Inflation risk and the economic recovery outlook

GBPUSD – technical overview

Technical studies are in the process of consolidating from stretched levels after the push to fresh multi-month highs. This leaves room for additional consolidation, before the market considers a meaningful bullish continuation towards a retest of the 2018 high. But look for setbacks to now be very well supported into the 1.3500 area.

• R2 1.4200 – Figure – Medium
• R1 1.4167 – 11 May high – Medium
• S1 1.3995 – 10 May low – Medium
• S2 1.3900 – Figure – Strong

GBPUSD – fundamental overview

The Pound had outperformed earlier this week on the UK coronavirus restrictions downgrade and SNP failure to gain a majority. But we have since seen some profit taking kick, mostly on the back of risk off flow and ahead of today's data dump out of the UK and US. Key standouts on today’s calendar include German inflation, UK trade, UK GDP, UK industrial production, UK construction output, Eurozone industrial production, a BOE Bailey speech, US inflation reads and more Fed speak.

USDJPY – technical overview

The major pair has run into massive resistance in the form of the monthly Ichimoku cloud, and has since rolled back over below the cloud. This translates to a longer-term trend that is still bearish despite the run up we saw in 2021, with risk for deeper setbacks ahead. It would take a clear break back above 113.00 to negate the outlook.

• R2 110.97 – 31 March/2021 high – Strong
• R1 109.70 – 3 May high – Strong
• S1 108.34– 7 May low – Medium
• S2 107.48 – 23 April low – Strong

USDJPY – fundamental overview

The continues to be unsure if it should be rallying on risk off flow or selling off on the broad based US Dollar demand. Most of the resulting price action is reflective, with the currency not really going anywhere at all. Key standouts on today’s calendar include German inflation, UK trade, UK GDP, UK industrial production, UK construction output, Eurozone industrial production, a BOE Bailey speech, US inflation reads and more Fed speak.

EURCHF – technical overview

Lots of sideways price action here, with no clear directional insight. For the most part, price action has been confined between 1.0600 and 1.1200, and it will take a weekly close above or below for an indication of the next big move.

• R2 1.1200 – Figure – Strong
• R1 1.1152 – 4 March/2021 high – Medium
• S1 1.0900 – Previous resistance – Medium
• S2 1.0736 – 10 December low – Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of renewed risk liquidation will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.

AUDUSD – technical overview

Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.7400.

• R2 0.7900 – Figure – Medium
• R1 0.7892 – 10 May high – Medium
• S1 0.7761 – 7 May low – Medium
• S2 0.7675 – 4 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been finding offers in recent sessions, with the currency weighed down by a number of factors. We're seeing selling on the back of risk off flow and unimpressive Aussie payroll data. Key standouts on today’s calendar include German inflation, UK trade, UK GDP, UK industrial production, UK construction output, Eurozone industrial production, a BOE Bailey speech, US inflation reads and more Fed speak.

USDCAD – technical overview

Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2000-1.2200 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2000 would suggest otherwise. Back above 1.2352 will strengthen the outlook.

• R2 1.2352 – 4 May high – Strong
• R1 1.2252 – 5 May low – Medium
• S1 1.2079– 11 May/2021 low – Medium
• S2 1.2062 – 2017 low – Strong

USDCAD – fundamental overview

Technic overbought conditions and a wave of risk off flow have finally inspired profit taking in Canadian Dollar longs. Key standouts on today’s calendar include German inflation, UK trade, UK GDP, UK industrial production, UK construction output, Eurozone industrial production, a BOE Bailey speech, US inflation reads and more Fed speak.

NZDUSD – technical overview

Finally signs of topping out after a nice multi-month rally. Look for a weekly close below 0.7000 to strengthen the bearish outlook and expose deeper setbacks towards the 0.6500 area. Back above 0.7315 would be required to take the immediate pressure off the downside.

• R2 0.7316 – 6 January high – Medium
• R1 0.7306 – 10 May high – Medium
• S1 0.7185 – 6 May low– Medium
• S2 0.7115 – 4 May low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is under pressure as risk appetite takes a hit in global markets. We've also seen some selling after New Zealand traffic gauges ease in April. Key standouts on today’s calendar include German inflation, UK trade, UK GDP, UK industrial production, UK construction output, Eurozone industrial production, a BOE Bailey speech, US inflation reads and more Fed speak.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped above of 4200, with a break back below 4000 to strengthen the outlook.

• R2 4250 – Psychological – Strong
• R1 4246 – 10 May/Record high – Medium
• S1 4110 – 13 April low – Medium
• S2 4000 – Psychological – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout should weigh more heavily on investor sentiment into the second half of 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600. Longer-term technical studies are however in the process of unwinding, with the market in search of a higher low ahead of a bullish continuation.

• R2 1876 – 29 January high – Strong
• R1 1856 – 10 February high – Medium
• S1 1756 – 29 April low – Medium
• S2 1724 – 13 April low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

BTCUSD – technical overview

Monthly technical readings are still tracking in severe overbought territory heading in 2021. Risk for any meaningful bullish continuation beyond the recent record high just ahead of $65,000 should be limited over the coming days and weeks, with the higher probability leaning towards more correction and consolidation. There is now room for the correction to extend back down into the $40,000 area, where a higher low would ideally be sought out for a resumption of the bigger picture uptrend.

• R2 65,000 – Psychological – Strong
• R1 64,900 – 14 April/Record high – Medium
• S1 47,045 – 25 April low – Medium
• S2 42,000 – Previous resistance – Strong

BTCUSD – fundamental overview

Heading into 2021, there was a great anticipation for institutional adoption. And as we saw follow through on this anticipation, the bitcoin price tripled in value, exploding to a record high beyond $60,000. But with much of that now priced into the market, and with short-term bitcoin fundamentals still correlating with global risk sentiment, there does appear to be room for somewhat of an adjustment lower in the price before we see that next wave of renewed demand. We also believe bitcoin's emergence into the mainstream will invite more challenge and scrutiny from central banks and governments, which could translate to a bumpy ride into H2 2021 before the asset once again finds its legs on the compelling longer-term value proposition.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

Despite the latest run to a fresh record high through $4,000, the market is looking quite extended following a massive run higher in 2021. At this stage, additional upside should be limited to allow for extended studies to unwind, before the market considers a meaningful bullish continuation. Look for setbacks to be well supported ahead of $2,000.

• R2 4500 – Psychological – Strong
• R1 4360 –  12 May/Record high – Medium
• S1 3360 – 7 May low – Medium
• S2 3000 – Psychological – Strong

ETHUSD – fundamental overview

Ether is getting closer and closer to entering a phase of meaningful correction and consolidation after an explosive start to 2021 that has resulted in fresh record highs beyond $4,000. There are already signs of overvaluation in the defi space and this in conjunction with an anticipated deterioration in global risk sentiment are been behind a lot of the reasoning for the anticipated downside pressure. Still, we believe there will be plenty of demand for ether down into the $2,000 area.