Choppy Markets Take in ECB Decision, US ADP

GBPUSD – technical overview

The latest round of setbacks off the recent 2015 high at 1.5815 have stalled out, with the market bouncing ahead of key support at 1.5089. Still, with the medium-term downtrend intact, any rallies are classified as corrective, with the market in search of another lower top below 1.5815 in favour of a bearish resumption back towards 1.5089. Look for the current bounce to be well capped below 1.5500, with only a daily close back above this level to delay the immediate bearish outlook.

• R2 1.5437 – 27May high – Strong
• R1 1.5400 – Figure – Medium
• S1 1.5305 – 1Jun high  – Medium
• S2 1.5170 – 1Jun low  – Strong

GBPUSD – fundamental overview

Solid UK construction PMIs along with a nice pickup in UK mortgage approvals, have helped to inspire a renewed round of bids in the Pound. Of course, the currency has also been a beneficiary of broad based USD declines on the back of optimism for a Greek deal, softer US factory orders data, and some dovish Fed speak. The Bank of England kicks off its two day policy meeting today, though nothing in the way of volatility is expected on this front, with the primary focus on UK services PMIs and US ADP employment data. Other US economic data today includes US trade, ISM non-manufacturing and the Fed Beige Book.

USDJPY – technical overview

Although the bullish structure remains firmly intact, following the recent break to fresh multi-year highs beyond 122.00, there are signs of short-term exhaustion after the market stalled out above 125.00 on Tuesday. The resulting bearish outside formation suggests we could see some corrective declines in the sessions ahead, though any setbacks should now be very well supported above previous resistance turned support at 122.00.

• R2 125.50 – Mid-Figure – Medium
• R1 125.05 – 2Jun/2015 high – Strong
• S1 123.75 – 2Jun low – Medium
• S2 122.77 – 27May low – Strong

USDJPY – fundamental overview

An exhausted USDJPY rally has finally succumb to the pressures of overextension, with the market pulling back from fresh multi-year highs just over 125.00 into Wednesday trade. Broad based USD weakness has been the primary driver of the price action, with the prospect for a Greece deal initially triggering currency gains, while dovish Fed Brainard comments and softer US factory orders have further contributed. Still, setbacks are expected to be very well supported in this market, with many medium and longer-term accounts looking to build into existing long positions on dips. Dealers cite plenty of demand ahead of 122.00. For today, the key focus will be on US ADP employment data, with US trade, ISM non-manufacturing and the Fed Beige Book also getting attention.

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 1.0435 – 2Jun high – Medium
• S1 1.0280 – 29May low– Medium
• S2 1.0235 – 20Apr low – Strong

EURCHF – fundamental overview

A hotter than expected Eurozone inflation print, along with a surge in German bund yields on the back of optimism over a Greek deal, have helped to bolster this market back above 1.0400. Moreover, 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 this market on 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 medium-term 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. The latest corrective rally should be well capped ahead of 0.8000, while ultimately, only a break back above 0.8163 will delay the bearish structure.

• R2 0.7931 – 22May high – Strong
• R1 0.7839 – 25May high – Medium
• S1 0.7756 – 3Jun low – Medium
• S2 0.7700 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has been very well bid in the early week, following a less dovish RBA rate decision on Tuesday and some better than expected Aussie GDP data early Wednesday. Broad based USD weakness on the back of optimism for a Greek deal, dovish Fed Brainard comments and softer US factory orders have also contributed to Aussie gains. Still, overall, the market is not bullish Aussie, with plenty of accounts looking to sell into the current rally and build into existing shorts. Today’s Aussie GDP was also somewhat misleading, with domestic demand non-existent and most of the GDP pickup coming from exports and inventories. Looking ahead, the key focus will be on US ADP employment data, with US trade, ISM non-manufacturing and the Fed Beige Book also getting attention.

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 setbacks now expected to be well supported above 1.2150.

• R2 1.2563 – 1Jun high – Strong
• R1 1.2500 – Psychological – Medium
• S1 1.2367 – 2Jun low – Medium
• S2 1.2305 – 26May low – Strong

USDCAD – fundamental overview

A nice recovery for the Canadian Dollar into Wednesday trade, with the price action to be expected somewhat following several days of intense downside pressure. Broad based USD weakness on the back of Greek deal optimism, dovish Fed comments and softer US factory orders have been sourced as the primary driver for the USDCAD pullback, while ongoing support for OIL prices is also factoring. Looking ahead, the key focus will be on US ADP employment data, with US trade, ISM non-manufacturing and the Fed Beige Book also getting attention.

NZDUSD – technical overview

Last week’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. The market has since paused for a breather following the latest round of fresh declines, but at this point, look for any intraday rallies to be well capped ahead of 0.7400.

• R2 0.7271 – 28May high– Strong
• R1 0.7201 – 2Jun high– Medium
• S1 0.7100 – Figure – Medium
• S2 0.7078 – 1Jun/2015 low – Strong

NZDUSD – fundamental overview

Though there have been no positive economic data developments out of New Zealand to speak of this week, Kiwi has managed to recover off recent lows on the back of some broad based USD selling. Also seen supporting is the relative outperformance in the correlated Australian Dollar. 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. Looking ahead, the key focus will be on US ADP employment data, with US trade, ISM non-manufacturing and the Fed Beige Book also getting attention.

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 2110 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 overall 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. Today, we will get a hint of what’s to come on Friday, with the release of ADP employment.

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 12.3460 – 2Jun high – Medium
• S1 12.1370 – 1Jun low – Medium
• S2 12.0130 – 28May low – Strong

Feature – fundamental overview

Fears of stagflation in South Africa have been mitigated somewhat following the release of the latest SARB monetary policy report. In its report, the central bank outlined its commitment to the current tightening cycle and that with inflation above forecast, more rate hikes could be expected. At the same time, the SARB also made it clear that with the economy in a fragile state, the tightening cycle would be moderate as the central bank would not want to stifle growth prospects. Ultimately, the outlook for the Rand is rather negative, particularly with the Fed on the verge of liftoff and the monetary policy divergence theme so pronounced.