Currencies Recover But Fed Timeline Still Intact

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 weeks ahead. Still, with weekly studies looking stretched, the market has deferred to a period of corrective activity. But ultimately, only back above 1.5165 would take the immediate pressure off the downside.

• R2 1.5010 – 19Mar high – Strong
• R1 1.4970 – 16Apr high – Medium
• S1 1.4812 – 16Apr low  – Medium
• S2 1.4700 – 15Apr low  – Strong

GBPUSD – fundamental overview

The UK currency has done a nice job recovering over the past week with a softer round of US economic data primarily driving the strength. However, the price action is classified as technical more than anything else, with zero UK inflation and upcoming election risk enough to keep the Sterling market from running to far. But there could still be some room to run today with the market taking in important data out of the UK and US. Participants will first try and make sense of the latest UK employment data. The jobless claims change is expected to come in at -29.5k versus -31.0k previous, while the ILO unemployment rate is forecast to drop to 5.6% from 5.7% previous. As for US CPI, anything on the hotter side will open renewed USD bids, while a softer print will be Sterling supportive.

USDJPY – technical overview

Although the market remains locked within a very well defined uptrend, lack of upside follow through has been discouraging of late, 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 118.72 – 3Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

A quiet Friday Asia calendar has made for even tighter trade in a Yen market that can’t really figure out its next move. A run of broad based US Dollar weakness has not been felt as much in the USDJPY pair, with this market continuing to be very well supported by medium-term players towards 118.00. It seems, even with the BOJ on hold for the moment and even with the Fed timeline in question, there is still no denying the pronounced monetary policy divergence theme, which is the ultimate driver of price action here. Dealers do however cite decent sell-stops below 118.00. Looking ahead, US CPI is the big event for Friday.

EURCHF – technical overview

The recent daily close below 1.0400 has put the pressure back on the downside exposing 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 1.0275 – 16Apr low – Medium
• S2 1.0250 – 16Jan high – Strong

EURCHF – fundamental overview

EURCHF has been under consistent pressure since the SNB decided to leave policy unchanged at its last meeting, 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, and ongoing uncertainty in Greece 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. Higher equities have been the only relief for the SNB, but it’s scary to think what kind of pressure the central bank will come under if equities falter.

AUDUSD – technical overview

Despite the latest minor bounce, the bearish structure remains firmly intact with the market positioning for the next major downside extension. A daily close below 0.7533 will now be required to confirm the onset of a bearish continuation, with setbacks then projected towards major psychological barriers at 0.7000. For now, corrective rallies should be well capped below 0.7900, while ultimately, only a daily close back above 0.7938 would delay and give reason for pause.

• R2 0.7938 – 24Mar high – Strong
• R1 0.7822 – 16Apr high – Medium
• S1 0.7673 – 16Apr low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

Traders have been scaling back Aussie short bets this week on broad based USD selling and a much better than expected Aussie employment report. On Thursday, Aussie unemployment unexpectedly fell for the second straight month, coming in below the forecast 6.3% at 6.1%. Meanwhile, 37.7k jobs were added, more than doubling expectations for 15k jobs, with the previous print also showing a major upward revision. This could suggest the worst is over in the Australia labour market and might put the RBA in a more comfortable position on the monetary policy front. Looking ahead, US CPI will be the big volatility mover in Friday trade.

USDCAD – technical overview

An extended period of multi-week consolidation has been broken to the downside, with the market taking out key support at 1.2350. While the broader uptrend is still firmly intact, the break below 1.2350 now opens the door to the possibility of a deeper correction into the 1.2000 area before the market looks to carve the next meaningful higher low and resume its uptrend. At this point, a daily close back above 1.2350 would be required to once again solidify bullish structure.

• R2 1.2352 – Previous Support – Strong
• R1 1.2281 – 15Apr low – Medium
• S1 1.2143 – 16Apr low – Medium
• S2 1.2063 – 21Jan low – Strong

USDCAD – fundamental overview

Heading into Friday, the Canadian Dollar is the standout outperformer across the board on the week. The relative outperformance in the Loonie has been driven off an on hold Bank of Canada rate decision which produced a much less dovish stance. The Bank of Canada seemed to take the chance for any additional easing off the table feeling more confident with the impact of recent accommodation and a welcome recovery in the price of oil. Still, dealers cite solid demand from medium-term players in this market on an expectation US yields will continue to move in the US Dollar’s favour. A good deal of volatility is expected later today with US CPI and Michigan confidence going head to head with Canada CPI and retail sales.

NZDUSD – technical overview

Though we have seen some strength over the past several sessions, the market remains locked within a broader, well defined downtrend. As such, look for a bearish reversal 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 compromise and give reason for pause.

• R2 0.7750 – Mid-Figure – Medium
• R1 0.7698 – 16Apr high – Medium
• S1 0.7579 – 16Apr low – Medium
• S2 0.7487 – 15Apr low – Strong

NZDUSD – fundamental overview

Interestingly enough, the New Zealand Dollar still trades higher on the week against the US Dollar despite a round of softer China data and a disappointing GDT auction. It seems the currency has been deferring to the benefit of higher global equities and some broad based selling in the Buck following a weaker round of US data. Friday’s US inflation data will be the next big event to watch for this pair, though the trajectory in global equity markets will be equally important for the risk correlated currency. Participants will also be focused on inflation data out of New Zealand early next week, with expectations centered on a cooler reading, which could push the RBNZ closer to accommodation and take some of the bid out of the elevated Kiwi rate.

US SPX 500 – technical overview

The most recent rally is stalling 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. Still, while the market holds above 2040, the uptrend remains firmly intact, with risk for a push to fresh highs beyond 2120 and towards a measured move objective at 2200 further up. At this point, a break below 2040 will be required to confirm a topping structure and accelerate declines.

• 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. At this point, the market has yet to relent, but if the Fed continues to move towards a sooner than later rate hike in 2015, this could be the final straw that breaks this artificially supported market’s back.

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, 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 has been violated at 1.3452 and daily close below will open the door for a more significant corrective decline before the market looks to reassert the uptrend. However, inability to close 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 1.3452 – 3Apr low – Strong
• S2 1.3400 – Figure – Medium

Feature – fundamental overview

This week’s MAS decision to leave policy unchanged after previously cutting rates caught the market off guard, with many participants booking profit on short SGD positions, particularly in light of broad based USD selling. 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 US data weakness, there is risk for some more short-term SGD appreciation. Friday’s US inflation readings will be the next big event to watch.