US Retail Sales Could Bring Fireworks to FX Market

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

With all the distraction of Greece and US retail sales, it may be easy to forget about other potential market moving developments today, which come in the form of the Bank of England Quarterly Inflation Report and Governor Carney press conference. Participants will be focused on what Mr. Carney has to say about softer inflation and sub-par growth and this is likely to have an influence on intraday Sterling sentiment. But overall, 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.

USDJPY – technical overview

The recent break of triangle resistance within the broader range of the past few months has opened the door for a potential bullish resumption in the well defined uptrend. Sights are now set on a retest of the December, 7 year peak at 121.85, with a clear break to expose the 125.00 area further up. Any setbacks should be well supported towards 118.00, but ultimately, only back below 115.55 would compromise the highly constructive outlook.

• R2 120.83 – 23Dec high – Strong
• R1 120.47 – 11Feb high – Medium
• S1 118.73 – 12Feb low – Medium
• S2 118.33 – 9Feb low – Strong

USDJPY – fundamental overview

Quite an unexpected intraday move in USDJPY, with the major pair pulling back sharply after being so well bid up in Wednesday trade. The move comes on reports the BoJ now believes any extra stimulus would be counterproductive, while the central bank has also added that consumer sentiment would be damaged by any further weakness in the currency. USDJPY was trading 120.30 ahead of this development, with the market dropping off to as low as the 118.75 area thus far. While the news is certainly something to take in, and a pullback is understandable, macro accounts will be looking to take advantage, with the dip presenting another opportunity to buy into a trade that carries with it compelling upside as the Fed, BOJ monetary policy divergence theme is still quite pronounced. Looking ahead, ongoing Greek headlines and US retail sales are in focus.

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 1.0415 – 9Feb low – Medium
• S2 1.0355 – 30Jan low – Strong

EURCHF – fundamental overview

Recent SNB Jordan comments have done a good job of keep the market well supported on dips. Jordan said the SNB was still prepared to intervene if needed and 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 on Greece uncertainty and geopolitical risk are looking less attractive these days and the SNB may start to have an easier time defending its bearish Franc stance. Certainly some form of a resolution on Greece would be a welcome bullish development for the risk correlated EURCHF rate. But in the interim, a bid up equity market is also doing a good job of propping this market.

AUDUSD – technical overview

The market remains locked within a very well defined downtrend, with deeper setbacks seen ahead. A recent correction has stalled out at 0.7876 and a fresh lower top is sought out ahead of the next major downside extension towards a measured move objective at 0.7375. Look for a daily close below 0.7625 to confirm, while only back above 0.7876 would take the immediate pressure off the downside.

• R2 0.7795 – 11Feb high – Medium
• R1 0.7729 - 12Feb high – Medium
• S1 0.7625 – 3Feb/2015 low – Strong
• S2 0.7600 – Figure – Medium

AUDUSD – fundamental overview

It has been a tough go for the Australian Dollar, with recent rate cuts from the RBA, falling commodities prices and a cooling China, just some of the variables weighing on the currency. Thursday’s release of the much weaker than expected employment data has done nothing to help Aussie’s cause, after employment came in more than two times worse than the negative print forecast and the unemployment rate rose to 6.4% from 6.2% previous. The data will now increase the likelihood of more RBA cuts in the pipeline and could lead to more Aussie underperformance going forward. Attention shifts to RBA Stevens’ parliamentary testimony late Thursday.

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, stretched technical studies are in the process of unwinding, and there is risk for additional consolidation before the market pushed back through 1.2800. 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 1.2800 – 30Jan/2015 high – Strong
• R1 1.2698 - 11Feb high – Medium
• S1 1.2572 – 11Feb low – Medium
• S2 1.2451 – 10Feb low – Medium

USDCAD – fundamental overview

There has been little relief for the Canadian Dollar in recent trade, with the currency still trading just off fresh 6 year lows against the Buck. Last week’s solid Canada employment report has been forgotten and it looks as though the Loonie’s fate is once again tied with the direction on oil prices. And with the oil recovery still quite shallow, and the Bank of Canada open to additional rate cuts and, 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.

NZDUSD – technical overview

The market has entered a period of correction and consolidation after breaking down to fresh 4 year lows at 0.7176. But the broader downtrend remains firmly intact with the market looking to carve the next lower top ahead of a bearish continuation below 0.7176 and towards psychological barriers at 0.7000 further down.

• R2 0.7449 – 4Feb high – Strong
• R1 0.7379 - 12Feb high – Medium
• S1 0.7288 – 4Feb low – Medium
• S2 0.7176 – 3Feb/2015 low – Medium

NZDUSD – fundamental overview

Kiwi has has come back under pressure in recent trade, partially in sympathy with weakness in the Australian Dollar and partially because of the latest slide in commodities prices. But with the central bank recently shifting from a more hawkish stance, and with pressures mounting for more central bank accommodation globally, there is risk for a more intensified liquidation of the commodity currency. Throw in PM Key calls for a 0.6500 rate, Greece uncertainty and escalating geopolitical tensions and any Kiwi upside should be limited. Solid offers are reported from macro accounts towards 0.7600.

US SPX 500 – technical overview

Despite recent gains, there are signs of a major top, with the market continuing to be very well capped on rallies ahead of the December record high. But a break and daily close back below key support at 1968 will be required to confirm the topping structure and accelerate declines.

• R2 2o93.00 – 29Dec/Record – Very Strong
• R1 2079.00 – 12Feb high – Medium
• S1 2041.00 – 9Feb low – Strong
• S2 2013.00 – 3Feb low – Medium

US SPX 500 – fundamental overview

Overall, stocks are still supported just off record highs on the expectation central banks will continue to backstop the global economy. But with central banks having very little left in the tank, there is a growing concern over the effectiveness of such policy going forward. This could ultimately make it difficult for stocks to hold onto near record high levels. For today, market sentiment is likely to be dictated by ongoing Greek debt negotiations and US retail sales.

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 1218.00 – 11Feb low – Medium
• S2 1200.00 – Psychological – Strong

GOLD (SPOT) – fundamental overview

Short-term long plays have been scared away in recent trade. 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 longer-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 entered a period of legitimate correction since collapsing to fresh multi-year lows at 43.55. A recent push above 51.25 opens the door to the possibility for fresh upside towards next key resistance at 59.00 in the sessions ahead. But the market will now need to hold above 47.35 and break back above 54.25 to keep the recovery structure intact. A close below 47.25 would put the pressure back on the downside for a retest of the 43.55 multi-year low from late January.

• 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

Though there have been signs of a potential bottom in recent trade, the fundamentals continue to weigh on the commodity. A bearish report from the IEA on Tuesday was followed up with Wednesday news of record supplies in the US. These developments have been sourced as the drivers behind this latest pullback. Still, there are value players down below the $50 level that could keep the market supported for the time being on dips.