Markets Looking Ahead In Light Monday Trade

GBPUSD – technical overview

A strong recovery rally rally out from multi-year lows has stalled out just shy of the 2015 high at 1.5552 to leave leave the broader underlying downtrend firmly intact. The market has now dropped back into the middle of the 2015 range and from here, there is risk for some choppy consolidation before the next major move. Below 1.4855 will open the door for a retest of the 1.4565 yearly low, while back above 1.5552 could signal a structural shift.

• R2 1.5304 – 30Apr low – Strong
• R1 1.5200 – Figure – Medium
• S1 1.5114 – 1May low  – Medium
• S2 1.5027 – 24Apr low  – Strong

GBPUSD – fundamental overview

It’s all turned quite negative for the Pound rather quickly. The market had seen some impressive demand in recent weeks on the back of some broad Dollar selling, before receiving a dose of reality in the latter half of last week. Economic data out of the UK was more than discouraging, with GDP, manufacturing PMIs and mortgage approvals all coming in a good deal softer, while the very real prospect for serious gridlock post this week’s UK election, hasn’t done anything to help Sterling’s cause. Throw in a less dovish Fed and forecasts for an upbeat US employment report this week, and there could be more downside risk for the Pound in the sessions ahead. UK markets are closed for holiday on Monday and trade is expected to be a good deal thinner today.

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 120.84 – 13Apr high – Strong
• R1 120.29 – 1May high – Medium
• S1 119.37 – 1May low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

The market has been bid up in recent trade on the back of an impressive rally in US yields and some hawkish comments from Fed Mester. Trading conditions may be a little thinner in the Golden Week, and with the economic calendar already quite light on Monday, the major pair could defer to consolidation. Dealers cite sizable stops above 120.85, with lighter stops below 119.35. Expectations have been building for a solid Friday employment report out of the US, and this could keep the market well supported in the interim. Still, with the Yen retaining some traditional correlations with risk assets, participants will also be watching equity markets closely. Any weakness there would likely weigh on USDJPY.

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. From here, there is risk for additional upside back towards 1.0815 in the days ahead, with any setbacks expected to be very well supported ahead of 1.0300. 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

The SNB has managed to find some temporary breathing room ever since it announced it was reducing the group of sight deposit account holders exempted from negative rates. SNB Jordan has also reiterated 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 a recent surge through 0.8000, the bearish structure remains intact with the market positioning for a medium-term lower top and next major downside extension. The rally has stalled out around previous support turned resistance at 0.8033 and this opens the door for a bearish resumption back towards and eventually below the recent multi-year low at 0.7533. Only back above 0.8075 would delay.

• R2 0.7976 – 29Apr low – Strong
• R1 0.7919 – 1May high – Medium
• S1 0.7791 – 27Apr low – Medium
• S2 0.7683 – 21Apr low – Strong

AUDUSD – fundamental overview

A 25bp rate cut from the RBA on Tuesday is apparently all but priced after the decision was leaked in the previous week via an article from journalist Peter Martin. The backdrop of softer business investment, declining trade, and waning confidence, along with the RBA’s welcoming of a lower exchange rate, are all supportive of a rate cut, though at the same time, solid employment and a pickup in inflation readings suggests that this could be the bottom for rates.

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 1.2305 – 21Apr high – Strong
• R1 1.2205 – 1May high – Medium
• S1 1.2062 – 1May low – Medium
• S2 1.1945 – 29Apr low – Strong

USDCAD – fundamental overview

Despite a better than expected Canada GDP print, softer US ISM manufacturing, 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. Last Thursday’s very solid US initial jobless claims and continuing claims data have also helped the Buck, while a surge in US yields further contributes to USD gains. There is no economic data on the Canada calendar for Monday, with US factory orders and a slew of Fed speak standing out.

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 0.7626 – 1May high– Medium
• S1 0.7487 – 15Apr low – Medium
• S2 0.7422 – 13Apr low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been one of the standout underperformers of late after the RBNZ shifted its policy outlook in the previous week, opening the door to the possibility for a rate cut, while also maintaining its discomfort with the elevated Kiwi rate. Another Fonterra payout cut hasn’t helped matters, while 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, the economic calendar for Monday is exceptionally light, with more of the focus for this pair on a slew of Fed speak and performance in correlated risk assets.

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 should last week’s less dovish FOMC decision be backed up by more hawkish Fed speak this week and a solid Friday monthly employment report, this could be the final straw that breaks the market’s back.

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 1170.00 – 1May low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market continues to show signs of demand since stalling 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 current dips, with no real sell-stops seen until below $1170.

Feature – technical overview

USDTRY remains locked within a well defined uptrend, with the pair trading just off record highs and looking for the next major upside extension into unchartered territory. A higher low is now sought out at 2.6445, with a break above the current record high at 2.7430 to confirm, opening a push towards 2.8500 further up. Only back below 2.6445 delays.

• 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

An expected rise in inflation and some solid manufacturing PMIs havn’t done much to alter the course of a Turkish Lira, just off recent record lows against the Buck. The CBRT is in a very tough spot, with the 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. Perhaps news from Turkey’s customs ministry that the trade gap has narrowed and confirmation from the CBRT that it will start paying remuneration on USD reserves this week, have helped to stall additional Lira declines for now.