RBA Disappoints Doves, USDJPY Clears 125.00

GBPUSD – technical overview

A 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 1.5385 – 28May high – Strong
• R1 1.5305 – 1Jun high – Medium
• S1 1.5170 – 1Jun low  – Medium
• S2 1.5089 – 5May low  – Strong

GBPUSD – fundamental overview

A combination of softer UK manufacturing PMIs and solid US ISM manufacturing have fueled the latest round of setbacks in GBPUSD. There isn’t much in the way of any impactful economic data due Tuesday, with only second tier releases in the form of UK construction PMIs and US factory orders. The market will likely trade off broader flows and start to position ahead of tomorrow’s US ADP and Thursday’s Bank of England rate decision.

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 into the 125.00-130.00 area. 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 125.50 – Mid-Figure – Medium
• R1 125.05 – 2Jun/2015 high – Strong
• S1 123.85 – 1Jun low – Medium
• S2 122.77 – 27May low – Strong

USDJPY – fundamental overview

BOJ Governor Kuroda continues to shell out his line that ‘it’s desirable FX moves in a stable manner and for it to reflect economic fundamentals.’ Still, it isn’t likely these comments do much to scare away USDJPY bulls, some of the most reliable bulls in the FX market over the past several months. The monetary policy divergence theme will keep driving this market higher over the medium-term, though it is possible that short-term profit taking works its way through in the sessions ahead now that the major pair has taken out 125.00 and is well overextended. Plenty of fresh demand is reported on dips.

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 1.0280 – 29May 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. Still, an ongoing SNB commitment to act to curb excessive overvaluation in the Franc, as highlighted by SNB Jordan over the weekend, should continue to support dips. Dealers cite solid demand, with no meaningful stops until below 1.0200.

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 will delay the bearish structure.

• R2 0.7839 – 25May high – Strong
• R1 0.7768 – 27May high – Medium
• S1 0.7598 – 1Jun low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

Although the RBA did come out and say that policy needs to be accommodative, this was a far cry from the decision markets were expecting, with the overall tone less dovish and more status quo than anything else. A recent run of downbeat data had fueled a bias for a looser monetary policy statement, but the RBA went ahead and left rates unchanged at record 2.25% lows, while offering no new guidance on rate policy. This has opened a round of profit taking on shorts, with the commodity currency outperforming on the day. Still, plenty of fresh offers are seen into rallies, with medium-term players comfortable building into short positions on the policy divergence theme.

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 1.2667 – 10Apr high – Strong
• R1 1.2563 – 1Jun high – Medium
• S1 1.2395 – 27May low – Medium
• S2 1.2305 – 26May low – Strong

USDCAD – fundamental overview

USDCAD buyers continue to flood into this trade, with this market rallying sharply out from sub-1.2000 levels over the past several days. A combination of downbeat Canada data and an on the whole healthy pickup in US data have been driving the latest surge, with the results further highlighting an already well pronounced monetary policy divergence. Interestingly enough, OIL prices have held up rather well, though this hasn’t really been much of a comfort to the correlated Loonie of yet.

NZDUSD – technical overview

Last 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– Medium
• R1 0.7195 – 29May high– Strong
• S1 0.7078 – 1Jun/2015 low – Strong
• S2 0.7050 – Mid-Figure – Medium

NZDUSD – fundamental overview

Perhaps Kiwi has been benefitting a bit into Tuesday trade on the back of some broad profit taking on US Dollar longs. Also seen supporting has been a less dovish RBA policy decision, with the correlated New Zealand Dollar following Aussie’s lead. Still, last week’s run of softer New Zealand data has fueled fresh yearly and multi-month lows in NZDUSD, with expectations building for a potential RBNZ rate cut next week.  Throw in the diverging Fed policy outlook, slowing China and exhausted global equities market and any rallies in NZDUSD should be very well capped.

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. The recent 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. The economic calendar is stacked this week, but the direction in this market will most probably hinge on Friday’s all important monthly employment report.

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

USDZAR remains locked within a very well defined uptrend, with the market now looking for a retest and break to fresh multi-year highs, beyond the current 2015 peak at 12.5210. A medium-term higher low looks to be in place at 11.6935, with a break above 12.5210 to confirm and open the next major upside extension. In the interim, any setbacks should be very well supported ahead of 11.9000.

• R2 12.5210 – 13Mar/2015 high – Strong
• R1 12.3000 – 23Apr high – Medium
• S1 12.1370 – 1Jun low – Medium
• S2 12.0130 – 28May low – Strong

Feature – fundamental overview

The South African Rand has been a relative underperformer of late, with the currency hit hard on broader macro themes and domestic scandal. An expectation for a sooner Fed rate hike has knocked the entire emerging market space, though the Rand has also been hit on a Rand rigging investigation. The Competition Commission is now reputedly probing more banks as it attempts to prove widespread collusion. Perhaps news of a potential Greece deal is helping to offset some of the negative ZAR flows in Tuesday trade.