US Dollar Not Out Of The Woods

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The Euro has extended its correction since breaking above key neckline resistance several days back. Though the medium-term downtrend is still firmly intact, a double bottom formation has triggered, exposing a potential measured move towards the February peak at 1.1535. At this point, setbacks should be well supported for now, with only a daily close below 1.1050 to put pressure back on the downside.

Screen Shot 2015-05-18 at 4.58.51 AM

  • R2 1.1500 – Psychological – Medium
  • R1 1.1467 – 15May high – Strong
  • S1 1.1324 – 15May low – Strong
  • S2 1.1279 – 12May high – Medium

EURUSD – fundamental overview

Dealers continue to cite decent demand for the Euro into Monday, with the single currency supported despite a leaked IMF memo that Greece is on the verge of default and news that Fitch is preparing to downgrade a number of larger Euro banks. It seems the ongoing round of disappointing economic data out of the US over the past several weeks has been the primary driver for Euro gains, with market participants scaling back Fed rate hike expectations. Though the US labour market is still looking healthy, the disconnect with other US economic data can not be ignored and has proven to be a major thorn at the side of the US Dollar.

GBPUSD – technical overview

Fresh 2015 highs for this market in the previous week, following an impressive surge through previous resistance at 1.5600. The bullish break takes some of the pressure off the downside and could signal additional upside 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.

Screen Shot 2015-05-18 at 4.59.19 AM

  • R2 1.5826 – 27Nov high – Strong
  • R1 1.5815 – 14May high – Medium
  • S1 1.5700 – Figure  – Medium
  • S2 1.5633 – 13May low  – Strong

GBPUSD – fundamental overview

Despite a softer round of Friday economic data out of the US, with industrial production and consumer confidence disappointing, the Pound was unable to extend recent recovery gains, with the market falling victim to some profit taking. Post UK election euphoria has been fading over the past few sessions and this has likely opened the door for this latest minor pullback. Still, with the Dollar contending with an ongoing bout of softer data, there is risk this Cable rally will still extend to yet another 2015 high towards 1.6000. Dealer’s cite decent demand with no real sell-stops reported until below 1.5630.

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.

Screen Shot 2015-05-18 at 4.59.33 AM

  • 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

A firmer Nikkei, along with demand from Japanese banks and pension funds, has helped to fuel a bit of demand in early Monday trade, with this market mostly shrugging off another round of softer US economic data on Friday. Overall, USDJPY hasn’t really gone anywhere and remains confined to some tight multi-week range trade. There has also been plenty of reason to sell the pair into rallies, on broader US Dollar weakness, scaled back Fed hike expectations 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.

Screen Shot 2015-05-18 at 4.59.43 AM

  • R2 1.0600 – Figure – Medium
  • R1 1.0525 – 30Apr high – Strong
  • S1 1.0385 – 14May low– Medium
  • S2 1.0305 – 7May 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, ongoing demand for global equities has also been supportive of this correlated exchange 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.

Screen Shot 2015-05-18 at 4.59.55 AM

  • R2 0.8163 – 14May high – Strong
  • R1 0.8089 – 15May high – Medium
  • S1 0.7947 – 13May low – Medium
  • S2 0.7863 – 8May low – Strong

AUDUSD – fundamental overview

Some mild underperformance in the Australian Dollar on Monday, with the market taking a bit of a hit on the back of comments from RBA Lowe. The central banker said further falls in the Australian Dollar would be supportive of the local economy, while also not ruling out the possibility for additional rate cuts if needed. Still, with the market contending with another batch of softer economic data out of the US, there is talk of Aussie demand into dips as the broader US Dollar correction has not yet relented on the prospect for a pushed back Fed rate hike timeline.

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.

Screen Shot 2015-05-18 at 5.00.10 AM

  • R2 1.2107 – 12May high – Strong
  • R1 1.2067 – 15May 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 helped the Canadian Dollar to continue to find bids on dips. The Canadian Dollar has also benefitted from a bout of broad based US Dollar weakness on the back of softer economic data out of the US, which has pushed back Fed rate hike expectations. 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.

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.

Screen Shot 2015-05-18 at 5.00.30 AM

  • R2 0.7564 – 14May high– Strong
  • R1 0.7503 – 15May high– Medium
  • S1 0.7402 – 12May high – Medium
  • S2 0.7318 – 13May low – 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, weekend news the New Zealand government will take additional measures to curb the overheating property market, has been weighing on Kiwi. 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 recent record high. 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.

Screen Shot 2015-05-18 at 5.00.41 AM

  • R2 2150.00 – Psychological – Medium
  • R1 2126.00 – 15May/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 squeaking out fresh record highs in the previous week. 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.

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  • 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

USDTRY has been in corrective mode over the past several days, with the market pulling back sharply from the 2.7430 record high from late April. Though there is still risk for additional corrective weakness, this market remains locked within a more well defined medium-term uptrend and should start to find support into the 2.5400 area ahead of a bullish resumption and next major upside extension. Ultimately, only a close below 2.5390 would force a shift in the structure.

Screen Shot 2015-05-18 at 5.01.44 AM

  • R2 2.6225 – 13May low – Medium
  • R1 2.5995 – 15May high – Strong
  • S1 2.5560 – 6Apr low – Medium
  • S2 2.5390 – 23Mar low – Strong

Feature – fundamental overview

Some revisions to CPI forecasts aren’t really factoring into price action, with the outlook pretty much offsetting. Into the end of the year Turkish CPI is seen slightly higher, while over the next 12 months the indicator is forecast lower. Looking out 24 months, inflation is only expected to be slightly firmer than current levels. Perhaps more importantly, on the rate front, markets are no longer pricing any rate cuts, with the CBRT expected to hold firm at 7.50%. This has perhaps helped the Lira a little in recent trade, though broad based US Dollar weakness has unquestionably been the the biggest driver of price action.

Peformance chart: Monday’s performance v. US dollar (5:15GMT)

Screen Shot 2015-05-18 at 8.12.51 AM

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