Market Roiled In Controversy, BOE, Fed Minutes Ahead

GBPUSD – technical overview

A nice pullback for this market since breaking to fresh 2015 highs in the previous week. However, there is some solid previous resistance turned support in the 1.5500 area, and if the market can hold above this level on a daily close basis, there is risk for another run to the topside, back through recent highs and towards 1.6000. Inability to close above 1.5500 will negate and put the pressure back on the downside for a more meaningful medium-term bearish trend resumption.

• R2 1.5638 – 18May low – Strong
• R1 1.5600 – Figure – Medium
• S1 1.5446 – 19May low  – Medium
• S2 1.5393 – 11May low  – Strong

GBPUSD – fundamental overview

The Pound has come under a good amount of pressure since breaking to fresh 2015 highs against the Buck in the previous week. Initially, it was profit taking post UK election euphoria and some renewed optimism over the outlook for second quarter US economic data, and now it’s in reaction to Tuesday’s disturbing inflation print, with CPI coming in negative and at its lowest levels since 1960. More broad based US Dollar demand into Wednesday has fueled additional declines in this major pair, which will now be forced to contend with additional volatility in the form of BOE and Fed Minutes.

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.

• R2 122.03 – 10Mar/2015 high – Strong
• R1 121.10 – 20May high – Medium
• S1 119.83 – 19May low – Medium
• S2 118.88 – 14May low – Strong

USDJPY – fundamental overview

Another surge in US equities to fresh record highs, and a healthy rally in US yields have been supportive of the USDJPY market in recent trade. Still, this market hasn’t really gone anywhere over the past several weeks, with plenty of offers capping rallies ahead of 122.00. From a policy perspective, the Dollar has been more vulnerable of late, with the prospect for a sooner Fed rate hike in question, while at the same time, the BOJ continues to signal it’s comfort with the current stance. Real money and leveraged types have been on the bid, while Japanese names are trying to cap the rally. Looking ahead, in light of the influence of monetary policy on this pair, the market will be very focused on the upcoming Fed Minutes.

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 1.0600 – Figure – Medium
• R1 1.0525 – 30Apr high – Strong
• S1 1.0385 – 14May low– Medium
• S2 1.0305 – 7May low – Strong

EURCHF – fundamental overview

This market has come back under some pressure in recent trade on the back of Euro outflows as market participants fear the worst in Greece. Greece has said it will not make the June IMF loan repayment if a deal is not reached by the payment deadline and this has fueled. Still, 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, even despite recent setbacks, the short-term pressure remains on the topside, and only back below 0.7863 would negate.

• R2 0.8052 – 18May high – Strong
• R1 0.8010 – 19May high – Medium
• S1 0.7897 – 20May low – Medium
• S2 0.7863 – 8May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been a victim of some broad based gains in the Buck over the past few sessions, with market participants finding renewed confidence in the prospect for a recovery in second quarter US economic data. This in conjunction with the more dovish RBA Minutes and some market uncertainty surrounding Greece has kept the commodity currency under pressure, though there has been some demand on dips, with the better than expected Aussie consumer sentiment data supporting a bit. The market will now look ahead to the release of the Fed Minutes later today.

USDCAD – technical overview

The market looks like it may finally have based out at 1.1920, putting in a meaningful medium-term higher low, ahead of the next major upside extension and bullish trend resumption. At this point, a break back above previous support at 1.2350 will strengthen the outlook.

• R2 1.2305 – 21Apr high – Strong
• R1 1.2256 – 20May high – Medium
• S1 1.2129 – 19May low – Medium
• S2 1.2067 – 15May high – Strong

USDCAD – fundamental overview

Tuesday’s BoC Governor Poloz comments were largely ignored, with participants instead focusing on some broad based US Dollar demand on the back of market jitters, solid US housing data and a notable pullback in the price of OIL. Canada wholesale sales won’t get much attention on Wednesday, with the focus shifting to the release of the Fed Minutes later in the day.

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 0.7564 – 14May high– Strong
• R1 0.7444 – 19May high– Medium
• S1 0.7337 – 19May low – Medium
• S2 0.7318 – 13May low – Strong

NZDUSD – fundamental overview

Though we have seen a little support for the New Zealand Dollar into Wednesday, any gains are likely to be very well capped, with the weight of a potential RBNZ rate cut, another disappointing Fonterra auction and renewed optimism over the outlook for the US economy, all factoring into negative Kiwi flows. One of the encouraging themes for the risk correlated currency has been continued push to record highs in US equity markets. But if this stretched market shows any signs of capitulation in the days ahead, it could be lights out for the New Zealand Dollar.

US SPX 500 – technical overview

The latest break and close above 2126 has opened the door for fresh record highs and the next major upside extension in this market, potentially towards a measured move in the 2200 area. At this point, a break back below 2100 would now be required to take the immediate pressure off the topside.

• R2 2150.00 – Psychological – Medium
• R1 2137.00 – 19May/Record – Strong
• S1 2084.00 – 12May low – Medium
• S2 2062.00 – 7May low – Strong

US SPX 500 – fundamental overview

Investors are feeding back into the broader uptrend in this market, with stocks breaking to fresh record highs. However, despite the gains, the market has demonstrated an inability to establish any meaningful bullish momentum thus far, 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 conviction and could be poised for capitulation over the coming sessions. Looking ahead, a good amount of volatility is expected late in the day on the release of the Fed Minutes.

GOLD (SPOT) – technical overview

The market has been in a corrective 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. Look for a break back above recent highs at 1232 to strengthen this outlook. Ultimately, only back below 1170 will negate.

• R2 1246.00 – 10Feb high – Medium
• R1 1232.00 – 18May 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. Dealers cite plenty of demand ahead of $1170 with buy-stops reported above $1235.

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 ahead of 2.5400 in favour of a bullish resumption and next major upside extension. Ultimately, only a close below 2.5390 would force a shift in the structure.

• R2 2.6225 – 13May low – Medium
• R1 2.6040 – 19May high – Strong
• S1 2.5560 – 6Apr low – Medium
• S2 2.5390 – 23Mar low – Strong

Feature – fundamental overview

Some upward revisions to Turkish CPI forecasts this week haven’t really factored into price action this week. 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% later today. This has perhaps helped the Lira a little in recent trade, though a resurgence in broad based US Dollar demand has unquestionably been the the biggest driver of price action. Today’s CBRT isn’t expected to produce any fireworks, though comments from Basci will be watched closely. The release of the Fed Minutes could be the bigger volatility generator later on.