USD Reasserts Post NFPs, Aussie Hit On China Trade

GBPUSD – technical overview

Though the broader downtrend remains intact, last week’s break back above 1.5270 has taken the immediate pressure off the downside. But ultimately, any rallies should be well capped ahead of 1.5600, with a  lower top sought out ahead of bearish resumption. Back below 1.5165 will confirm and open renewed downside pressure.

• R2 1.5485 – 23Dec low – Strong
• R1 1.5352 - 6Feb high – Medium
• S1 1.5165 – 5Feb low  – Strong
• S2 1.5139 – 4Feb low  – Medium

GBPUSD – fundamental overview

Although the Pound has come back under some pressure following the US employment report, there are signs of relative strength for the UK currency. While the Pound is at risk for weakness against the US Dollar on the prospect for a sooner than later Fed rate hike, the reality of a Fed rate hike also pushes the Bank of England closer to its monetary policy reversal. The BOE is the next central bank likely to follow the Fed with a rate hike, and this alone makes Sterling more attractive against most other currencies over the medium term.

USDJPY – technical overview

The market remains locked in a consolidation within a very well defined uptrend, with setbacks expected to be supported on dips. The recent correction off fresh 7-year highs at 121.85 has stalled out at 115.55 and a medium-term higher low is now sought ahead of the next major upside extension back through 121.85 and towards the 125.00 area further up. Only a daily close back under 115.55 would delay the bullish structure. Friday’s break above triangle resistance suggests the market could be poised for bullish resumption.

• R2 119.97 – 8Jan high – Strong
• R1 119.22 – 6Feb high – Medium
• S1 118.00 – 4Feb high – Medium
• S2 116.88 – 3Feb low – Strong

USDJPY – fundamental overview

The Yen has taken a backseat of late, caught between the flows from safe haven bids and those of diverging central bank policy. But ultimately, it should be the diverging policy flows that win out and send the Yen lower, with flight to safety Yen lure no longer what it once was. USDJPY has been getting a little more attention in the early week, after technicians cited a break of some triangle resistance within the multi-week consolidation. Certainly the strong US jobs from Friday is supportive of the major pair, with the data widening yield differentials out further in favour of the US Dollar.

EURCHF – technical overview

Medium-term technical studies are still tracking in oversold territory following the dramatic and violent decline from a few weeks back, and the recent break above 1.0250 has opened a push towards a measured move objective around 1.0700 over the coming sessions. Look for any setbacks to be well supported above 1.0250, while only a daily close back below this level would compromise the recovery structure.

• R2 1.0700 – Measured Move – Strong
• R1 1.0645 – 5Feb high – Medium
• S1 1.0405 – 2Feb low – Medium
• S2 1.0355 – 30Jan low – Strong

EURCHF – fundamental overview

While SNB Jordan failed to confirm the rumours of a 1.0500 to 1.1000 EURCHF corridor, his comments over the weekend were enough to keep the market well supported on dips. Jordan said the SNB was still prepared to intervene if needed and that although interest were currently sitting at -0.75%, he didn’t believe negative rates had reached their limit yet. Safe haven flows into the Franc are looking less attractive these days and the SNB may start to have an easier time defending its bearish Franc stance.

AUDUSD – technical overview

The market has entered a period of consolidation after breaking down to fresh 6 year lows at 0.7625. Additional upside over the coming sessions should not be ruled out to allow for the oversold studies to unwind. But the downtrend remains firmly intact and look for a lower top to carve out somewhere ahead of 0.8000 in favour of the next major downside extension and bearish continuation towards psychological barriers at 0.7000.

• R2 0.7890 – 29Jan high – Medium
• R1 0.7876 - 6Feb high – Strong
• S1 0.7720 – 29Jan low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

The combination of a solid US jobs report and unsettling China trade data have left the Australian Dollar as the standout underperformer in the early week. The healthy NFP print and pickup in wage growth has increased the likelihood the Fed will remove its “patient” language at the next meeting, and this will weigh more heavily on Aussie yield differentials. The RBA is moving in the opposite direction having just cut rates, and with Aussie exports to China now dropping off 35.3% following this latest China data, more RBA rate cuts could follow.

USDCAD – technical overview

The outlook for this pair remains highly constructive, with the price breaking medium-term resistance, surging to fresh +5 year highs. This has opened the door for a push towards the 2009 peak at 1.3065 in the days ahead. However, technical studies are in the process of unwinding from overbought, and there is risk for additional weakness to allow for these studies to unwind before the market continues higher. Still, any setbacks should be well supported into the 20-Day SMA, with only a break and close below the short-term moving average to delay.

• R2 1.2644 – 3Feb high – Strong
• R1 1.2593 - 4Feb high – Medium
• S1 1.2352 – 3Feb low – Medium
• S2 1.2245 – 20-Day SMA – Strong

USDCAD – fundamental overview

Finally some relief for the Canadian Dollar in recent trade, with the currency recovering off fresh 6 year lows against the Buck. Signs of a recovery in oil prices and some equally strong employment data out of Canada this past Friday have been helping to limit additional USD gains for now. Yet, with the Bank of Canada open to additional rate cuts and with the oil recovery still quite shallow, more Canadian Dollar weakness is in the cards. Macro accounts will be looking to build into existing USDCAD longs, but may wait for the pair to correct a bit more from overbought technical readings.

NZDUSD – technical overview

The market has entered a period of consolidation after breaking down to fresh 4 year lows at 0.7176. Additional upside over the coming sessions should not be ruled out to allow for the oversold studies to unwind. But the downtrend remains firmly intact and look for a lower top to carve out somewhere ahead of 0.7600 in favour of the next major downside extension and bearish continuation towards psychological barriers at 0.7000.

• R2 0.7495 – 28Jan high – Medium
• R1 0.7449 - 4Feb high – Strong
• S1 0.7288 – 4Feb low – Medium
• S2 0.7176 – 3Feb/2015 low – Strong

NZDUSD – fundamental overview

A nice recovery in Kiwi off 4 year lows, with the currency recovering on the back of some perceived less dovish RBNZ Wheeler comments and some impressive components within New Zealand employment data. But with the central bank shifting from a more hawkish stance, and with pressures mounting for more central bank accommodation globally, the RBNZ may just be stalling ahead of an inevitable shift towards all out dovish policy. Throw in Friday’s impressive US employment report and the likelihood the Fed will raise rates in mid 2015 and the yield differential outlook continues to favour additional Kiwi declines.

US SPX 500 – technical overview

Finally signs of a major top, with the market very well capped on rallies. Look for a break and daily close below key support at 1968 to confirm the topping structure and open the door for a fresh downside acceleration exposing the October 2014, 1820 area base. Ultimately, only a daily close above 2069 would compromise the bearish outlook and put the focus back on the 2097 record high.

• R2 2o93.00 – 29Dec/Record – Very Strong
• R1 2073.00 – 6Feb high – Strong
• S1 2013.00 – 3Feb low – Medium
• S2 1970.00 – 16Dec low – Strong

US SPX 500 – fundamental overview

Overall, the Fed is still inching closer to a hike, as indicated in the most recent monetary policy statement, and this will make it hard to argue against a less accommodative stance. This in conjunction with concern over the effectiveness of global accommodative central bank policy to stimulate growth is starting to cast a shadow on investor optimism, and could ultimately make it difficult for stocks to hold onto recent gains off record highs. Stocks closed lower on Friday despite the solid US employment report, and it looks as though equity market participants are feeling less optimistic now that the Fed is on the verge of pulling back its free money support of the market.

GOLD (SPOT) – technical overview

The market continues to show signs of medium-term basing following the break of key resistance at 1256 a few weeks back. As such, the current pullback is viewed as corrective, with the market in search of the next higher low ahead of a bullish continuation towards 1345. Ultimately, only back below 1200 would compromise the recovery outlook and put the pressure back on the downside.

• R2 1308.00 – 22Jan high – Strong
• R1 1269.00 – 6Feb high – Medium
• S1 1220.00 – 50% fib – Strong
• S2 1200.00 – Psychologica – Strong

GOLD (SPOT) – fundamental overview

Short-term long plays have been scared away, with the US Dollar rallying across the board. However, while the metal has pulled from recent highs, this shouldn’t do anything to change a newer, bigger picture taking form. Accommodative central policy action around the globe has opened the door for significant currency depreciation and has left medium-term investors with a lack of confidence. These market participants are now comfortable holding the hard asset and continue to buy the metal on dips as the ripple effects from these central bank actions work their way through the rest of the market. Geopolitical tensions in the Ukraine and ongoing uncertainty around Greece are also gold supportive themes. There is talk of solid demand ahead of $1200.

Feature – technical overview

US OIL (spot) has finally entered a period of legitimate correction since collapsing to fresh multi-year lows at 43.55 last week. Last week’s push above 51.25 now opens the door to the possibility for fresh upside towards next key resistance at 59.00 in the sessions ahead. Still, the overall downtrend remains firmly intact and rallies are expected to stall out ahead of bearish resumption. A weekly close back above 59.00 would be required to force a structural shift.

• R2 59.00 – 18Dec high – Strong
• R1 54.25 – 3Feb high – Medium
• S1 47.35 – 5Feb low – Medium
• S2 43.55 - 29Jan/2015 low – Strong

Feature – fundamental overview

Finally some signs of a bottom in oil prices, with a number of themes driving the price action. Initially, the market had been bid up a bit on talk of rig reductions in the US. But the rebound intensified as market participants started to look to book profits on shorts with the price at risk of correcting from severely oversold technical conditions. Oil bulls have also found encouragement on news Saudi Arabia has boosted prices in the US. Still, overall, fears of reduced global demand and oversupply issues are not going away that fast and are expected to weigh once again into a rally.