Buck Extends Gains, Bank of Canada Ahead

GBPUSD – technical overview

The recovery rally to fresh 2015 highs at 1.5815 looks to have finally stalled out, with the market considering the possibility of bearish trend resumption. Tuesday’s close below 1.5445 strengthens the outlook and suggests a medium-term lower top is in place at 1.5815 ahead of the next major downside extension, eventually below the yearly low at 1.4565. Next key support comes in at 1.5089. In the interim, rallies should be well called ahead of 1.5650.

• R2 1.5507 – 25May high – Strong
• R1 1.5475 – 26May high – Medium
• S1 1.5353 – 26May low  – Medium
• S2 1.5300 – Figure  – Medium

GBPUSD – fundamental overview

All of this US Dollar buying has done a good job of mitigating any positives out from the UK economy. On Tuesday, UK CBI Distributive Trades came in at a whopping 51, after the market had been looking for a 17 print. This already follows last week’s impressive UK retail sales. But for the time being, it’s the rebound in US economic data and sooner than later Fed rate hike prospect that is dictating trade, with market participants looking to buy the Buck at every turn. Dealers cite HFT demand in early Wednesday trade, though medium-term players are waiting to sell into any GBPUSD rallies.

USDJPY – technical overview

The market has finally broken out of a multi-month range, with the price surging through key resistance at 122.00, to open the door for the next major upside extension towards the 125.00-130.00 area further rup. The broader trend remains highly constructive and any setbacks should now be very well supported on dips. At this point, only a close below 118.23 would delay.

• R2 124.00 – Figure – Medium
• R1 123.32 – 26May/2015 high – Strong
• S1 122.02 – Previous high – Medium
• S2 121.49 – 26May low – Strong

USDJPY – fundamental overview

Although this major pair is looking stretched following an impressive Tuesday breakout, there is plenty of demand on dips, with Japanese importers included in this mix, as notable buyers into month end. Beyond the technical justification, this latest wave of demand has been triggered by solid US economic data, hawkish Fed comments, and a downplaying of Yen weakness on Tuesday by Japan Chief Cabinet Secretary Suga. Post Minutes comments from BOJ Iwata also haven’t hurt USD flows, after the central banker said the 2% inflation target timeframe was somewhat delayed and quantitative easing would continue until the target was met.

EURCHF – technical overview

The market has finally leveled out after a multi-day drop out from the February high at 1.0815. From here, there is risk for recovery 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 1.0323 – 26May low– Medium
• S2 1.0305 – 7May low – Strong

EURCHF – fundamental overview

This market has come 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 be able to make its next IMF loan repayment if a deal is not reached by the June 5th payment date, and this has fueled declines. Add more fuel to the fire is the Tuesday retreat in equity markets, with the liquidation encouraging safe haven bids. Still, an ongoing SNB commitment to act to curb excessive overvaluation in the Franc, should help support dips. 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 0.7533. Intraday rallies are now expected to be well capped ahead of 0.8000, while ultimately, only a break back above 0.8163 would delay the bearish structure.

• R2 0.7931 – 22May high – Strong
• R1 0.7839 – 25May high – Medium
• S1 0.7682 – 21Apr low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

Aussie has been finding some support off recent lows, though the move higher is less a function of Aussie demand. Shorter-term accounts have been out booking profit on USD longs, following a nice run over the past several sessions. But medium-term players are happily waiting to jump back into Aussie shorts into rallies. Softer Aussie construction data hasn’t really factored into Wednesday trade thus far with the market reacting to broader themes.

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. Tuesday’s daily close back above previous support at 1.2350 strengthens the outlook, with any setbacks now expected to be well supported above 1.2000.

• R2 1.2500 – Psychological – Strong
• R1 1.2448 – 26May high – Medium
• S1 1.2305 – 26May low – Medium
• S2 1.2275 – 25May low – Strong

USDCAD – fundamental overview

A round of solid US economic data, hawkish Fed comments and some selling in OIL, have all contributed to the latest slide in the Loonie. The big event risk for today on the global economic calendar is the Bank of Canada rate decision. While the BoC is widely expected to leave rates on hold at 0.75%, there is risk the monetary policy statement will carry a more dovish tone, with the Canadian economic recovery failing to gain meaningful traction.

NZDUSD – technical overview

Despite a minor consolidation, 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 deeper setbacks in the sessions ahead, for a retest of the key 0.7176, 2015 low, 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 0.7395 – 22May high– Strong
• R1 0.7322 – 26May high– Medium
• S1 0.7217 – 27May low – Medium
• S2 0.7176 – 3Feb/2015 low – Strong

NZDUSD – fundamental overview

Better than expected New Zealand trade data earlier this week, hasn’t really done all that much to help the beleaguered Kiwi. It seems broad based US Dollar demand, on the expectation for a sooner Fed rate hike, softer commodities and a pullback in risk correlated equity markets, are all contributing to this latest wave of Kiwi selling that has taken this pair back towards the yearly low at 0.7176. The RBNZ has been slowly shifting to the accommodative side, and the policy divergence with the Fed can not be ignored and should continue to weigh on this market going forward.

US SPX 500 – technical overview

The latest break to fresh record highs has stalled out, with the lack of bullish momentum suggesting the market could be exhausted at current levels and poised for a significant corrective decline. Tuesday’s close below 2116 strengthens the outlook and could open the door for deeper setbacks towards critical support at 2040 over the coming sessions. Ultimately, only back above 2137 negates.

• 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

The equity market has failed to establish any meaningful bullish momentum after breaking to fresh record highs in the previous week and could be at risk for stalling out yet again. A wave of solid US economic data, along with a number of hawkish comments from various Fed officials are all supportive of a rate liftoff sooner than later, and this reality is making it less attractive to be long equities at lofty levels.

GOLD (SPOT) – technical overview

The market has been very well supported on dips since recovering from the 2014 base. The price action 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 a daily close 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

Despite recent setbacks, the GOLD market continues to show signs of demand on dips. 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 for capital allocation than GOLD. Dealers cite plenty of interest ahead of $1170 with buy-stops reported above $1235.

Feature – technical overview

USDSGD has turned back up, following an intense round of declines off multi-year highs from March. The recent break back above a double bottom neckline at 1.3400 now opens the door for additional upside in the sessions ahead towards a measured move objective in the 1.3650 area. At this point, it looks like the market has carved out a medium-term higher low at 1.3190, en route towards a retest of the 1.3937 March peak.

• R2 1.3650 – Measured Move – Strong
• R1 1.3534 – 21Apr high – Medium
• S1 1.3403 – 26May low – Medium
• S2 1.3358 – 25May low – Strong

Feature – fundamental overview

Emerging market FX has come under pressure across the board as the US Dollar gains momentum in light of the sooner than later Fed rate hike prospect. A round of solid US economic data and hawkish Fed comments have been driving the price action, while we have also seen some reason for relative SGD weakness following the recent release of the much softer than expected Singapore industrial production print.