Mind The Gaps

GBPUSD – technical overview

An impressive rally to fresh 2015 highs has stalled out ahead of the 1.6000 psychological barrier, with the market reversing lower and exposing a drop back towards some internal support at 1.5550. A break and close below 1.5550 will open the door for a more pronounced bearish reversal, while inability to do so will keep the immediate pressure on the topside for an eventual retest and break above 1.6000.

• R2 1.5930 – 18Jun/2015 high – Strong
• R1 1.5803 – 24Jun high – Medium
• S1 1.5650 – Mid-Figure  – Medium
• S2 1.5625 – 17Jun low  – Strong

GBPUSD – fundamental overview

We don’t get any first-tier economic data out of the UK on Monday and the market will likely welcome this fact given all the distraction with Greece. UK consumer credit, mortgage approvals and money supply figures are due, while in the US the market will take in pending home sales and Dallas Fed manufacturing. However, if the Euro remains pressured, the Pound could find some bids on a flight to safety appeal, even though the US Dollar is likely to benefit more on these flows. Dealers site decent offers between 1.5700-1.5750, with buy stops reported above 1.5775.

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 consolidation 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 124.45 – 17Jun high – Strong
• R1 124.00 –Figure – Medium
• S1 122.10 – 29Jun low – Medium
• S2 122.00 – Previous Resistance – Strong

USDJPY – fundamental overview

All of the monetary policy divergence between the Fed and BOJ is taking a major backseat in the early week, with the Greece saga dominating headlines. It has become quite clear that counter to what many had thought, traditional risk correlations with the Yen are still very much alive, with the currency benefitting a great deal on the weekly open from the flight to safety flows on the Greek uncertainty, potential for escalation and Grexit. The market has so far stalled just shy of critical barriers at 122.00, though dealers cite major sell-stops on a break below the psychological barrier. Macro players will be looking to take advantage of any overextended Yen appreciation and will try and add to existing Yen shorts if USDJPY drops into the 121.00s. On the data front, Japanese industrial production came in much weaker than expected, while US pending home sales and Dallas Fed manufacturing are ahead.

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 1.0575 to strengthen the constructive outlook and accelerate gains. Ultimately, only a daily close below 1.0300 would compromise the recovery outlook and give reason for pause.

• R2 1.0575 – 4Jun high – Strong
• R1 1.0497 – 26Jun high – Medium
• S1 1.0280 – 29May low – Medium
• S2 1.0235 – 20Apr low – Strong

EURCHF – fundamental overview

The SNB is being put to the test in the early week, with the weekend fallout from the Greece turmoil opening a massive flight to safety Franc bid. Just the other week, SNB Jordan was on the wires reiterating the central bank’s view of the overvalued Franc and that the central bank was prepared to act to curb unwanted appreciation in the local currency, specifically if brought on by an escalation in the Greece crisis. So now that we have seen such an escalation, it will be interesting to see if the SNB does in fact step in to support the latest round of setbacks in the EURCHF rate.

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 0.7771 – 24Jun high – Strong
• R1 0.7700 – Figure – Medium
• S1 0.7587 – 29Jun low – Medium
• S2 0.7533 – 2Apr/2015 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has held up relatively well in the face of a massive sell off in risk assets on the back of the escalated Greek crisis. While the threat of Grexit is an Aussie negative theme, it seems the weekend move by the PBOC to cut rates is doing a good job of offsetting the negative flows. Looking at the Australian economic calendar this week, we get an update from RBA Stevens on Tuesday, followed by building approvals Wednesday, trade data Thursday and retail sales on Friday. For now, ongoing Greece headlines and the fate of this saga will likely dictate direction, while Fed rate hike expectations will also play a role. US pending home sales and the Dallas Fed manufacturing index are the notable economic releases in Monday trade.

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. Setbacks should now be well supported in the 1.2200 area, while ultimately, only a daily close back below 1.2127 would delay the constructive outlook. Look for a break back above 1.2563 to confirm the constructive outlook and accelerate gains.

• R2 1.2442 – 9Jun high – Strong
• R1 1.2423 – 24Jun high – Medium
• S1 1.2277 – 24Jun low – Medium
• S2 1.2215 – 19Jun low – Strong

USDCAD – fundamental overview

The Canadian Dollar has mostly been confined to consolidation in recent trade, though the general direction over the past several days has been lower. Most of the attention right now is away from Canada and the US, with broader macro themes dictating trade. The ongoing Greece saga is commanding the market’s attention at the moment and will likely play an influential role this week. Should the situation in Greece deteriorate further, look for additional depreciation in the Canadian Dollar. Looking at the economic calendar for Monday, Canada industrial product and raw materials prices are due along with US pending home sales and the Dallas Fed manufacturing index. OIL prices haven’t factored as much of late, with the commodity trading sideways.

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. Daily studies are however looking a little stretched and there is risk for a short-term corrective bounce in the sessions ahead. But any rallies should now be well capped well below 0.7200.

• R2 0.7012 – 17Jun high– Strong
• R1 0.6924 – 25Jun high– Medium
• S1 0.6785 – 29Jun/2015 low – Strong
• S2 0.6700 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar managed to extend declines to fresh 2015 and multi-year lows in Monday trade, with the massive wave of safe haven flows weighing on the risk correlated Kiwi. The escalation in the Greece crisis is yet another reason to be selling a currency already highly exposed to a dramatic shift in RBNZ policy over the past several months. Softer GDP, falling commodities, weak dairy prices, and concerning export levels have all contributed to the RBNZ shift to accommodation, and with officials talking down the currency, it looks like we are headed in the direction of 0.6500. For now, the Greek impasse and its impact on risk sentiment will continue to play a major part in this market’s direction. It is worth noting however that the weekend China rate cut could be helping to slow the pace of this latest bout of Kiwi weakness.

US SPX 500 – technical overview

The recent 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. Look for the latest topside failure and daily close back below 2100 to strengthen the outlook open the door for deeper setbacks towards critical support at 2040 over the coming sessions. Ultimately, only a daily close above 2137 negates.

• R2 2137.00 – 19May/Record – Strong
• R1 2100.00 – Psychological – Medium
• 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 since breaking to fresh record highs in May and could be at risk of forming a major top. The escalation in the Greek crisis has opened a fresh round of setbacks in the early week, though a wave of solid first-tier US economic data over the past few weeks has already 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 1206.00 – 18Jun 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, with global equities looking vulnerable at record highs, and with the Greece crisis in escalation mode, there is no better place for capital allocation than GOLD. Dealers cite plenty of interest around $1170, with decent buy stops above $1235.

Feature – technical overview

USDZAR is locked within a well defined uptrend, with the market consolidating off recently established 2015 highs. A medium-term higher low is in place just over 11.6900, with any setbacks expected to be very well supported above the level ahead of the next major upside extension back above 12.6365. Ultimately, only a break and close below 11.6900 would negate.

• R2 12.6375 – 8Jun/2015 high – Strong
• R1 12.4835 – 11Jun high – Medium
• S1 12.0540 – 25Jun low – Medium
• S2 11.6945 – 6Apr low – Strong

Feature – fundamental overview

Emerging market FX is feeling the pressure of the escalation in the Greece crisis, with the potential spillover fueling a more intensified exodus from risk correlated investments. The Rand had been decently bid in the previous week, with elevated inflation forecasts stoking expectations for rate hikes from the SARB. But with the IMF cautioning against the South African central bank being in a hurry to raise rates and with risk markets showing signs of capitulation, scope exists for more Rand weakness over the medium term.