Fed, RBNZ, BOJ Stand Out In Busy Week

GBPUSD – technical overview

Though the broader downtrend remain intact, the latest break back above 1.5165 opens the door for additional upside in the sessions ahead. Next key resistance comes in the form of the 78.6% fib retrace off the 2015 high-low move at 1.5340 and this level could be tested before the market considers the next lower top and a bearish resumption. Ultimately, only back above 1.5552 would compromise the bearish structure.

• R2 1.5255 – 6Mar high – Strong
• R1 1.5188 – 24Apr high – Medium
• S1 1.5080 – 22Apr high  – Medium
• S2 1.5027 – 24Apr low  – Strong

GBPUSD – fundamental overview

Although the headline US durable goods print came in better than expected, the market was more disturbed with the offsetting and conflicting core showing, which came in a good deal softer. This helped to extend Sterling’s recovery against the Buck, with the market clearing key stops above 1.5165. Looking ahead, Monday’s calendar is rather light and most of the day will likely be spent contemplating tomorrow’s UK GDP release and the FOMC rate decision later in the week. Also on investor minds is the upcoming UK election, sure to produce added volatility on the prospect for a hung parliament.

USDJPY – technical overview

Although the market remains locked within a very well defined uptrend, lack of upside follow through has been discouraging of late, with the pair more content on deferring to a period of consolidation. Still, overall, the broader trend remains highly constructive and any setbacks should continue to be very well supported in favour of the next major upside extension through 122.03 and towards key psychological barriers at 125.00 further up. At this point, only a close below 118.00 would delay, while a break below 115.55 would be required to negate the constructive outlook.

• R2 120.09 – 23Apr high – Strong
• R1 119.66 – 24Apr high – Medium
• S1 118.53 – 20Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

A lot of event risk to take in this week, with both the Fed and BOJ set to decide on policy. The general consensus is the Fed could now come out on the more dovish side in light of recent economic data out of the US, while the BOJ will leave policy as is. We have seen this reflected in price action, with the major pair unable to sustain any gains in recent trade and coming back under pressure towards support in the 118.00 area. Friday’s softer core US durable goods print has done nothing to help the Dollar’s cause, with a round of fresh offers coming into play post data.

EURCHF – technical overview

The market has finally put in an impressive rebound after a multi-day drop out from the February, 1.0815 recovery high. Last week’s bullish reversal cleared the previous 8 consecutive daily lower highs, with the strong performance potentially signaling some form of a key low in place at 1.0235. Inability to close below 1.0250 had warned of this bounce and from here, there is risk for additional upside back towards 1.0815 in the days ahead. Ultimately, only back below 1.0235 negates.

• R2 1.0495 – 6Apr high – Strong
• R1 1.0430 – 22Apr high – Medium
• S1 1.0300 – Figure – Medium
• S2 1.0235 – 20Apr low – Strong

EURCHF – fundamental overview

Last week, the SNB came out with an announcement that it was reducing the group of sight deposit account holders that would be exempted from negative rates. This helped to finally offer some support to the EURCHF rate, which had been under intense pressure for many weeks. SNB Jordan was also out last week reiterating the central bank’s commitment to act to curb excessive overvaluation in the Franc. There are many out there that are still pricing in additional accommodation from the SNB, taking it deeper into unprecedented negative interest rate policy.

AUDUSD – technical overview

Despite the latest minor bounce, the bearish structure remains firmly intact with the market positioning for the next major downside extension. A daily close below 0.7533 will now be required to confirm the onset of a bearish continuation, with setbacks then projected towards major psychological barriers at 0.7000. For now, corrective rallies should be well capped below 0.7900, while ultimately, only a daily close back above 0.7938 would delay and give reason for pause.

• R2 0.7900 – Figure – Medium
• R1 0.7842 – 17Apr high – Strong
• S1 0.7764 – 24Apr low – Medium
• S2 0.7683 – 21Apr low – Strong

AUDUSD – fundamental overview

The Australian Dollar is coming off a couple of weeks of supportive developments, with Aussie employment coming in solid and inflation picking up. Meanwhile, some broad based weakness in the US Dollar and bearish Kiwi developments have also contributed to recent gains. Market participants will now be looking ahead to RBA Stevens, due to speak much later in the day at 22:40GMT. If Stevens reflects positively on some of these recent changes, it could provide more support for the commodity currency this week. However, overall, even with expectations for a Fed rate hike scaling back, the monetary policy divergence theme is not something that is expected to fade away and should continue to invite Aussie offers against the Buck.

USDCAD – technical overview

An extended period of multi-week consolidation has been broken to the downside, with the market taking out key support at 1.2350. While the broader uptrend is still firmly intact, the break below 1.2350 now opens the door to the possibility of a deeper correction into the 1.1900 area before the market looks to carve the next meaningful higher low and resume its uptrend. At this point, a daily close back above 1.2350 would be required to once again solidify bullish structure.

• R2 1.2305 – 21Apr high – Strong
• R1 1.2211 – 22Apr low – Medium
• S1 1.2088 – 17Apr low – Strong
• S2 1.2000 – Psychological – Medium

USDCAD – fundamental overview

Last week, Bank of Canada Governor Poloz reaffirmed the likelihood the central bank was done cutting rates after saying January’s policy ease looked to be enough to deal with Q1’s front-loaded oil shock. Poloz also sounded rather upbeat on the outlook for growth in the economy. Still, with the Loonie already rallying quite a bit in recent trade, with the broader fundamentals supporting an ongoing monetary policy divergence with the Fed, and with OIL likely to find renewed offers into this rally, fresh USDCAD demand from medium-term players is resurfacing on dips. There is plenty of demand for this pair towards 1.1900.

NZDUSD – technical overview

Though we have seen some strength in recent trade, the market remains locked within a broader, well defined downtrend. As such, look for a more pronounced bearish reversal in the sessions ahead, back towards the key low of 0.7176, below which opens the next major downside extension towards psychological barriers at 0.6500. Ultimately, only back above 0.7890 would compromise and give reason for pause.

• R2 0.7741 – 17Apr high – Strong
• R1 0.7665 – 23Apr high – Medium
• S1 0.7537 – 23Apr low – Medium
• S2 0.7487 – 15Apr low – Strong

NZDUSD – fundamental overview

It seems we are seeing a bit of a repricing of RBNZ expectations, with last week’s softer New Zealand inflation data followed up by dovish RBNZ McDermott comments. McDermott highlighted the fact the central bank would be open to cutting rates if growth and inflation continued to slow. Any Kiwi upside is seen limited against the Buck from here, with sizable medium-term players stepping in to sell the market on the Fed divergence theme. There has also been a good deal of demand on the AUDNZD cross rate, which many believe to be overdone and at risk for a major reversal off recent record lows. Trade has been light on Monday with New Zealand markets closed for ANZAC Day, though volatility is sure to pick up later this week ahead of the highly anticipated RBNZ rate decision

US SPX 500 – technical overview

The most recent rally is stalling after only slightly exceeding critical resistance in the form of the record high from February at 2120. This suggests we could be in the process of carving out a more meaningful top. Still, while the market holds above 2040, the uptrend remains firmly intact, with risk for a push to fresh highs beyond 2120 and towards a measured move objective at 2200 further up. At this point, a break below 2040 will be required to confirm a topping structure and accelerate declines.

• R2 2150.00 – Psychological – Medium
• R1 2121.00 – 24Apr/Record – Strong
• S1 2040.00 – 18Mar low – Strong
• S2 2000.00 – Psychological – Medium

US SPX 500 – fundamental overview

There is a growing sense that with equities so elevated, any additional upside should be limited with a potential capitulation in the works. At this point, the market has yet to relent, but if this week’s FOMC continues to show signs of liftoff in the months ahead, this could be the final straw that breaks this artificially supported market’s back. Otherwise, a more dovish Fed will scale back expectations and fuel additional record high gains towards 2200.

GOLD (SPOT) – technical overview

The market has been in a consolidation mode since recovering out ahead of the 2014 base. The bounce suggests the market could now be poised for additional upside in the sessions ahead in an attempt to carve out a more meaningful longer-term base. Still, a daily close above 1224 will be required to strengthen the constructive prospect. Meanwhile, a daily close back below 1178 delays the recovery and puts pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1224.00 – 6Apr high – Strong
• S1 1178.00 – 31Mar low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market continues to show signs of demand since stalling out several days back ahead of the 2014 base. Many investors already feel that with currencies across the board in a downward spiral, and global equities at risk for major capitulation, there is no better place to be invested than in the yellow metal. Gold has since pulled back a bit since rallying above $1220, but there is healthy demand reported into dips, with no real sell-stops seen until below $1175.

Feature – technical overview

USDTRY is in the process off consolidating just off fresh record highs. Technical studies are looking a little stretched overall, and there is risk for correction in the sessions ahead to allow for these studies to unwind. But ultimately, the broader uptrend remains firmly intact with any setbacks expected to be very well supported in favour of continued record highs. A break back below 2.6640 would now be required to take the immediate pressure off the downside.

• R2 2.8000 – Psychological – Medium
• R1 2.7430 – 24Apr/Record – Strong
• S1 2.6640 – 20Apr low – Strong
• S2 2.6120 – 10Apr low – Medium

Feature – fundamental overview

Last week’s announcement from the CBRT that it would be increasing the rate paid on Lira reserve requirements by 50bp as of May, didn’t do much to offset Wednesday’s on hold rate decision. The central bank continues to be in a very tough spot, with a mix of rising inflation, a declining currency and struggling economy, making it impossible to make any moves on rates. Adding more fuel to the fire, Turkish PM Erdogan continues with his criticism of higher rates and the negative impact on the local economy. For now, much of the Lira’s fate rests in the hands of this week’s Federal Reserve decision.