FX MARKETS OVERVIEW 10th DECEMBER 2018

GBP plumbed a new 2018 low and traded at its lowest level since June 2017 on Monday as Brexit uncertainties hit FX markets. The GBP index traded down 0.84% on reports that PM May has decided to delay Tuesday’s important Brexit vote. UK data added to the negativity. Y/y GDP came in below expected at 1.5% against 1.6%. In addition, manufacturing production and goods trade balance fell below forecasts. Antipodean currency indices, AUD and NZD were up 0.47% and 0.28% respectively on the back of speculation the U.S. FED may be close to ending its rate hike cycle. The Euro was up 0.19%, with traders waiting for French President Emmanuel Macron to address the country after protestors caused chaos in Paris over the weekend. Global markets remain fragile with trade tension, global growth worries, Brexit and Italian budget issues impacting global asset classes.

Last week, global bond markets rallied and yields fell as global growth uncertainties took centre stage. The U.S. 2/5-year and 3/5-year yield spreads inverted, as well as the benchmark 2/10-year spread touching its lowest in over a decade, heightening fears of a recession. The decline in yields resulted in the USD trading lower which has been performing excellently over the last few months. This resulted in the dollar’s largest weekly loss in 3 months. Moreover, Canadian officials had arrested Huawei CFO for extradition to the U.S, potentially increasing tensions between the U.S. and China.

TECHNICALS

GBP.USD

GBPUSD has broken the 1.2661 support and a close would bolster downside risks. Both near-term 21/10-DMA’s are southbound, highlighting negative pressures. Momentum setups reinforce trending setups, with the RSI remaining in negative territory, now at 36. The bias continues to the downside and the 76.4% fib retracement of the post-Brexit rally now comes into focus.

EUR.USD

EURUSD is trading in a range between 1.1215 and 1.15. A break above the 1.1501 high may suggest further gains, though the downtrend line may cap the rally. The recent consolidation has caused short-term trending setups to have no directional bias. Friday’s bullish MA cross is negated unless prices rally above the aforementioned range.  Momentum setups have been tracking higher into positive territory, though the overall bias seems to lack upside conviction.

USD.JPY

Uptrend remains intact for USDJPY as prices rejected the 23.6% fib of the March-October rally. A counter downtrend has formed as prices have failed to make new highs. The recent decline lower has caused near-term 21/10-DMA’s to touch. Further negativity may well see the moving averages cross, suggesting a greater bearish backdrop may be developing. The RSI is below 50, though is tracking higher.

AUD.USD

AUDUSD has broken through the uptrend channel, but prices have held onto the 0.7202 support. Resistance lies at 0.7250, the 38.2% fib retracement of the October-December advance. Trending setups are flat with the 21/10-DMA’s trending sideways. The Daily MA’s may also offer resistance on rally attempts. The RSI has fallen below the uptrend line, now at 46.

© Akif SH. Din, AGORA-direct Limited, 10/12/2018

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