A Busy Week Ahead For Markets

GBPUSD – technical overview

A period of solid corrective activity within the broader underlying downtrend is finally showing signs of stalling out, with the market putting in a strong bearish outside day formation in the previous week. A lower top is now sought out at 1.5552 in favour of the next major downside extension below the 2015 low at 1.4951. Look for a break through 1.5316 to confirm and accelerate.

• R2 1.5552 – 26Feb high – Strong
• R1 1.5459 - 27Feb high – Medium
• S1 1.5333 – 23Feb low  – Medium
• S2 1.5316 – 17Feb low  – Strong

GBPUSD – fundamental overview

Today’s UK PMI data isn’t expected to have any meaningful market moving influence, and attention will be fixated on broader macro themes. A slew of solid data out of the US in the previous week has opened a resurgence in US Dollar demand, with a mid-year Fed hike back on the table. Still, the Bank of England has been sounding relatively upbeat of late (closer to a hike), and this could help the Pound outperform against many other currencies, with UK rate differentials looking more favourable. EURGBP has dropped to a 7 year low and reflects the positive GBP sentiment away from the US Dollar. Later this week we get more colour on the dynamic, with the Bank of England due and US NFPs out on Friday.

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 120.47 – 12Feb high – Medium
• S1 119.11 – 27Feb low – Medium
• S2 118.24 – 17Feb low – Strong

USDJPY – fundamental overview

News of a weekend China rate cut and some softer than expected Japanese Q4 capex data have been fueling fresh bids in USDJPY in the early week. However, gains have been limited and the market appears to not want to get too far ahead of itself with a busy economic calendar ahead. Also perhaps weighing a bit on the pair are traditional risk correlations, with equity markets showing some signs of exhaustion as sentiment fades. Today’s US personal consumption and ISM manufacturing will be the next point of focus for the major pair.

EURCHF – technical overview

The recovery out from the historic low from several weeks back continues, with medium term technical studies breaking up from oversold levels. However, the correction has finally come into some stiff resistance just over 1.0800, with the market rolling back over and at risk for deeper setbacks in the seasons ahead. Still, the recovery remains intact while above 1.0415, with a higher low sought ahead of the next upside extension towards 1.1000. Only back below 1.0415 would give reason for pause.

• R2 1.1000 – Psychological – Strong
• R1 1.0815 – 20Feb high – Medium
• S1 1.0550 – 16Feb low – Medium
• S2 1.0415 – 9Feb low – Strong

EURCHF – fundamental overview

Some renewed flight to safety demand for the Franc in recent sessions will not be a welcome development for the SNB. Last week’s solid batch of economic data out of the US has spooked risk appetite, with the implication this will trigger a sooner than later Fed policy reversal and remove the free money that has been incentivizing risk taking. The market had recently been bid up above 1.0800 on talk of a EURCHF 1.0500-1.1000 corridor and ongoing dovish comments from SNB Jordan. But with risk coming off, with plenty of work needed to get done on Greece, and with the ECB about to embark on QE, the SNB will need to keep a close watch, as there is now scope for additional safe haven Franc demand.

AUDUSD – technical overview

The recent range break through 0.7876 looks to have been a false break, with the market stalling out above 0.7900 and reversing sharply last Thursday to put in a strong bearish outside day. This sets the stage for a more immediate bearish resumption, with a break back below 0.7740 to strengthen the outlook and expose a retest of the multi-year low from early February at 0.7625. Only back above 0.7913 negates.

• R2 0.7913 – 26Feb high – Strong
• R1 0.7834 - 27Feb high – Medium
• S1 0.7740 – 24Feb low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

Much of the focus for the Australian Dollar will be on the early Tuesday RBA decision. At this point, it’s a toss up as to whether the central bank will opt for another 25bp cut to record low rates of 2.00%. But if the latest batch of data is to be considered, the risk for a cut seems to be running a little higher. Soft employment, Q4 capex, retail sales and PMI data along with the cool CPI and TD-MI inflation all point to another rate cut from the RBA. And even if the central bank decides to hold off, this will only delay expectations for a move in April. As such, look for market participants to continue selling the Australian Dollar.

USDCAD – technical overview

The outlook for this pair remains highly constructive, after recently breaking to fresh +5 year highs at 1.2800. This has opened the door for a push towards the next major objective in the form of the 2009 peak at 1.3065. However, the market has since entered a period of consolidation in search of the next medium-term higher low, and will need to break back through 1.2800 to trigger a bullish resumption. In the interim setbacks have been very well supported ahead of 1.2350.

• R2 1.2664 – 24Feb high – Strong
• R1 1.2535 - 26Feb high – Medium
• S1 1.2449 – 27Feb low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

Expectations for another rate cut from the Bank of Canada this week have been downgraded following  Governor Poloz comments. The central banker said last month’s rate cut had bought the BoC time to see how the economy responded to the latest drop in oil prices. Still, the overarching themes of the Fed rate outlook and US oil dominate trade, and with oil unable to establish a meaningful recovery as of yet and US data increasing the likelihood for a sooner Fed rate hike, USDCAD should continue to remain very well supported on dips. For today, the focus will be on US personal consumption, ISM manufacturing, Canada current account and Canada manufacturing PMIs.

NZDUSD – technical overview

The market remains locked within a very well defined downtrend, with deeper setbacks seen ahead. Recent corrective gains have stalled out at critical previous support turned resistance just over 0.7600 and a fresh medium-term lower top is now sought out ahead of the next major downside extension through 0.7176 and towards the 0.6500 area further down. Ultimately, only a daily close back above 0.7614 would delay the bearish outlook.

• R2 0.7710 – 21Jan high – Medium
• R1 0.7614 - 26Feb high – Strong
• S1 0.7474 – 25Feb low – Medium
• S2 0.7422 – 24Feb low – Strong

NZDUSD – fundamental overview

A recovery in the New Zealand Dollar could be at risk, with the currency coming back under pressure over the past few sessions on the back of a solid batch of US economic data suggesting the Fed will hike rates sooner than later. The RBNZ has already expressed its distaste for a stronger Kiwi and with sentiment coming off, the risk correlated currency could be vulnerable to additional weakness in the days ahead. There were already heavy offers from macro accounts waiting to build into exiting shorts on this latest rally and more selling is expected ahead. Monday’s softer New Zealand terms of trade showing could also be factoring into price action a bit.

US SPX 500 – technical overview

Still no signs of any material let up just yet, with the market extending gains to fresh record highs well beyond 2100. The recent 2100 break has ended a period of consolidation and could expose a fresh upside extension towards 2150 in the sessions ahead. At this point, a drop back below 2083 would be required at a minimum to take the immediate pressure off the topside.

• R2 2150.00 – Psychological – Medium
• R1 2120.00 – 25Feb/Record – Strong
• S1 2083.00 – 17Feb low – Medium
• S2 2041.00 – 9Feb low – Strong

US SPX 500 – fundamental overview

Last week, Fed Chair Yellen reminded investors that policy had been accommodative for a long time, and if data continued to improve, we could see a sooner than later Fed rate hike. And so, with subsequent US data coming in on the healthy side, expectations for a June rate hike were bolstered significantly, with risk coming off as a result on the pricing out of free money central bank policy. Any signs of additional strength in this week’s US data, highlighted by Friday’s NFPs, will likely open the door for additional capitulation in overinflated, record high US equities.

GOLD (SPOT) – technical overview

The market continues to show signs of medium-term basing following the break of key resistance at 1256 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. Last Tuesday’s bounce from 1190 encourages the constructive outlook, with only a daily close back below this level to delay the recovery outlook and put the pressure back on the downside. Look for a push back towards the 1307, 2015 high in the days ahead.

• R2 1246.00 – 10Feb high – Strong
• R1 1237.00 – 16Feb high – Medium
• S1 1190.00 – 24Feb low – Strong
• S2 1183.00 – 17Dec low – Medium

GOLD (SPOT) – fundamental overview

Overall, accommodative central policy action around the globe has opened the door for significant currency depreciation, leaving longer-term investors with a lack of confidence in fiat currency. 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 has entered a period of legitimate correction since collapsing to fresh multi-year lows at 43.55. A recent push back above 50.00 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 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 global oversupply can not be shaken. The market will now need to break back above 54.25 to further encourage recovery prospects. It is also worth noting the role politics are playing at current levels, with many governments welcoming the lower price as a stimulus measure given the benefit to the consumer.