BOJ Leaves Policy On Hold, US Retail Sales Ahead

GBPUSD – technical overview

The market has entered a period of correction out from a recent 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 1.4500 in favour of a lower top and next downside extension below 1.3836, towards major support at 1.3500 further down. Ultimately, only a daily close back above 1.4500 will take the immediate pressure off the downside.

• R2 1.4437 – 11Mar high – Strong
• R1 1.4305 – 15Mar high – Medium
• S1 1.4200 – Figure  – Medium
• S2 1.4118 – 10Mar low – Strong

GBPUSD – fundamental overview

The recovery in the Pound has stalled out in recent trade, with the UK currency once again feeling the pressure from Brexit, while also lightening up ahead of tomorrow’s UK employment data and Thursday’s Bank of England rate decision. Also factoring into trade is position squaring into Wednesday’s FOMC event risk. While there is no first tier UK data out on Tuesday, we could get some volatility from a batch of US data featuring retail sales, PPI, empire manufacturing, NAHB housing, business inventories and TIC flows.

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 114.15 – 15Mar high – Medium
• S1 112.75 – 11Mar low – Medium
• S2 112.23 – 9Mar low  – Strong

USDJPY – fundamental overview

The major pair is tracking lower in the aftermath of the BOJ decision which produced an as expected result. The central bank’s QQE program was left unchanged in an 8-1 vote, while the policy balance rate also remained unmoved at -0.1% in a 7-2 vote. The BOJ did add that money reserve funds were exempt from the negative rate. Overall, despite willingness to add to easing if needed, there isn’t much left in the monetary policy tank to stimulate the economy. News that China has drafted rules for a Tobin tax on FX trade has also been weighing on sentiment, further contributing to downside pressure in USDJPY. Looking ahead, the focus will be on a batch of US data featuring retail sales, PPI, empire manufacturing, NAHB housing, business inventories and TIC flows. Once this data is out of the way, it will be back to thinking about Wednesday’s FOMC.

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, in favour of a higher low and the next major upside extension through 1.1200, towards 1.1500 further up. Only a close below 1.0715 would delay the outlook.

• R2 1.1062 – 17Feb high – Strong
• R1 1.1025 – 10Mar high – Medium
• S1 1.0894 – 10Mar low – Medium
• S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

There is no doubt the SNB has been delighted with the market’s reaction to the latest round of larger than forecast ECB stimulus. It would seem the SNB would have ECB Draghi to thank for that, after the central banker said he didn't anticipate it would be necessary to cut rates further. The SNB will have an important decision to make when it meets on Thursday, and it will need to determine if additional easing is required to offset this latest ECB move. Clearly if the Euro holds up, it will make it easier for the central bank to hold off on trekking deeper into negative interest rate policy.

AUDUSD – technical overview

The recent break above medium-term resistance at 0.7385 has forced a shift in the structure and now opens the door for a push towards next key resistance at 0.7849 further up. At this point, a break back below previous resistance at 0.7385 would be required to take the pressure of the topside and open a broader resumption of the longer-term downtrend.

• R2 0.7594 – 14Mar/2016 high – Strong
• R1 0.7528 – 15Mar high – Medium
• S1 0.7447 – 11Mar low – Medium
• S2 0.7385 – Previous Resistance – Strong

AUDUSD – fundamental overview

The RBA has released its latest Minutes and nothing too surprising from the release, with the central bank happy to sit on the sidelines for now with a mild easing bias. Members highlighted the fact that domestic and international data supported the central bank’s current policy stance, but also acknowledged the fact that lower inflation could inspire additional easing. Following this latest robust Aussie GDP print, odds for any rate cuts have however been scaled back, with only a 9% chance for an April easing and just 19bps of easings priced into year ahead, down from 25bps last week. But the Australian Dollar has come under some pressure, with news that China has drafted rules for a Tobin tax on FX trade weighing on sentiment. Looking ahead, the focus will be on a batch of US data featuring retail sales, PPI, empire manufacturing, NAHB housing, business inventories and TIC flows. Once this data is out of the way, it will be back to thinking about Wednesday’s FOMC.

USDCAD – technical overview

The latest break below the 78.6% fib retrace off the October 2015 to January 2016 low to high move, opens the door for a full retracement back to the October base at 1.2832 further down. Overall, the longer-term uptrend is still intact, but the market will need to break back above 1.3447 to take the immediate pressure off the downside and set up the possibility for a higher low.

• R2 1.3447 – 9Mar high – Strong
• R1 1.3352 – 11Mar high – Medium
• S1 1.3211 – 14Mar low– Medium
• S2 1.3168 – 11Mar/2016 low– Strong

USDCAD – fundamental overview

The light Monday economic calendar put the focus on OIL prices and the upcoming FOMC rate decision. The resulted in some profit taking on long Canadian Dollar positions, with OIL pulling back and market participants squaring up ahead of tomorrow’s Fed risk. OIL weakness was attributed to comments from Iran that it would be increasing production. Looking ahead, Canada existing home sales are due, but the focus will be on a batch of US data featuring retail sales, PPI, empire manufacturing, NAHB housing, business inventories and TIC flows. Once this data is out of the way, it will be back to thinking about Wednesday’s FOMC.

NZDUSD – technical overview

The market remains confined to a broader downtrend with rallies continuing to be very well capped ahead of medium-term resistance at 0.6900. 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 0.6774 – 11Mar high – Strong
• R1 0.6700 – Figure– Medium
• S1 0.6619 – 10Mar low – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

Risk correlated FX has come under pressure in the early week, with a pullback in commodities prices and profit taking ahead of tomorrow’s Fed factoring into price action. Another development weighing on Kiwi into Tuesday is this latest news out of China that it has drafted rules for a Tobin tax on FX trade. Looking ahead, we get the latest GDT auction results along with a heavy batch of US data featuring retail sales, PPI, empire manufacturing, NAHB housing, business inventories and TIC flows. Once this data is out of the way, it will be back to thinking about Wednesday’s FOMC.

US SPX 500 – technical overview

The latest rally is classified as corrective, with any additional upside expected to be well capped below 2050 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 2050.00 – Psychological – Strong
• R1 2023.00 – 10Mar high – Strong
• S1 1988.00 –11Mar low – Medium
• S2 1968.00 – 10Mar low – Strong

US SPX 500 – fundamental overview

Investors have done a good job shrugging off any concerns over extended monetary policy, with signals of the Fed holding off and this latest round of ECB stimulus helping to extend the impressive recovery run in stocks. But the irony is that with stocks recovering and external risks receding, this could keep the Fed pushing towards more rate hikes later this year, even if it holds off tomorrow. The market is currently pricing a 47% chance of a June rate hike and 80% chance of a 25bp hike by year end. The rally in stocks is however starting to find renewed offers on the back discouraging China news which includes softer weekend retail sales and industrial production, along with reports of the drafting of rules for a Tobin tax on FX.

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 1191, 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 1293.50 – 10Mar/2016 high – Strong
• R1 1261.10 – 14Mar high – Medium
• S1 1211.40 – 26Feb low – Medium
• S2 1191.50 – 11Oct high – Very Strong

GOLD (SPOT) – fundamental overview

GOLD continues to show impressive demand on dips. The yellow metal has become increasingly attractive in the current market environment. Uncertainty has catapulted GOLD on its status as a compelling hedge against exhausted monetary policy. Even this impressive rally in stocks has done little to weigh on the commodity, reflective of the fact that any rallies in risk are less than compelling these days.

Feature – technical overview

USDSGD has entered a period of correction since pulling back from the multi-year peak at 1.4442 from January. But overall, the structure remains constructive, with dips seen well supported. Look for any additional setbacks to continue to be well supported above 1.3500 in favour of an eventual resumption of the uptrend and retest of 1.4442. Ultimately, only back below 1.3500 would delay the constructive outlook.

• R2 1.3882 – 10Mar high – Strong
• R1 1.3817 – 11Mar high – Medium
• S1 1.3696 – 11Mar/2016 low – Medium
• S2 1.3608 – 22Jul low – Strong

Feature – fundamental overview

The Singapore Dollar has enjoyed a nice recovery run over the past several weeks. A resurgence in risk appetite has helped fuel the renewed demand for the emerging market currency, with expectations for a scaled back Fed timeline behind much of the move. However, signs of stabilisation in risk markets, could once again get the Fed thinking about hikes, something that would not be supportive of risk correlated currencies. Already into Tuesday we are seeing the Singapore Dollar back under pressure as it weakens on position squaring ahead of the Fed, while also finding offers on softer weekend China data and news China has drafted rules for a Tobin tax on FX. Singapore’s biggest export client is China and so naturally, any signs of slowdown in China are a negative for the Singapore Dollar.