FOMC Minutes Put June Hike Back On Table

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 1.4950 – Mid-Figure – Medium
• S1 1.4776 – 2Apr low  – Medium
• S2 1.4740 – 1Apr low  – Strong

GBPUSD – fundamental overview

M&A activity has taken away some of the negative attention from upcoming UK election risk, opening some relative outperformance in the Pound, with Royal Dutch Shell to buy BG Group for GBP47 Billion and Vivendi announcing it’s consideration for a purchase of Sky. Still the Pound has been offered on rallies, with the broader monetary policy divergence theme extending in the Dollar’s favour on a surprisingly hawkish FOMC Minutes. For today, key event risk for the Pound comes in the form of the Bank of England rate decision at 11GMT. No change is seen on policy, with rates widely expected to hold steady at 0.50% and the asset purchase target to hang in at 375B. Ahead of the risk, the UK market will also absorb some UK trade data.

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

Any Yen gains on the back of this week’s Bank of Japan decision to leave policy on hold and refrain from pushing further into accommodation were offset by Wednesday’s surprisingly hawkish FOMC Minutes, with many Fed members considering a June rate hike. Still, with the Minutes published pre-last week’s discouraging US NFP print, there is also risk the Fed will hold off until further into 2015, which has kept the Yen from declining too much. But overall, the fundamentals of intense monetary policy divergence between the Fed and BOJ continue to support the weaker Yen outlook, with USDJPY seen higher over the medium and longer-term. For today, key risk for the pair comes in the form of US initial jobless claims.

EURCHF – technical overview

Despite some setbacks over the past several weeks, the broader recovery outlook remains intact, with the market still 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. Hotter than expected Wednesday Swiss inflation readings, 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 0.7727 – 8Apr high – Strong
• S1 0.7631 – 8Apr low – Medium
• S2 0.7570 – 3Apr 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, solid construction data and a stabilization in the price of beaten down iron ore. Overall, the monetary policy divergence theme with the Fed is still quite pronounced, especially after Wednesday’s hawkish FOMC Minutes, and medium-term players will look to take advantage of any Aussie rallies for fresh sell opportunities. But for now, there is still risk for some Aussie outperformance away from the US Dollar, with the currency coming off record lows against its Kiwi cousin as market participants exit the AUDNZD short 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 1.2656 – 2Apr high – Strong
• R1 1.2574 – 3Apr high – Medium
• S1 1.2388 – 8Apr low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

The story is the same for the Canadian Dollar, with the currency’s fate very much tied to the performance in the oil market. And so, with oil pulling back on Wednesday, so too did the Canadian Dollar after initially posting fresh multi-day highs against the Buck. The late Wednesday release of a much less dovish than expected FOMC Minutes, putting the possibility for a Fed rate hike in June back on the table then opened an additional deluge of Loonie weakness, with the currency also very well offered on the USDCAD dip below 1.2400 and ahead of critical bullish consolidation support at 1.2350. Looking ahead, the focus for Thursday will be on Canada building permits and house prices, and US initial jobless claims and wholesale sales.

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%. New Zealand PM John Key has also come out in an interview with CNBC saying “a strong Kiwi against its Trans Tasman Aussie cousin has become a headache for the country’s export and tourism industry.” Key is an ex-currency trader and his comments on the FX market carry even more weight than those of his counterparts.

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

There is a growing sense that with equities so elevated and the Fed still on course to move towards a sooner than later rate hike in 2015, any additional upside should be limited with a potential capitulation in the works. Interestingly enough, Wednesday’s FOMC Minutes confirmed this fact after revealing many Fed officials were considering the possibility of a June liftoff. There has also been 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.

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 has since pulled back a bit since revering through $1200, with a more hawkish FOMC Minutes driving some broad US Dollar demand and in turn weighing on the inversely correlated metal. But there is healthy demand reported into dips, with no real sell-stops seen until below $1175.

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 post FOMC Minutes, more record lows are in store for the Lira. It’s worth noting, Turkey has entered the Dollar denominated bond market, taking advantage of the super low borrowing costs and offering a product without the Lira risk. The USD1.5B 11 year issue was priced at 250bp over 10 year USTs and well received.