- FinMin meeting
- policy decision
- Exporter offers
- UK election
- PBOC cut
- data offsets
- Bad run
- Easy money
- solid demand
- USDSGD
Suggested reading
- Greece Saunters Across the Autobahn, M. Lewis, Bloomberg View (May 7, 2015)
- China’s High Risk Rate Cut, C. Stephen, MarketWatch (May 10, 2015)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The recent break above 1.1053 is significant and could open the door for a more pronounced upside extension in the days ahead. Though the medium-term downtrend is still firmly intact, a double bottom formation has triggered, exposing a potential measured move into the 1.1550 area. At this point, a daily close below 1.1053 would be required to put the pressure back on the downside.
EURUSD – fundamental overview
The Eurzone FinMin meeting kicks off today and there doesn’t appear to be too much to look forward to in the way of a Greece resolution. Greece continues to try and push for terms more in line with its anti-austerity mandate, while its creditors are becoming increasingly impatient. This raises the risk for an accidental default and at this point, a Grexit is no longer some far off remote possibility. The Euro has come under some pressure in recent sessions, with a resurgence in broad based US Dollar demand weighing on the major pair. Â
GBPUSD – technical overview
A strong recovery 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.
GBPUSD – fundamental overview
The Pound has been a clear outperformer over the past few sessions, with the surprising UK election result driving trade. Market participants have been comforted by the ‘more of the same’ result and this has been reflected in the price action. At this point, while we still should expect some post election volatility, a lot of the attention on Monday will be placed on the Bank of England rate decision. Though no policy change is expected, participants will be watching to see if the tone of the decision carries any bias to the hawkish or dovish side.
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.
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 broad based Dollar demand is helping to support, with a combination of higher Japanese equities and a weekend PBOC rate cut, driving the price action. Still, there are solid exporter offers on rallies above 120.00, with a sizable option barrier of a few yards also seen capping gains over the short-term.
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.
EURCHF – fundamental overview
Recent SNB measures on sight deposits and an ongoing commitment from the central bank to continue to act to curb excessive overvaluation in the Franc, should help to support this market on dips. Dealers cite demand around 1.0300, with no meaningful stops until below 1.0200. Risk markets responded positively to the outcome of the UK election, finding comfort in the idea of stability and no change. This has also helped to prop the EURCHF rate in recent trade.
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.
AUDUSD – fundamental overview
A light economic calendar and lack of any first-tier data out of Australia on Monday, leaves this market trading on broader themes. One such theme weighing on the pair has been the weekend rate cut from the PBOC. Although such a cut is meant to infuse a sense of confidence in markets, it seems the worry of a more pronounced slowdown in China is having more of an impact on sentiment at the moment. Broad based US Dollar demand and a softer NAB business confidence reading are also factoring into 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.
USDCAD – fundamental overview
Both Canada and US employment came in softer than expected on Friday and the offsetting data left this pair trading off broader flows. Though US NFPs were slightly weaker, the market was perhaps a little encouraged by the fact that the number was relatively close to expectation, enough to put fears to rest after last month’s big miss in this series. As such, we have since seen some broad based US Dollar demand, with USDCAD showing formidable support on dips below 1.2000. Oil prices have also topped out a bit, something that is not necessarily a positive for Canadian Dollar bulls.
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.
NZDUSD – fundamental overview
Speculation for a June RBNZ rate cut is now gaining momentum, and this is a pretty big deal considering only a few weeks back, the market had been pricing a more hawkish RBNZ. The New Zealand Dollar has been a standout underperformer over the past several days on a major repricing of RBNZ expectations, with softer economic data further fueling dovish speculation. This includes, another Fonterra payout cut, dovish FinMin English comments, a negative GDT auction print, weaker than expected New Zealand Q1 employment, a slowing China, and this latest disappointing electronic retail sales. 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.
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.
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 1225 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.
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
USDSGDÂ 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.
Feature – fundamental overview
The Singapore Dollar has been suffering from a cooling off in China and some weaker local data. The weekend decision by the PBOC to cut rates hasn’t done anything to inspire confidence, and this has opened some solid demand for the US Dollar in the early week. Overall, the ongoing expectation for the Fed to move sooner than later, despite a slightly weaker Friday NFP report, is also playing a role, and the outlook for this market continues to favour Singapore Dollar weakness.