Currency Markets Enter Choppy Waters

GBPUSD – technical overview

The broader downtrend remains firmly intact, with the market taking out recent trend lows at 1.4635, trading down to 1.4565 thus far. This confirms a fresh lower top at 1.5165 and opens the door for the next major downside extension towards a measured move objective at 1.4100 in the days ahead. Still, with weekly studies looking stretched, there is risk for some corrective rallies and choppy trade. But ultimately, only back above 1.5165 takes the immediate pressure off the downside.

• R2 1.4886 – 9Apr high – Strong
• R1 1.4801 – 14Apr high – Medium
• S1 1.4681 – 13Apr high  – Medium
• S2 1.4565 – 13Apr/2015 low  – Medium

GBPUSD – fundamental overview

Zero inflation in the UK and a softer than expected core CPI reading have been shrugged off for now, with the Pound recovering on the back of some broad based US Dollar selling post a slightly weaker than expected Tuesday US retail sales print. But UK election uncertainty runs high, with the flip-flopping continuing as the latest polls put Labour back in the lead. The risk for a hung parliament looms and this is something that could weigh on the Pound into any rallies over the coming sessions. Looking ahead, the UK economic calendar is quiet on Wednesday, with more of the focus placed on event risk and data abroad.

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 120.84 – 13Apr high – Strong
• R1 120.17 – 14Apr high – Medium
• S1 119.07 – 14Apr low – Medium
• S2 118.72 – 3Apr low – Strong

USDJPY – fundamental overview

Slightly better than expected Japan industrial production, still in the negative, has hardly factored into Wednesday price action, with the Yen mostly coming back under a bit of pressure on broad based USD buying and a clarification from Japan PM aide Hamada that 120.00 was an acceptable level for USDJPY. The official has said earlier in the week that 105.00 was a more appropriate level based on PPP. Overall, longer-term players continue to see good opportunities to buy USDJPY dips, with the monetary policy divergence theme ultimately driving price action.

EURCHF – technical overview

The recent daily close below 1.0400 puts the pressure back on the downside and exposes an immediate retest of support at 1.0250. A break and daily close below 1.0250 would then accelerate declines towards parity in the sessions ahead. At this point, key resistance comes in at 1.0495 and a break back above this level will be required to take the pressure off the downside.

• R2 1.0495 – 6Apr high – Strong
• R1 1.0450 – 9Apr high – Medium
• S1 1.0295 – 14Apr low – Medium
• S2 1.0250 – 16Jan high – 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 below 1.0300, to its lowest levels since January, participants will be on the lookout for any signs of movement from the central bank. Last week’s hotter than expected Swiss inflation readings, ongoing uncertainty in Greece and downturn in sentiment have also contributed to recent declines, while this week’s news the Moroccan CB has reduced the Euro weighting in its FX basket to 60% from 80% hasn’t helped.

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 0.7533 lows the other week, a daily close below 0.7533 will now be required to confirm the onset of the next downside extension, with setbacks then projected towards major psychological barriers at 0.7000. Any rallies should be well capped below 0.7800, while ultimately, only a daily close back above 0.7938 would negate and give reason for pause.

• R2 0.7738 – 9Apr high – Strong
• R1 0.7678 – 13Apr high – Medium
• S1 0.7533 – 2Apr/2015 low – Strong
• S2 0.7500 – Psychological – Medium

AUDUSD – fundamental overview

Any recovery in the Australian Dollar from the previous week, on the back of an on hold RBA, solid Aussie economic data and stabilization in the price of iron ore, has been offset this week, with the currency falling victim to a discouraging batch of data out of China. Monday’s horrid China trade numbers have been followed up on Wednesday with a further decline in GDP, and weaker than expected industrial production and retail sales. This casts a shadow on the outlook for the correlated Australian economy and has opened some relative underperformance, with Aussie coming back under pressure towards recent record lows against Kiwi, just shy of parity. Looking ahead, Thursday’s Aussie employment data will be the next big event for this market.

USDCAD – technical overview

Although the market has recently broken to a fresh multi-year high at 1.2835, inability to establish a daily close above 1.2800 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 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 1.2667 – 10Apr high – Strong
• R1 1.2562 – 13Apr low – Medium
• S1 1.2445 – 14Apr low – Medium
• S2 1.2350 – 2Feb low – Strong

USDCAD – fundamental overview

The balance has shifted back in the Canadian Dollar’s favour in recent trade, with all of the important drivers going the Loonie’s way. Solid Canada data and broad based US Dollar selling on the back of Tuesday’s weaker than expected US retail sales have been the primary sources of CAD demand, though the ongoing recovery in the OIL market should also not be discounted. Looking ahead, there is plenty of room for additional volatility on Wednesday, with the Bank of Canada rate decision due. While it is clear the Bank of Canada won’t be making any changes on rates, given last week’s healthy Canada employment numbers and the stabilization in the price of oil, it is possible Poloz and co. will take on a less dovish outlook.

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 0.7630 – 3Apr high – Strong
• R1 0.7553 – 14Apr high – Medium
• S1 0.7391 – 1Apr low – Medium
• S2 0.7275 – 18Mar low – Strong

NZDUSD – fundamental overview

Interestingly enough, the New Zealand Dollar hasn’t been negatively impacted by the latest round of softer China data, with the higher yielding currency choosing to focus more on broad based US Dollar declines post Tuesday’s weaker US retail sales print. Still, New Zealand has been struggling with a rapid decline in dairy prices and with China cooling down, this could spell more trouble for the local dairy market. New Zealand PM John Key was out last week saying “a strong Kiwi against its Trans Tasman Aussie cousin has become a headache for the country’s export and tourism industry,” and with AUDNZD back under pressure towards recent record lows just shy of parity, these comments from the ex-currency trader could start to resonate. Looking ahead, the latest dairy auction results will be a primary focus for this market.

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. There has also been a new pattern 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 over the past couple of weeks we have seen stock market investors perhaps giving up on the idea that weaker data is still risk asset supportive. US durable goods, NFPs and this latest retail sales print have all failed to offer fresh support.

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. Meanwhile, 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 rallying above $1220, with last week’s 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

USDSGD remains locked within a well defined uptrend but has been showing signs of exhaustion since topping out at a fresh multi-year high above 1.3900 in March. Key support comes in at 1.3452 and a break below will open the door for a more significant corrective decline before the market looks to reassert the uptrend. However, inability to break below 1.3452 will keep the immediate pressure on the topside for an eventual push through the next key psychological barrier at 1.4000.

• R2 1.3937 – 13Mar/2015 high – Strong
• R1 1.3747 – 13Apr high – Medium
• S1 1.3521 – 8Apr low – Medium
• S2 1.3452 – 3Apr low – Strong

Feature – fundamental overview

This week’s MAS decision to leave policy unchanged after previously cutting rates has caught the market off guard, with many participants booking profit on short SGD positions. Other economic data out of Singapore has also contributed to renewed SGD demand. MTI readings showed better than expected Singapore growth, while Wednesday’s retail sales print came in much better than forecast at 15.8% versus the 3% expected. Still, overall, MAS monetary policy divergence with the Fed should invite more medium and longer-term US Dollar bids. But for now, with the US Dollar overextended and given this latest broad based USD slide on the back of Tuesday’s softer US retail sales, there is risk for some more short-term SGD appreciation.