Pound Finds Comfort In Cameron, NFPs Ahead

GBPUSD – technical overview

A strong recovery rally rally out from multi-year lows is stalling shy of the 2015 high at 1.5552, leaving the broader underlying downtrend still firmly intact. 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 1.5552 – 26Feb/2015 high – Strong
• R1 1.5523 – 8May high – Medium
• S1 1.5357 – 8May low  – Medium
• S2 1.5292 – 6May high  – Strong

GBPUSD – fundamental overview

If it wasn’t clear ahead of the election, it’s becoming readily apparent on Friday that markets are welcoming the news of a definitive Cameron victory in the UK election. Although there will still be some uncertainty over a future EU membership vote, likely to take place in 2017, for now, the more of the same outcome is proving to be a lot more reassuring to the market than what could have been a much more unpredictable alternative. Looking ahead, more Pound volatility is expected for the remainder of the day on the election risk, while this market will also have to contend with UK trade and the highly anticipated monthly employment report out of the US.

USDJPY – technical overview

Although the market remains locked within a well defined uptrend, lack of upside follow through has been discouraging, 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 120.50 – 5May high – Medium
• S1 119.05 – 7May low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Not a lot of movement in this market over the past several weeks, with a lot of choppy, back and forth trade. For today, some early broad based Dollar demand is helping to support, with a combination of encouraging US claims data Thursday and some softer China trade figures, driving the price action. Also seen helping is the result of the UK election, with the clear Cameron victory reassuring markets there won’t be any sweeping change to worry about. Of course, everything now comes down to the monthly employment report out of the US, due at 12:30GMT.

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 1.0525 – 30Apr high – Strong
• R1 1.0425 – 5May high – Medium
• S1 1.0305 – 7May low– Medium
• S2 1.0235 – 21Apr low – Strong

EURCHF – fundamental overview

All of the risk positive fallout from the UK election result, and yet no upside in this market. Despite some stability in risk assets, EURCHF remains under pressure and is giving the SNB more of a headache into the end of the week. Still, the market is well off the 1.0235 low from April and an ongoing commitment from the SNB to continue to act to curb excessive overvaluation in the Franc should help to support this market on dips. Dealers do cite demand around 1.0300, with no meaningful stop seen until below 1.0200. Attention now shifts to Friday’s US employment report.

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 0.7850 – Mid-Figure – Medium
• S2 0.7787 – 5May low – Strong

AUDUSD – fundamental overview

The RBA SOMP failed to provide any forward guidance, though the economic projections were on the downbeat side, with the central bank outlining expectations for slower growth and a more prolonged period of higher unemployment. Still, with the RBA having moved down to record low rates at 2.00% and with Stevens questioning the impact of rate cuts at this point, it will require a quite a lot to get the RBA thinking cut again. Aussie had initially been weighed down in early Friday trade on the back of another unimpressive data print out of China, with trade coming in below forecast and imports dropping a heavy 16.1%. However, some risk on trade post the UK election result helped to wipe away these setbacks, with the pair leveling out ahead of the highly anticipated 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 1.2163 – 7May high – Medium
• S1 1.2034 – 7May low – Medium
• S2 1.1940 – 6May low – Strong

USDCAD – fundamental overview

US claims data at 15 year lows have inspired some renewed confidence for US Dollar bulls, with the market buying back the Buck aggressively in Thursday trade. The Canadian Dollar was actually an underperformer on Thursday, with the relative weakness being driven off a sell-off in the price of OIL, following an impressive recovery run for the commodity. For today, things are likely to heat up significantly, with Canada employment due at the same time as the highly anticipated US monthly employment report.

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 0.7577 – 5May high– Strong
• R1 0.7528 – 7May high– Medium
• S1 0.7391 – 1Apr low – Medium
• S2 0.7372 – 19Mar low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been the standout underperformer this week. We have been seeing a repricing of RBNZ expectations following last week’s RBNZ policy decision, where the central bank opened 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, weaker than expected New Zealand Q1 employment and some soft China data. Perhaps this repricing and structural shift has been most apparent on the AUDNZD cross, which has enjoyed a formidable recovery off record lows. 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 2062.00 – 7May low – Medium
• S2 2040.00 – 11Mar low – Strong

US SPX 500 – fundamental overview

Equity markets are looking a little softer of late 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, today’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

The Singapore Dollar has been suffering from a cooling off in China and some weaker local data this week after manufacturing PMIs came in below forecast, putting in the fifth consecutive monthly contraction for this series. Overall, the ongoing expectation for the Fed to move sooner than later, despite some soft Q1 economic data, is also playing a role, and the outlook for this market continues to favour Singapore Dollar weakness. Clearly today’s monthly employment report out of the US will play an influence on market direction in the sessions ahead.