US Dollar Falls On Hard Times

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 ahead of 1.6000, with a medium-term lower top sough out ahead of bearish resumption.

• R2 1.5826 – 27Nov high – Strong
• R1 1.5800 – Figure – Medium
• S1 1.5633 – 13May low  – Strong
• S2 1.5557 – 12May low  – Medium

GBPUSD – fundamental overview

The Pound continues to extend its surge to fresh 2015 highs, on the back of solid UK employment data and a fresh round of broad based US Dollar declines post softer US retail sales. Still, a less upbeat Bank of England growth outlook and expectation that inflation will stay below 2% until 2017, has pushed back BOE rate hike forecasts and should start to act as a bit of a weight on additional Sterling gains. There is talk of demand towards 1.6000, though fresh offers are seen ahead of the psychological barrier.

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 119.00 – Figure – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Even the Yen has been unable to resist the temptation to rally on the back of yet another soft round of US data, this time in the form of weak US retail sales. The bad run in the US is now starting to have an impact on Fed rate hike expectations and yield differentials, with momentum shifting away from the Dollar. Throw in a Bank of Japan that has expressed satisfaction with current accommodation as is, and the Yen demand is making sense. Moreover, the Yen still shares traditional correlations with risk assets and any downside pressure in global equities can be supportive of Yen flows.

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 earlier this week that partial bailout disbursements could be exchanged for a partial implementation of reform measures, and a EUR750M Greek loan repayment on Tuesday, have also been supportive of this market. Still the SNB also needs to be on the lookout for any safe haven Franc flows in the event of an equity market capitulation.

AUDUSD – technical overview

The recent daily close above previous resistance at 0.8075 strengthens the recovery outlook for this pair, with the break now suggesting the market is attempting to fulfill a more significant double bottom objective in the 0.8300 area. Overall, the broader downtrend remains intact, but for the interim, the pressure is on the topside, and only back below 0.7863 would negate.

• R2 0.8200 – Figure – Strong
• R1 0.8163 – 14May high – Medium
• S1 0.8075 – 29Apr high – Medium
• S2 0.7947 – 13May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has found comfort in a bout of broad based US Dollar weakness, with the price action encouraging renewed gains through 0.8100. Wednesday’s softer than expected US retail sales release has cast serious doubt on the prospect for a Fed rate hike over the coming months and markets have reacted accordingly, selling the Dollar aggressively. Still, with the RBA quite uncomfortable with the elevated exchange rate, and with plenty of sizable medium-term players looking to sell the Australian Dollar, any additional upside could prove hard to come by in the sessions ahead, particularly with the correlated China economy cooling off and risk assets starting to show signs of rolling over.

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, exposing a measured move extension to 1.1865 further down. But look for the market to be well supported around the 1.1865 area, with only a weekly close below this level to compromise the constructive outlook.

• R2 1.2107 – 12May high – Strong
• R1 1.2028 – 13May high – Medium
• S1 1.1900 – Figure – Medium
• S2 1.1865 – Measured Move – Strong

USDCAD – fundamental overview

OIL’s ability to stay well supported in recent trade and hold onto it’s recovery has been icing on the cake for a Canadian Dollar that continues to rally on the back of broad based US Dollar weakness. Wednesday’s softer US retail sales data opened a fresh wave of USD declines, with this pair breaking down and threatening a drop into the 1.1800s. Still, with technicians citing solid support into the 1.1865 area and dealers also reporting demand around 1.1900, the risk for significant Canadian Dollar gains from current levels seems limited. Looking ahead, the BoC will release its Spring issue of the ‘Bank of Canada Review’ and the market could be exposed to volatility from the publication. The market will also take in second-tier economic data in the form of Canada housing, US claims and US PPI.

NZDUSD – technical overview

Despite a minor bounce, 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 0.7626 – 1May high– Medium
• R1 0.7577 – 5May high– Strong
• S1 0.7476 – 14May low – Medium
• S2 0.7402 – 12May high – Strong

NZDUSD – fundamental overview

Though Kiwi has underperformed of late, the higher yielding currency is finding some demand over the past few sessions on the back of broad based US Dollar declines. A softer US retail sales print triggered additional Kiwi bids on Wednesday, with fresh demand early Thursday following a better than expected New Zealand retail sales showing. Still, with the RBNZ moving closer towards a potential rate cut, with Governor Wheeler continuing to talk down the elevated Kiwi rate, and with correlated global equities starting to show signs of capitulation, additional upside in the New Zealand Dollar should be limited.

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 evidenced by this latest disappointing US retail sales showing.

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 looking less attractive in a low yield environment, add with global equities at risk for major capitulation, there is no better place to be invested than in the yellow metal. Throw in this latest slide in the Dollar and the market could be poised for a surge through reported stops over $1225.

Feature – technical overview

USDSGD has been in corrective mode over the past several weeks, with the market pulling back sharply from the 1.3937, 2015 peak from March. There is now risk for additional corrective action, with a break below 1.3148 to confirm a lower top at 1.3400 and open the next downside extension exposing psychological barriers at 1.3000. A break back above 1.3400 would now be required to signal an end to the correction and signal a resumption of the broader uptrend.

• R2 1.3300 – Figure – Medium
• R1 1.3265 – 14May high – Strong
• S1 1.3148 – 29Apr low – Strong
• S2 1.3100 – Figure – Medium

Feature – fundamental overview

The Singapore Dollar has benefitting in recent trade from a bout of across the board US Dollar weakness. Still, broader risk to the global economy and some notable underperformance in Asian currencies on concern over a cooling China economy, are themes that should not be discounted, and could once again inspire fresh USD demand in the sessions ahead. But for the time being, as the US Dollar goes, so does this market.