Too Many Holes in this Rally

GBPUSD – technical overview

The recovery rally out from a recent 7 year low has stalled out ahead of key resistance at 1.4668, potentially setting the stage for the next major lower top and bearish resumption. A daily close below 1.4000 will strengthen this outlook and expose a retest of 1.3836, which guards against the multi-year base at 1.3500 further down. Back above 1.4515 would be required to take the immediate pressure off the downside.

• R2 1.4459 – 30Mar high – Strong
• R1 1.4419 – 19Apr high – Medium
• S1 1.4271 – 19Apr low – Medium
• S2 1.4131 – 18Apr low – Strong

GBPUSD – fundamental overview

Wednesday’s UK employment data was unimpressive and yet, interestingly enough, the Pound actually held up relatively well in the face of this release. It seems a swing of momentum back in favor of the ‘Bremain’ camp helped to keep the UK currency supported into dips. Even dovish comments from the normally hawkish BOE Ian McCafferty, failed to materially weigh. Still, the Pound closed lower, unable to ignore the market’s appetite for higher yielding currencies and a well received US existing home sales report. Looking ahead, UK retail sales are due, followed by US initial jobless claims and the Philly Fed manufacturing survey.

USDJPY – technical overview

This latest break below the previous multi-month low from March is a significant development, as it potentially warns of a fresh downside extension and measured move into the 106.00s following a period of multi-day bearish consolidation. The recent daily close below 110.00 strengthens this prospect, with any rallies now seen well capped ahead of 112.00. But ultimately, only back above 115.00 would force a shift in the structure and take the pressure off the downside.

• R2 110.67 – Previous Support – Strong
• R1 110.00 – Psychological – Medium
• S1 108.76 –20Apr low – Medium
• S2 107.63 – 11Apr/2016 low – Strong

USDJPY – fundamental overview

BOJ Governor Kuroda’s Wednesday comment that monetary easing was not a promise for a weaker currency or stronger equities, initially invited Yen demand, while early OIL weakness also weighed on USDJPY. But another surge in risk assets into the latter half of the day could not be ignored, with the major pair pushing higher into the close. Solid US existing home sales perhaps also helped to prop USDJPY. Looking ahead, volatility from the ECB decision could factor into trade, while the market also takes in US initial jobless claims and the Philly Fed manufacturing survey.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 have been well supported, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to continue to be supported above 1.0800, in favour of a higher low and the next major upside extension through 1.1200, towards 1.1500 further up. Only a close below 1.0715 would delay the outlook.

• R2 1.1024 – 17Feb high – Strong
• R1 1.1000 – Psychological – Medium
• S1 1.0844 – 7Apr low – Medium
• S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

With the VIX dropping to its lowest levels since August and with US equities closing in on a retest of record highs from 2015, it shouldn’t come as any surprise to see the Franc tracking lower as a result. Over the weekend, SNB Jordan was also out suggesting the central bank could reduce the amount of cushion it grants banks on the negative deposit rate, in a further effort to stem unwanted Franc appreciation. While Jordan conceded there were no immediate plans to change the threshold, he believed banks could handle deeper sub-zero rates. For the time being, the SNB has been able to relax a bit, with risk assets supported. However, it is worth noting that weakness in the Franc in response to this latest wave of risk on trade has been less than impressive, which could be a concern if the market rolls over. For now, the attention will shift to today’s ECB decision.

AUDUSD – technical overview

An impressive run for this pair over the past several days, with gains extending to fresh 2016 highs. However, the run is starting to look a little stretched and there is risk for a pullback and potential bearish resumption. Still, a break back below 0.7477 would be required to strengthen this outlook and take the immediate pressure off the topside. Until then, a test of next key medium-term resistance at 0.7850 should not be ruled out.

• R2 0.7849 – 18Jun high – Strong
• R1 0.7829 – 20Apr/2016 high – Medium
• S1 0.7746 – 19Apr low – Medium
• S2 0.7619 – 14Apr low – Strong

AUDUSD – fundamental overview

An upbeat NAB quarterly business confidence report has helped to keep Aussie supported into Thursday, with AUDUSD just off recent 2016 highs. Overall, the market has been tracking along side better bid commodities and higher equities, led by US stocks back towards record high levels from 2015. Looking ahead, the key focus will be on the fallout from the ECB decision, US initial jobless claims and the Philly Fed manufacturing survey. 

USDCAD – technical overview

Overall, pressure remains on the downside, with the market taking out next major support in the form of the October 2015 base at 1.2832 and extending into the 1.2500s thus far. The breakdown now opens the door for the possibility of a fresh downside extension towards a measured move at 1.2500 before any form of a base and meaningful bounce. Back above 1.2990 would be required to take the immediate pressure off the downside.

• R2 1.2798 – 19Apr high – Strong
• R1 1.2730 – 20Apr high – Medium
• S1 1.2593 – 20Apr/2016 low – Strong
• S2 1.2500 – Measured Move – Very Strong

USDCAD – fundamental overview

Wednesday’s second tier Canadian data didn’t do anything to impact the Canadian Dollar, with the softer wholesale sales reading shrugged off as OIL prices continued to surge. Even solid US existing home sales were ignored in the face of the OIL demand, with all of this opening yet another rally in the Loonie to a fresh 2016 highs. The drop in USDCAD since January is however starting to look a little stretched and dealers are reporting decent bids towards 1.2500. Looking ahead, an empty Canada calendar will leave the market focused on US initial jobless claims and the Philly Fed manufacturing survey.

NZDUSD – technical overview

Despite gains to fresh 2016 highs, the market still remains confined to a broader downtrend with rallies expected to be well capped around the key psychological barrier at 0.7000. Still, a break back below 0.6759 will be required to strengthen the bearish outlook and expose fresh declines towards next key support at 0.6546 further down. Ultimately, only a weekly close above 0.7000 compromises the bearish outlook.

• R2 0.7100 – Figure – Medium
• R1 0.7054 – 19Apr/2016 high – Strong
• S1 0.6948 – 19Apr low – Medium
• S2 0.6824 – 14Apr low – Strong

NZDUSD – fundamental overview

It seems the risks associated with a higher Kiwi rate are finally getting recognition from the market, which has sold recent rallies above 0.7000 despite broader flow, supportive of the risk correlated commodity currency. There is still a good deal of dovishness priced into the RBNZ over the coming months, and even if risk assets remain supported, the prospect of additional rate cuts and RBNZ jawboning, seem to be what is getting taken more seriously of late. Looking ahead, the key focus will be on the fallout from the ECB decision and some US data featuring initial jobless claims and the Philly Fed manufacturing survey.

US SPX 500 – technical overview

This latest multi-day rally is classified as corrective, with any additional upside expected to be well capped below 2100 on a weekly close basis in favour of the next major downside extension below 1800 and towards a measured move at 1500 further down. Look for a break back below 2021 to strengthen this outlook and accelerate declines.Ultimately, only a weekly close above 2100 will delay.

• R2 2117.00 – 3Nov high – Strong
• R1 2112.00 – 20Apr/2016 high – Medium
• S1 2065.00 –18Apr low – Medium
• S2 2021.00 – 24Mar low – Strong

US SPX 500 – fundamental overview

Stocks continue to extend the impressive rally out from the February low, breaking to fresh yearly highs. But the stock market is also looking vulnerable at lofty heights in 2016, with the rally continuing to feel like it has very little behind it. The fact that monetary policy is exhausted on a global scale is not something that should be a comfort to stocks also trading close to the 2015 record high. Moreover, there is clearly a debate going on within the Fed and the case for slowing down the normalisation process may not be as much of a done deal as the market is pricing, something that could once again spook investors. Looking ahead, we get the ECB decision, US initial jobless claims and the Philly Fed manufacturing survey.

GOLD (SPOT) – technical overview

The market continues to show signs of a major structural shift, with the impressive recovery from the multi-year low in late 2015 at 1046, extending above the critical October 2015 peak at 1191. From here, any setbacks should be well supported ahead of 1191, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only a weekly close back below 1191 would delay the newly adopted constructive outlook.

• R2 1283.50 – 10Mar/2016 high – Strong
• R1 1262.70 – 12Apr high – Medium
• S1 1208.35 – 28Mar low – Medium
• S2 1191.50 – Previous Resistance – Very Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported in recent dips, with the yellow metal finding solid demand in 2016 on the back of fears over the limitations of exhausted monetary policy and extended global equities. Whether the US Dollar is bid is becoming less relevant, with risk sentiment likely to be the primary driver going forward. Renewed weakness on this front will continue to bolster the yellow metal.

Feature – technical overview

USDMXN finally looks poised to start thinking about turning back up after a period of intense correction from earlier this year. Overall, the structure remains constructive, with the most recent dip supported ahead of 17.0000. Look for a break and close back above 17.9900 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 17.0000 would give reason for pause.

• R2 17.9900 – 16Mar high – Strong
• R1 17.7610 – 18Apr high – Medium
• S1 17.0950 – 31Mar/2016 low – Strong
• S2 17.0000 – Psychological – Strong

Feature – fundamental overview

The latest recovery in OIL prices and concurrent resurgence in demand for risk assets, have most definitely helped to keep the Peso supported. Still, there is plenty of good reason to be doubting the odds for any meaningful Peso gains from current levels. Although the swaps market is still pricing two more Banxico rate hikes between now and year end, it’s quite possible participants will scale back from this more hawkish pricing. Despite what stock markets might have investors believe, the global outlook is rather shaky, as recently expressed by the IMF. Meanwhile, the local economy is still struggling and Mexican inflation has been rather tame. All of this would be supportive of a more cautious Banxico going forward, which ultimately, should weigh more heavily on the Peso.