Back to Economic Data After Anticlimactic Fed

GBPUSD – technical overview

The intense declines in early 2016 are finally showing signs of stalling out, with the market in desperate need of a healthy correction. Last Thursday’s bullish outside day price action off a near 7-year low at 1.4080 could be the catalyst to trigger this overdue bounce that has room to extend back to the 1.4600-1.4800 area before the market even considers a lower top and meaningful bearish resumption.

• R2 1.4427 – 15Jan high – Strong
• R1 1.4367 – 26Jan high – Medium
• S1 1.4200 – Figure  – Medium
• S2 1.4173 – 26Jan low  – Strong

GBPUSD – fundamental overview

The Pound continues to have a hard time recovering off last week’s near 7 year low against the Buck, with the Fed decision doing nothing to help the UK currency’s cause. While we did get some dovishness from the decision, with the Fed addressing concerns for global markets, the fact that the door was still open for a March hike was enough to keep the major pair under pressure. Looking ahead, the key focus on Thursday will be on the release of UK GDP data. Clearly with the Pound struggling so much of late, there is a good chance the results of this data will have a major influence on the currency’s direction today. Other data out on Thursday includes UK CBI reported sales, US initial jobless claims, durable goods and pending home sales.

USDJPY – technical overview

Although the market was able to take out the August 2015 base at 116.30, inability to establish a daily close below the level suggests the major pair could be looking to base out in favour of a push back to the topside. Look for a daily close above 119.00 to strengthen this outlook and potentially accelerate gains. Still, while the market holds below 120.65, the overall pressure remains on the downside and risk remains for a lower top and drop back below last week’s critical low at 115.97.

• R2 119.70 – 5Jan high – Strong
• R1 119.07 – 27Jan high – Medium
• S1 118.04 – 27Jan low – Medium
• S2 117.65 – 26Jan low – Strong

USDJPY – fundamental overview

The latest Fed decision produced an anticlimactic reaction in markets, with this major pair consolidating around recent levels. On net, the decision produced offsetting messages, with the Fed highlighting concern for the global markets, but at the same time, still leaving the door open for a rate hike in March. The softer than expected Japan retail sales data has also not done much to influence direction, with the market starting to position ahead of tomorrow’s BOJ policy decision. Heading into the event risk, speculation has been building that the BOJ will look to expand its current easing program. Recent comments from BOJ Governor Kuroda that the central bank will do whatever it takes to reach its 2% inflation target, and comments from PM Abe adviser Honda that he favours more QE, have contributed to this speculation. Looking at the calendar for the remainder of the day, we get US initial jobless claims, durable goods and pending home sales.

EURCHF – technical overview

A period of multi-week consolidation has finally been broken, with the market clearing critical range resistance at 1.1050 to signal a bullish continuation. Given the fact that the previous consolidation range was about 350 points, the push above 1.1050 opens a measured move upside extension of the equivalent size, projecting gains towards 1.1400. Any setbacks should be very well supported ahead of 1.0800, while only below 1.0715 negates the constructive outlook.

• R2 1.1200 – Figure – Strong
• R1 1.1100 – Figure – Medium
• S1 1.0985 – 26Jan low – Medium
• S2 1.0909 – 20Jan low – Strong

EURCHF – fundamental overview

The combination of negative interest rates and the SNB’s willingness to intervene in the market have proven to be productive tools in making the Franc less attractive, effectively altering its status in the currency market. Certainly recent price action would agree, with the EURCHF rate clearing the September peak at 1.1050, despite an intensification in risk liquidation flows in early 2016 and the latest ECB decision in which Draghi left the door open for additional accommodation in March.

AUDUSD – technical overview

Inability for the  market to extend declines below last week’s multi-year low at 0.6827 suggests the Australian Dollar is looking to establish some kind of interim base in favour of a corrective recovery. Still, the broader downtrend remains firmly intact and any rallies in the sessions ahead are expected to be well capped below 0.7200 in favour of a lower top and bearish resumption.

• R2 0.7171 – 6Jan high – Strong
• R1 0.7081 – 27Jan high – Medium
• S1 0.6992 – 27Jan low – Medium
• S2 0.6918 – 26Jan low – Strong

AUDUSD – fundamental overview

Aussie imports came in a little better than expected, while exports disappointed. Still, with Wednesday’s Aussie inflation data on the firmer side and with the RBNZ coming out more dovish, this has helped to keep the Australian Dollar well supported on Thursday. The Fed decision didn’t do much to factor into trade, with any dovishness from expressed concern over the shakeup in global markets offset by the fact that the door was still open for a rate hike in March. Looking at the calendar for the remainder of the day, we get US initial jobless claims, durable goods and pending home sales.

USDCAD – technical overview

Technical studies have finally unwound from violently overbought readings, though there is scope for a deeper correction towards previous resistance turned support in the form of the psychological barrier at 1.4000. Still, overall, the broader uptrend remains firmly intact and setbacks are expected to be very well supported around 1.4000 in favour of a higher low and fresh upside extension. Only a daily close below 1.3800 would compromise the current structure.

• R2 1.4326 – 26Jan high – Strong
• R1 1.4200 – Figure – Medium
• S1 1.4028 – 27Jan low – Medium
• S2 1.4000 – Psychological – Strong

USDCAD – fundamental overview

The direction in the OIL market continues to be the primary driver of price action in this pair, and with the commodity mounting a decent recovery over the past few sessions, we have also seen a healthy recovery in the Canadian Dollar. The Fed decision did little to factor into price action, with the central bank offsetting its expressed concern over the global markets by leaving the door open for a March hike. Looking ahead, OIL will continue to dictate direction, while a round of US data could also factor, with US initial jobless claims, durable goods and pending home sales due.

NZDUSD – technical overview

Setbacks have been well supported on dips into the 0.6350 area and the market has entered a period of correction following an intense wave of declines in early 2016. Still, overall, the broader downtrend remains intact and any rallies should be well capped into 0.6700 in favour of a fresh lower top and the next downside extension towards the 2015 multi-year low at 0.6130.

• R2 0.6559 – 21Jan high– Strong
• R1 0.6500 – Figure– Medium
• S1 0.6411 – 21Jan low – Medium
• S2 0.6347 – 20Jan low – Strong

NZDUSD – fundamental overview

Some heavy setbacks for the New Zealand Dollar into the North American close on Wednesday, though it wasn’t the Fed decision that triggered the declines. There was very little to take away from the FOMC decision, with the door still open for a March hike, despite the Fed’s expressed concern for the global markets. Kiwi setbacks came by way of the RBNZ decision shortly after the Fed. Although the RBNZ left rates on hold, it did not shy away from expressing a clear easing bias. The central bank conceded inflation would take longer to get to target than expected, while at the same time highlighting the fact that “some easing may be required over the coming months.” Another weight on Kiwi into Thursday has been the latest Fonterra announcement that the dairy giant would be cutting its milk price forecast. Looking at the calendar for the remainder of the day, we get US initial jobless claims, durable goods and pending home sales.

US SPX 500 – technical overview

Signs of a critical structural shift following an impressive multi-year rally to a fresh record high in 2015. The market has finally stalled out at 2137, with the recent break back below the critical August base at 1834 strengthening the outlook. From here, any rallies are expected to be well capped below previous support at 1993, in favour of the next major downside extension towards 1700. Only a daily close back above 1993 will take the pressure off the downside.

• R2 1955.00 – 13Jan high – Strong
• R1 1917.00 – 27Jan high – Medium
• S1 1858.00 –26Jan low – Medium
• S2 1811.00 – 20Jan low – Strong

US SPX 500 – fundamental overview

Stocks are trying to find some comfort in the fact that the Fed upgraded its concern for the global markets, which could delay additional rate hikes. However, there didn’t seem to be enough in the last monetary policy statement to get investors feeling too good about any shift in the Fed’s timeline, with the door still open for a potential rate hike in March. On net, not much to take from Wednesday’s FOMC and the market will continue to digest the decision while taking in a batch of US data, featuring initial jobless claims, durable goods and pending home sales.

GOLD (SPOT) – technical overview

The latest surge through previous resistance at 1112 is a significant development and suggests the market is in the process of a bullish structural shift. Look for a meaningful base to now be in place down at 1046, with fresh upside projected towards the 1200 area over the coming days. Any setbacks should be well supported above 1070, with only a close back below this level to compromise the newly adopted bullish outlook.

• R2 1138.00 – 3Nov high – Strong
• R1 1123.00 – 26Jan high – Medium
• S1 1092.00 – 21Jan low – Medium
• S2 1071.00 – 14Jan low – Strong

GOLD (SPOT) – fundamental overview

Despite favourable US Dollar fundamentals as the Fed finally sets out on its path to policy normalisation, GOLD is finding formidable demand into 2016, given deteriorating global sentiment and uncertainty in the air, most recently brought on by a worrisome China outlook and a collapse in the price of OIL. Longer term macro players have been accumulating the metal as a hedge against an overinflated equity market that could be on the verge of a more significant decline. On the other side, there are some investors who believe the US Dollar is starting to look overvalued and as such, any weakness ahead, could open the door for renewed GOLD demand on the inverse USD correlation.

Feature – technical overview

USDTRY is showing signs of exhaustion after stalling shy of the December record peak at 3.0750. A drop back below 2.9825 will strengthen the corrective outlook and open the door for a more pronounced decline back into the 2.9000 area. Still, overall, the broader uptrend remains firmly intact and only below 2.7580 would compromise the constructive outlook.

• R2 3.0750 – 24Sep/Record – Strong
• R1 3.0360 –20Jan high – Medium
• S1 2.9825 – 8Jan low – Medium
• S2 2.9025 – 21Dec low – Strong

Feature – fundamental overview

While the global backdrop remains shaky and the Fed continues with it policy normalisation, there is very little the CBRT will be able to do to prevent a further decline in the Turkish Lira, which currently sits just off record lows against the Buck. But for now, we are seeing some stabilisation, with the recent recovery in global equities and a slightly more dovish Fed inviting renewed demand for emerging market FX. The FOMC monetary policy statement showed the Fed being a little more sensitive to risk abroad, which has been a welcome development as it encourages the prospect the Fed will be willing to keep policy looser if necessary, to help prop a struggling global economy.