Not All Greek In Wednesday Trade

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 1.5196 would be required to put pressure back on the downside.

• R2 1.5485 – 23Dec low – Strong
• R1 1.5441 - 16Feb high – Medium
• S1 1.5300 – 11Feb high  – Medium
• S2 1.5196 – 10Feb low  – Strong

GBPUSD – fundamental overview

Bank of England Minutes and UK employment data are being taken in on Wednesday. Perhaps in light of all the colour we’ve already had from the recent BOE QIR, and Governor Carney’s dismissal of concern over sustained lower inflation, the Minutes will produce less volatility than the employment data which could end up being the more pressing release. The market will be looking for improvement on this front with many expecting a drop in the unemployment rate to 5.7% from 5.8% previous.

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 119.42 – 17Feb high – Medium
• S1 118.24 – 17Feb low – Medium
• S2 118.00 – 4Feb high – Strong

USDJPY – fundamental overview

Not much of a surprise from the BOJ on Wednesday, after the central bank revealed in its monetary policy statement it was staying pat, voting 8-1 to retain the JPY80T annual increase in the monetary base. The BOJ went on to say the economy was on a path of moderate recovery, with exports showing signs of improvement. Perhaps most relevant to investors was the central bank’s commitment to QE until 2% inflation is maintained. USDJPY hasn’t moved much on the news, with all of it being priced in. The market is now looking ahead to the Fed Minutes for further insight into the the yield differential equation between the two countries.

EURCHF – technical overview

The recovery out from the historic low from several weeks back continues, with medium term technical studies still correcting from oversold levels. A recent multi-session range consolidation has been broken, with the push above 1.0650 opening the door for the next measured move extension towards the psychological barrier at 1.1000. At this point, only back below 1.0415 would compromise the constructive outlook.

• R2 1.0800 – Figure – Medium
• R1 1.0695 – 17Feb high – Medium
• S1 1.0550 – 16Feb low – Medium
• S2 1.0415 – 9Feb low – Strong

EURCHF – fundamental overview

The EURCHF market has been very well supported by ongoing comments from SNB Jordan. Jordan has said the Swiss Franc is still significantly overvalued and the SNB is prepared to intervene further if needed. He also has said he doesn’t believe negative rates have 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 remains locked within a well defined downtrend, with deeper setbacks seen ahead. However, should the market put in a daily close above 0.7876, this would open the possibility for a larger correction towards 0.8125 before a resumption of the underlying downtrend. Inability to establish a daily close above 0.7876 will keep the immediate pressure on the downside for a retest of the 0.7625 key low.

• R2 0.7975 – 27Jan high – Medium
• R1 0.7876 - 6Feb high – Strong
• S1 0.7742 – 17Feb low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

M&A related activity is helping prop the Australian Dollar on news Japan Post will acquire Australia’s Toll Holdings for USD5.1B. This already follows Aussie supportive flows following a less dovish RBA Minutes that failed to make any hints of additional rate cuts. 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. Today’s Fed Minutes will offer additional clarity on the matter.

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 1.2537 – 13Feb high – Medium
• R1 1.2478 - 17Feb 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 several days, 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 how the market perceives today’s Fed Minutes.

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 previous support at 0.7609. But additional gains beyond will prove hard to come by, with only a close back above 0.7609 to delay the negative outlook.

• R2 0.7609 – Previous Base – Strong
• R1 0.7584 - 22Jan high – Medium
• S1 0.7470 – 16Feb low – Medium
• S2 0.7314 – 12Feb low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has enjoyed a nice recovery rally over the past several days, and is finding additional support in the mid-week on news of the 5th consecutive increase in dairy prices. This is a welcome development for Fonterra as it helps to ensure forecasts for the current season will be met. Still, there is talk of heavy offers towards 0.7600, with many macro accounts betting the Fed yield differential theme will weigh more heavily as the Fed starts to raise rates. As such, today’s Fed Minutes should inspire additional volatility.

US SPX 500 – technical overview

The market has taken out the December peak, breaking to yet another fresh record high through 2100. 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 2083 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 2102.00 – 17Feb/Record – Strong
• S1 2083.00 – 17Feb low – Medium
• S2 2041.00 – 9Feb low – Strong

US SPX 500 – fundamental overview

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 as it awaits the outcome of the latest Fed Minutes.

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. Key trend-line support comes in around 1200 and ultimately, only a daily close back below the psychological barrier would compromise the recovery outlook and put the pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1237.00 – 16Feb high – Strong
• S1 1200.00 – Trend-Line – Strong
• S2 1183.00 – 17Dec low – Medium

GOLD (SPOT) – fundamental overview

Expectations for a Greek deal and the pricing in of a Fed rate hike mid-year have been weighing more heavily on the metal in recent trade. Still, 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. There is sizable demand reported around $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 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. In a recent report, a major US investment firm said it believed the market would now stabilize for three major reasons. 1) Energy companies were quick in cutting capital expenditure plans in reaction to the slide in prices. 2) Oil rig counts in the US had been falling sharply. 3) Major forecasting agencies projecting lower non-OPEC growth. The emergence of geopolitical risk is also not lost, with the civil war in Libya perhaps also playing a supportive role.