Soft ADP Spooks US Dollar Longs

GBPUSD – technical overview

The broader downtrend remains firmly intact, with the market consolidating of recent 5-year lows at 1.4635. This opens the door for the next major downside extension towards a measured move objective at 1.4000 in the weeks ahead. A fresh medium-term lower top is now sought out ideally ahead of 1.5300 in favour of a bearish resumption. Ultimately, only back above 1.5550 would negate.

• R2 1.5010 – 19Mar high – Strong
• R1 1.4922 – 27Mar high – Medium
• S1 1.4740 – 1Apr low  – Medium
• S2 1.4635 – 18Mar/2015 low  – Strong

GBPUSD – fundamental overview

The Pound has been consolidating off recent multi-year lows against the Buck, but could be showing some signs of life into Thursday. A combination of as expected UK manufacturing PMIs and softer US data, highlighted by the disappointing ADP report has shaken the conviction of US Dollar bulls. Traders are now squaring up on Dollar longs ahead of what could be a softer US employment report on Friday, and much of Thursday trade will likely be dictated by the pre-event risk positioning. UK construction PMIs are due but aren’t likely to influence price action, while US initial jobless claims and trade data will be digested in the North American session. Still, with a hung parliament hanging in the balance next month, Sterling rallies could be limited.

USDJPY – technical overview

Although the market has recently 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. Still, 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 120.36 – 31Mar high – Medium
• S1 119.11 – 30Mar low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

The US Dollar has come back under broad pressure following a round of softer Thursday data highlighted by US ADP. Speculation the ADP print is a warning for what to expect from tomorrow’s US employment report has triggered the broad based profit taking on Dollar longs and this has weighed on USDJPY as well. Though there have been calls for additional BOJ stimulus this week, it seems the downturn in risk sentiment is having more of an influence on the major pair at the moment. Still, any setbacks show exceptional support ahead of 118.00, with longer-term players happy to take advantage of any and all USDJPY dips on the policy divergence theme.

EURCHF – technical overview

Has been in the process of correcting since recovering to 1.0815 in mid-February. But the latest drop below 1.0400 suggests the market could now be poised for a fresh downside extension in the sessions ahead. Ultimately, setbacks are still viewed as corrective while above 1.0000, with the broader recovery outlook intact. Only below 1.0000 would negate and give reason for pause.

• R2 1.0559 – 25Mar high – Strong
• R1 1.0460 – 1Apr high – Medium
• S1 1.0355 – 30Jan low – Strong
• S2 1.0300 – Figure – Medium

EURCHF – fundamental overview

The global equity market continues to show potential signs of topping and this hasn’t be a welcome development for the SNB. EURCHF was already under pressure since the last SNB decision to leave policy unchanged and setbacks have now extended well below what had been a much talked about SNB 1.0500 corridor base. The SNB has reiterated it remains ready to act to curb excessive overvaluation in the Franc, and with the market trading back into the 1.0300s and at its lowest levels since recovering through 1.0800, participants will be on the lookout for any signs of movement from the central bank.

AUDUSD – technical overview

The bearish structure remains firmly intact with the market threatening a fresh downside extension. Look for a daily close below 0.7560 to confirm, with setbacks then projected towards major psychological barriers at 0.7000. Any rallies should now be well capped below 0.7800, while ultimately, only a daily close back above 0.7938 would negate and give reason for pause.

• R2 0.7747 – 30Mar high – Medium
• R1 0.7664 – 31Mar high – Strong
• S1 0.7560 – 11Mar/2015 low – Strong
• S2 0.7500 – Psychological – Medium

AUDUSD – fundamental overview

A round of better than expected Aussie trade data has done little to prop an ailing Australian Dollar contending with a collapse in the price of iron ore. The last time iron ore traded below $50, Aussie was trading in the 0.6600 area against the Buck. The ongoing weakness in the price of the correlated commodity is increasingly the chance for another cut from the RBA at next week’s meeting, and this has been driving relative underperformance. The Australian Dollar has dropped to a fresh record low against the New Zealand Dollar on Thursday and is closing in on the much talked about parity level.

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 kept the market locked within a familiar multi-day consolidation. But ultimately, the broader uptrend remains firmly intact, with the next big push seen towards the 2009 peak at 1.3065. 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 1.2835 – 18Mar/2015 high – Strong
• R1 1.2784 – 31Mar high – Medium
• S1 1.2576 – 1Apr low – Medium
• S2 1.2533 – 26Mar high – Strong

USDCAD – fundamental overview

The Canadian Dollar has recovered a bit in recent trade, with a better than expected Tuesday Canada GDP print driving some initial strength, and then Thursday’s weaker US data and oil bounce accelerating Loonie gains. Overall, the Fed divergence theme and softer oil market should continue to weigh on the Loonie, though there is risk building for more short-term Canadian Dollar upside if yesterday’s ADP report is a hint at what lies ahead for tomorrow’s highly anticipated US monthly employment report. For today, Canada, US trade and US initial jobless claims are the standout releases on the calendar.

NZDUSD – technical overview

The market has recently stalled out above 0.7600 and remains locked within a well defined downtrend. Look for deeper setbacks 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 0.7566 – 30Mar high – Strong
• R1 0.7511 – 31Mar high – Medium
• S1 0.7392 – 1Apr low – Strong
• S2 0.7275 – 18Mar low – Medium

NZDUSD – fundamental overview

Kiwi traders haven’t been too bothered by another disappointing showing in the dairy auction, which came in at -10.8%. This follows a previous print of -8.8% and doesn’t inspire too much confidence in the outlook for the sector. But for now, it seems the broad based US Dollar selling following a softer US ADP print has been enough to drive the commodity currency higher in Thursday trade. Traders are positioning ahead of what could now be let down NFP print, with even the weakness in equity markets not really doing anything to weigh on Kiwi sentiment. The New Zealand Dollar has rallied to a fresh record high against the Australian Dollar on Thursday.

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.

• 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. Though the market has since stabilized, there is risk for a major downside acceleration if the 2040 level is taken out this week. The all-important monthly US employment report is due on Friday, and with the result likely to influence the Fed policy timeline, the next big move in stocks could be driven off this event.

GOLD (SPOT) – technical overview

The market has been in recovery mode over the past several days after stalling shy of the 2014 base. The bounce suggests the market could now be poised for additional upside in the sessions ahead in an attempt to carve out a more meaningful longer-term base. Still, a break above 1223 will be required to the constructive prospect. Until then, immediate pressure remains on the downside and scope exists for a lower top below 1223 and retest of the 1131, 2014 base.

• R2 1223.00 – 2Mar high – Strong
• R1 1206.00 – 27Mar high – Medium
• S1 1178.00 – 31Mar low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market continues to show signs of broader recovery since stalling out the other week ahead of the 2014 base. 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. Some post softer than expected US ADP Dollar selling has also been playing a role in the latest rebound. Looking ahead, much of the focus will be on the Friday monthly employment report out of the US.

Feature – technical overview

USDTRY has been locked within a very well defined uptrend, with the market recently breaking to fresh record highs. The latest pullback off the high is viewed as corrective, with the next higher low sought out ahead of bullish continuation. Key support comes in at 2.4335, which represents the previous higher low, and ultimately, only a break below this level would compromise the constructive outlook.

• R2 2.6800 – Psychological – Medium
• R1 2.6485 – 13Mar/Record – Strong
• S1 2.5405 – 23Mar low – Medium
• S2 2.5150 – 11Feb high – Strong

Feature – fundamental overview

Though the Lira has found a brief period of relief in recent trade on the back of broad based USD selling post soft ADP, market participants know not to get too carried away, with the Turkish economy still quite vulnerable. Though Tuesday’s Turkey GDP data was better than expected, Wednesday’s manufacturing PMIs dropped to a 6 year low. Throw in the political unrest in Turkey following the murder of an AK party prosecutor earlier in the week and any Lira gains should continue to be well offered. The next key release out of Turkey comes Friday in the form of the important CPI data.