Market Settles In Ahead Of Next Week’s Fed Decision

GBPUSD – technical overview

A nice recovery for this market over the past several sessions, with the price surging back above 1.5500. While we could be on pace for a retest of the recent yearly high at 1.5815, it is going to take a close above Wednesday’s 1.5554 high to strengthen this outlook. Otherwise, we may have already seen a lower top at 1.5554, with the market stalling out at solid internal resistance going back to February (see highlighted blue on chart).

• R2 1.5600 – Figure – Medium
• R1 1.5554 – 10Jun high – Strong
• S1 1.5421 – 11Jun low  – Strong
• S2 1.5369 – 10Jun low  – Strong

GBPUSD – fundamental overview

Solid economic data out of the UK this week has helped to support the Pound, with the UK currency recovering a good deal against the Buck. Still, US economic data has also been moving in the right direction, as highlighted by last Friday’s employment report and yesterday’s retail sales. This should push the Fed closer to that rate hike and ultimately limit any meaningful Sterling rallies. Dealers have cited decent GBPUSD sell interest ahead of 1.5600. UK construction output, BoE McCafferty, US PPI and Michigan sentiment are the highlights in Friday trade.

USDJPY – technical overview

Although the bullish structure remains firmly intact, following the recent break to fresh multi-year highs, the market has finally entered a period of healthy correction after stalling ahead of 126.00. Stretched studies are unwinding from overbought, with room for further weakness to 122.00. But any additional setbacks below 122.00 should be very well supported in favour of a bullish resumption.

• R2 124.73 – 9Jun high – Strong
• R1 124.13 –11Jun high – Medium
• S1 122.45 – 10Jun low – Medium
• S2 122.00 – Previous Resistance – Strong

USDJPY – fundamental overview

We’ve mostly seen a lackluster bout of consolidation in the major pair since the mid-week Kuroda shake-up. Remember, Kuroda was out early Wednesday with Yen supportive comments. But the market had already been due for some form of a technical correction following an intense bout of gains, and Kuroda was the catalyst. Dips continue to be well absorbed, with investors still betting big on the monetary policy divergence trade. Thursday’s solid US retail sales print is supportive of the US Dollar, though there has been some downside pressure on traditional correlations with equities and risk aversion. Looking ahead, US PPI and Michigan sentiment come into focus.

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 1.0400 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 1.0575 – 4Jun high – Medium
• S1 1.0440 – 8Jun low – Medium
• S2 1.0398 – 3Jun low – Strong

EURCHF – fundamental overview

Signs of progress in the Greece saga earlier this week have faded and it appears Greece and its creditors will be back and forth into the final hour when everything will most certainly come to a head. Still, setbacks have held up rather well in the face of this news. Perhaps ECB Noyer comments from earlier in the week 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 0.7934 – 20May high – Medium
• R1 0.7819 – 3Jun high – Strong
• S1 0.7693 – 11Jun low – Medium
• S2 0.7598 – 1Jun low – Strong

AUDUSD – fundamental overview

Overall, a decent week for the Australian Dollar, which managed to avert a retest of its 2015 lows against the Buck and hold up in the face of dovish RBA Stevens comments and a drop in costumer sentiment. The highlight of the week came early Thursday, with the combination of an RBNZ cut and very strong Aussie employment report fueling a push back to recent range highs. Broader US Dollar weakness also helped to support Aussie, though an ongoing expectation for a sooner Fed rate hike should keep the commodity currency well capped into rallies. US PPI comes into focus on Friday, with Michigan sentiment also getting attention. Next week we get the RBA Minutes and FOMC rate decision.

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. Recent setbacks should now be well supported in the 1.2200 area, after the market reached a short-term double top objective. Ultimately, only a daily close below 1.2150 would delay the constructive outlook.

• R2 1.2442 – 9Jun high – Strong
• R1 1.2353 – 11Jun high – Medium
• S1 1.2202 – 10Jun low – Medium
• S2 1.2129 – 29May low – Strong

USDCAD – fundamental overview

A bearish reversal day in OIL and some softer second tier data out of Canada on Thursday, have inspired a fresh round of bids in USDCAD. Also seen supporting this pair was another healthy showing from US economic data, with retail sales coming in slightly better than forecast. The market is now locked in what appears to be a wait and see mode, as it still looks for clarity on the Fed timeline, which won’t come until next week’s FOMC decision. For today, the focus will be on the direction of OIL, US PPI and Michigan sentiment.

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. For now, the market will be focused on trying to establish below the psychological barrier at 0.7000, with the first key support level below the barrier coming in at 0.6946, the low from August 2010. Any rallies should now be well capped below 0.7400.

• R2 0.7150 – Mid-Figure– Medium
• R1 0.7100 – Figure– Strong
• S1 0.6967 – 11Jun/2015 low – Medium
• S2 0.6946 – Aug 2010 low – Strong

NZDUSD – fundamental overview

A massive unwinding of Kiwi longs is underway after the RBNZ went ahead and completed its 180 shift on monetary policy with the announcement of a 25bp rate cut. The rate cut was accompanied by some dovish commentary, with the central bank citing concerns of a slowdown in the economy and signaling more rate cuts ahead. Kiwi is now contemplating the establishment below next major psychological barriers at 0.7000 against the Buck and is testing levels not seen since 2010. Softer NZ manufacturing PMIs in early Friday trade won’t do anything to help Kiwi’s cause. Looking ahead, US PPI and Michigan sentiment are the key standouts. Next week, the FOMC decision will cast further light on the divergence between the Fed and RBNZ.

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. Despite Wednesday’s bounce, the recent close below 2100 strengthens the bearish 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 and yesterday’s retails sales, have 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. Looking ahead, a higher US PPI reading could weigh on this market, while Michigan sentiment will also be watched. Next week, more volatility is expected with the FOMC decision due.

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. Daily studies are a little stretched, with room for current 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 2.6905 – 6Jun high – Medium
• S2 2.6550 – 5Jun low – Strong

Feature – fundamental overview

A stretched Turkish Lira, just off record lows, is welcoming some late week demand, with President Erdogan’s talk of quickly forming a coalition government seen as a positive development. Still, the struggling Turkish economy remains at risk and is a victim of vulnerability in broader emerging markets as the Fed starts to move towards a rate liftoff. Next week’s FOMC rate decision will be a major influence of direction and there is still plenty of room for additional record lows if US economic data continues to support a sooner rate hike.