Euro Sinks to Fresh Low Ahead of Major Risk

GBPUSD – technical overview

The market remains locked within a well defined downtrend, with a recent corrective rally stalling out and in the process of attempting to carve a lower top. Look for deeper setbacks in the days ahead to retest the 2015 low at 1.4951, with a break below to confirm a 1.5552 lower top and open the next major downside extension into the 1.4400 area. Only back above 1.5555 would delay and give reason for pause.

• R2 1.5372 – 4Mar high – Strong
• R1 1.5316 - 17Feb low – Medium
• S1 1.5196 – 10Feb low  – Strong
• S2 1.5139 – 4Feb low  – Medium

GBPUSD – fundamental overview

The Pound has dropped off in sympathy with the Euro over the past 24 hours, though the currency has not been immune to its own bout of unfortunate data. The UK BRC shop price index and UK services PMIs have both disappointed, and this has offered an additional excuse for Sterling declines against the Buck. The Bank of England is due with its policy decision today, and while no change is expected here, keep an eye on the headlines for any indication of the central bank’s tone. There has been lots of talk of the BOE moving on a rate rise sooner than later and we could get more insight later today.

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

The Yen has come back under some mild pressure in recent trade, with a wave of post US non-manufacturing ISM USD buying and a solid showing at the 30 year JGB auction supporting . Still comments from PM Abe adviser Honda earlier this week that USDJPY may have reached the “upper limit of its comfort zone,” have been capping USDJPY gains, while the pullback in global equities has also not been lost on the major pair, which still shares a traditional correlation with risk. Overall, the broader outlook continues to favour the diverging Fed, BOJ policy story, and there remains good USDJPY interest on dips.

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

Reports out of Switzerland of FinMin comments the SNB would be open to a new floor were quickly denied, but did not prevent this market from a little intraday range volatility on Wednesday. Overall, the EURCHF market has been bid up above 1.0800 post collapse 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 0.7860 - 4Mar 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 economic data coming in mostly in line with expectation, most recently Aussie retail sales and trade. The Australian Dollar is actually standing out as an outperformer in Thursday trade, with the currency getting a bit of a boost from RBA Lowe who said the currency was now closer to fair value. With Aussie economic data out of the way, attention will now shift to today’s BOE, ECB event risk, and tomorrow’s highly anticipated monthly employment report out of the US.

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, though a break below, could open a deeper correction to 1.1900 before bullish resumption.

• R2 1.2664 – 24Feb high – Strong
• R1 1.2565 - 2Mar high – Medium
• S1 1.2352 – 3Feb low – Strong
• S2 1.2300 – Figure – Medium

USDCAD – fundamental overview

The Bank of Canada has seemingly found comfort in developments since its last rate cut, after leaving rates on hold Wednesday and shifting to a more neutral policy outlook. A stabilization in the price of oil and more balanced inflation risk have been sourced as the major factors behind the central bank’s decision, and this has led to some profit taking on long USDCAD positions. Looking ahead, Canada Ivey PMIs, US initial jobless claims and US factory orders will be the focus on Thursday, ahead of Friday’s all-important monthly US employment report.

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 0.7502 – 3Mar low – Medium
• S2 0.7422 – 24Feb low – Strong

NZDUSD – fundamental overview

Lack of any first tier New Zealand data this week has left this market trading on broader flows. Kiwi has mostly been consolidating in the 0.7500s, perhaps supported, despite USD demand, on EURNZD and AUDNZD flows, with both markets at record lows. 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. Talk of the RBNZ increasing macroprudential measures to rein in the hot property market could be driving some Kiwi underperformance in Thursday trade. Medium term players and real money accounts have been sellers of NZDUSD.

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 2087.00 – 4Mar 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 above 1223 to strengthen the outlook.

• 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.