MARKET BRIEFING – LONDON OPEN 09.12.2015
The European Central Banks decisions not to deliver on its promise of QE2 has created indecision in the minds of traders.
Following the ECB’s lack of action, the market is now divided on the outcome of the Reserve Bank of New Zealand’s rate decision that takes place today.
However, some websites are reporting that the forecast is that the Official Cash Rate will be cut by 25 basis points from 2.75% to 2.50%.
A rate cut at this stage although significant, a failure by the RBNZ to follow through at this juncture would not put this story to bed.
What is of equal importance is the wording of the forward guidance that is made available to the market.
A dovish statement by the RBNZ will reinforce the negative bias for NZDUSD. Furthermore, the apparent policy divergence between the RNBZ and the United States Federal Reserve could further weaken the Kiwi over the short to medium term.
From a technical perspective, there is a concern within the RBNZ that the New Zealand Dollar has shown recent signs of strength. The price action having put a bottom in place at the 0.6120 which coincides with an area of monthly Fibonacci support around the 61.8% retracement level that was generated from March 2009 low and August 2011 high.
The move off the 61.8% Fibonacci level was sufficient enough to push NZDUSD through upward resistance as the price action broke through the upper slope of a downward channel that began in July 2014.
With the price action having re-broken above the 100 periods daily moving average as NZDUSD attempts to put in place a higher high, higher low, higher high formation on the daily chart, the fear within the RBNZ is that with the Kiwi no perilously close to the 200 periods daily moving average.
The opportunity now presents itself for a reinjection of some bearish news that will reinforce the dovish argument for NZDUSD and allow for this currency to once again depreciate, thus helping these country exporters to maintain their competitive advantage.
In terms of timing and levels, we should see a pickup in downside momentum post the FOMC meeting on December 16. That is unless we get a dovish surprise from the Federal Reserve Chairwoman, Janet Yellen.
The key levels would be a bounce off the 200 SMA around the 0.6700 / 0.6750 area and confirmation of the bearish bias will occur if we see a breach of the most recent daily swing low at the 0.6425 and then followed by a break of the 0.6400 big figure.
A more aggressive strategy would be to follow the downside momentum as the price action breaks key 4 and 1-hour support levels.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0990
Target 2: 1.0790
Projected range in ATR’s: 0.0103
Daily control level: 1.0950
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5105
Target 2: 1.4910
Projected range in ATR’s: 0.0101
Daily control level: 1.5160
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 123.55
Target 2: 122.30
Projected range in ATR’s: 0.62
Daily control level: 123.50
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0020
Target 2: 0.9825
Projected range in ATR’s: 0.0100
Daily control level: 1.0035
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3675
Target 2: 1.3495
Projected range in ATR’s: 0.0091
Daily control level: 1.3315
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7285
Target 2: 0.7140
Projected range in ATR’s: 0.0072
Daily control level: 0.7385
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1089.00
Target 2: 1060.00
Projected range in ATR’s: 14.94
Daily control level: 1066.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 40.00
Target 2: 37.00
Projected range in ATR’s: 1.56
Daily control level: 42.85
MORE ON ACFXblog.com