Market Still Trying To Figure Out Next Move

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 1.5165 – 18Mar high – Strong
• R1 1.5080 – 22Apr high – Medium
• S1 1.4913 – 22Apr low  – Medium
• S2 1.4856 – 21Apr low  – Strong

GBPUSD – fundamental overview

The more hawkish than expected Wednesday Bank of England Minutes has driven some outperformance in the Pound over the past few sessions. Though the central bank did still highlight downside risks to inflation, there was a confidence that wage and price inflation would catch up with economic growth. The real kicker however was that all members agreed the next policy move would be for higher rates. Still, with UK election risk and the prospect for a hung parliament hanging in the balance, and with the Fed monetary policy divergence theme not going anywhere, additional upside may be hard to come by.

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 120.85 – 13Apr high – Strong
• R1 120.17 – 14Apr high – Medium
• S1 119.34 – 22Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

It seems Wednesday’s better than expected US existing home sales print has been used as an excuse to reprice Fed rate timeline expectations, with participants increasing bets on a sooner hike. This has in turn acted to prop the highly correlated Fed policy pair. Disappointing Japan and China PMI data at their lowest levels in a year have failed to materially influence price action. Still, this market is also correlated with risk sentiment, and any downturn in the price of lofty global equities could open the door for a reversal and renewed Yen bids. Ultimately however, dealers continue to cite very solid demand towards 118.00.

EURCHF – technical overview

The market has finally put in an impressive rebound after a multi-day drop out from the February, 1.0815 recovery high. Wednesday’s bullish reversal cleared the previous 8 consecutive daily lower highs, with the strong performance potentially signaling some form of a key low in place at 1.0235. Inability to close below 1.0250 had warned of this bounce and from here, there is risk for additional upside back towards 1.0815 in the days ahead. Ultimately, only back below 1.0235 negates.

• R2 1.0495 – 6Apr high – Strong
• R1 1.0430 – 22Apr high – Medium
• S1 1.0300 – Figure – Medium
• S2 1.0235 – 20Apr low – Strong

EURCHF – fundamental overview

It seemed like it would only be a matter of time before some response from the SNB, with the EURCHF rate consistently under pressure these past several weeks. The move into the 1.0200s proved too much for the central bank, finally coming out with an announcement that it was reducing the group of sight deposit account holders that would be exempted from negative rates. This opened a surge in EURCHF back above 1.0400 in Wednesday trade. The SNB has reiterated it remains ready to act to curb excessive overvaluation in the Franc.

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 0.7842 – 17Apr high – Strong
• R1 0.7807 – 22Apr high – Medium
• S1 0.7683 – 21Apr low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

Interestingly enough, the market has mostly managed to shrug off the softer than expected China HSBC manufacturing PMIs at a 1 year low of 49.2. It seems the expectation for further China stimulus, as already demonstrated this past weekend, is offsetting for now. Meanwhile, Australian data has been Aussie supportive, highlighted by last week’s solid employment data, and Wednesday’s hotter than expected CPI print. We are also starting to see a bit of a favourable Aussie divergence against the New Zealand Dollar, with AUDNZD finding renewed bids off recently established record lows.

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 1.2328 – 16Apr high – Medium
• S1 1.2180 – 20Apr low – Medium
• S2 1.2088 – 17Apr low – Strong

USDCAD – fundamental overview

Bank of Canada Governor Poloz backed up last week’s less dovish rate decision, reaffirming the likelihood the central bank was done cutting rates after saying January’s policy ease looked to be enough to deal with Q1’s front-loaded oil shock. Poloz also sounded rather upbeat on the outlook for growth in the economy. Still, with the Loonie already rallying quite a bit in recent trade, with the broader fundamentals supporting an ongoing monetary policy divergence with the Fed, and with OIL likely to find renewed offers into this rally, fresh USDCAD demand from medium-term players is resurfacing on dips.

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 more pronounced 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 0.7741 – 17Apr high – Strong
• R1 0.7665 – 23Apr high – Medium
• S1 0.7550 – Mid-Figure – Medium
• S2 0.7487 – 15Apr low – Strong

NZDUSD – fundamental overview

It seems we are seeing a bit of a repricing of RBNZ expectations this week, with softer New Zealand inflation data being followed up by dovish RBNZ McDermott comments. McDermott highlighted the fact the central bank would be open to cutting rates if growth and inflation continued to slow. Any Kiwi upside is seen limited against the Buck from here, with sizable medium-term players stepping in to sell the market on the Fed divergence theme. There has also been a good deal of demand on the AUDNZD cross rate, which many believe to be overdone and at risk for a major reversal off recent record lows.

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 signs continue to point to a Fed 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, a daily close 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 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 consolidating just off fresh record highs. Technical studies are looking a little stretched overall, and there is risk for correction in the sessions ahead to allow for these studies to unwind. But ultimately, the broader uptrend remains firmly intact with any setbacks expected to be very well supported in favour of continued record highs. A break back below 2.6640 would now be required to take the immediate pressure off the downside.

• R2 2.8000 – Psychological – Strong
• R1 2.7500 – Figure – Medium
• S1 2.6640 – 20Apr high – Strong
• S2 2.6120 – 10Apr low – Medium

Feature – fundamental overview

The announcement from the CBRT that it would be increasing the rate paid on Lira reserve requirements by 50bp as of May, hasnt done anything to offset Wednesday’s on hold rate decision, and the central bank continues to be in a very tough spot. The mix of rising inflation, a declining currency and struggling economy leave the CBRT between a rock and a hard place and with no rate hikes in the cards, there is risk for additional record lows in the Lira.