Markets Fixated On Greek Negotiations

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 pressure back on the downside.

• R2 1.5485 – 23Dec low – Strong
• R1 1.5441 - 16Feb high – Medium
• S1 1.5339 – 16Feb low  – Medium
• S2 1.5300 – 11Feb high  – Medium

GBPUSD – fundamental overview

The Pound has found itself consolidating recent gains following a somewhat hawkish BOE Quarterly Inflation Report and Governor Carney assurance there is no threat of persistent deflation. BOE member Martin Weale has also said he believes rates will rise quicker than the market expects. All of this bodes well for the Pound and market participants will now look to digest the most recent UK inflation data. Dealers cite demand up towards the 1.5600 area, with sell stops reported below 1.5300.

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

The market will be waiting for tomorrow’s anticipated policy statement from the BOJ to assess if last week’s news the central bank will hold off on additional accommodation is backed up. The Yen has found renewed bids on this news, along with Monday’s positive GDP showing, taking the Japanese economy out of technical recession. 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

The market has been in the process of correcting following an unprecedented decline from several weeks back. Gains have so far stalled at 1.0650, but with medium-term studies still showing additional room for recovery, look for a daily close above 1.0650 to confirm 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 1.0650 – 16Feb 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 before the existing Greek bailout expires on February 28.

AUDUSD – technical overview

The market remains locked within a 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

While the RBA Minutes reiterated the Australian Dollar remained above most estimates of fundamental value, failure to make any hints of additional rate cuts proved to be a letdown for doves. Aussie has already been benefitting from broader profit taking on US Dollar longs, and the Minutes have helped encourage additional recovery. Still, the currency’s correlation with risk is not lost, and with Greek negotiations hanging in the balance, additional upside should be limited short of a resolution on the matter. But even with a resolution, yield differentials with the US Dollar are not favourable over the medium-term and macro accounts will be looking to take advantage if Aussie extends gains.

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 stabilization in commodities prices. Still, overall, with the Bank of Canada prepared to cut rates again, the bigger picture isn’t changed and renewed USDCAD bids are expected to emerge into dips. In the interim, much of the flows of this market will be contingent on the price action in oil and whether the black gold can press higher back towards $60.

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 continues to find bid interest on the back of Monday’s solid New Zealand retail sales and some broad based profit taking on USD longs. 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 find formidable offers into the current rally. Throw in a breakdown in EU-Greek negotiations and signs of exhaustion in record high US equities and the outlook for the higher yielding currency is less encouraging.

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 2062 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 2062.00 – 12Feb low – Medium
• S2 2041.00 – 9Feb low – Strong

US SPX 500 – fundamental overview

Stocks will welcome the return of the US market following the long holiday weekend. US equities trade at 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 these record high levels. For now, the market has pulled back a bit on news of the breakdown in talks between the EU and Greece, despite the Greek FinMin’s assurances of a deal.

GOLD (SPOT) – technical overview

The market continues to show signs of medium-term basing following the break of key resistance at 1256 a several 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 1269.00 – 6Feb high – Strong
• R1 1246.00 – 10Feb 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. On the other hand, inability to establish above 54.25 followed by another downside break below 47.25 will 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 technical overextension, US Dollar selling, and industry spending cuts are all helping to support the price. An escalation of violence in Libya and concerns over exports from Kurdistan also remind of geopolitical risk supportive of the commodity.