China Trade Data Rattles Market

GBPUSD – technical overview

The market has entered a period of correction out from last 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 1.4306 – 22Feb high – Strong
• R1 1.4284 – 7Mar high – Medium
• S1 1.4134 – 7Mar low  – Medium
• S2 1.4108 – 4Mar low – Strong

GBPUSD – fundamental overview

Bank of England Governor Carney is getting out in front of Brexit risk, unveiling plans to help stabilise markets in the event of an exit. The news has helped offer another prop to the Pound as it continues to recover out from last week’s 7 year low against the Buck. The UK currency has also been benefitting from a round of broad based US Dollar weakness on increased prospects the Fed will scale back its rate hike timeline following last Friday’s softer hourly earnings print in the US employment report. Looking ahead, lack of data on the UK calendar will leave the market focused on any new developments from Carney’s appearance in the Commons and a BOE Weale speech.

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 112.75 – 8Mar low – Medium
• S2 112.16 – 1Mar low – Strong

USDJPY – fundamental overview

Renewed bids for the Yen in recent sessions, with the currency initially supported on broad based US Dollar weakness and now finding this latest interest from a round of better than expected Japanese GDP and horrid China trade data. The solid Japanese GDP reduces the odds of any additional stimulus from the BOJ at the upcoming meeting, while the discouraging China trade data has triggered a fresh wave of risk liquidation flow that is also benefitting the Yen. China exports were down a dramatic 25%, nearly doubling already downbeat expectations for the series. Imports were also off a good deal and this could be something that keeps the Yen supported for the remainder of the day.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 have been well supported, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to continue to be supported above 1.0715, 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 1.1000 – Psychological – Strong
• R1 1.0975 – 7Mar high – Medium
• S1 1.0900 – Figure – Medium
• S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

The SNB has been finding welcome relief from this latest equity market rally and recovery in risk assets. However, the week ahead will be tougher now that this rally has run a good deal and the market starts to focus on the upcoming ECB meeting. The ECB is expected to expand its easing, which would unquestionably put more unwanted downside pressure on the EURCHF rate. This has fueled speculation the SNB will once again be forced to act when it meets next week, responding to any ECB easing with an easing move of its own. Brexit risk premium will also keep the SNB on it toes and there is chatter of a more active SNB on a EURCHF move into the 1.0750 area.

AUDUSD – technical overview

The recent break above medium-term resistance at 0.7385 could be warning of a more significant structural shift, pointing to additional upside in the days and weeks ahead. Still, the market would need to establish above 0.7529 to confirm the structural shift, while inability to do so could open the door for a broader bearish resumption.

• R2 0.7529 – 6Jul high – Strong
• R1 0.7484 – 7Mar/2016 high – Medium
• S1 0.7392 – 7Mar low – Strong
• S2 0.7340 – 4Mar low – Strong

AUDUSD – fundamental overview

An impressive rally in the Australian Dollar looks to be running out of steam into Tuesday, with the currency knocked lower in the aftermath of a horrid China trade data showing. China exports came in at -25.4% versus expectations of -12.5%, while imports came in at -13.8% versus the -10% forecast. This overshadowed any positives from relatively upbeat NAB business confidence and conditions data, while comments from RBA Lowe that there was still scope for additional easing, were largely shrugged off.

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 1.3499 – 2Mar high – Strong
• R1 1.3378 – 7Mar high – Medium
• S1 1.3261 – 7Mar/2016 low – Medium
• S2 1.3230 – 78.6% fib retrace – Strong

USDCAD – fundamental overview

OIL’s impressive rally and some more broad based US Dollar weakness following last week’s softer hourly earnings component in the US employment report, resulted in another push in the Canadian Dollar to a fresh 2016 high. However, we have since seen some profit taking on Canadian Dollar longs, with many traders looking to square up ahead of a Wednesday’s Bank of Canada decision that may end up being less dovish now that the Loonie has rallied about 10% since its near 13 year low in January. Also weighing on the Canadian Dollar is this latest round of discouraging China trade data. Looking ahead, Canada housing starts and building permits are due.

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 0.6900 ahead of the 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 compromises the bearish outlook.

• R2 0.6835 – 4Jan/2016 high– Strong
• R1 0.6800 – Figure– Medium
• S1 0.6750 – 7Mar low – Medium
• S2 0.6714 – 4Mar low – Strong

NZDUSD – fundamental overview

Downbeat New Zealand Q4 manufacturing sales and a horrid China trade print have been weighing on the New Zealand Dollar in Tuesday trade. Data out of New Zealand has come out on the softer side of late and this should keep the RBNZ leaning to the dovish side when it meets early Thursday. Moreover, recent Kiwi strength on the back of some broad based US Dollar weakness will be an unwelcome development for a central bank that would like to see a lower NZDUSD exchange rate. This could also be reflected when the RBNZ meets on Thursday and should keep the currency well capped into additional rallies ahead of the event risk.

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 2010.00 – 4Mar high – Strong
• S1 1968.00 –2Mar low – Medium
• S2 1923.00 – 1Mar low – Strong

US SPX 500 – fundamental overview

This latest run of ugly China trade data is unquestionably contributing to the pullback in equities on Tuesday, with investors reminded of the fragility of global markets and exhausted monetary policy. Stocks have been largely bid up in recent days on expectations for a scaled back Fed. But with the global economy still suffering, this could once again weigh heavily in the days and weeks ahead. The recovery in sentiment has also been helped along by the impressive rebound in the price of OIL, and yet, this is still only a recovery in a market that has been confined to a broader downtrend and could once again turn lower at any moment.

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 1306.80 – 2015 high – Strong
• R1 1279.75 – 4Mar/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 the metal has been broad based selling in the Buck on scaled back Fed expectations.

Feature – technical overview

USDTRY has entered a period of multi-week consolidation since pulling back from the September 2015 record high at 3.0785. But overall, the structure remains constructive, with dips seen well supported. Look for any additional setbacks to continue to be well supported above 2.8730 in favour of an eventual resumption of the uptrend and retest of 3.0785. Ultimately, only back below 2.8730 would delay the constructive outlook.

• R2 3.0040 – 26Feb high – Strong
• R1 2.9510 –2Mar high – Medium
• S1 2.8930 – 4Feb low – Strong
• S2 2.8730 – 3Dec low – Strong

Feature – fundamental overview

Politics are making headlines in Turkey this week. The EU is in negotiations with Turkey on the refugee crisis. The EU is looking for Turkey to take in asylum seekers that would otherwise be diverted through to the west. In return, Turkey would like to receive promised aid and an accelerated process to Turkey’s EU bid. The Turkish Lira hasn’t responded much to these developments and is more sensitive to broader risk sentiment which has taken a hit into Tuesday following the release of some horrid China trade data. This puts more pressure on risk correlated emerging market currencies, while the recovery in the price of OIL has also been weighing on the importer.