US Dollar Finds Renewed Demand, FOMC Minutes Ahead

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 1.4920 – 7Apr high – Medium
• S1 1.4776 – 2Apr low  – Medium
• S2 1.4740 – 1Apr low  – Strong

GBPUSD – fundamental overview

Though we have seen some stability in the Pound over the past few sessions, the currency still remains under broad pressure against the Buck. 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. Even Tuesday’s better than expected UK services PMIs at 7 month highs failed to inspire Sterling demand. 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. Looking ahead, key risk for Wednesday comes in the form of the FOMC Minutes.

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 consolidation. 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 120.45 – 7Apr high – Medium
• S1 119.43 – 7Apr low – Medium
• S2 118.72 – 3Apr low – Strong

USDJPY – fundamental overview

Not a big surprise from the BOJ on Wednesday, after the central bank left policy on hold in an 8-1 vote as was widely expected. The BOJ continued to see the economy in moderate recovery and pledged to continue with its QQE until it reached stable 2% inflation. USDJPY was bid back up on Tuesday but could be at risk for some downside on Wednesday with the BOJ sitting back and a dovish FOMC Minutes due later today. Also seen weighing a bit have been comments from Fed Kocherlakota who said the Fed shouldn’t raise rates until the second half of 2016. But overall, the monetary policy divergence theme between the Fed and Bank of Japan is expected to continue to drive the USDJPY market higher over the medium and longer-term.

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. For today, the market will take in Swiss CPI data expected at 0.1% from -0.3% previous. Also factoring into price action will be the release of the FOMC Minutes later in the day.

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 0.7711 – 7Apr high – Strong
• S1 0.7570 – 3Apr low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

Although the RBA is still expected to slash rates further in the months ahead, the Australian Dollar has received a welcome boost this week after the central bank opted to leave policy on hold at 2.25% on Tuesday. Also helping to drive some of the recent outperformance have been a better than expected retail sales print and rebound in the price of iron ore, with the collapsing commodity snapping a 7 day slump. Overall, the monetary policy divergence theme with the Fed is still quite pronounced and medium-term players will look to take advantage of any Aussie rallies for fresh sell opportunities. But there is still risk for some more short-term Aussie upside, with a dovish FOMC Minutes expected later today.

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

The Canadian Dollar has done a good job holding near recent highs despite some broad based US Dollar bids, with a resurgence in OIL demand offsetting the US Dollar flow. Technicians site a potential double bottom on the weekly OIL chart and if this pattern is triggered, it could keep the Canadian Dollar supported over the coming days. Looking ahead, key event risk in Wednesday trade comes in the form of the FOMC Minutes due at 18GMT. The market will be looking for a dovish Minutes after the Fed downgraded growth, inflation, employment and rate hike forecasts at the previous meeting. Still, the monetary policy divergence theme favours the US Dollar over the medium-term, with plenty of healthy USDCAD demand seen towards 1.2350.

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 0.7484 – 8Apr low – Medium
• S2 0.7392 – 1Apr low – Strong

NZDUSD – fundamental overview

Most of the Kiwi price action this week 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, solid Tuesday data out of the US, and some concern over elevated asset prices has weighed on the market this week and the higher yielding, risk correlated currency could be at risk of turning lower, with the Fed-RBNZ policy divergence theme coming back into the picture. Attention now turns to today’s release of the FOMC Minutes.

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 last 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. More colour will be given today with the release of the FOMC Minutes.

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 daily close above 1223 will be required to strengthen the constructive prospect. However, back 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. Gold could find more support on Wednesday, with a dovish FOMC Minutes expected after the Fed downgraded its growth, inflation, employment and Fed rate hike forecasts at the previous meeting.

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

The key point of stress for the Turkish government and central bank is the rising inflation picture 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) hasn’t done anything to remedy the problem and it seems that with the Fed monetary policy divergence theme still alive and well, more record lows are in store for the Lira.