US Closed for Holiday, Eurogroup Meeting in Focus

GBPUSD – technical overview

Though the broader downtrend remains intact, the recent 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 pressure back on the downside.

• R2 1.5590 – Measured Move – Strong
• R1 1.5485 - 23Dec low – Strong
• S1 1.5370 – 13Feb high  – Medium
• S2 1.5300 – 11Feb high  – Medium

GBPUSD – fundamental overview

The Pound is still outperforming into the new week following a somewhat hawkish BOE Quarterly Inflation Report and Governor Carney assurance there is no threat of persistent deflation. The Pound has already been benefiting from broad profit taking on USD longs and could be poised to extend gains further after BOE member Martin Weale said he believed rates will rise quicker than the market expects. Dealers now cite demand up towards the 1.5600 area. There is no first tier data out of the UK on Monday and trade could be quiet with the US market closed for holiday.

USDJPY – technical overview

A push in the major pair beyond multi-day triangle resistance has produced a lackluster follow through thus far, with the market stalling well ahead of the 121.85, 7 year peak from December and retreating back into mid-range. Still, the broader bullish structure is firmly intact, with eventual upside projected through 121.85 and towards 125.00 further up. Only back below 115.55 would delay the highly constructive outlook.

• R2 120.83 – 23Dec high – Strong
• R1 119.20 – 13Feb high – Medium
• S1 118.00 – 4Feb high – Medium
• S2 116.88 – 3Feb low – Strong

USDJPY – fundamental overview

Some exciting price action in the Yen over the past couple of days following news the BoJ now believes any extra stimulus would be counterproductive, and consumer sentiment would be damaged by any further weakness in the Yen. Though Monday’s GDP data was below expectation, the fact that Japan is out of technical recession offers further support to the notion the BOJ will hold off on additional easing. 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

The EURCHF market has been very well supported since comments from SNB Jordan the other week. Jordan said the SNB was still prepared to intervene if needed and 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 direction in the market will be contingent on the outcome of the Eurogroup meeting and prospect for a Greek debt resolution.

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. However, 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 0.7842 - 10Feb high – Medium
• S1 0.7724 – 13Feb low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has managed to shrug off softer China data (excluding China FDI) and dovish RBA Minutes expectations, with the currency benefiting from some broad based US Dollar weakness. But overall, Aussie gains should be limited with the market pricing more RBA cuts at the next meeting in March. AUDNZD is also getting some attention in the early week, with this cross rate dropping back down towards recent record lows.

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 1.2646 – 12Feb high – Medium
• R1 1.2537 - 13Feb high – Medium
• S1 1.2352 – 3Feb low – Strong
• S2 1.2300 – Figure – Medium

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. 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, more consolidation is to be expected with US markets closed for holiday.

NZDUSD – technical overview

The market remains locked within a very well defined downtrend, with deeper setbacks seen ahead. However, we are currently in the process of a correction in which the market is seeking out the next medium-term lower top ahead of bearish resumption. The recent break back above 0.7495 opens the door for a fresh extension that could expose the 0.7600-0.7815 area. But additional gains beyond will prove hard to come by, with only a break back above 0.8000 to compromise the negative outlook.

• R2 0.7609 – Previous Base – Strong
• R1 0.7584 - 22Jan high – Medium
• S1 0.7411 – 13Feb low – Medium
• S2 0.7314 – 12Feb low – Strong

NZDUSD – fundamental overview

Kiwi is outperforming in Monday trade on the back of solid New Zealand retail sales data which came in at +1.7% q/q versus a +1.3% q/q expectation. Still, with PM Key targeting an exchange rate of 0.6500 and with the RBNZ slowly shifting to the dovish side, there is risk the currency will soon find formidable offers into the current rally, especially with the US Dollar widely favored as the currency of choice in the current macro environment.

US SPX 500 – technical overview

The market has taken out the December peak, breaking to yet another fresh record high. 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 2085 and the market will need to put in a daily close below this level to take the immediate pressure off the topside.

• R2 2150.00 – Psychological – Medium
• R1 2098.00 – 13Feb/Record – Strong
• S1 2085.00 – 13Feb low – Medium
• S2 2041.00 – 9Feb low – Strong

US SPX 500 – fundamental overview

Yet another record high for this market 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 these record high levels. US markets are closed for Presidents Day and participants will have time to reflect on this latest price action over the long weekend.

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 recent 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 with a lack of confidence. These 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 establish 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. Last week, 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.