OIL Pullback Rattles Shaky Market

GBPUSD – technical overview

The corrective rally in the major pair has stalled out for now at 1.4668, with this most recent break and close below 1.4350 suggesting the market could already be poised for the next major downside extension below 1.4080. A daily close below 1.4235 would strengthen this outlook and accelerate declines back to the near 7 year low, while back above 1.4668 would be required to negate and take the immediate pressure off the downside.

• R2 1.4413 – 15Feb low – Strong
• R1 1.4395 – 18Feb high – Medium
• S1 1.4235 – 17Feb low  – Medium
• S2 1.4149 – 29Jan low  – Strong

GBPUSD – fundamental overview

Hawkish BOE Cunliffe comments and hope for a deal that will avoid Brexit have been helping to support this latest round of weakness in the Pound. On Thursday, BOE Cunliffe indicated he did not believe the BOE rate hike timeline should be pushed out as far as the market was looking. Meanwhile, PM Cameron is doing his best to get a deal done before the end of today’s EU Summit. There will also be a good amount of economic data to digest in Friday trade, with UK retail sales and public finances due along with US inflation. As always, the price of OIL and direction in global equities should not be overlooked.

USDJPY – technical overview

The correction out from the recent multi-month low at 110.98 has stalled out, with the market contemplating the formation of a lower top at 114.88 ahead of the next major downside extension below 110.98 and towards the 107.00 area further down. However, a break below 110.98 would be required to confirm the lower top and strengthen the bearish outlook. But ultimately, while the market holds below 116.00 the immediate pressure remains on the downside.

• R2 114.87 – 16Feb high – Strong
• R1 113.38 – 19Feb high – Medium
• S1 112.00 – Figure – Medium
• S2 111.66 – 12Feb low – Strong

USDJPY – fundamental overview

Not a big surprise to see USDJPY rolling back over into Friday, with the major pair weighed down on a reversal in risk sentiment. Also seen weighing on the pair has been this latest round of dovish Fed rhetoric, strongly hinting at the likelihood the Fed will scale back from what had been a more aggressive rate hike timeline. Moreover, there has been increasing skepticism over the ability for additional BOJ stimulus to help the economy and such reservation have further narrowed yield differentials in the Yen’s favour. Looking ahead, risk sentiment flow will be a big driver on Friday, though US inflation data should not be overlooked.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 are viewed as corrective, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to be well supported above 1.0900 on a daily close basis, in favour of a higher low and the next major upside extension through 1.1200 and towards 1.1400 further up. Only a close below 1.0900 would delay the outlook.

• R2 1.1096 – 8Feb high – Strong
• R1 1.1062 – 17Feb high – Medium
• S1 1.0950 – 11Feb low – Medium
• S2 1.0910 – 20Jan low – Strong

EURCHF – fundamental overview

An impressive recovery in risk assets over the past week has taken a good deal of pressure off the SNB, with the risk correlated EURCHF rate rallying in response. Clearly, the SNB strategy of weakening the Franc has been highly effective these past several months. But at the same time with signs of risk liquidation flow intensifying in 2016 and with the other traditional safe haven currencies rallying sharply to their detriment, the SNB battle could get a lot tougher going forward. We’ve already seen EURCHF come under pressure off recent highs and should other central banks move to looser policy, this could make the Franc more attractive again. The SNB has reiterated its commitment to offset Franc inflows at every turn, but it will be interesting to see what happens if risk sentiment takes another turn for the worse.

AUDUSD – technical overview

The market has entered a period of correction out from the recent multi-year low at 0.6827. However, any additional upside should be limited to the 0.7265 area, with a lower top sought out ahead of a fresh downside extension and bearish continuation below 0.6827 and towards the next key barrier at 0.6500 further down. Ultimately, only back above 0.7385 would force a shift in the bearish structure.

• R2 0.7242 – 4Feb high – Strong
• R1 0.7187 – 17Feb high – Medium
• S1 0.7081 – 16Feb low – Medium
• S2 0.7037 – 10Feb low – Strong

AUDUSD – fundamental overview

It hasn’t taken a lot to knock Aussie lower in Friday trade, with comments from RBA Edwards that he would be more comfortable with and AUDUSD rate of 0.6500, opening the door for a fresh wave of declines. The setbacks follow an already weaker Thursday session that saw Aussie under pressure following a discouraging Australia employment report. The latest weakness in stocks and OIL haven’t helped the risk correlated commodity currency’s cause either. Looking ahead, risk sentiment and OIL direction will be important to monitor, while the market will also digest the latest US inflation readings.

USDCAD – technical overview

The market has entered a period of intense correction following the recent surge to a near 13 year high at 1.4690. This most recent setback below 1.3800 opens the door for a deeper drop into the 1.3500s, which coincides with medium-term rising trend line support. At this point, only back above 1.4017 would suggests the correction has run its course, with the market poised for bullish resumption.

• R2 1.3912 – 16Feb high – Strong
• R1 1.3800 – Figure – Medium
• S1 1.3700 – Figure – Medium
• S2 1.3639 – 4Feb/2016 low – Strong

USDCAD – fundamental overview

The combination of upbeat US data, lower OIL and pullback in stocks, all helped to inspire a recovery in this pair. Thursday’s US initial jobless claims and Philly Fed impressed US Dollar bulls a bit, while news of the EIA inventory build at the highest level in 84 years and no output cut plans from Saudi Arabia, invited downside pressure on the price of OIL, which in turn weighed on the Loonie. Looking ahead, plenty of Friday data to take in with Canada retail sales and inflation accompanied by US inflation.

NZDUSD – technical overview

The market remains confined to a broader downtrend with any rallies seen very well capped. A recent correction has stalled out around 0.6750 with the market looking like it is in the process of carving a fresh lower top ahead of the next major downside extension. The latest break below 0.6563 strengthens the outlook, exposing declines towards next key support at 0.6347 in the sessions ahead. Ultimately, only back above 0.6900 negates the bearish outlook.

• R2 0.6752 – 5Feb high– Strong
• R1 0.6668 – 18Feb high – Medium
• S1 0.6600 – Figure – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

Overall, despite recent gains, it will be hard to ignore this week’s softer New Zealand retail sales, sinking 2-year inflation expectations, disappointing GDT auction, weaker jobs ads, softer producer prices and drop in consumer confidence. All of this confirms the need for additional RBNZ easing ahead, which ultimately, should once again weigh on the currency, particularly in a shaky global risk environment. Looking ahead, broader macro themes should continue to influence direction, with the market also taking in US inflation.

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 recent break back below the critical August base at 1834 strengths the newly adopted bearish outlook and 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. Ultimately, only a daily close back above 1993 will take the immediate pressure off the downside.

• R2 1993.00 – Previous Support – Strong
• R1 1947.00 – 1Feb high – Medium
• S1 1885.00 –17Feb high – Medium
• S2 1808.00 – 11Feb/2016 low – Strong

US SPX 500 – fundamental overview

Stocks have enjoyed a healthy recovery in recent days, largely supported by a bounce in the price of OIL and round of dovish Fed speak. But overall, with the OIL outlook still highly suspect, with central bank monetary policy exhausted and with fears escalating over a deterioration in China, it feels as though these rallies should continue to be well capped in favour of additional downside in the days and weeks ahead. Throw in the emergence of uncertainty over bank creditworthiness and subpar corporate earnings and there is very little to get too excited about right now. It is also becoming increasingly apparent in 2016 that even if the Fed in fact opts to scale back its rate hike timeline, this might not be as supportive as many had thought.

GOLD (SPOT) – technical overview

The market continues to show signs of a major structural shift, with the impressive recovery from the multi-year low in late 2015 at 1046, extending above the critical October 2015 peak at 1192. From here, any setbacks should be well supported ahead of 1160, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only back below 1100 negates the constructive outlook.

• R2 1263.00 – 11Feb/2016 high – Strong
• R1 1240.00 – 18Feb high – Medium
• S1 1191.00 – 16Feb low – Medium
• S2 1164.00 – 8Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD has pulled back from recent highs, but still stands out as an emerging asset in recent days. Massive outflows across equities, high yield and emerging markets have left investors looking for an alternative investment. GOLD has become increasingly attractive in the current market environment. The wave of risk liquidation in 2016 has catapulted the metal on its status as a compelling hedge against uncertainty and negative interest rate policy. Dealers cite strong bids into dips.

Feature – technical overview

USDSGD has entered a period of correction after pulling back from the recent multi-year high from early January at 1.4445. But overall, the structure remains highly constructive, with dips well supported for now into the 1.3800s. Look for any additional setbacks to continue to be well supportive above 1.3800 in favour of an eventual resumption of the uptrend and retest of 1.4445. Ultimately, only back below 1.3730 would negate the highly constructive outlook.

• R2 1.4170 – 4Feb high – Strong
• R1 1.4110 –17Feb high – Medium
• S1 1.4008 – 18Feb low – Medium
• S2 1.3860 – 11Feb/2016 low – Strong

Feature – fundamental overview

The Singapore Dollar has come back under pressure in recent days with the emerging market Asia currency mostly tracking peer direction. USDSGD has been following USDKRW higher on the growing expectation for a BOK rate cut, with the USDSGD rate also supported on Thursday’s Bank of Indonesia rate cut. Policy easing to help stimulate the Asian markets has been a theme in 2016 and one which points to additional Singapore Dollar weakness going forward. Throw in shaky risk sentiment and a Fed already on its path to policy normalization, and there is risk this market sees a retest of the recent multi-year high at 1.4445 sooner than later. Looking ahead, the market will be focused on US inflation, which has been showing signs of ticking up. Anything on the hotter side will be a Singapore Dollar negative.