Nobody can argue the fact that this week was certainly a nail – biter, to say the least. In the minds of many, it was supposed to be the week that the USA elected its first female President. It was supposed to be the week, unlike Brexit, the status quo would prevail. It was supposed to be the week that the Democrats wrestled back the Senate.
The defeat of the “safe bet” New Zealand rugby team last weekend was almost like a precursor to the storm that was on its way. The world held its breath, and on Wednesday Donald Trump was elected as the 45th President of the United States. For some, there was elation, for others, complete shock and disappointment. The Republicans won just about anything that was up for grabs. Insofar as the financial markets were concerned, we were warned that an apocalypse was on its way. The prediction was that the world would run to anything that was “safe”. Ultimately, the exact opposite happened:
- The Equity Markets rallied
- The Bond Yields rallied
- The USD rallied
- Gold tumbled
At the outset, Trump’s policies appear to be very market-friendly in the sense that he brings with him promises of reduced corporate tax rates, deregulation of an over-regulated banking industry and some leeway for infrastructure spend. His campaign may have been rhetoric but in my opinion members of his party will reign him in when the need arises. Evidence of this presented itself this morning when Trump revealed that perhaps his aggressive stance has already softened – he is open to leaving intact some of the key aspects to Obamacare.
There have been some rather violent protests slowly gathering momentum regarding his impending leadership. Drawing some parallels with Brexit, one has to admit, that sometimes change really can be refreshing. The Brits may be able to test to this, the dust will settle, life will go on – and who knows, maybe the history books will mark 2016 as the year the world changed for the better.
The EURUSD traded slightly lower this week but found support at 1.0850, a break here and we start targeting 1.0775 and the year low at 1.0710. For now the EUR is fighting hard at these levels and one does get the impression that there may be a bit of a slowdown in momentum, perhaps an indication of an impending fight back next week?
While almost all pairs were left reeling on the broad strength of the greenback, cable was the exception. We saw some incredible strength in the GBP, partly because of imminent trade deals and partly because the world has started to accept global change. Price traded to the levels last seen before the crash in October, we did see some profit taking late in New York and we closed around 1.2600. I may have mentioned this before but I won’t be convinced of a lasting rally until we have a weekly close above our Brexit lows, which comes in at 1.2750.
The USDJPY was the major mover last week, and this could be said to be true once again this week. The pair traded above the 200 day MA at 106.63, which should clearly be construed as bullish. My concern however, is that for two consecutive days the bulls have lost the battle at 107.00. This makes this pair a bit of lottery come Sunday evening and my gut says that we may see a softer dollar early next week. At this stage, however, this trade really is too much of a 50/50 for me.
Today, I have purposely left the commodity currencies for last. As the risk sentiment pendulum changed this week, so we saw the likes of Gold and Copper take a battering. This was the catalyst for the AUD, NZD and ZAR to suffer a sharp sell-off against the USD and all three have traded below their 100 day moving averages, which most would see as bearish. The USDCAD was affected by both weakening oil prices and the fact that Trump would like to renegotiate the NAFTA agreement. I am not yet convinced that Trump will convince Congress to rip all of its trade agreements apart, as ultimately he doesn’t want to start a global trade war – it is not one that the US is equipped to win. I guess that only time will tell.
A lot of pairs closed around some big support and resistance levels last week; the USD seemed to be losing a little bit of momentum and there is divergence forming in many of pairs. Traders will take the weekend to let the dust settle and once heightened emotions settle and the level of trepidation comes down a notch, I suspect that we may see some form of rally against the dollar.
Weekly FX Ranges 14/11/2016 – 21/11/2016
Majors
EURUSD
Resistance 1.1060 – 1.1080
Support 1.0850 – 1.0800
GBPUSD
Resistance 1.2700 – 1.2736
Support 1.2365 – 1.2300
AUDUSD
Resistance 0.7700 – 0.7720
Support 0.7530 – 0.7500
NZDUSD
Resistance 0.7290 – 0.7330
Support 0.7100 – 0.7050
USDCAD
Resistance 1.3530 – 1.3570
Support 1.3350 – 1.3300
USDJPY
Resistance 106.70 – 107.10
Support 104.25 – 104.00
USDCHF
Resistance 0.9880 – 0.9915
Support 0.9748 – 0.9729
Selected FX Pairs
USDZAR
Resistance 14.3000 – 14.4500
Support 13.6000 – 13.4500
AUDCAD
Resistance 1.0285 – 1.0315
Support 1.0211 – 1.0170
EURCHF
Resistance 1.0780 – 1.0800
Support 1.0720 – 1.0700
EURGBP
Resistance 0.8860 – 0.8900
Support 0.8600 – 0.8558
EURJPY
Resistance 116.00 – 116.28
Support 114.90 – 114.62
GBPJPY
Resistance 134.50 – 134.90
Support 129.50 – 129.04
Commodity and Indices
XAUUSD
Resistance 1284.00 – 1299.50
Support 1225.00 – 1215.00
XAGUSD
Resistance 18.50 – 18.63
Support 17.20 – 17.03
DE30
Resistance 10780 – 10828
Support 10400 – 10350
UK100
Resistance 6876 – 6900
Support 6756 – 6691
US500
Resistance 2166 – 2180
Support 2117 – 2090
BRENT
Resistance 46.74 – 47.36
Support 44.60 – 44.19
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