Markets Brace For NFPs In Super Thin Holiday Trade

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

Though we have seen a mild recovery in the Pound over the past few sessions, the gains pale in comparison to those of many other major currencies. It seems the combination of UK deflation risk and an upcoming election that is likely to result in a hung parliament have been driving some of the relative underperformance, while this latest softer UK construction PMI showing hasn’t helped. Bank of England rate hike forecasts have been pushed back into 2016 and this could continue to weigh on the Cable rate over the medium-term with the Fed-BOE monetary policy divergence theme front and center. For now, the focus shifts to today’s US monthly employment report in highly illiquid holiday trade.

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

Price action in the Yen has halted to a virtual standstill over the past few sessions with participants settling in ahead of today’s monthly employment report out of the US. A minor bounce in the Nikkei and recovery in JGB yields have failed to do anything to prop USDJPY and the next big move for this market may not come until after today’s employment report, or even into next week when fuller trade resumes post holiday. But overall, the Fed-BOJ monetary policy divergence theme is alive and well and whatever the result of today’s data, yield differentials should continue to widen in the Buck’s favour over the coming months as the Fed prepares for a rate hike and the BOJ considers more easing measures. 

EURCHF – technical overview

Has been in the process of correcting since recovering to 1.0815 in mid-February. The latest drop below 1.0400 suggests the market could now be poised for a fresh downside extension in the sessions ahead. A daily close below 1.0400 would strengthen this prospect. But 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

EURCHF has been under consistent pressure since the last SNB decision to leave policy unchanged, with setbacks extending 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 dipping back below 1.0400 on Thursday, to its lowest levels since recovering through 1.0800, participants will be on the lookout for any signs of movement from the central bank. Ongoing uncertainty in Greece and lack of resolution on that front has not been a welcome development for the SNB and has also contributed to recent declines.

AUDUSD – technical overview

The bearish structure remains firmly intact with the market threatening a fresh downside extension. Though we did see a Wednesday break to fresh lows below 0.7560, 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 0.7533 – 2Apr/2015 low – Strong
• S2 0.7500 – Psychological – Medium

AUDUSD – fundamental overview

The Australian Dollar has been a standout underperformer of late, even amidst a broader US Dollar sell-off, with AUDUSD breaking to 6-year lows on Thursday to 0.7533 ahead of a minor recovery. Aussie has been hit hard in recent days on declining iron ore prices and expectations the RBA will move to cut rates again next Tuesday. The relative weakness has also opened fresh record lows in AUDNZD which has broken below 1.0100 and threatens a test of parity. There has however been some mild demand on Friday, following a tick up in China HSBC services PMIs. Attention now shifts to today’s all-important monthly employment report out of the US, which should make for some interesting trade in razor thin holiday trade.

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 1.2784 – 31Mar high – Strong
• R1 1.2656 – 2Apr high – Medium
• S1 1.2533 – 26Mar high – Medium
• S2 1.2410 – 26Mar low – Strong

USDCAD – fundamental overview

The prospect for an Iran nuclear deal has been a central focus for Canadian Dollar traders, with the outcome of the deal to dictate direction in the oil market. This has opened some up and down trade in the commodity, with the Loonie reacting in kind. But overall, with oil prices higher on the week into Friday and with the US Dollar selling off on the back of a discouraging US ADP print, and better Canada trade, the Canadian Dollar has found renewed bids back into the middle of a familiar multi-week range. With Canada out for Good Friday and most of the US market closed, a volatile North American session could be forthcoming as a very thin market digests the all important monthly employment report out of the US.

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 0.7600 – Figure – Medium
• R1 0.7566 – 30Mar high – Strong
• S1 0.7425 – 2Apr low – Medium
• S2 0.7392 – 1Apr low – Strong

NZDUSD – fundamental overview

Kiwi traders haven’t been too bothered by another disappointing dairy auction showing this week, 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 Kiwi. But for now, it seems the broad based US Dollar selling has been enough to drive the commodity currency higher. Traders are positioning ahead of what could now be let down NFP print after this week’s softer US ADP. The New Zealand Dollar has also rallied to a fresh record high against the Australian Dollar on Friday.

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. The all-important monthly US employment report is due today, and with the result likely to influence the Fed policy timeline, the next big move in stocks could be driven off this event. Still, given the razor thin holiday session and Good Friday stock market closure, it will be difficult to truly gauge market appetite until fuller trade next week.

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 1209.00 – 1Apr 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 several days back 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, with market participants considering the possibility this data is a warning of a disappointing US NFP print later today.

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. The key point of stress for the government and central bank is the stress to the local economy amidst rising inflation. This puts the CBRT in a difficult corner where it has to weigh the risks of higher interest rates to offset a record low Lira against an economy that desperately needs the relief of lower rates. Today’s higher than expected inflation print (+7.61% versus 7.55 previous and 7.30% expected) won’t do anything to remedy the problem.