Markets Back In Full Swing, RBA Stays Pat

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 some UK PMIs and the BOE’s Financial Policy Committee Record of March Meeting.

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

The BOJ has kicked off its two day policy meeting which could open some welcome volatility in the currency. Though policy is expected to remain unchanged, there have been developments in recent days supporting the need for additional stimulus. A softer Tankan highlighting discouraging business sentiment is one reason, while calls for more easing from Yamamoto, a ruling party lawmaker and architect of PM Abe’s Abenomics have also contributed to ramped bearish Yen bets. Overall, even with last Friday’s softer NFPs 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 Yen weakness.

EURCHF – technical overview

Despite some setbacks over the past several weeks, the broader recovery outlook remains intact, with the market well supported on a daily close basis above 1.0400. From here, look for renewed upside in the sessions ahead back towards the recovery peak at 1.0815, while only a daily close below 1.0400 would delay and give reason for pause.

• R2 1.0559 – 25Mar high – Strong
• R1 1.0495 – 6Apr high – 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

It was a close call, but in the end, the RBA opted to leave rates on hold at 2.25% while retaining a dovish bias and readiness to ease further should such measures be required. The Australian Dollar is the standout relative outperformer on the day as a result, with the currency having already benefited pre-event risk on the back of a much better than expected Aussie retail sales print at 0.7% versus 0.5% expected and upward revision to January’s number. The RBA move also inspired a good deal of profit taking on short AUDNZD positions, with this market rallying out from fresh record lows just shy of parity. Overall, the RBA decision could open a recovery in the Australian Dollar against many of the major currencies, though any meaningful gains against the Buck should be limited, with the Fed-RBA monetary policy divergence still quite pronounced.

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 and with the US Dollar selling off on the back of a discouraging employment report last Friday, the Canadian Dollar has found renewed bids into a familiar multi-week range. A softer Canada Ivey PMI print on Monday has stalled some of the Canadian Dollar gains and dealers also cite major support in USDCAD at 1.2350, with solid demand ahead of the level and heavy stop-losses reported below. Looking ahead, the economic calendar is exceptionally light on Tuesday and the market will defer to trading off broader macro flows.

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 0.7630 – 3Apr high – Medium
• S1 0.7496 – 3Apr low – Medium
• S2 0.7392 – 1Apr low – Strong

NZDUSD – fundamental overview

Most of the Kiwi price action in Tuesday trade has been driven off cross related flows, with many market participants booking profit on AUDNZD shorts post solid Aussie retail sales and an RBA decision to leave rates on hold at 2.25%. The New Zealand Dollar had been supported in recent trade on the broad based post US NFP US Dollar selling, but a softer dairy auction result and some concern over elevated asset prices has weighed on the market this week and the higher yielding, risk correlated currency could be in the process of turning lower, with the Fed-RBNZ policy divergence theme coming back into the picture.

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 of 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 1224.00 – 6Apr 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 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.