Month End Flows And US GDP

GBPUSD – technical overview

The recovery rally to fresh 2015 highs at 1.5815 has stalled out, with the market considering the possibility of bearish trend resumption. The recent daily close back 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 towards 1.5000. Next key support comes in at 1.5089. In the interim, rallies should be well called ahead of 1.5650.

• R2 1.5437 – 27May high – Strong
• R1 1.5385 – 28May high – Medium
• S1 1.5261 – 28May low  – Strong
• S2 1.5200 – Figure  – Medium

GBPUSD – fundamental overview

The Pound was already suffering from concerns over the fate of the UK’s EU membership following a speech from the Queen Mum earlier in the week, and took another hit in Thursday trade after the release of the softer than expected second estimate of Q1 UK GDP. Still, with the US Dollar enjoying a nice broad based run in recent sessions, there has been some profit taking on Dollar longs ahead of the weekend, which has helped to support the Pound a little. Overall, the risks are tilted in the Dollar’s favour with US economic data picking back up and a sooner than later Fed rate hike expected. For today, the focus will be on the release of US GDP data.

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 up. 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 125.00 – Psychological – Medium
• R1 124.45 – 28May/2015 high – Strong
• S1 123.49 – 28May low – Medium
• S2 122.77 – 27May low – Strong

USDJPY – fundamental overview

End of month profit taking on long US Dollar positions has been playing a part in trade for this major pair into Friday, with USDJPY backing off from the fresh multi-year highs seen in Thursday trade. Also contributing to the pullback has been a better run of Japanese data, including a nice uptick in industrial production. As far as policy implications are concerned, the better data would further confirm the outlook which supports the BOJ remaining on hold for the time being and not pursuing additional QE. Still, overall, broader flows continue to be highly supportive of a higher USDJPY rate, with the Fed moving closer to a rate hike and this market breaking some critical technical resistance. Dealers cite plenty of demand towards 122.00.

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 above 1.0300 on a daily close basis. 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 1.0385 – 25May high – Strong
• S1 1.0305 – 28May low– Medium
• S2 1.0235 – 20Apr 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. Adding more fuel to the fire are comments from IMF Lagarde who says there have been no substantial results in talks and a Grexit is possible. 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. On Friday, the market faces added volatility as it digests the latest Swiss GDP figures.

AUDUSD – technical overview

Overall, the broader downtrend remains intact after the market stalled out ahead of 0.8200 several days back. Look for a lower top to now 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 should be well capped ahead of 0.8000, while ultimately, only a break back above 0.8163 would delay the bearish structure.

• R2 0.7839 – 25May high – Strong
• R1 0.7768 – 27May high – Medium
• S1 0.7617 – 28May low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

While the RBA may not cut rates at its upcoming meeting, there is every reason to expect the central bank will leave the door open for additional policy accommodation next Tuesday, as the Australian economy continues to face headwinds. Thursday’s much weaker Aussie Q1 CAPEX showing has been followed up on Friday with disappointing new home sales and private sector credit data. AUDUSD is now closing in on a retest of the 2015 and multi-month low against the US Dollar, though we have seen some end of month profit taking support the pair ahead of the 2015 low. Looking ahead, the big release in Friday trade comes in the form of US GDP.

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 towards the 2015 high at 1.2835. The recent 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 1.2538 – 28May high – Strong
• R1 1.2492 – 27May high – Medium
• S1 1.2395 – 27May low – Medium
• S2 1.2305 – 26May low – Strong

USDCAD – fundamental overview

Mixed batches of economic data out of Canada and the US on Thursday were offsetting, and the market chose to focus on other factors which included some end of month flows and price action in the OIL market. A strong run for the US Dollar over the past several days has resulted in some profit taking from shorter-term spec accounts ahead of June, while a nice recovery in OIL following a mid-week dip has also helped to inspire renewed bids in the Canadian Dollar. Still, overall, broader flows are supportive of the US Dollar, with the monetary policy divergence theme standing out as the major driver. The Fed is expected to hike sooner than later and this should continue to push USDCAD back towards its 1.2835, 2015 high. For today, plenty of volatility is expected with GDP prints due out of Canada and the US at 12:30GMT.

NZDUSD – technical overview

Thursday’s break to fresh 2015 and multi-month lows confirms a medium-term lower top at 0.7744 and opens the door for the next major downside extension towards a measured move objective in the 0.6500 area. At this point, look for any intraday rallies to be well capped ahead of 0.7400.

• R2 0.7271 – 28May high– Strong
• R1 0.7212 – 27May low– Medium
• S1 0.7129 – 28May/2015 low – Strong
• S2 0.7100 – Figure – Medium

NZDUSD – fundamental overview

Softer New Zealand building permits and business confidence aren’t going to do anything to help the beleaguered Kiwi, which has broken to fresh yearly and multi-month lows against the US Dollar. Earlier this this week, we saw another Fonterra reduction in milk prices, which already gave bears another good excuse to knock the commodity currency lower. There has been a dramatic shift in RBNZ expectations these past few months and with the market now pricing in the possibility for a rate cut on June 10, deeper setbacks are projected. Throw in the diverging Fed policy outlook and any rallies in NZDUSD should be very well capped. Looking ahead, US GDP stands out as the key release in Friday trade.

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 2099.00 – 26May 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. Today’s US GDP data will be watched closely and could very well factor into trade. Anything above expectation will likely weigh on stocks with the data further confirming a sooner Fed move, while anything on the soft side could also weigh as softer data of late has been losing its bullish appeal.

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 1.3540 – 27May high – Medium
• S1 1.3403 – 26May low – Medium
• S2 1.3358 – 25May low – Strong

Feature – fundamental overview

A round of end of month profit taking on USD longs has opened a minor SGD rally into Friday trade. Investment banks and local funds have reportedly been on the offer. Still, broader flows are now firmly supportive of the US Dollar, with Fed policy expectations angling for a sooner than later rate liftoff. We have also seen some notable M&A related flows for this pair, after Avago Technologies agreed to pay US$37B in cash and stock for US rival Broadcom Corporation. This is the biggest acquisition in the technology world since the dotcom bubble. Looking ahead, US GDP data will cap things off for the week.