Fed Timeline Speculation Still Top Market Driver

GBPUSD – technical overview

The recent break below 1.4951 has resulted in fresh 2015 and multi-month lows to 1.4635 thus far, while also confirming a medium-term lower top at 1.5552. This opens the door for the next major downside extension towards a measured move objective at 1.4350 in the weeks ahead. However, the market could be entering a period of short-term correction after putting in a bullish outside week in the previous week. Still, any rallies are now expected to be very well capped ahead of 1.5300, with only a break above 1.5555 to force a shift in the structure.

• R2 1.5165 – 18Mar high – Strong
• R1 1.5010 – 19Mar high – Medium
• S1 1.4800 – Figure  – Medium
• S2 1.4635 – 18Mar/2015 low  – Strong

GBPUSD – fundamental overview

The Pound has been a standout underperformer in recent trade, with some dovish BOE talk getting backed up by a more subdued UK inflation reading on Tuesday. Expectations for a 2015 BOE rate hike have been scaled back dramatically, and with UK election risk also hanging in the balance, it could be a bumpy road ahead for Sterling. One positive development in recent trade has however come from BOE Deputy Governor Shafik who says the next rate move from the BOE will be higher, not lower. Lack of any first-tier UK data on Wednesday will leave the market trading off broader flows and also focused on the US Durable goods release.

USDJPY – technical overview

Although the market has recent broken to fresh multi-year highs through 122.00, lack of upside follow through has been discouraging, with the pair more content on deferring to a period of correction. Overall, the broader trend remains highly constructive and any setbacks should continue to be very well supported in favour of the next major upside extension through 122.03 and towards key psychological barriers at 125.00 further up. At this point, only a close below 118.00 would delay, while a break below 115.55 would be required to negate the constructive outlook.

• R2 121.20 – 20Mar high – Medium
• R1 120.17 – 23Mar high – Medium
• S1 119.22 – 24Mar low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Though BOJ Iwata has said the BOJ’s 2% inflation target will be difficult to reach given lower oil prices and waning consumer demand, he also sees no change in the uptrend towards the target. The Yen has found some renewed interest in recent trade on the back of some broad USD profit taking, uptick in JGB yields and pullback in equities. However, month end, quarter end flows have been US Dollar supportive, with most medium-term players still looking to take advantage of the more prominent monetary policy divergence. US durable goods orders are due Wednesday and could be the next big market mover for the Yen.

EURCHF – technical overview

The recovery out from the historic lows has finally come into some stiff resistance just over 1.0800, with the market rolling back over. Still, the newly adopted constructive outlook remains intact while above 1.0415, with a higher low sought ahead of the next upside extension towards 1.1000. Only a daily close back below 1.0415 would give reason for pause.

• R2 1.0700 – 19Mar high – Strong
• R1 1.0605 – 23Mar high – Medium
• S1 1.0415 – 9Feb low – Strong
• S2 1.0355 – 30Jan low – Medium

EURCHF – fundamental overview

The market was clearly disappointed with last week’s SNB decision to leave policy unchanged. Many had been looking for the central bank to move further into negative interest rate policy with another 25bp cut to -1.00%. EURCHF has dropped off as a result and now trades well off the recent range highs at 1.0815. In fact, the market has broken down below the much talked about 1.0500-1.1000 SNB corridor and this has fueled speculation we could see some SNB action in the sessions ahead. However, though SNB Jordan has made it clear the central bank is ready to take additional action, the market will need to see such action to be convinced.

AUDUSD – technical overview

Despite the latest bounce, the downtrend remains firmly intact, following the recent break to fresh multi-year lows at 0.7560. This opens the door for the next major downside extension, with setbacks projected towards the next major psychological barrier at 0.7000. As such, any rallies should continue to be well capped below 0.7900 on a daily close basis, while ultimately, only a daily close back above 0.8025 would delay the bearish outlook and give reason for pause.

• R2 0.8025 – 28Jan high – Strong
• R1 0.7938 – 24Mar high – Medium
• S1 0.7763 – 23Mar low – Strong
• S2 0.7731 – 12Mar high – Medium

AUDUSD – fundamental overview

Tuesday’s softer than expected China PMI showing has been followed up on Wednesday with an RBA Financial Stability Review that still highlights risks associated with the Australian commercial property market. All of this continues to suggest the RBA will seriously consider another rate cut in April, and should ultimately weigh on an Australian Dollar that has only benefitted in recent trade from a broad based bout of profit taking on US Dollar longs post last week’s Fed. Dealers cite healthy offers towards 0.8000, with decent sell-stops reported below 0.7750.

USDCAD – technical overview

Although the market has recently broken to a fresh multi-year high above 1.2800, inability to establish a daily close above the figure has triggered the onset of a correction. Ultimately, the broader uptrend remains firmly intact, with the next big push seen towards the 2009 peak at 1.3065. But in the interim, there is risk for a period of additional correction and choppy consolidation before bullish resumption. Setbacks should however be very well supported above 1.2350, with only a break below to delay the constructive outlook.

• R2 1.2758 – 19Mar high – Medium
• R1 1.2615 – 23Mar high – Strong
• S1 1.2428 – 24Mar low – Medium
• S2 1.2350 – 3Feb low – Strong

USDCAD – fundamental overview

A broad sell off in the US Dollar, coupled with a mild recovery in oil prices, have helped to invite renewed interest in the beaten down Canadian Dollar. Most of the price action has been driven off last week’s more dovish FOMC decision, with yield differentials shifting back in the Loonie’s favour. There is no economic data due out of Canada on Wednesday, with US durable goods orders taking center stage. Decent demand is reported ahead of 1.2350, with stops cited below.

NZDUSD – technical overview

Though the broader downtrend remains firmly intact, Monday’s break above previous resistance at 0.7613 delays the bearish outlook. However, the bounce is still classified as corrective and a medium-term lower top is sought somewhere below 0.7800 ahead of the next major downside extension below 0.7176 and towards 0.6500. Ultimately, only back above 0.7890 would give reason for pause.

• R2 0.7710 – 22Jan high – Medium
• R1 0.7697 – 24Mar high – Strong
• S1 0.7548 – 23Mar low – Strong
• S2 0.7441 – 12Mar high – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been bid up in recent trade, with the currency primarily benefitting from post Fed US Dollar weakness. Decent buy-stops have since been triggered above 0.7620 and this in turn has opened fresh record lows in AUDNZD this week. Still, private client and macro account sell interest remains strong, and these participants are taking advantage of the post Fed USD declines to build into existing Kiwi shorts. Disappointing New Zealand trade data, which showed a surplus of only  NZ$50M versus the NZ$350M expected, is already weighing on the market on Wednesday, while a downturn in global equities is being cited as an additional cause for relative weakness in the higher yielding, risk correlated commodity currency.

US SPX 500 – technical overview

Last week’s push back above 2100 suggests the market is now poised for a retest and break of the recent record high at 2120. Look for a break above 2120 to confirm a bullish continuation and open the next major upside extension towards a measured move objective at 2200. Recent setbacks have been supported at 2040, 80 points off the 2120 record high, and so a break above 2120 will open a move equal in size of 80 points to 2200. At this point, a break back below 2040 would now be required to take the pressure off the topside and force a shift in the constructive outlook.

• R2 2150.00 – Psychological – Medium
• R1 2120.00 – 25Feb/Record – Strong
• S1 2083.00 – 16Mar high – Medium
• S2 2060.00 – 18Mar low – Strong

US SPX 500 – fundamental overview

Equity markets have welcomed the latest Fed decision with open arms as it lets investors know the Fed will continue to keep the free money flowing for a little while longer. While the Fed did remove its ‘patient’ language last Wednesday, it more than offset this move after downgrading inflation, growth, employment and interest rate forecasts. Stocks haven’t really cared much about negative news relating to the health of the US economy and continue to trade on Fed policy trajectory. So while the Fed stays on hold a little while longer, investors may take this as an opportunity to push the market to yet another record high. Still, there has been some reason for concern following a slew of hawkish comments from various Fed officials this week. Fed’s Mester, Bullard, Williams and Fischer have all been talking rate hikes in the months ahead.

GOLD (SPOT) – technical overview

The intense decline from the January peak has stalled out in recent trade, just shy of the critical base from 2014 at 1131. Last Wednesday’s bullish reversal day strengthens the possibility for a key low, and the market could now be poised for renewed strength in the sessions ahead back above 1200. Still, a break above 1223 will be required to encourage a more legitimate recovery outlook. Until then, scope still exists for a lower top and retest of the multi-year low at 1131.

• R2 1223.00 – 2Mar high – Strong
• R1 1195.00 – 24Mar high – Medium
• S1 1179.00 – 23Mar low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

Despite a minor rebound following last week’s more dovish Fed, speculation the central bank will still move on rates sooner than later, has kept the US Dollar supported, which has weighed on the inversely correlated gold market into rallies. With inflation nowhere to be seen and the Buck in demand, many see no incentive to be buying gold at current levels. Still, there are plenty of bargain hunters out there that would argue differently. These players contend that with currencies across the board in a downward spiral, and global equities at risk for major capitulation, there is no better place to be invested than in the yellow metal. Gold has since managed to recover ahead of the 2014 base and is now flirting with a move back above $1200.

Feature – technical overview

USDSGD has been locked within a very well defined uptrend over the past several months, with the market putting in a series of higher highs and higher lows. The market has most recently entered a corrective period within the uptrend, in search of the next medium-term higher low. Key support comes in at 1.3485, which represents the previous higher low, and only a break below this level would compromise the constructive outlook.

• R2 1.3940 – 13Mar/2015 high – Strong
• R1 1.3805 – 23Mar high – Medium
• S1 1.3610 – 24Mar low – Medium
• S2 1.3485 – 26Feb low – Strong

Feature – fundamental overview

Much like all currencies in recent trade, the Singapore Dollar has been finding renewed strength on the back of post Fed US Dollar weakness. Perhaps Monday’s hotter than expected core inflation readings of 1.3% versus the 1.0% expected have also contributed to SGD gains. However, into Wednesday, the Singapore Dollar is finding some resistance, with renewed US Dollar demand on hotter than expected US inflation data and some talk of potential MAS intervention capping additional gains. Looking ahead, this market will start thinking about tomorrow’s Singapore manufacturing data which is forecast to come in a good deal softer than previous.