US Dollar Dips Well Supported

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

Services PMIs are the main event on the UK economic calendar for Wednesday, though it is unlikely the data will have any meaningful influence, especially after a solid construction PMI showing failed to inspire fresh bids on Tuesday. Instead, price action will likely be dictated by upcoming event risk in the form of Thursday’s Bank of England rate decision, and broader macro flows. Mostly however, it’s Friday’s monthly employment report out of the US that will be watched the closest, with the results of this data to determine just how much policy divergence the market should expect between the Fed and BOE. A UK clearer has been on the bid, while a US prime name and model fund are sellers.

USDJPY – technical overview

A push in the major pair beyond multi-day triangle resistance has produced a lackluster follow through, with the market stalling well ahead of the 121.85, 7 year peak from December. Still, the broader bullish structure is firmly intact, with eventual upside seen 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

A BOJ Kuroda parliament speech hasn’t offered any new insight into USDJPY direction, though the market has come back under some pressure in recent trade. Tuesday’s Honda comments that USDJPY may have reached the “upper limit of its comfort zone,” have certainly contributed to the downside, while the pullback in global equities has not been lost on the major pair, which still shares a traditional correlation with risk. Still, the broader outlook continues to favour the diverging Fed, BOJ policy story, and there remains good interest on dips. A softer round of Japanese PMIs on Tuesday have also helped to buoy setbacks.

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

A solid German retail sales print and some downplayed better than expected Swiss GDP numbers have helped to keep the EURCHF market well supported on dips for now. 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 plenty of uncertainty still out there and with the ECB embarking on its QE program, the SNB will need to keep a close watch, as plenty of scope still exists for additional safe haven Franc flow, especially with stocks showing signs of topping.

AUDUSD – technical overview

The recent range break through 0.7900 looks to have been a false break, with the market stalling out and reversing back into the familiar multi-session range. 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 0.7844 - 3Mar high – Medium
• S1 0.7740 – 24Feb low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

On paper, it hasn’t been a bad week for the Australian Dollar, with the RBA deciding to keep rates on hold on Tuesday and GDP coming out within expectation earlier today. And yet, Aussie hasn’t been able to muster any relative outperformance or significant gains. Attention in the Aussie market now shifts to Thursday’s Australia trade data, while the broader focus continues to be on US economic calendar and impact on Fed policy and yield differentials. Market participants will also be focused on risk sentiment, with the Australian Dollar still correlated to bouts of weakness in global equities.

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 at 1.2350.

• R2 1.2664 – 24Feb high – Strong
• R1 1.2565 - 2Mar high – Medium
• S1 1.2433 – 3Mar low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

Expectations for another rate cut from the Bank of Canada later today have been downgraded following last week’s Governor Poloz comments. The central banker said the previous rate cut had bought the BoC time to see how the economy responded to the latest drop in oil prices. Recent economic data hasn’t been all that bad either, as highlighted by yesterday’s above forecast GDP print. 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.

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

Lack of any first tier New Zealand data has left this market trading on broader flows. Kiwi has retained a mild bid tone into the mid-week, perhaps supported on favourable commodity currency flows. Still, with the New Zealand Dollar so heavily tied to risk sentiment, and with global equities at risk for capitulation, Kiwi upside is expected to be limited to the 0.7600 area. For today, the focus will be on US economic data in the form of ADP, ISM non-manufacturing and the Fed Beige Book.

US SPX 500 – technical overview

The market could be poised for deeper setbacks in the sessions ahead after triggering a double top on the daily chart. Tuesday’s break below the 2102 neckline has confirmed the double top which opens a measured move downside extension towards next key support around 2080. Back above 2120 negates and opens fresh record highs towards 2150.

• R2 2150.00 – Psychological – Medium
• R1 2120.00 – 25Feb/Record – Strong
• S1 2097.00 – 3Mar low – Medium
• S2 2083.00 – 17Feb low – Strong

US SPX 500 – fundamental overview

It seems the stock market could finally be feeling the pressure of an impending Fed policy reversal. On the whole the US economic recovery is moving in the right direction and pushing the Fed closer to a hike. Expectations for a June liftoff have been increasing and any signs of additional strength in the remainder of this week’s US data, highlighted by Friday’s NFPs, will likely open the door for a more significant capitulation in artificially supported, record high US equities.

GOLD (SPOT) – technical overview

The market continues to show signs of medium-term basing off the 2014 low. As such, the pullback from January 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 1237.00 – 16Feb high – Strong
• R1 1223.00 – 2Mar 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 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 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.