RBA Cuts To Record Low, UK and US Data Ahead

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 1.5175 – 4May high – Medium
• S1 1.5090 – 4May low  – Medium
• S2 1.5027 – 24Apr low  – Strong

GBPUSD – fundamental overview

UK markets are back from holiday and will be looking right past today’s construction PMI data and towards Thursday’s highly anticipated election. With a hung parliament all but guaranteed, participants are likely to become increasingly unsettled with the prospect of a multi-week gridlock before finding any clarity on the direction of the newly formed government. Later today we get a round of US data including ISM non-manufacturing and trade. Dealers cite stops below 1.5090.

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 mostly hawkish Fed official comments. 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. Softer Swiss manufacturing PMIs haven’t had any impact on this market.

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 0.7787 – 5May low – Medium
• S2 0.7683 – 21Apr low – Strong

AUDUSD – fundamental overview

Not much of a surprise from the RBA on Tuesday, after the central bank went ahead and cut rates 25bps to a record low 2.00% as was widely expected. But at this point, with the RBA already having warned of the ineffectiveness of further reductions, it will most likely take a formidable hurdle for the central bank to move any lower. More clarity on the matter will be offered this Friday when the RBA releases its statement on monetary policy. The initial reaction to the rate decision saw AUDUSD higher through 0.7900, on a sell the rumour, buy the fact reaction. However, with yield differentials expected to continue to move in the US Dollar’s favour, any gains in this market are expected to be very well capped, especially after a softer round of pre-RBA Aussie data in the form of disappointing performances of services and trade.

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

It seems, ever since the Fed came out less dovish last week, market participants have been happy to build back into US Dollar longs on the anticipated monetary policy divergence theme. The market has mostly managed to shrug off some recent solid Canada GDP data and an impressive OIL recovery, instead choosing to focus on yield differentials. Looking ahead, the market will absorb the latest Canada and US trade data, along with US ISM non-manufacturing. Dealers cite stops above 1.2205.

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 0.7506 – 1May 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 GDT auction and New Zealand employment release will be the key events to watch over the next 24 hours.

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 a solid Friday monthly employment report, this could be the final straw that breaks the overinflated 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

USDSGD has been in corrective mode over the past few weeks, with the market pulling back sharply from the 1.3937, 2015 peak from March. However, the broader uptrend remains intact and a medium-term higher low is now sought out at 1.3148 ahead of the next major upside extension. Ultimately, only back below 1.3148 would compromise the outlook.

• R2 1.3434 – 24Apr high – Strong
• R1 1.3400 – Figure – Medium
• S1 1.3279 – 4May low – Medium
• S2 1.3222 – 1May low – Strong

Feature – fundamental overview

Sentiment for Asian currencies has turned down in recent days, with the slowdown in China having a notable impact on these markets. The Singapore Dollar has come back under pressure as a result, with local data also not helping after manufacturing PMIs came in softer than expected, putting in the fifth consecutive monthly contraction for this series. Overall, the ongoing expectation for the Fed to move sooner than later is also playing a role, and the outlook for this market continues to favour Singapore Dollar weakness.