Currencies Trying to Hold Up Against Buck

GBPUSD – technical overview

Setbacks have extended to fresh multi-year lows, with the latest break and daily close below previous support at 1.4080 setting the stage for the next major downside extension towards a measured move objective at 1.3500. The 1.3500 barrier also coincides with the critical multi-year base from 2009. Intraday rallies should be well capped below 1.4200, while only back above 1.4408 would take the immediate pressure off the downside.

• R2 1.4043 – 26Feb high – Strong
• R1 1.4000 – Psychological – Medium
• S1 1.3836 – 29Feb/2016 low  – Strong
• S2 1.3800 – Figure – Medium

GBPUSD – fundamental overview

The Pound is finally finding a little relief off the early Monday 7 year low, with the UK currency benefitting from a calming in risk associated with Brexit and some softer than expected second tier US data in the form of Chicago PMIs and pending home sales. But plenty of offers are reported into rallies and it is going to take a lot more for the beleaguered Pound to inspire confidence. Looking ahead, key standouts on Tuesday calendar come in the form of UK manufacturing PMIs, US ISM Manufacturing and US contruction spending.

USDJPY – technical overview

The market is 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. Still, while the market holds below 116.00 the immediate pressure remains on the downside.

• R2 113.99 – 26Feb high – Strong
• R1 113.00 – Figure – Medium
• S1 111.90 – 25Feb low – Medium
• S2 110.98 – 11Feb/2016 low – Strong

USDJPY – fundamental overview

The Yen continues to hold up impressively despite the record low bond yields in Japan, with the 10 year yield dipping into negative territory. Pressure continues to build for the BOJ to expand its easing efforts this month, with the Yen tracking near uncomfortable elevated levels and inflation still well subdued. Ongoing risk associated with China, as reflected by the recent RRR cut and the latest disappointing China PMIs, along with broader risk in the global economy has more than offset any negative Yen flow to this point, keeping USDJPY trading just off recent multi-month lows and dangerously close to the 110.00 barrier. Although there have been some positives out of the Japanese job market, this has been overshadowed by a lack of pickup in spending resulting from the improving labour market outlook. Looking ahead, US ISM Manufacturing and US contruction spending are the key standouts on Tuesday’s calendar.

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 1.0715 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 1.0715 would delay the outlook.

• R2 1.1029 – 23Feb high – Strong
• R1 1.0949 – 25Feb high – Medium
• S1 1.0810 – 29Feb/2016 low – Medium
• S2 1.0715 – 20Aug low – Strong

EURCHF – fundamental overview

There has been a lot of talk in recent weeks of the threat to the SNB strategy of weakening the Franc in a world where other central banks are on the verge of implementing additional accommodation and global risk sentiment is deteriorating. If yield differentials narrow back in the Franc’s favour and if the SNB is forced to consider intervening in a global backdrop that is seeing a mass exodus from risk, it will be very difficult for the SNB to prevent appreciation in the Franc. Perhaps SNB Jordan further contributed to Franc gains last week after highlighting the limitations of monetary policy, while also pointing out that ECB rate cuts would likely invite an appreciation in the Franc. The SNB should also be worried about similar accommodative moves from the BOJ this month and unwelcome Franc inflows from this event.

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 (78.6% fib retrace), 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 0.7259 – 23Feb high – Strong
• R1 0.7168 – 29Feb high – Medium
• S1 0.7108 – 29Feb low – Medium
• S2 0.7069 – 19Feb low – Strong

AUDUSD – fundamental overview

The RBA decision has come and gone and with little in the way of any change to the previous decision. The RBA left rates on hold at 2% as was widely expected, while mostly producing a cut and paste job of its last statement, maintaining a mild easing bias and net positive outlook on the economy, while acknowledging broader risks. Aussie had been under some pressure in the lead up to the decision, weighed down on dovish bets, a disappointing Aussie current account and building approvals, and some softer China PMI data. But the market has since recovered in the aftermath of the less dovish than expected RBA statement. Looking ahead, US ISM Manufacturing and US contruction spending are the key standouts on the calendar for the remainder of the day.

USDCAD – technical overview

Setbacks have intensified in recent sessions, with the market breaking back below critical rising trend-line support off the May 2015 low. This opens the door for a deeper drop into previous resistance turned support at 1.3457 before the market considers the possibility of a medium-term higher low and bullish resumption back towards the recent near 13 year peak at 1.4690. Back above 1.3860 will be required to take the immediate pressure off the downside.

• R2 1.3654 – 18Feb low – Strong
• R1 1.3588 – 29Feb high – Medium
• S1 1.3482 – 29Feb/2016 low – Medium
• S2 1.3457 – Previous Resistance – Strong

USDCAD – fundamental overview

Not much in the way of movement from the Canadian Dollar in recent sessions, with the currency comfortable differing to a period of consolidation. But overall, the Loonie has mounted an impressive recovery rally these past several days and with OIL prices holding up rather well, the currency could be poised for additional strength. Bank of Canada rate cut bets have also been scaled back, with the Canadian government committed to fiscal policy reform, taking pressure off the Bank of Canada to cut rates. Looking ahead, volatility is sure to heat up on Tuesday, with plenty of risk on the economic calendar. In today’s trade, participants will be taking in Canada GDP, Canada manufacturing PMIs, US ISM Manufacturing and US construction spending.

NZDUSD – technical overview

The market remains confined to a broader downtrend with any rallies seen very well capped. Look for this latest correction to stall out in the 0.6800 area, in favour of a medium-term lower top and next major downside extension. A break below 0.6546 will strengthen the outlook and expose fresh declines towards next key support at 0.6347 further down. Ultimately, only back above 0.6900 negates the bearish outlook.

• R2 0.6775 – 26Feb high– Strong
• R1 0.6642 – 25Feb low – Medium
• S1 0.6565 – 29Feb low – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has held up rather well in recent trade, with the risk correlated commodity currency perhaps benefitting from stability in the price of OIL and China’s latest RRR cut. The early Tuesday release of softer China PMIs hasn’t done much at all to weigh on Kiwi, though plenty of offers are reported further up. Overall, with New Zealand data coming out on the softer side of late, and with the risk environment quite shaky, any rallies should prove hard to come by. Moreover, the RBNZ has expressed its discomfort on many occasions with a higher Kiwi rate, and the central bank will likely look to ease further in the months ahead. Certainly, calls for further easing have ramped up in recent weeks given the deterioration in local data. Looking ahead the big risk for Kiwi on Tuesday comes by way of the GDT auction. But not to be overlooked is a batch of US data featuring ISM manufacturing and construction spending.

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 1972.00 – 26Feb high – Medium
• S1 1890.00 –24Feb low – Medium
• S2 1808.00 – 11Feb/2016 low – Strong

US SPX 500 – fundamental overview

Plenty of talk from central bankers in recent days about the limitations of accommodative monetary policy. This isn’t something that welcomes investment in stocks and could ultimately weigh more heavily going forward. 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 any rallies should continue to be well capped in favour of additional downside in the days and weeks ahead. Throw in overall solid US economic data and evidence of rising inflation in the US, which only increases prospects the Fed will need to tighten in the months ahead, and there is very little to get too excited about right now. It’s also becoming increasingly apparent in 2016 that even if the Fed opts to scale back its rate hike timeline, this might not be as supportive as many had thought. Certainly China’s most recent move to stimulate via another RRR cut has done very little to inspire investor interest.

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 1200, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only a weekly close back below 1191 would delay the newly adopted constructive outlook.

• R2 1263.00 – 11Feb/2016 high – Strong
• R1 1253.00 – 24Feb high – Medium
• S1 1202.00 – 22Feb low – Medium
• S2 1191.00 – 16Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD continues to show impressive demand on dips. 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 exhausted monetary policy.

Feature – technical overview

USDSGD has entered a period of consolidation 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 1.4200 – 29Jan low – Strong
• R1 1.4167 –4Feb high – Medium
• S1 1.3965 – 16Feb low – Medium
• S2 1.3860 – 11Feb/2016 low – Strong

Feature – fundamental overview

China’s latest move to calm markets by way of another RRR cut may be helping to prop the Singapore Dollar a bit into Tuesday trade. Still, with market participants losing faith in exhausted monetary policy, and with China PMIs coming out on the weaker side of expectation, any additional upside in the Singapore Dollar should be met with formidable resistance. Dealers cite plenty of solid demand on dips below 1.4000.