately lower because the Fed will become more predictable again during 2014.

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NZD/USD – Daily Chart

Could have ended a minor Elliott wave abc correction at .8336 and stays bearish while below it

NZD/USD rose in three distinctive waves, a, b and c, from its .8084 November low to this week’s .8336 high.
We will therefore have a short term bearish outlook while no daily chart close above the .8336 high is being made.
The significant support zone seen at .8165/.8084 (200 day moving average, October low, 50% retracement, July peak and November trough) is thus back in the picture.
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S&P GSCI Total Return Index

Erosion of 200 day ma suggests unfinished business on the topside

The S&P GSCI Total Return Index eroded its 3 month downtrend and has cleared the 55 and 200 day ma. While we acknowledge that the recent strength is regarded as corrective only still, it is possible that we could see this extend a little further.
The move will shortly encounter the 50% retracement at 4872, but much tougher resistance is located at 4930/41, which is the 61.8% retracement and the high seen in October. We look for this to hold the topside and provoke failure.
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Gold – Daily Chart

Stabilisation is ongoing and positive divergence points to a bounce, neutralising our forecast

Even though the gold price has not yet taken out the 1257.27 late November high we have decided to neutralise our medium term forecast for the following three reasons:

1) no follow through to the downside has been seen and instead gold has broken out of its one month downtrend channel;

2) the current December low at 1211.57 has been retested late last week and not only held but was followed by a short term reversal to the upside;

3) we can see triple positive divergence on the daily RSI.
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EUR/PLN – Daily Chart

Drifts back towards the 78.6% Fibonacci retracement at 4.1523 and thus remains sidelined

EUR/PLN is drifting back down towards the 78.6% Fibonacci retracement of the April-to-June rise at 4.1523.
As long as it, the November low at 4.1517 and the 4.1443 September low underpin, further sideways trading remains on the cards. We will retain our short term slightly bearish view while the 200 day moving average at 4.2082 and the November peak at 422.04 cap.
If bettered, the 50% retracement and the late September high at 4.2318/4.2403 could be reached, though.
Further range trading should be seen into year end with the currency pair expected to stay below the 4.3098 September high. As long as this is the case the odds favour a retest of the September low at 4.1443 at some stage. Failure there on a weekly basis will mean that a top has been formed with the 200 week moving average at 4.1210 then being in focus.
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Commodity Spotlight Base Metals

Revival of global economy will support prices in 2014

After 2013 has turned out to be a year of considerable losses, metals should be able to pick up again moderately next year. For one thing, the global economic recovery we envisage should result in reviving demand, China remaining the key driver of demand despite enjoying weaker growth. And for another thing, our opinion is that market estimates of supply are excessive in the case of some metals, and that this is not yet reflected in prices.


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FX Week

Mixed USD fortunes

Major currency pairs are taking their lead from central banks, with the USD gaining at the expense of the JPY as Fed ‘tapering’ appears to be drawing nearer, while declines in EUR/USD are being delayed by uncertainty about the future policy direction of the ECB. The coming week will be partly truncated by US Thanksgiving holidays on Thursday, but important data also looms in the Eurozone where November CPI data is released.


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Commodity Spotlight Precious Metals

Outlook 2014: The lustre is only returning slowly

The gold price is likely to recover from its historic slump this year and increase moderately in 2014. Investment demand should gradually revive. In conjunction with robust demand from Asia, this indicates upward movement in the gold price to $1,400 per troy ounce by the end of 2014. In the wake of gold, and boosted by growing industrial demand, the silver price should also be able to make good some of its losses next year. As a result of supply problems and rising demand, platinum and palladium are also likely to show supply deficits in 2014, supporting higher prices.

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Commodity Spotlight Agriculturals

Outlook 2014: Many surpluses – for now at least!

Currently there is little sign of a supply shortage for wheat in 2014, nor for oilseed, cotton or corn. Negative price performance could reduce the corn-growing area, particularly in the USA, but this should rovide only moderate price uplift if the large surplus expected in the current season materialises. For coffee prices, given the prospect of a bumper harvest in Brazil, we expect at best a recovery, but no trend reversal. It is a similar tory for sugar, but we see further upside potential for cocoa prices in view of market deficits.

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EUR/USD potential rising wedge.

Potential rising wedge pattern remains viable.

EUR/USD remains within confines of the rising wedge pattern. This offers resistance at 1.3635 today and support at 1.3492. We continue to view the pattern as a potential rising wedge pattern and a close below 1.3492 will complete it. We look for the 1.3295/94 zone to be retested (current November low and the 50% retracement of the move up from July).

A close below 1.3492 will target initially 1.3229 then the 61.8% retracement at 1.3166. If we utilise the move down from October and measure down a move of equal magnitude, this would offer a potential longer term target of 1.2892.

Above 1.3650, will allow for another run up to 1.3750, 1.3833 which is expected to provoke failure.

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NZD/USD – Daily Chart

Held at .8165/.8084 key support, a fall through which will eye the .7873/.7683 region

NZD/USD is once again trading above the 200 day moving average at .8165, having briefly dipped to .8084 last week.

The .8165/.8084 area represents significant support, made up of the 200 day moving average, the October and early November lows, 50% retracement, July peak and current November trough.

Should a drop through the .8084 low be seen, our forecast of a reversal lower being formed will be confirmed.
In this case the psychological .8000 zone and then the .7879/.7683 region (200 week moving average and the June to August lows) will be back in the picture.

We will retain our view of a top being formed as long as NZD/USD stays below the .8408/16 current November highs. Resistance below this area can be seen along the 55 day moving average at .8299 and the channel resistance line at .8325.

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