Thin Easter Market Still Digesting Soft NFPs

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 1.5100 – Figure – Medium
• R1 1.5010 – 19Mar high – Strong
• S1 1.4810 – 3Apr low  – Medium
• S2 1.4740 – 1Apr 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. The latest YouGov poll shows the Torries slightly in the lead. 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 120.36 – 31Mar high – Medium
• R1 119.94 – 3Apr high – Medium
• S1 118.72 – 3Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

A softer NFP print out of the US has opened broad based declines in the US Dollar, with the Yen rallying as a result. Also supporting Yen bids has been a pullback in risk sentiment in reaction to the discouraging US data, with the Yen still correlating to risk. The BOJ is scheduled to meet this Tuesday, Wednesday, which could open some more volatility in the currency. There have been calls in recent days for additional easing measures, though most of the market believes the BOJ will stay on hold for now. Overall, even with the latest US data perhaps pushing back the Fed’s timeline, it is unlikely to have any meaningful influence on the medium-term fundamentals, which continue to favour additional US Dollar upside.

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 1.0500 – Psychological – Medium
• S1 1.0390 – 2Apr low – Medium
• S2 1.0355 – 30Jan low – Strong

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 recently dipping back below 1.0400, 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 downside pressure in global equities have 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 break to fresh lows below 0.7560 last Wednesday, a daily close below 0.7560 will be required 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 0.7697 – 3Apr 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 last Thursday at 0.7533 ahead of a minor recovery aided by a softer US NFP print. Aussie has been hit hard in recent days on declining iron ore prices and expectations the RBA will move to cut rates again tomorrow to record lows at 2.00%. The relative weakness has also opened fresh record lows in AUDNZD which has broken below 1.0100 and threatens a test of parity.

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 1.2656 – 2Apr high – Strong
• R1 1.2574 – 3Apr high – Medium
• S1 1.2410 – 26Mar low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

Overall, with oil prices recovering last week and with the US Dollar selling off on the back of a discouraging employment report, the Canadian Dollar has found renewed bids into a familiar multi-week range. Dealers cite major support in USDCAD at 1.2350, with solid demand ahead of the level and heavy stop-losses reported below. Looking ahead on this light Easter holiday Monday, Canada Ivey PMIs, the Bank of Canada business outlook survey and US ISM non-manufacturing will be the key releases in today’s trade.

NZDUSD – technical overview

The market has recently stalled out ahead of 0.7700 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 0.7696 – 24Mar high – Strong
• R1 0.7650 – Mid-Figure – Medium
• S1 0.7496 – 3Apr low – Medium
• S2 0.7392 – 1Apr low – Strong

NZDUSD – fundamental overview

Kiwi traders weren’t too bothered by another disappointing dairy auction showing last week, which came in at -10.8%. This followed a previous print of -8.8%. But for now, it seems the broad based US Dollar selling post a much softer US NFP print has been enough to keep the higher yielding commodity currency supported, even in the face of sliding equities. Elsewhere, a diverging Australian economy, suffering most recently by a heavy decline in iron ore prices has resulted in the New Zealand Dollar rallying to fresh record highs against the Australian Dollar.

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

Interestingly enough, there has been a bit f a pattern in recent days of weaker US economic data no longer supporting equities. Since the onset of the financial markets crisis in 2008, soft US data has been equity supportive on the assurance this data would keep the Fed in ultra accommodative mode. But the other week we saw stocks sell off on weaker durable goods, while on Friday, stocks moved lower again on the discouraging US NFP print. There is a growing sense that with equities so elevated and the Fed still on course to move towards a rate hike in 2015, any additional upside should be limited with a potential capitulation in the works.

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 close above 1223 will be required to the constructive prospect. Below 1178 delays the recovery and puts pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1223.00 – 2Mar high – Strong
• 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 and NFP Dollar selling has also been playing a role in the latest rebound, with market participants considering the possibility this will now push back the Fed’s rate hike timeline.

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 NFPs, 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 rising inflation in a slowing economy. 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. Last Friday’s higher than expected inflation print (+7.61% versus 7.55 previous and 7.30% expected) won’t do anything to remedy the problem.