Will Profit Taking Take Hold As Greece Talks Linger?

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 1.5316 would be required to put pressure back on the downside.

• R2 1.5590 – Measured Move – Strong
• R1 1.5485 - 23Dec low – Strong
• S1 1.5316 – 17Feb low  – Medium
• S2 1.5196 – 10Feb low  – Strong

GBPUSD – fundamental overview

The Pound has been performing well in recent trade, with some contrasting fundamentals and broader profit taking on long US Dollar positioning contributing to the price action. Softer US economic data and a more dovish Fed Minutes have come up against some encouraging UK data and a more upbeat Bank of England outlook. For today, the fate of the Pound may come at the hands of UK retail sales which are expected to come in at -0.3% versus +0.2% previous. Dealer’s cite sell orders towards 1.5600, with sizable stops 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. Setbacks should continue to be well supported ahead of 117.00, while 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

Softer Japan manufacturing PMIs and BOJ Kuroda testimony have failed to factor into trade, with USDJPY still victim to consolidation in lighter Asian holiday trade. Overall, the direction in this market will be dictated by risk sentiment and monetary policy divergence. There have been signs of potential exhaustion in record high US equity markets, and if we do see some capitulation in the sessions ahead, it could open USDJPY declines and delay the broader bullish outlook for the pair. Developments relating to Greece negotiations will likely influence price action on Friday, while attention will also shift to next week’s anticipated Yellen testimony.

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, while there is room for a minor pullback, only below 1.0415 would compromise the constructive outlook.

• R2 1.1000 – Psychological – Strong
• R1 1.0850 – Mid-Figure – Medium
• S1 1.0630 – 18Feb low – Medium
• S2 1.0550 – 16Feb low – Strong

EURCHF – fundamental overview

Though the impact of Swiss economic data on Franc direction is a rare event (as evidenced by Thursday’s trade data), Wednesday’s Swiss ZEW expectations release was one such event after the data series tumbled sharply to -73.0 from -10.8 previous, putting in the largest dive on record. The EURCHF market had already been very well supported on chatter of SNB intervention, with this latest release only contributing further to EURCHF gains. Of course, also helping to support this market has been the unstoppable momentum in equity markets. Clearly any change of sentiment on this front, could open renewed Franc demand. Much of the focus for Friday will be on developments out of the Greek negotiations. Dealers now cite interest all the way up to the 1.1000 barrier, with stops reported below 1.0550.

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

It’s back to focusing on broader macro risk for the Australian Dollar following a choppy Thursday session that was influenced by apparent false information. The currency had initially come under some relative pressure in early Thursday trade on news an S&P analyst suggested Australia’s AAA rating could be at risk. But this news was later formally denied by the rating agency and Aussie regained footing. However, this wasn’t before fresh record lows were set in an AUDNZD cross that has come under intense pressure in recent weeks on RBA, RBNZ policy divergence. Much of the direction in this market will now be dictated by US Dollar demand and investor risk appetite, with the ongoing Greek negotiations factoring.

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 normalizing, and there is risk for additional consolidation 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 1.2554 - 19Feb high – Medium
• S1 1.2352 – 3Feb low – Strong
• S2 1.2300 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar has deferred to a period of consolidation in recent trade and may continue to do so with the rest of the market doing much of the same. Much of the currency’s direction has been tied to the price of oil, and with the black gold still deciding on the next move, the Loonie has been fairly quiet. Overall however, the Canadian Dollar has been trending lower on a combination of weaker oil and diverging monetary policy themes, and this should continue to weigh on the Loonie over the medium-term. For now, Canada retail sales are in focus, while market participants will also be looking ahead to next Tuesday, with Fed Chair Yellen and BoC Poloz on the calendar.

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 exposes 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. Back below 1.0500 would suggest the next lower top has been set.

• R2 0.7710 – 21Jan high – Medium
• R1 0.7609 - Previous Base – Strong
• S1 0.7502 – 18Feb low – Medium
• S2 0.7470 – 16Feb low – Medium

NZDUSD – fundamental overview

A drop off in New Zealand consumer confidence and softness in local PPI data this week could be weighing on this latest Kiwi rally a bit, while the market is also quite focused on developments surrounding Greece debt negotiations. Ultimately, despite elevated equity markets, there is still a good amount of uncertainty out there at the moment which could negatively influence the higher yielding, risk correlated New Zealand Dollar. The RBNZ maintains a less accommodative stance on policy than most central banks, and if risk comes off, the central bank would be more exposed and forced to move more aggressively towards easing. This in turn could open a more intensified liquidation in the local currency. Dealers cite heavy offers ahead of 0.7600.

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 2103.00 – 19Feb/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 also 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. Stocks have already failed to extend gains on the dovish Fed Minutes and it’s possible the event could mark a critical inflection point for risk assets. Headlines are confirming with news of well known buy siders reducing long exposure. Of course ongoing Greek debt negotiations are also a central theme right now and should not be overlooked. Looking ahead, the market will start to position ahead of testimony from Fed Chair Yellen next Tuesday, Wednesday.

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. Wednesday’s bounce of major trend-line support encourages the constructive outlook, with only a daily close back below 1197 to delay the recovery outlook and put the pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1237.00 – 16Feb high – Strong
• S1 1197.00 – Trend-Line – Strong
• S2 1183.00 – 17Dec low – Medium

GOLD (SPOT) – fundamental overview

Gold is finding some welcome support in recent trade, with the more dovish Fed Minutes and ongoing Greece uncertainty keeping the market propped above $1200. Overall, 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 has opened 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 47.35 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

Although there have been signs of stabilization around $50, the market is still having a hard time managing any decent recovery. Geopolitical risk, cutbacks and rig reductions have all helped to slow the rapid pace of declines, and yet the overbearing theme of oversupply can not be shaken. US inventories are expected to rise to another record, while a possible rise in Saudi output has added to recent bearishness. The market will now need to break back above 54.25 to further encourage recovery prospects.