Bond market versus the Fed

GBPUSD – technical overview

Technical studies are in the process of unwinding from stretched levels after the push to fresh multi-month highs. This leaves room for additional setbacks over the coming sessions, 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 1.4241 – 23 February/Multi-month high – Strong
• R1 1.4200 – Figure – Medium
• S1 1.3888 – 26 February low – Medium
• S2 1.3830 – 17 February low – Strong

GBPUSD – fundamental overview

The Pound gave back gains into the end of last week on the back of soft UK labour data and a recovery in the US Dollar on rising US bond yields. Key standouts on Monday’s calendar come in the form of UK manufacturing PMIs, US manufacturing data, and US construction spending.

USDJPY – technical overview

The major pair remains confined to a massive multi-year triangle and it's going to take a clear break above or below the triangle to determine the direction of the next major move. We have seen a contraction in range as the market reaches the apex of the triangle, which suggests a breakout is coming soon. But until the triangle is broken, look to continue to see the market play the range within the triangle.

• R2 107.00 – Figure – Strong
• R1 106.70 – 26 February/2021 high – Medium
• S1 104.92 – 23 February low – Medium
• S2 104.41 – 10 February low – Strong

USDJPY – fundamental overview

At the moment, the Yen has been more sensitive to yield differentials with the US Dollar, as US yields rise, than it is to the intense pullback in risk assets. But should the risk liquidation intensify, more Yen demand is expected to work back into the mix. Key standouts on Monday’s calendar come in the form of US manufacturing data, and US construction spending.

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 – Medium
• R1 1.1098 – 25 February/2021 high – Strong
• 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 0.7500.

• R2 0.8008 – 25 February/Multi-month high – Strong
• R1 0.7884 – 26 February high – Medium
• S1 0.7692 – 26 February low – Medium
• S2 0.7600 – Figure – Strong

Big setbacks for the Australian Dollar into the end of the week on the back of weakness in the Yuan, RBA intervention to cap yields and liquidation in US equities. Key standouts on Monday’s calendar come in the form of US manufacturing data, and US construction spending.

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 1.2500 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2500 would suggest otherwise. Back above 1.3000 will strengthen the outlook.

• R2 1.2882 – 28 January/2021 high – Strong
• R1 1.2764 – 12 February high – Medium
• S1 1.2500– Psychological – Medium
• S2 1.2468 – 25 February/Multi-month low – Strong

USDCAD – fundamental overview

The Loonie held up better than its commodity currency cousins into the end of last week, getting a bit of help from the rise in Canada industrial product prices. Nevertheless, the currency was not immune to the downside pressure in risk assets, rise in US yields and weakness in the price of oil, all contributing to the latest round of weakness in the Canadian Dollar. Key standouts on Monday’s calendar come in the form of Canada manufacturing PMIs, US manufacturing data, and US construction spending.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom, after the market bottomed out in 2020. The recent break back above 0.7000 further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud and focused on pushing back towards longer-term resistance in the 0.7500 area. Any setbacks are expected to be well supported ahead of 0.7000.

• R2 0.7500 – Psychological – Medium
• R1 0.7465 – 25 February/Multi-month high – Medium
• S1 0.7158 – 17 February low – Medium
• S2 0.7096 – 18 January/2021 low – Strong

NZDUSD – fundamental overview

The rise in US yields and concurrent round of weakness in US equities has played a large part in this latest Kiwi slide. Though we've also seen added selling pressure on the back of a 10% decline in Kiwi exports. Key standouts on Monday’s calendar come in the form of US manufacturing data, and US construction spending.

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 ahead of 4000, with a break back below 3600 to strengthen the outlook.

• R2 4000 – Psychological – Strong
• R1 3965 – 16 February/Record high – Medium
• S1 3700 – Round number – Medium
• S2 3663 – 4 January low – 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 in 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 1700. Longer-term technical studies are however in the process of consolidating, 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 1717 – 26 February/2021 low – Medium
• S2 1700 – Psychological – 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

The short-term outlook should be less constructive in the aftermath of this latest wave of parabolic price action to fresh record highs through $55,000. Key indicators are unwinding from extreme overbought territory across multiple timeframes, warning of a period of deeper correction and consolidation before any meaningful bullish continuation can be expected. At the same time, look for setbacks to now be well supported into the $35,000 - $40,000 area.

• R2 57,565 – 20 February/Record high – Strong
• R1 51,415 – 24 February high – Medium
• S1 42,000 – Previous resistance – Strong
• S2 40,000 – Psychological – Strong

BTCUSD – fundamental overview

With so much of the good news priced in around all of the new adoption from major players in the traditional markets, and with the market as extended as it was in early 2021, a major period of pullback was fully anticipated in Q1. And while there is certainly a place for bitcoin to benefit in periods of risk off given its store of value draw, at the moment, the crypto asset is still vulnerable to periods of risk liquidation in US equities. We do however see plenty of demand from larger players into dips, with the $35,000-$40,000 seen as an attractive area to build exposure.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market has entered a period of overdue correction following a parabolic run to fresh record highs through 2,000 in February. There is room for additional declines, potentially back into the 1,000 area, before the market looks for that next higher low and a bullish continuation.

• R2 2042 – 20 February/Record high – Strong
• R1 1715 – 24 February high – Medium
• S1 1315 – 28 February low – Medium
• S2 1270 – February low – Strong

ETHUSD – fundamental overview

Ether is in the process of an overdue price correction after an explosive start to 2021 that resulted in fresh record highs beyond $2,000. There were already signs of overvaluation in the defi space and this in conjunction with a deterioration in global risk sentiment have been behind a lot of this downside pressure. Still, we believe there will be plenty of demand for ether down into the $1,000 area.