Market Participants Brace For Volatile Week

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 1.5560 high to strengthen this outlook. Otherwise, we may be in the process of carving the next lower top, with the market stalling out at solid internal resistance going back to February (see highlighted blue on chart).

• R2 1.5700 – 21May high – Medium
• R1 1.5598 – 12Jun high – Strong
• S1 1.5466 – 12Jun low  – Medium
• S2 1.5421 – 11Jun low  – Strong

GBPUSD – fundamental overview

While the Pound has pulled back in Monday trade in sympathy with the Euro, the UK currency has also been weighed on its own merits following S&P’s revision of the UK credit outlook to ‘negative.’ Still, the market has found some support on dips with Rightmove HPI coming in at 3%, well above the previous -0.1% print. Looking ahead, the UK economic calendar is empty on Monday, with second tier US data in focus. US industrial production and Empire State manufacturing will get some attention, though the market will mostly be looking ahead to Wednesday’s FOMC rate decision.   

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 entered a choppy bout of consolidation since last week’s Kuroda shake-up, after the central banker came out with Yen supportive comments. Still, dips in the major pair continue to be well supported, with investors betting big on the monetary policy divergence trade. A solid US retail sales print has been doing a good job of supporting US Dollar dips, though there has been some downside pressure on traditional correlations with equities and risk aversion. More chop is expected this week ahead of Wednesday’s FOMC decision, but for today, the focus will be on US industrial production and Empire State manufacturing.

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. A recent push back above 1.0525 strengthens the constructive outlook and should keep the pressure on the topside.

• R2 1.0700 – 19Mar high – Medium
• R1 1.0575 – 4Jun high – Strong
• S1 1.0422 – 15Jun low – Medium
• S2 1.0398 – 3Jun low – Strong

EURCHF – fundamental overview

All signs of progress in the Greece saga have once again 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. Moreover, an ongoing SNB commitment to act to curb excessive overvaluation in the Franc 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 0.7677 – 12Jun low – Medium
• S2 0.7598 – 1Jun low – Strong

AUDUSD – fundamental overview

The Australian Dollar kicks off Monday trade after having taken in a mixed bag in the previous week. A dovish RBA Stevens, leaving the door open for additional rate cuts and disturbing drop in consumer sentiment weighed on the commodity currency, while an impressive employment report managed to offset somewhat, allowing the currency to avoid a more immediate retest of the recent 2015 base at 0.7533. Overall, the monetary policy divergence theme with the Fed should continue to weigh on Aussie, with the Fed expected to signal a sooner rate hike this week after recent data confirmed the central bank’s view of transitory setbacks in Q1. For today, the market will digest RBA Kent comments and look ahead to US industrial production and Empire State manufacturing.

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 – Strong
• S2 1.2129 – 29May low – Medium

USDCAD – fundamental overview

Renewed downside pressure in OIL and some softer second tier data out of Canada last week, have inspired a fresh round of bids in USDCAD. Also seen supporting this pair is the recent run of healthy US economic data, highlighted by NFPs and retail sales. The market will now start to position ahead of Wednesday’s FOMC rate decision, but for today, the focus will be on Canada manufacturing shipments, US industrial production and Empire State manufacturing.

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 next key support level coming in to 0.6900. Any rallies should now be well capped below 0.7400.

• R2 0.7100 – Figure– Medium
• R1 0.7027 – 12Jun high– Strong
• S1 0.6942 – 12Jun/2015 low – Medium
• S2 0.6900 – 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 last week. 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 looking to establish below 0.7000 against the Buck and is testing levels not seen since 2010. Looking ahead, US industrial production and Empire State manufacturing are the key standouts on Monday, though the market will also be looking ahead to tomorrow’s GDT auction and Wednesday’s NZ current account and FOMC rate decision.

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 back 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 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 an impressive US employment report and 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. Clearly this Wednesday’s FOMC rate decision will play a major role in direction, and if the Fed comes in on the more hawkish side as expected, this could open a more pronounced acceleration of declines.

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

USDSGD setbacks have been very well supported in the 1.3500 area and the market looks like it is in the process of carving the next medium-term higher low ahead of a bullish resumption. Look for a break back above 1.3629 to confirm and open the door for a retest of the 2015 high at 1.3937 further up. Ultimately, only a daily close below 1.3500 delays.

• R2 1.3629 – 8Jun high – Strong
• R1 1.3571 – 2Jun high – Medium
• S1 1.3510 – 3Jun high – Strong
• S2 1.3337 – 20May low – Medium

Feature – fundamental overview

It’s all about external variables for the moment, with the Singapore Dollar under pressure on broader themes. An expectation the Fed will lean more to the hawkish side this week, following a slew of solid US economic data, has been driving yield differentials in the US Dollar’s favour, while another breakdown in Greece talks is weighing on emerging market FX and also fueling USDSGD demand.