A Worrying Disconnect

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 1.5815 – 14May high – Medium
• S1 1.5728 – 14May low  – Medium
• S2 1.5633 – 13May low  – Strong

GBPUSD – fundamental overview

The Pound continues to extend its surge to fresh 2015 highs, on the back of diverging economic data. The highlights  of the week were a solid UK employment report and 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. Looking ahead, UK construction output kicks things off, followed by a round of data in the US including empire state manufacturing, industrial production, capacity utilization and Michigan sentiment.

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 118.88 – 14My low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

The major pair has found some renewed demand into Friday, with a solid round of US jobless claims data, at 15 year lows, being used as an excuse to drive this directionless market higher. Overall, USDJPY hasn’t really gone anywhere and remains confined to some tight multi-week range trade. There has been plenty of reason to sell the pair into rallies as well, on broader US Dollar weakness and ongoing comments from BOJ Kuroda that policy will remain as is. For now, it doesn’t look like the market is quite yet ready to make a decision on its next key move.

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. Meanwhile, there has been a growing sense of optimism for a Greek deal and this has also helped to prop the EURCHF rate. Dealers cite solid demand, with no meaningful stops until below 1.0200.

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 0.8000 – Psychological – 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 disappointing US retail sales release and Thursday’s much softer US PPI, have cast more doubt on the prospect for a Fed rate hike over the coming months and markets have reacted accordingly. Still, solid US claims data has offset a bit and with the RBA quite uncomfortable with the elevated Aussie 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.

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 1.1919 – 14May low – 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 find bids 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, we get Canada manufacturing shipments, international securities transactions and existing home sales, along with US empire state manufacturing, industrial production, capacity utilization and Michigan sentiment.

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 0.7564 – 14May high– Strong
• S1 0.7421 – 8May low – Medium
• S2 0.7402 – 12May high – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been having a very hard time holding onto gains, even in the face of broad US Dollar weakness, with a recent shift in the RBNZ policy outlook and discouraging developments on the local front, driving Kiwi underperformance. Most recently, Fonterra was forced yet again to cut its twelve month forecasts on dairy. Still, Kiwi has managed to recover off recent lows against the Buck, and with US equities pushing fresh record highs, this should be somewhat supportive of the higher yielding, risk correlated currency.

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. But a daily close above 2126 will open a fresh upside extension, potentially towards 2200.

• 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

Investors are feeding back into the broader uptrend in this market, with stocks pushing to fresh record highs into Friday trade. However, despite the gains, the market has demonstrated an inability to establish any meaningful upside beyond the 2120s and could be at risk for stalling out yet again. For now, scaled back Fed rate hike expectations have seemingly been supportive of the flows, though there is a sense these gains are lacking in meaningful conviction and could be poised for capitulation over the coming sessions.

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. A daily close above 1225 will strengthen the constructive prospect and open the door for fresh upside towards 1300.

• R2 1246.00 – 10Feb high – Medium
• R1 1227.00 – 14May 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, and with global equities looking vulnerable at record highs, 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 back towards $1300 in the sessions ahead.

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 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 benefitted 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. We are already seeing renewed US Dollar demand and SGD underperformance into Friday, on the back of a weaker than expected Singapore retail sales print.