Will The Run Of Euro Outperformance Continue?

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 1.5375 – 3Jun high – Medium
• S1 1.5251 – 3Jun low  – Medium
• S2 1.5170 – 1Jun low  – Strong

GBPUSD – fundamental overview

The Pound wasn’t sharing the Euro’s enthusiasm in Wednesday trade, with the currency more content on some sideways chop, with any rallies being well capped on account of a softer UK services PMI print. The UK currency will get more attention today with the Bank of England rate decision due, though with the central bank widely expected to leave policy on hold at 0.50% (APT GBP375B), not much volatility is expected. US initial jobless claims are also due, but in the end, Thursday might end up being a day of position squaring ahead of Friday’s monthly employment report out of the US.

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 earlier this week. A bearish outside formation on Tuesday suggests we could see some corrective declines in the sessions ahead, though any setbacks should 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

A Thursday dip in the Nikkei has been weighing on the major pair, with rallies well capped and the market mostly confined to some consolidation post an impressive breakout the other week. While there is risk for some more short-term profit taking on longs, any dips are seen very well supported, with larger players continuing to build into Yen shorts. For today, US initial jobless claims is the standout, though most of the price action will likely involve positioning ahead of the Friday US monthly employment report.

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. The latest push back above 1.0525 strengthens the constructive outlook and should accelerate gains.

• R2 1.0700 – 19Mar high – Strong
• R1 1.0605 – 23Mar high – Medium
• S1 1.0435 – 2Jun high – Medium
• S2 1.0398 – 3Jun low – Strong

EURCHF – fundamental overview

The SNB has been fighting a tough currency battle and should be feeling a lot better this week, with the Franc selling off a good chunk against the Euro. Surging German bund yields, optimism for a Greek deal and a less dovish sounding ECB Drahi have all been driving relative outperformance in the Euro. Moreover, an ongoing SNB commitment to act to curb excessive overvaluation in the Franc, as highlighted by SNB Jordan last weekend, should also continue to support this market on dips.

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 0.7819 – 3Jun high – Medium
• S1 0.7700 – Figure – Medium
• S2 0.7668 – 1Jun high – Medium

AUDUSD – fundamental overview

No surprise to see the Australian Dollar back under pressure and underperforming in Thursday trade, with the currency taking a hit on a horrid batch of data. Aussie retail sales and trade were both a good deal weaker than forecast and with the currency having enjoyed a nice recovery out from recent lows post a less dovish RBA and some better than expected, but misleading GDP, it was only a matter of time before macro players would jump back into existing shorts. Looking ahead, US initial jobless claims are due for release, though the market will now start to position ahead of Friday’s highly anticipated US NFP report.

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 gloomy trade data print out of Canada and some renewed downside pressure in OIL prices, have kept this pair very well supported on dips. Overall, with US economic data improving and the Fed on course for a rate liftoff in September, the risks continue to tilt in favour of the US Dollar, which could be readying for a retest of the 2015 high at 1.2835. Looking ahead, Canada Ivey PMI and US initial jobless claims are the standouts on the economic calendar for Thursday. But we could mostly see some positioning ahead of Friday’s first-tier data, with Canada and US employment reports due.

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 the New Zealand economic calendar has been exceptionally quiet this week, Kiwi has been very well offered into rallies. Last week’s run of softer New Zealand data has fueled fresh yearly and multi-month lows, 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 tomorrow’s monthly employment report out of the US.

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 next big move 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 12.4000 – Psychological – 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. This puts added pressure on EM currencies with already restrictive policy.