Euro Breaks Higher Low Sequence, Yellen Ahead

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 1.4807 – 26Mar low  – Medium
• S2 1.4635 – 18Mar/2015 low  – Strong

GBPUSD – fundamental overview

Thursday’s better than expected UK retail sales print failed to inspire the Pound, which continues to underperform in the market. Into Friday, the Pound is the only major currency down against the Buck on the week. Dovish BOE talk was backed up by more subdued UK inflation readings this week and this has been weighing. 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. A slew of BOE speakers will get attention in early Friday trade, with BOE Haldane, Carney and Broadbent all on the docket. Focus then shifts to the US, with Q4 GDP, and a late Yellen speech to influence price action.

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 – Strong
• R1 120.17 – 23Mar high – Medium
• S1 118.23 – 17Feb low – Strong
• S2 116.87 – 3Feb low – Medium

USDJPY – fundamental overview

Recent gains in the Yen have been very well capped, with the currency trading well off its Thursday highs against the Buck. A combination of safe haven flows and softer Wednesday US durable goods orders were seen as the primary drivers behind the Yen rally, while ongoing signs the BOJ won’t be moving into further accommodation anytime soon, also contributed. However, the US Dollar has since regained its footing across the board, while disappointing Japanese retail sales and softer Japanese core CPI readings have inspired additional Yen short interest. Looking ahead, Q4 US GDP and a late Friday Yellen speech will be watched closely.

EURCHF – technical overview

Has been in the process of correcting since recovering to 1.0815 in mid-February. Still, the newly adopted constructive outlook remains intact while above 1.0415, with a higher low sought ahead of the next upside extension through 1.0815 and into the 1.1000-1.1200 area. 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

A fresh wave of risk liquidation in equity markets this week is not exactly the kind of stuff that pleases the SNB. The EURCHF market has already come under pressure after 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 broken down below the much talked about 1.0500-1.1000 SNB corridor this week and this has fueled speculation we could see some SNB action ahead. However, though the SNB has made it clear it 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

The Australian Dollar has been having a hard time holding onto gains this week, despite a healthy recovery in commodities prices. Thursday’s across the board rebound in the US Dollar has been driving some of the recent weakness. The focus for today now shifts to US GDP readings and an anticipated late Friday Yellen speech. However, looking ahead, market participants will also start to position for the April RBA rate decision which could go either way. There has been a lot of talk about another cut at the next meeting, and next week’s economic data could influence the outcome. Next week we get credit growth on Tuesday, building approvals Wednesday and trade data Thursday.

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 1.2410 – 26Mar low – Medium
• S2 1.2350 – 3Feb low – Strong

USDCAD – fundamental overview

The Canadian Dollar has mostly managed to shrug off weakness brought on by risk liquidation and elevated geopolitical tension, with a solid recovery in the price of oil helping to offset the negative flow. Bank of Canada Governor Poloz was on the wires Thursday, seemingly ruling out the possibility of an April rate cut after downplaying oil weakness and classifying the behavior as transitory. Much of the direction in this market going forward could come down to the US Dollar sentiment side of the equation and Fed policy outlook. For today, we may get additional hints from Fed Chair Yellen due to speak late in the day, while the earlier releases of US Q4 GDP and Michigan sentiment will also factor.

NZDUSD – technical overview

Despite the recent push through resistance at 0.7600, the market remains locked within a well defined downtrend and is in the process of seeking out the next medium-term lower top, which could now be in place at 0.7697. Look for a resumption of declines in the sessions ahead back towards the key low of 0.7176, below which opens the next major downside extension towards psychological barriers at 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

Despite a decent broad based decline in the US Dollar this week, the New Zealand Dollar hasn’t been able to hold onto gains through 0.7600. Private client and macro account sell interest remains strong, and these participants are taking advantage of the USD declines to build into existing Kiwi shorts. Disappointing New Zealand trade data this week may have factored into some of the selling, while a downturn in global equities and elevated geopolitical tension are being cited as an additional cause for relative weakness in the higher yielding, risk correlated commodity currency. For today, US Q4 GDP and a Yellen speech are in focus, while next week, Kiwi traders will be anxious to get the results of Thursday’s Fonterra dairy auction after the index fell by a steep 8.8% in its previous showing.

US SPX 500 – technical overview

The most recent rally has stalled out ahead of critical resistance in the form of the record high from February at 2120. This suggests we could be in the process of carving out a more meaningful top. Look for a break and close below critical support at 2040 over the coming sessions to confirm the structural shift and open the door for deeper setbacks towards 2000. However, inability to establish a close below 2040 will keep the pressure on the topside for a push to fresh record highs.

• R2 2150.00 – Psychological – Medium
• R1 2120.00 – 25Feb/Record – Strong
• S1 2040.00 – 18Mar low – Strong
• S2 2000.00 – Psychological – Medium

US SPX 500 – fundamental overview

As the Fed inches closer and closer to a rate hike, euphoria has morphed into trepidation. There is a nervous tension and real sense that we are finally at the end of the rope and it all could come crashing down. On Wednesday, US durable goods came in much softer and the bad data triggered a negative equity market reaction. This is a big deal and could be an early warning sign that the old, intuitive normal, of bad data translating into lower stocks, is finally ready to make its return. Also factoring into the wave of risk liquidation has been the escalation in geopolitical tension following airstrikes in Yemen. Though the market stabilized on Thursday on some better initial jobless claims, it could be exposed to deeper setbacks if Friday’s US Q4 GDP and Michigan confidence readings disappoint. Fed Chair Yellen is due late in the day on the subject of monetary policy.

GOLD (SPOT) – technical overview

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

• R2 1223.00 – 2Mar high – Strong
• R1 1209.00 – 5Mar high – Medium
• S1 1179.00 – 23Mar low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market has been finding renewed bids after recently being well supported ahead of the 2014 base. Initially, it was some post Fed US Dollar selling that got the metal going, and since, we have seen an acceleration of gains back through $1200 following the weaker than expected US durable goods data and escalation in geopolitical tension in Yemen. Many investors already feel 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. Attention now turns to key Friday risk in the form of Q4 US GDP, Michigan confidence and a late day Fed Chair Yellen speech on the topic of ‘The New Normal for Monetary Policy.’

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, potentially now in place at 1.3610. 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 found some renewed strength off recent multi-year lows on the back of post Fed US Dollar weakness. However, the rally appears to be fading and fresh US Dollar demand has emerged into the end of the week. It seems a combination of elevated geopolitical tension in Yemen, signs of weakness in risk assets, and some softer local data are all contributing. On Thursday, Singapore industrial production came in on the softer side, putting in a 3.6% drop, against forecasts for a 2.2% decline. This was the 4th decline in the past 6 months for this data series.