What Investors Are Secretly Hoping for on Friday

GBPUSD – technical overview

The market has entered a period of correction out from this week’s fresh 7 year low at 1.3836 to allow for some stretched studies to unwind. But overall, the downside pressure remains intact with the current push higher expected to stall out, ideally ahead of 1.4300 in favour of the next lower top and next downside extension below 1.3836 and towards major support at 1.3500 further down. Ultimately, only a daily close back above 1.4400 will take the immediate pressure off the downside.

• R2 1.4235 – 17Feb low – Strong
• R1 1.4194 – 3Mar high – Medium
• S1 1.4100 – Figure  – Medium
• S2 1.4033 – 3Mar low – Strong

GBPUSD – fundamental overview

This latest recovery in the Pound hasn’t had anything to do with this week’s local data, which has produced discouraging UK PMIs. But with Brexit fear cooling off and with Thursday’s US data coming in overall soft, this has served as enough of an excuse for the Pound to recover from its Monday 7 year low against the Buck. Also helping to fuel this recovery have been comments from the German FinMin who suggested Germany wanted the UK to stay in the EU. Looking ahead, the market will take in UK consumer inflation expectations, though this is unlikely to factor into trade. The marquee event of the day comes in the US, with the monthly employment report due. US trade is also out and should not be overlooked.

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 114.56 – 2Mar high – Strong
• R1 114.00 – Figure – Medium
• S1 113.22 – 2Mar low – Medium
• S2 112.16 – 1Mar low – Strong

USDJPY – fundamental overview

Some choppy intraday trade in USDJPY, with the major pair unsure which way to commit following a round of ambiguous comments from BOJ Governor Kuroda. The central banker initially expressed reservation in expanding current stimulus after saying he wasn’t considering lower negative interest rates at this point. But shortly thereafter, Kuroda also said the limits of quantitative and qualitative easing had not been reached. Certainly this could be interpreted as a hint the BOJ won’t do much when it meets this month but will be prepared to act at future meetings if necessary. Attention now shifts to the upcoming monthly employment report out of the US, which is likely to inspire the next wave of volatility in a market that has mostly been consolidating in a tight range. Also out on Friday is US trade.

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 1.1500 further up. Only a close below 1.0715 would delay the outlook.

• R2 1.0949 – 25Feb high – Strong
• R1 1.0900 – Figure – 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. If yield differentials narrow back in the Franc’s favour and if the SNB is forced to consider intervening in a global backdrop that sees another downturn in risk, it will be very difficult for the SNB to prevent appreciation in the Franc. Perhaps SNB Jordan further contributed to this latest round of Franc gains after recently highlighting the limitations of monetary policy. But for now, the SNB is getting help from this latest rebound in global equities.

AUDUSD – technical overview

The market has entered a period of correction out from the recent multi-year low at 0.6827, trading up to fresh 2016 highs. However, any additional upside should be well capped below critical medium-term range resistance at 0.7385 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 a daily close back above 0.7385 would force a shift in the structure.

• R2 0.7400 – Figure – Medium
• R1 0.7385 – 4Dec high – Very Strong
• S1 0.7281 – 3Mar low – Strong
• S2 0.7200 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar stands out as a relative outperformer over the past week on the back of a resurgence in risk appetite, higher commodities and solid developments on the local front. In Australia this week, we’ve seen a less dovish RBA rate decision, above forecast GDP and narrowing in the trade deficit. However, Aussie has hit a bit of a sour note into Friday, with the market taking in a slightly softer than expected Aussie retail sales print. AUDUSD has also rallied up to critical medium-term resistance and could be poised for a bearish reversal, especially if today’s highly anticipated monthly employment report out of the US beats expectation. US trade data is also due today.

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 and dropping to a fresh 2016 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 1.3499 – 2Mar high – Medium
• S1 1.3371 – 3Mar/2016 low – Medium
• S2 1.3230 – 78.6% fib retrace – Strong

USDCAD – fundamental overview

The Canadian Dollar continues to benefit from broad based US Dollar liquidation, higher OIL and some well received Canada growth data this week. Thursday’s on the whole softer than expected round of US data has also factored into price action, driving USDCAD down to a fresh 2016 low. US initial jobless claims and factory orders came in worse than expected, while US ISM non-manufacturing had worrying components. Looking ahead, there is a good amount this market will be digesting on Friday. The primary source of volatility will come from the monthly employment report out of the US, but we also get Canada Ivey PMIs, Canada trade and US trade.

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 ahead of 0.6800, 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 0.6835 – 4Jan/2016 high– Strong
• R1 0.6775 – 26Feb high– Strong
• S1 0.6714 – 4Mar low – Medium
• S2 0.6655 – 3Mar low – Strong

NZDUSD – fundamental overview

Absence of first tier economic data out of New Zealand this week has left the currency trading on broader flow. Currencies have been well bid across the board with a recovery in global equities and commodities helping to prop. Kiwi has however been underperforming against it peers, with cross related selling against the Australian Dollar following solid Aussie data leads driving the relative weakness. Overall, with New Zealand data coming out on the softer side of late, and with the risk environment still 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 err on the dovish side next Thursday and leave the door open for additional easing. Looking ahead, all eyes are on today’s monthly employment report out of the US. But not to be overlooked is US trade data.

US SPX 500 – technical overview

The current rally is classified as corrective, with any additional upside expected to be well capped in the 2000-2025 area in favour of the next major downside extension below 1800 and towards a measured move at 1600 further down. Ultimately, only a daily close back above 2050 will delay the bearish outlook.

• R2 2026.00 – 5Jan high – Strong
• R1 2000.00 – Psychological – Strong
• S1 1968.00 –2Mar low – Medium
• S2 1923.00 – 1Mar low – Strong

US SPX 500 – fundamental overview

Stocks have enjoyed an impressive recovery rally over the past several days, helped along by expectations for a scaled back Fed and overall solid US economic data. Investors are trying to get one last Goldilocks fix where they are still able to benefit from ultra accommodative monetary policy, while the US economy improves and employment reaches maximum levels. But if economic data out of the US continues to impress, it will put the Fed in the more difficult position of needing to seriously consider the data and move ahead with its path to higher interest rates. Inflation has also been showing signs of ticking up, adding to the pressure on the Fed to raise rates. Today’s US employment report will be an important one to watch. Anything above forecast could very well open the door for renewed downside pressure on stocks as it suggests the Fed may not be able to hold off with hikes for as long as investors would like. Anything softer could keep the rally going.

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 1307.00 – 2015 high – Strong
• R1 1268.25 – 3Mar/2016 high – Medium
• S1 1224.70 – 2Mar low – Medium
• S2 1190.80 – 16Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD continues to show impressive demand on dips. 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. Also supporting this week is some broad based selling in the Buck.

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 constructive, with dips seen well supported 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 1.3725 would negate the constructive outlook.

• R2 1.4118 – 21Feb high – Strong
• R1 1.4044 –2Mar high – Medium
• S1 1.3860 – 11Feb/2016 low – Strong
• S2 1.3800 – Figure – Medium

Feature – fundamental overview

Emerging market FX has been bolstered this week by a broader recovery in global equities and commodities. This has triggered US Dollar outflows despite overall solid US economic data, with the market more focused on the Fed scaling back its rate hike timeline and holding off from raising rates in mid-March. A stable Yuan rate and additional China stimulus measures have also been helping to support the Singapore Dollar back to recent range highs against the Buck. Dealers do however cite plenty of USDSGD demand in the 1.3800 area and there is risk for some Singapore Dollar selling as participants start to position ahead of today’s US NFPs. The monthly employment report could have a significant influence on direction in USDSGD if the data comes in above forecast, as anything stronger will dent investor hopes for a prolonged scaled back Fed, which in turn will shift yield differentials decidedly back in the Buck’s favour.