Despite misses on stocks and gold, Citi FX Technicals' excellent "12 Charts of Christmas" performed well in 2013 [8] directionally across FX, bonds, and commodities. This year, Tom Fitzpatrick and his team unveil 2014's most important charts - establishing a starting point for their outlook in the year ahead. From a slowing housing market to expectations of a strong USD; and from a "roll-over" in Consumer Confidence to strength in gold, they see the "repair process" continuing albeit at a slow pace but worry that the stock markets are looking more and more like 2000.
Via CitiFX Technicals,
What do we believe for 2014?
- The USD bullish trend remains intact and the DXY Index should set new trend highs (90+).
- EURUSD: We expect a sharp turn lower that could see EURUSD in the 1.18-1.22 range in 2014. A very easy ECB policy will likely be a contributing factor here.
- USDJPY: Remains in a broad uptrend and we would expect a move towards at least 110-111 this year. This should continue to be supportive of the Nikkei.
- Consumer Confidence: Looks set to “roll” lower in a fashion similar to 2000 and 2007. This may have implications for the U.S. Equity market which looks stretched at this point in a fashion similar to 2000.
- Housing looks better than it was at the lows but nowhere near the traditional recovery/escape velocity of prior cycles. In 2014 we may even see a pause in its improvement.
- US yields: Similar to last year we suspect that an initial move lower may well emerge towards at least 2.40% (10 year) and 3.50% (30 year) and possibly lower. This is within a longer trend dynamic where they will likely move higher again thereafter. We would expect significantly higher yields in the next few years to materialise.
- Gold finally looks to be forming a base for a move higher. However we need both more convincing price action and likely a struggling equity market to solidify this potential.
- In Local Markets the USDBRL chart is one of the more convincing pictures and suggests a much weaker BRL is in prospect in 2014.
Overall: We see a backdrop where the “repair process” of recent years continues at a slow pace but where the US continues to look like the “best house on a bad street” when it comes to the major developed nations. This should also benefit the USD and keep the relative picture for yields (monetary policy) in favour of the US.
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The corrective platform could be the “launch pad” for a move to new highs in the trend and a stronger USD all the way to 2016 as per previous post housing collapse cycles.
[10]
EURUSD turning lower like it did in 1998? A move towards 1.20 this year and much further over the next 2+ years looks likely.
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A move similar to 1978-1982 could see USDJPY as high as 118 eventually while a repeat of 1995-1998 would suggest as far as 139. An average of the two could see USDJPY close to 130 by 2015. For 2014 we would expect a move to at least 110-111
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Another 4 year and 4 month trend coming to an end?
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The last 2 peaks in Consumer Confidence led the S&P by 3-4 months. That pretty much takes us to now... big divergence between the Equity market and the real economy.
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Peak in the 1,820-1,830 area? Prior peaks have seen pretty quick falls to the 200 week moving average.
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Is the US 30 year yield double topping as it has done so many times before?
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The potential double bottom will target 3.70 with a break above 2.62. Beyond there the all-time USDBRL high at 4.00 could well be eventually tested.
And summarising their strong conviction 2014 views:
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