US Dollar Appetite Fading…At Least For Now

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. The market is now looking to carve the next medium-term lower top and scope exists for the correction to extend into the 1.5485-1.5590 area before bearish resumption. At this point, a drop back below 1.5165 would be required to put the immidiate pressure back on the downside.

• R2 1.5590 – Measured Move – Strong
• R1 1.5485 - 23Dec low – Strong
• S1 1.5300 – 11Feb high  – Medium
• S2 1.5196 – 10Feb low  – Strong

GBPUSD – fundamental overview

A somewhat hawkish BOE Quarterly Inflation Report and subsequent Carney assurance there was no threat of persistent deflation, have helped generate a bout of Sterling outperformance in recent trade. The Pound was already benefiting from broad profit taking on USD longs on improved risk appetite and softer US economic data and could be poised to extend gains as the currency correction continues. Dealers now cite interest towards the 1.5600 area with no meaningful sell-stops until below 1.5200.

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 ahead of 117.00, 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 118.51 – 12Feb low – Medium
• S2 118.33 – 9Feb low – Strong

USDJPY – fundamental overview

Some exciting price action in the Yen over the past 24 hours following the news the BoJ now believes any extra stimulus would be counterproductive, and consumer sentiment would be damaged by any further weakness in the Yen. This in conjunction with softer US data and the potential for the Fed to push off its rate hike beyond mid-year, has made some noise in the yield market, with differentials narrowing back in the Yen’s favour a bit. Still, macro accounts will be looking to take advantage of the current USDJPY dips, with the longer-term picture unchanged and the Yen at risk for continued weakness. Dealers cite solid demand all the way down to 117.00.

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 move to 1.0645 thus far. A push above 1.0645 will extend the recovery and expose 1.1000 further up. Any setbacks are now expected to be well supported above 1.0415, 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 keeping 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 are looking less attractive these days and the SNB may start to have an easier time defending its bearish Franc stance. For now, the SNB is welcoming the latest wave of risk on trade following a Russia, Ukraine peace deal and concurrent rally in equity markets.

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. Should the market break back above 0.7876, this would open the possibility for a larger correction towards 0.8125 before a resumption of the underlying downtrend.

• R2 0.7876 – 6Feb high – Strong
• R1 0.7795 - 11Feb high – Medium
• S1 0.7625 – 3Feb/2015 low – Strong
• S2 0.7600 – Figure – Medium

AUDUSD – fundamental overview

Three hour testimony from RBA Stevens hasn’t really produced any really forward guidance on policy following last week’s rate cut from the RBA. The central banker did however say that rate cuts had become less effective as a policy tool but at the same time, would not rule out the possibility for additional easing. The market certainly hasn’t ruled out the possibility, pricing in a 70% chance for another reduction at the next meeting in March. Overall, the Australian Dollar has managed to find some support in recent trade, with the currency benefitting from a broad based bout of profit taking on USD longs and a recovery in commodities prices.

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 correction before the market pushes back through 1.2800. Still, any setbacks should be well supported around 1.2000, with only a weekly close below this level to compromise the uptrend.

• R2 1.2698 – 11Feb high – Medium
• R1 1.2646 - 12Feb high – Medium
• S1 1.2442 – 12Feb low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

The beaten down Canadian Dollar has been finding a little more love over the past week or so, with the Loonie recovering on the back of broad based US Dollar profit taking and a recovery in commodities prices. The news of a Russia, Ukraine peace deal and softer US data have been cited for a good portion of the US Dollar weakness, while stability in the gold market and jump in the oil price back above $50 are propping CAD. Still, overall, with the Bank of Canada prepared to cut rates again, the bigger picture isn’t changed much and renewed USDCAD bids are expected to emerge into dips. For today, Michigan sentiment and Canada manufacturing shipments are in focus.

NZDUSD – technical overview

The market remains locked within a very well defined downtrend, with deeper setbacks seen ahead. A recent correction has stalled ahead of 0.7500 and a fresh lower top is sought out ahead of the next major downside extension towards a measured move objective at 0.6855. Look for a daily close below 0.7175 to confirm, while only back above 0.7500 would take the immediate pressure off the downside. Should the market break back above 0.7500, this would open the possibility for a larger correction towards 0.7815 before a resumption of the underlying downtrend.

• R2 0.7609 – Previous Base – Strong
• R1 0.7486 - 12Feb high – Medium
• S1 0.7314 – 12Feb low – Medium
• S2 0.7176 – 3Feb/2015 low – Medium

NZDUSD – fundamental overview

The New Zealand has been very well supported in recent trade, with the currency benefitting from broad based profit taking in the US Dollar following a bout of risk on trade and softer US economic data. Still, with the PM targeting an exchange rate of 0.6500 and with the RBNZ slowly shifting further towards the dovish side, there is risk the currency will soon find formidable offers into the current rally. New Zealand retail sales are due out on Monday and will be the next big market mover for Kiwi.

US SPX 500 – technical overview

The recent break of internal range resistance ahead of the record high suggests the market will now want to take out the December peak and ascend to new heights. However, only a weekly close above 2100 would convince of any meaningful upside from current levels, while inability to do so will warn of trend exhaustion and the onset of a major structural shift. Key short-term support comes in at 2041 and the market will need to break back below this level to take the immediate pressure off the topside.

• R2 2100.00 – Psychological – Very Strong
• R1 2093.00 – 29Dec/Record – Strong
• 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 record high levels. For today, the focus will be on ongoing Greek debt developments and Michigan sentiment.

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

Although 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 (and even central banks as evidenced by today’s recommended read) 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.

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

Oil has been holding its own in recent trade, with the market trying to establish some form of a recovery out from sub $50 lows. The market took in a bearish IEA report and news of record supplies in the US, and after a brief stumble, managed to find its way back above $50. The themes weighing on the commodity have not gone away, but at least for now, it seems the combination of some technical overextension, US Dollar selling and industry spending cuts, are all helping to support the price.