UK Election, US Dollar, Stocks and Oil

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 1.4950 will open the door for a retest of the 1.4565 yearly low, while back above 1.5552 could signal a structural shift.

• R2 1.5397 – 1May high – Strong
• R1 1.5292 – 6May high – Medium
• S1 1.5150 – 6May low  – Medium
• S2 1.5089 – 5May low  – Strong

GBPUSD – fundamental overview

Most of the recent gains in the Pound have been less a function of any positives on the UK front and more driven off broad based US Dollar declines on the back of softer US economic data. While Wednesday’s slightly better UK services PMIs may have helped a bit, it was the disappointing US ADP print that really drove Cable demand. Of course, the focus for today will be on the UK election. This election has been touted as one of the biggest toss ups in decades and whichever side comes out on top doesn’t necessarily send any reassuring messages to financial markets. The risk for a hung parliament runs high, and it will likely take many more weeks before we get any clarity.

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 120.50 – 5May high – Strong
• R1 120.05 – 6May high – Medium
• S1 119.20 – 6May low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Another round of soft US economic data, highlighted by Wednesday’s unimpressive US ADP, has opened the door for a modest pullback in the major pair. Weakness in global equities, which still share traditional correlations with the Yen, and dovish Fed comments have also been driving price action. Still, this is a market that has mostly been confined to rangebound trade, with any dips into the 118.00s well supported. Looking ahead, US initial jobless claims come into focus, though the market will likely look past this data series quickly and position ahead of tomorrow’s US NFPs.

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 1.0347 – 5May low– Medium
• S2 1.0315 – 23Apr low – Strong

EURCHF – fundamental overview

The recent reduction on the group of sight deposit account holders exempted from negative rates should keep EURCHF well supported for now, with ongoing comments from SNB Jordan reiterating the central bank’s commitment to act to curb excessive overvaluation also helping to prop. Meanwhile, the cross rate has received a bit of an additional boost over the past couple of sessions on news of progress on Greek talks and the ECB upping its ELA commitment.

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 just over 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 0.8075 – 29Apr high – Strong
• R1 0.8030 – 6May high – Medium
• S1 0.7918 – 6May low – Medium
• S2 0.7787 – 5May low – Strong

AUDUSD – fundamental overview

Tuesday’s RBA rate cut to a record low 2.00% has been followed up by softer Aussie retail sales on Wednesday and below forecast employment Thursday. But one wouldn’t know it from looking at the price action in this pair, with Aussie driving higher, largely on the back of broad based USD weakness and a repricing of AUDNZD expectations. Looking ahead, US initial jobless claims stands out in Thursday trade, though more attention will be placed on tomorrow’s RBA SOMP and monthly employment report out of the US.

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 1.2205 – 1May high – Strong
• R1 1.2131 – 5May high – Medium
• S1 1.1940 – 6May low – Strong
• S2 1.1900 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar isn’t ready just yet to give up its recent run, with a combination of much weaker US economic data and a formidable recovery in the price of oil helping to fuel Loonie gains to multi-day highs against the Buck. Still, with the OIL rebound looking like it could be a little tired following a bearish technical reversal on Wednesday, with the door open for a sooner Fed hike, and with global sentiment starting to wane, there is plenty of demand for USDCAD into this dip. For today, the focus will be on Canada building permits and US initial jobless claims.

NZDUSD – technical overview

The market remains locked within a broader, well defined downtrend and looks to be in the process of carving out the next medium-term lower top. 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 0.7615 – 1May high – Medium
• R1 0.7577 – 5May high– Strong
• S1 0.7459 – 6May 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. And since then, this repricing has been backed up by another Fonterra payout cut, dovish FinMin English comments, a negative GDT auction print, and weaker than expected New Zealand Q1 employment. Perhaps this repricing and structural shift has been most apparent on the AUDNZD cross, which has enjoyed a formidable recovery off record lows over the past several days. The New Zealand Dollar is also vulnerable to pullbacks in global equities, with the higher yielding currency less attractive in the scenario on flight to safety flows.

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 2066.00 – 6May low – Medium
• S2 2040.00 – 11Mar low – Strong

US SPX 500 – fundamental overview

Equity markets are looking a little softer into Thursday and it feels as though the market is less attracted to the possibility of a lower for longer Fed scenario, even though it should in theory incentivize further demand. Central banks have relied heavily on this strategy to help with the recovery and if this strategy shows signs of losing appeal, we could be in for a rough ride ahead. Stocks have had a way of rallying on softer US economic data on the expectation the Fed will hold off, but recently, there has been an emerging pattern of stocks selling off on softer data. As such, tomorrow’s US NFP report will likely take on added meaning.

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 1170 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 1.3378 – 5May high – Medium
• S1 1.3216 – 6May low – Medium
• S2 1.3148 – 29Apr low – Strong

Feature – fundamental overview

A bit of a short covering rally in this market on Thursday on talk of potential intervention in the Korean Won. Decent investment bank and buy-side demand was reported after Korean Finmin Choi was on the wires expressing concern over the impact of a weaker Yen on the Korean economy. Choi also warned the MOFE wouldn’t hesitate to take action in the event of rapid exchange rate fluctuation.