How Much Longer Will This USD Correction Last?

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 1.5054 – 17Apr high – Strong
• R1 1.5000 – Psychological – Medium
• S1 1.4900 – Figure  – Medium
• S2 1.4812 – 16Apr low  – Strong

GBPUSD – fundamental overview

The UK currency has done a nice job recovering over the past several days 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. Friday’s better than expected UK employment showing helped to open multi-day Cable highs, though the gains could not be sustained following a hotter than expected core CPI print out of the US. Looking ahead, the economic calendar for Monday is light, with this market to trade off broader macro developments.

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 120.17 – 14Apr high – Strong
• R1 119.74 – 15Apr high – Medium
• S1 118.57 – 17Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Any expected sentiment boost from the weekend China RRR cut has been lost on USDJPY, as this market remains under pressure near multi-day range lows. Broad based currency gains against the US Dollar have contributed to renewed Yen demand in recent days, while a less dovish BOJ and threat of a capitulation in equities prices have also factored into price action. Meanwhile, there has been some talk going around of stop hunting below 118.00.

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 1.0265 – 17Apr 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.

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 0.7842 – 17Apr high – Medium
• S1 0.7759 – 17Apr low – Strong
• S2 0.7673 – 16Apr low – Medium

AUDUSD – fundamental overview

The aggressive 1% China RRR cut over the weekend has done nothing to help the correlated Australian Dollar, with the commodity currency starting to find solid offers from medium-term players. The Australian Dollar has benefitted from some broad based US Dollar declines and solid local data in recent days, though with the macro dynamics still showing a divergence in monetary policy, there continues to be risk for additional Aussie weakness ahead. Looking to the economic calendar this week, Aussie CPI due Wednesday will get a lot of attention. Certainly if the the data comes in on the cooler side, it will weigh more heavily on the currency. Later today, RBA Stevens is scheduled to speak.

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 1.1900 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 1.2272 – 17Apr high – Medium
• S1 1.2143 – 16Apr low – Medium
• S2 1.2088 – 17Apr low – Strong

USDCAD – fundamental overview

The Canadian Dollar comes off a week which saw the currency outperform across the board. While currencies were broadly bid against the Buck, the Loonie managed to take top prize on account of some favourable local developments. Initially, the less dovish Bank of Canada outlook was supportive of the Loonie, while an acceleration in the recovery of OIL prices further contributed. And though Friday US data was USD supportive with hotter core CPI and solid Michigan confidence, the Canadian Dollar managed to hold onto most of its gains, with Canada retail sales coming in much better than expected. Looking ahead, the big event for this pair on Monday will be the Bank of Canada Poloz speech due later in the day.

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 0.7800 – Figure – Medium
• R1 0.7741 – 17Apr high – Strong
• S1 0.7645 – 17Apr low – Strong
• S2 0.7579 – 16Apr low – Medium

NZDUSD – fundamental overview

Perhaps the New Zealand Dollar has received a bit of a boost into Monday on the back of the weekend news of the aggressive RRR cut from the PBOC. Still, any additional upside is seen limited with sizable medium-term players stepping in to sell the market on the monetary divergence theme and risk the higher yielding currency will be exposed in the event of a capitulation in global equity markets. Also seen generating fresh offers on Monday has been the softer than expected inflation readings out of New Zealand, which should push the RBNZ closer to a more accommodative stance. Q1 CPI came in at -0.3% q/q versus forecasts for -0.2%, while the y/y came in at 0.1% versus consensus of 0.2%

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 liftoff in the months ahead, 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

USDTRY is in the process off correcting of recently established fresh record highs. Technical studies are looking a little stretched overall, and there is risk for additional weakness in the sessions ahead to allow for these studies to unwind. Ultimately though, the broader uptrend remains firmly intact and a medium-term higher low is sought out ahead of 2.5400 in favour of the next major upside extension beyond 2.7310.

• R2 2.7310 – 15Apr/Record high – Strong
• R1 2.7005 – 17Apr high – Medium
• S1 2.6415 – 10Apr high – Medium
• S2 2.6120 – 10Apr low – Strong

Feature – fundamental overview

Turkey’s latest CBRT survey of expectations has produced some raised inflation forecasts which could make things a little more challenging for a central banking contending with rising inflation, a declining currency and struggling economy. Forecasts show no change on rates in the coming months, and market participants will be anxious to hear from Governor Basci next week, with the central banker expected to introduce alternative macroprudential measures as a means to keep the central bank from needing to push higher on rates.