FX Traders Struggle To Reconcile Price Action

GBPUSD – technical overview

The latest round of setbacks off the recent 2015 high at 1.5815 have stalled out, with the market consolidating ahead of key support at 1.5089. Any additional rallies are classified as corrective, with a fresh lower top sought in favour of a bearish resumption below 1.5089. Look for any rallies to be well capped below 1.5500, with only a daily close back above this level to delay the immediate bearish outlook.

• R2 1.5441 – 4Jun high – Strong
• R1 1.5400 – Figure – Medium
• S1 1.5300 – Figure  – Medium
• S2 1.5190 – 5Jun low  – Strong

GBPUSD – fundamental overview

All has been very quiet in UK markets this week as the light economic calendar keeps many traders on the sidelines. For the most part, the Pound has just been reacting to US Dollar sentiment, with this latest wave of Dollar selling opening a mild recovery. More choppy trade is expected on Tuesday, though UK trade could factor in a bit as the data is digested. Tomorrow, the focus will be on a BOE Governor Carney speech at Mansion House and whether or not he makes any comments on monetary policy direction or the level of the exchange rate.

USDJPY – technical overview

Although the bullish structure remains firmly intact, following the recent break to fresh multi-year highs, there are signs of short-term exhaustion ahead of 126.00. Daily, weekly and monthly studies are overextended and warn of a healthy correction ahead, though any setbacks should be very well supported above previous resistance turned support at 122.00.

• R2 125.85 – 5Jun/2015 high – Strong
• R1 125.05 – 2Jun high – Medium
• S1 124.00 – Figure – Medium
• S2 123.75 – 2Jun low – Strong

USDJPY – fundamental overview

Technically, the major pair was well extended across multiple timeframes and some form of a corrective pullback was due. And so, this latest retreat is completely healthy for a market that had been in need of such a reversal, though many have attributed the pullback to Obama’s bearish USD comments which were denied. It would seem the profit taking in stock markets could be a more legitimate source for recent Yen demand, with the currency still somewhat tied to its traditional correlation with risk. Whatever the case, larger players will be looking to build into USDJPY dips, with the monetary policy divergence theme and favourable USD yield differentials still the ultimate driver of this trade.

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. Last week’s push back above 1.0525 strengthens the constructive outlook and should accelerate gains.

• R2 1.0700 – 19Mar high – Strong
• R1 1.0574 – 4Jun high – Medium
• S1 1.0440 – 8Jun low – Medium
• S2 1.0398 – 3Jun low – Strong

EURCHF – fundamental overview

Swiss employment and inflation data are getting digested in Tuesday trade, though economic data has never really been a big driver of trade in this market. With Greece talks fizzling out yet again, we are back to seeing some heavy Euro outflows, with this market under pressure on the lack of clarity. It appears Greece and its creditors will be back and forth into the final hour later this month when everything will most certainly come to a head as IMF payments come due. Still, the market has held up rather well in the face of this news, and comments from ECB Noyer that a Grexit wouldn’t cause instability in the Eurozone or have a serious influence on the Euro, have been helping to prop. Moreover, an ongoing SNB commitment to act to curb excessive overvaluation in the Franc, as highlighted by SNB Jordan the other week, should continue to support 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. Any corrective rallies should be well capped ahead of 0.8000, while ultimately, only a break back above 0.8163 will delay the bearish structure.

• R2 0.7819 – 3Jun high – Strong
• R1 0.7731 – 5Jun high – Medium
• S1 0.7598 – 1Jun low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a good job averting a retest of the yearly low thus far, with some broad based USD weakness on Monday and solid Aussie housing finance and NAB business survey results early Tuesday, supporting the commodity currency. Still, macro flows are not supportive of Aussie on a medium-term basis, and plenty of offers are seen into rallies. The monetary policy divergence theme continues to dictate trade, while a cooling China and rolling global equities market are further contributing to Aussie weakness. Looking ahead, all eyes will be on RBA Governor Stevens, due to speak tomorrow.

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 establishment back above previous support at 1.2350 strengthens the outlook, with setbacks now expected to be well supported above 1.2150. Above 1.2563 accelerates.

• R2 1.2563 – 1Jun high – Strong
• R1 1.2472 – 8Jun high – Medium
• S1 1.2367 – 2Jun low – Medium
• S2 1.2304 – 26May low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been holding up rather well of late, with a slew of solid economic data supporting the Loonie. Last Friday’s employment report out of Canada was overshadowed by the US employment report, but the solid reading was a welcome development for CAD bulls, and this has now been followed up by another impressive round of data on Monday in the form of Canada housing starts and building permits. There is no first tier data out of Canada or the US on Tuesday and the market will trade off broader flows. Overall however, any additional CAD demand should prove hard to come by, with expectation for a sooner Fed rate hike ultimately seen driving the Buck higher.

NZDUSD – technical overview

The recent 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 0.7201 – 2Jun high– Strong
• R1 0.7157 – 8Jun high– Medium
• S1 0.7024 – 5Jun/2015 low – Medium
• S2 0.7000 – Psychological – Strong

NZDUSD – fundamental overview

Any New Zealand Dollar gains this week have been less a function of Kiwi demand and more on broader US Dollar selling. The outlook for the higher yielding New Zealand Dollar has turned bearish, with softer local data, a cooling China and potential capitulation in global equities all weighing. Whatever data we have seen this week has also not been supportive, with inflation looking softer and manufacturing sales putting in the worst quarterly showing since 2009. The RBNZ rate decision is only a few sessions away and the market continues to price increased risk for a potential rate cut.

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 2100 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 2137.00 – 19May/Record – Strong
• R1 2123.00 – 3Jun high – Strong
• S1 2062.00 – 7May low – Medium
• S2 2040.00 – 11Mar low – Strong

US SPX 500 – fundamental overview

The equity market has failed to establish any meaningful bullish momentum after recently breaking to fresh record highs and could be at risk for stalling out yet again. A wave of solid US economic data, highlighted by last Friday’s impressive US monthly employment report, has helped to solidify prospects for a sooner than later rate liftoff, 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 a fresh bounce 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 1232.00 – 18May high – Strong
• R1 1204.00 – 1Jun high – Medium
• S1 1163.00 – 5Jun 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 around $1170.

Feature – technical overview

USDTRY remains locked within a well defined uptrend, with the market extending gains to fresh highs at 2.8095, beyond the previous 2015 peak at 2.7430. A medium-term higher has been confirmed at 2.5600, with the break above 2.7430 exposing 2.9000. Still, daily studies may be a little stretched, with room for some short-term corrective declines. But any setbacks should be very well supported ahead of 2.6000.

• R2 2.8200 – Figure – Medium
• R1 2.8095 – 8Jun/Record – Strong
• S1 2.7360 – 8Jun low – Medium
• S2 2.7060 – 4Jun high – Strong

Feature – fundamental overview

Another record low for the Turkish Lira on Monday, with the currency hit hard on the weekly open after President Erdogan’s ruling AK party failed to gain a majority government in the election. EMFX has already taken a nice hit on the back of the solid US employment report and strain this is having on interest rate differentials, and this latest election fallout is only making things more challenging for the Lira. The CBRT has since responded to the Lira slide after cutting its Euro deposit rate to 1.5% from 2.0% and US Dollar deposit rate to 3.5% from 4.0%.