Hodgepodge Price Action Into Friday Trade

GBPUSD – technical overview

Though the broader downtrend remains intact, the latest surge has resulted in a push back towards key resistance in the form of the 2015 high. From here, look for the market to hold below the yearly high at 1.5552 in favour of a lower top and bearish resumption. A daily close back below 1.5300 will strengthen the outlook and put the pressure back on the downside. However, a daily close above 1.5552 would compromise the medium-term structure and open the door for a more significant structural shift.

• R2 1.5552 – 26Feb/2015 high – Strong
• R1 1.5498 – 29Apr high – Medium
• S1 1.5303 – 30Apr low  – Strong
• S2 1.5262 – 27Apr high  – Medium

GBPUSD – fundamental overview

In only about two weeks, this market has managed to recover nearly 1000 points off the yearly low, just shy of the 2015 peak at 1.5552. It has been quite a recovery for the Pound, though with such a run, the market could start to get a little exhausted. We already saw signs of this on Thursday, and with the Monday UK holiday, participants will also start to position ahead of next week’s UK election risk. For today, we could see some volatility on UK manufacturing PMIs, while in the US, we get US ISM manufacturing and Michigan confidence.

USDJPY – technical overview

Although the market remains locked within a 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 120.09 – 23Apr high – Strong
• R1 119.89 – 30Apr high – Medium
• S1 118.49 – 30Apr low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Solid US initial jobless claims and continuing claims data at 15 year lows, were seen as strong drivers behind the latest rally in the major pair. Overall, the market hasn’t really done much at all, confined to a tight multi-week range into Golden Week. Japanese inflation readings out earlier have hardly factored into trade, and the market will now look ahead to Friday’s US data in the form of US ISM manufacturing and Michigan confidence. Equity markets have been showing signs of potential topping and this is something that should be watched closely with the Yen still sharing some traditional correlations with risk assets.

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. Last week’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. Any setbacks should be well supported ahead of 1.0300, while ultimately, only below 1.0235 negates.

• R2 1.0605 – 23Mar high – Strong
• R1 1.0525 – 30Apr high – Medium
• S1 1.0380 – 28Apr low– Medium
• S2 1.0315 – 23Apr low – Strong

EURCHF – fundamental overview

Last week, the SNB came out with an announcement that it was reducing the group of sight deposit account holders that would be exempted from negative rates. This helped to finally offer some support to the EURCHF rate, which had been under intense pressure for many weeks. SNB Jordan was also out last week reiterating the central bank’s commitment to act to curb excessive overvaluation in the Franc. There are many out there that are still pricing in additional accommodation from the SNB, taking it deeper into unprecedented negative interest rate policy. Though with Jordan also stressing that current policy should not be taken as the ‘new normal’ it will be interesting to see just how much more the SNB is prepared to do. Meanwhile, some renewed optimism for a Greek resolution has also been helping to support.

AUDUSD – technical overview

Despite the latest surge through 0.8000, the bearish structure remains intact with the market positioning for a medium-term lower top and next major downside extension. Look for the market to now stall out above 0.8000, around previous support turned resistance at 0.8033. A daily close below 0.7862 will help confirm the outlook and put the pressure back on the downside. Ultimately, only back above 0.8300 would compromise the downtrend.

• R2 0.8075 – 29Apr high – Strong
• R1 0.7976 – 29Apr low – Medium
• S1 0.7862 – 30Apr low – Medium
• S2 0.7833 – 28Apr low – Strong

AUDUSD – fundamental overview

The RBA will certainly have a tough decision on its hands when it meets next Tuesday. The market is trying to figure out if the central bank will slash rates to another record level at 2%. The backdrop of softer business investment, declining trade, and waning confidence, along with the RBA’s welcoming of a lower exchange rate, all support a rate cut, though at the same time, solid employment and a pickup in inflation readings could keep the RBA on hold at 2.25%. For today, the focus is on US data, with ISM manufacturing and Michigan confidence due.

USDCAD – technical overview

While the broader uptrend is still firmly intact, the market has entered a period of healthy correction following a recent break below support at 1.2350. But now that the market has finally traded into the measured move downside objective area in the 1.1900s, look out for the formation of the next meaningful higher low and resumption of the broader uptrend. Ultimately, only a weekly close below 1.1900 would compromise the constructive outlook.

• R2 1.2195 – 27Apr high – Strong
• R1 1.2132 – 30Apr high – Medium
• S1 1.1945 – 29Apr low – Strong
• S2 1.1900 – Figure – Medium

USDCAD – fundamental overview

Despite a better than expected Canada GDP print and continued recovery in the price of OIL, the Canadian Dollar has not been able to hold onto recent gains. It seems, ever since the Fed came out less dovish, market participants have been happy to build back into US Dollar longs on the anticipated monetary policy divergence theme. Thursday’s very solid US initial jobless claims and continuing claims data have also helped the Buck, and the market will now look ahead to Friday data that includes Canada manufacturing PMIs, US ISM manufacturing and Michigan confidence.

NZDUSD – technical overview

Though we have seen some strength in recent trade, 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 0.7744 – 29Apr high – Strong
• R1 0.7650 – Mid-Figure– Medium
• S1 0.7536 – 23Apr low – Strong
• S2 0.7500 – Psychological – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been one of the standout underperformers this week after the RBNZ confirmed expectations, shifting its policy outlook and opening the door to the possibility for a rate cut. At the same time the central bank expressed its discomfort with the elevated New Zealand Dollar. Another Fonterra payout cut didn’t helped matters and this latest line from FinMin English acknowledging a more dovish trajectory in the central bank’s policy path, has provided even more reason to sell. In contrast, the less dovish Fed further highlights the ongoing policy divergence theme with the RBNZ. Looking ahead, we get US ISM manufacturing and Michigan confidence.

US SPX 500 – technical overview

The most recent rally is stalling after only slightly exceeding critical resistance in the form of the previous 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 broader uptrend remains firmly intact, with a break below 2040 ultimately required to confirm a topping structure and accelerate declines. Initially, the market will need to close below 2070 to encourage the reversal prospect.

• R2 2150.00 – Psychological – Medium
• R1 2126.00 – 27Apr/Record – Strong
• S1 2071.00 – 17Apr low – Medium
• S2 2040.00 – 11Mar low – Strong

US SPX 500 – fundamental overview

There is a growing sense that with equities so elevated, any additional upside should be limited with a potential capitulation in the works. At this point, the market has yet to really relent, but failure to rally post softer US GDP and a less dovish FOMC decision could be the final straw that breaks this artificially supported market’s back. All eyes on today’s US ISM manufacturing and Michigan confidence.

GOLD (SPOT) – technical overview

The market has been in a consolidation mode since recovering out ahead 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 1224 will be required to strengthen the constructive prospect. Meanwhile, a daily close back below 1175 delays the recovery and puts pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1224.00 – 6Apr high – Strong
• S1 1175.00 – 24Apr low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market continues to show signs of demand 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 to $1224, 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 just off 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. But ultimately, the broader uptrend remains firmly intact with any setbacks expected to be very well supported in favour of bullish continuation. A break back below 2.5390 would now be required to take the immediate pressure off the downside.

• R2 2.8000 – Psychological – Medium
• R1 2.7430 – 24Apr/Record – Strong
• S1 2.6445 – 29Apr low – Medium
• S2 2.5390 – 23Mar low – Strong

Feature – fundamental overview

The CBRT continues to be in a very tough spot, with a mix of rising inflation, a declining currency and struggling economy, making it impossible to make any moves on rates. Adding more fuel to the fire, Turkish PM Erdogan continues with his criticism of higher rates and the negative impact on the local economy. The Lira didn’t get much help from the Fed on Wednesday, after the central bank delivered a less dovish statement. For today, the market trades with a little less liquidity on account of the Labour Day holiday, though we could see a pickup in volatility with stocks vulnerable, Turkey protests underway and US ISM manufacturing and Michigan confidence due.