Sterling Stands Out In Quiet Early Week

GBPUSD – technical overview

Fresh 2015 highs for this market, following an impressive Monday surge through 1.5600. The bullish break takes some of the pressure off the downside and could signal the next major upside extension from here, towards a measured move objective in the 1.5900 area. Still, with the broader downtrend intact, look for the rally to eventually be well capped towards 1.6000, with a medium-term lower top sough out ahead of bearish resumption.

• R2 1.5700 – Figure – Medium
• R1 1.5613 – 11May/2015 high – Medium
• S1 1.5500 – Figure  – Medium
• S2 1.5393 – 11May low  – Strong

GBPUSD – fundamental overview

The Pound has been a clear outperformer over the past few sessions, with the surprising UK election result driving Cable to fresh 2015 highs in the early week. Market participants have been comforted by the ‘more of the same’ election result and this has been reflected in the price action. Monday’s as expected, unchanged Bank of England decision hasn’t really factored into trade and at this point, we could start to see the election volatility fade into the background, as economic data is digested. UK industrial and manufacturing production are the standouts in Tuesday trade.

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

Economic data is hardly factoring into trade, especially after a wash overnight, with a positive Japanese leading index reading being offset by a decline in the coincident index. Still, this is a market that remains very well supported on dips, with sizable bids coming from Japanese pension funds. Perhaps comments from Fed Williams have also been supporting the major pair a bit, after the official said a rate hike should not be telegraphed months in advance and data should be considered right up to the day of the policy decision.

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. Look for a push back above 1.0525 to confirm and accelerate gains. Ultimately, only below 1.0235 negates.

• R2 1.0525 – 30Apr high – Strong
• R1 1.0451 – 8May high – Medium
• S1 1.0305 – 7May low– Medium
• S2 1.0235 – 21Apr low – Strong

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 solid demand, with no meaningful stops until below 1.0200. Comments from Eurogroup Chairman Dijsselbloem that partial bailout disbursements could be exchanged for a partial implementation of reform measures, and a EUR750M Greek loan repayment today, are also supportive of this market in Tuesday 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.

• R2 0.8075 – 29Apr high – Strong
• R1 0.8030 – 6May high – Medium
• S1 0.7863 – 8May low – Medium
• S2 0.7787 – 5May low – Strong

AUDUSD – fundamental overview

A combination of renewed currency demand against the US Dollar and some better Aussie house finance data, have been helping to support this market in Tuesday trade. Aussie has also been the beneficiary of inflows from New Zealand, as market participants begin to reprice RBNZ expectations and yield differentials between the cousin countries. Key Aussie risk on Tuesday will be the Australian Budget, and everyone will be keyed in to see what Mr. Hockey has to say.

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

A light economic calendar has resulted in some very quiet trade for this market, with both the US Dollar and Loonie still trading around last Friday’s softer employment data out of both countries. There is nothing of note on today’s calendar and this pair is likely to trade off broader macro themes and flows. The Canadian Dollar has been finding some renewed offers at current levels, with renewed concerns over the outlook for China weighing, while a stalling out in the OIL recovery has also factored into trade.

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 0.7466 – 11May high– Medium
• S1 0.7274 – 18Mar low – Medium
• S2 0.7176 – 3Feb/2015 low – Strong

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 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. Looking ahead, we get the RBNZ FSR at 21:00GMT followed by an RBNZ Wheeler speech.

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. Comments from Fed Williams won’t help investor sentiment, with the official not willing to rule out rate hikes at any upcoming meetings.

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.

• 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 1.3500 – Psychological – Medium
• R1 1.3434 – 24Apr high – Strong
• 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. 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, particularly with correlated risk assets starting to show signs of rolling over.