Investors Feeling Good Again…For Now

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 1.4019 – 1Mar high – Medium
• S1 1.3904 – 1Mar low  – Medium
• S2 1.3836 – 29Feb/2016 low  – Strong

GBPUSD – fundamental overview

Most of the price action in the Pound over the past few sessions can be attributed to a calming Brexit risk fear. While this theme is sure to continue to influence price action going forward, the market has ratcheted it down a notch into the new week, resulting in profit taking on Sterling shorts. Certainly, there hasn’t been anything positive on the data front that would be supportive of the Pound, with Tuesday’s UK manufacturing PMIs coming in at the lowest level in nearly 3 years. Meanwhile, US data has been solid, with ISM manufacturing and construction spending coming in well above forecast. Looking ahead, we get BOE speak from MPC members Broadbent and Cunliffe, UK construction PMIs and US data in the form of ADP employment and the Fed Beige Book.

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 114.88 – 16Feb high – Strong
• R1 114.19 – 1Mar high – Medium
• S1 113.00 – Figure – Medium
• S2 112.16 – 1Mar low – Strong

USDJPY – fundamental overview

Some mixed price action out of Japan into Wednesday trade. The Yen continues to be driven off broader macro flow and themes and has sold off over the past 24 hours on the back of a resurgence in demand for risk assets. China’s move to cut the RRR has inspired confidence in markets, but how much this lasts remains to be seen. Still, USDJPY rallies could be capped after Moody’s came out and downgraded its outlook for China. Looking ahead, the key focus on the calendar for the remainder of the day will be on US ADP employment and the Fed Beige Book. Of course, this market will also keep a close eye on the performance in equities.

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. Looking ahead, Swiss GDP will be digested on Wednesday.

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 0.7301 – 4Jan/2016 high – Medium
• R1 0.7265 – 78.6% fib retrace – Strong
• S1 0.7165 – 2Mar low – Medium
• S2 0.7108 – 29Feb low – Strong

AUDUSD – fundamental overview

Any concern the RBA wasn’t more dovish on Tuesday was offset early Wednesday, with the release of a much better than expected GDP print out of Australia. The data reaffirms the RBA’s more upbeat outlook and ‘wait and see’ policy stance. The Australian Dollar has been an outperformer on the day as a result, with gains accentuated on a resurgence in demand for equities and stabilisation in commodities prices. Still, it is worth noting, dealers cite plenty of strong offers from medium-term names towards 0.7300. Looking ahead, US ADP employment and the Fed Beige Book 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 towards the 78.6% fib retrace off the October-January move at 1.3230 before the market considers the possibility of a medium-term higher low and bullish resumption of the broader uptrend. Back above 1.3588 will be required to take the immediate pressure off the downside.

• R2 1.3588 – 29Feb high – Strong
• R1 1.3500 – Psychological – Medium
• S1 1.3386 – 1Mar/2016 low – Medium
• S2 1.3230 – 78.6% fib retrace – Strong

USDCAD – fundamental overview

Higher OIL and a resurgence in demand for stocks have been contributing factors to this latest rally in the Loonie, though much of the run up in the commodity currency has come from the much better than expected Canada GDP showing on Tuesday. USDCAD sell-stops have been tripped up below 1.3400 and there is interest building for a move lower into the 1.3200s. All of this positive Canada flow more than offset any USD upside on the back of Tuesday’s well received US ISM manufacturing and construction spending reads. Looking ahead, lack of economic data on the Canada calendar will leave this market focused on stocks, OIL and a round of US releases featuring ADP employment and the Fed Beige Book.

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 0.6663 – 2Mar high – Medium
• S1 0.6565 – 29Feb low – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to hold up in recent trade on stable commodities and a recovery in equities, though the currency has been underperforming relative to its peers. Overall, with New Zealand data coming out on the softer side of late, and with the risk environment quite shaky, any additional 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. While Tuesday’s GDT auction did produce the first positive reading of 2016, the data was hardly encouraging. Meanwhile, a Moody’s downgrade of its China outlook, solid US data and above forecast Aussie GDP, should also keep the currency capped. Looking ahead, US ADP employment and the Fed Beige Book are the key releases for the remainder of the day.

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. As such, the current rally is classified as corrective, with any additional upside expected to be well capped below 2000 on a daily close basis in favour of the next major downside extension towards 1700. Ultimately, only a daily close back above 2000 will take the pressure off the downside.

• R2 2000.00 – Psychological – Strong
• R1 1993.00 – Previous Support – Strong
• S1 1923.00 –1Mar low – Medium
• S2 1890.00 – 24Feb 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 the current rally should soon be well capped in favour of a resumption of declines 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.

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. Even this latest rally in stocks has done very little to weigh on the metal, reflective of the fact that this rally in risk is less than convincing.

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

The Singapore Dollar has been benefitting this week from external flow, with the recovery in risk sentiment fueling demand for the emerging market Asia currency. China’s RRR cut seemed to have helped inspire demand for the local currency, with global equities also bid back up. Meanwhile, warnings from China Deputy Governor Chen Yulu that US Dollar strength poses risks to emerging markets and the latest downgraded outlook from Fed Dudley, have also been supportive of the Singapore Dollar. Still, overall, with the global risk outlook quite shaky and with the Fed remaining on course for additional rate increases, the Singapore Dollar should be vulnerable, with deeper setbacks on the cards. Moody’s downgrade of it’s China outlook is already inviting renewed Singapore Dollar offers in Wednesday trade.