US Dollar Rally Fizzles Out

GBPUSD – technical overview

Setbacks have been very well supported this week into previous resistance turned support in the 1.5400s, with the market now contemplating a fresh higher low at 1.5446, to be confirmed on a push back above last week’s 2015 high at 1.5815. Still, the medium-term downtrend remains intact, and any gains towards 1.6000 are expected to be well capped. At this point however, a break back below 1.5446 would be required to take the immediate pressure off the topside.

• R2 1.5745 – 18May high – Strong
• R1 1.5700 – 21May high – Medium
• S1 1.5588 – 20May high  – Medium
• S2 1.5525 – 21May low  – Strong

GBPUSD – fundamental overview

Quite a recovery for the Pound on Thursday, with the currency benefitting greatly from a well above forecast UK retail sales showing. The market had been looking for a print of 0.4% m/m, so when the actual number came in at 1.2% m/m, there was a flurry of buying that resulted in some across the board Sterling outperformance. The major pair has remained well supported into Friday, with the disappointing batch of Thursday US data further contributing to price action. Looking ahead, much of the focus for Friday will be on a BOE Governor Carney speech at the EU forum, US CPI, and an end of day Fed Chair Yellen speech on the US economic growth outlook.

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 118.23 would delay.

• R2 122.03 – 10Mar/2015 high – Strong
• R1 121.48 – 20May high – Medium
• S1 120.58 – 20May low – Medium
• S2 119.83 – 19May low – Strong

USDJPY – fundamental overview

As was widely expected, the Bank of Japan left policy unchanged early Friday. Still, the event risk has helped inspire additional Yen demand after the BOJ cited expectations for moderate growth and an inflation pickup. This puts a damper on hopes for any additional stimulus from the central bank any time soon, and could act as a disincentive to those who have been selling the Yen aggressively on loose BOJ policy forecast. Moreover, with the Fed timeline scaled back post this week’s Minutes, weakness in USDJPY is making good sense. Looking ahead, US CPI and a speech from Fed Chair Yellen on the US economic growth outlook, will command most of the attention for the remainder of the day.

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 1.0350 – Mid-Figure– 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 declines. 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 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

A recent recovery rally has stalled out ahead of 0.8200 and overall, the broader downtrend remains intact. Look for a lower top to be in place at 0.8163, in favour of the next major downside extension back towards and eventually below the current multi-year base from early April at 0.7433. Intraday rallies are now expected to be well capped around 0.8000, while ultimately, only a break back above 0.8163 would delay the bearish structure.

• R2 0.8010 – 19May high – Strong
• R1 0.7950 – Mid-Figure – Medium
• S1 0.7861 – 20May low – Medium
• S2 0.7787 – 5May low – Strong

AUDUSD – fundamental overview

Market participants have moved past this week’s more dovish RBA Minutes, instead focusing on a scaled back Fed rate hike timeline and another soft round of Thursday economic data out of the US. Aussie has been bid back up into Friday, also finding additional bids on the back of renewed commodity demand. Still, there are good offers reported on rallies into the 0.8000 area and additional upside may prove hard to come by. Looking ahead, a lot of how this currency pairs settles on the week will have to do with today’s US CPI print and a late Friday speech from Fed Chair Yellen on the economic growth outlook for the US economy.

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, while any setbacks should be well supported above 1.2000.

• 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

The Canadian Dollar has mostly reacted off broader sentiment for the US Dollar this week, with the Loonie under pressure on Monday, Tuesday, but slowly recovering since. Of course, the ability for OIL prices to retain a bid tone and hold onto the recent recovery has also been CAD supportive. Looking ahead, there will be plenty for this market to digest in Friday trade, with Canada CPI and retail sales due alongside US CPI. Late in the day, Fed Chair Yellen comments will be watched closely, with the central banker slated to speak on the topic of the US economic growth outlook.

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 0.7339 – 22May low – Medium
• S2 0.7282 – 20May low – Strong

NZDUSD – fundamental overview

A relatively upbeat New Zealand Budget this week and accompanying comments from FinMin English that the economy is in good shape, have helped to prop Kiwi off the weekly lows. Moreover, broad based US Dollar weakness on the back of a scaled back Fed rate hike timeline and some softer US economic data, have also fueled renewed Kiwi demand. But overall, with the RBNZ inching closer towards a rate cut, with the dairy market continuing to look soft, and with equity markets vulnerable at record highs, any additional upside in the risk correlated currency should be met with formidable resistance. Looking ahead, US CPI and a Fed Yellen speech on the US economic growth outlook come into focus.

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 and daily close back below 2116 would now be required to take the immediate pressure off the topside.

• R2 2150.00 – Psychological – Medium
• R1 2137.00 – 19May/Record – Strong
• S1 2116.00 – 18May low – Medium
• S2 2084.00 – 17May 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 this week. 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 the market could be poised for capitulation over the coming sessions. Looking ahead, investors will be paying attention to US CPI data and a late day Fed Chair Yellen speech on the topic of the US economic growth outlook.

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 2.6110 – 20May high – Strong
• S1 2.5600 – 21Apr low – Medium
• S2 2.5390 – 23Mar low – Strong

Feature – fundamental overview

Dollar weakness against the major currencies in the latter half of the week hasn’t been felt as much in the emerging market FX space. While we have seen an impressive recovery in the Lira over the past several weeks, the currency is starting to show signs of renewed weakness. An on hold CBRT decision this week and expectations the central bank won’t be looking to cut any time soon, have indeed helped to support the Lira, although it seems risk associated with Greece and a potential cooling in China are variables that can not be overlooked. Throw in the uncertainty surrounding the upcoming Turkey election and it would make sense for additional TRY rallies to be well capped.