Time to Buckle Up – It’s Fed Day!

GBPUSD – technical overview

The corrective rally out from the recent 7 year low at 1.3836 is showing signs of stalling out, with the market looking to carve a fresh lower top ahead of the next major downside extension back towards and eventually below 1.3836. A break below the recent 1.3836 low will then expose a more significant decline to a key measured move objective at 1.3500 further down. At this point, only back above 1.4437 delays.

• R2 1.4305 – 15Mar high – Strong
• R1 1.4200 – Figure – Medium
• S1 1.4118 – 10Mar low  – Medium
• S2 1.4033 – 3Mar low – Strong

GBPUSD – fundamental overview

Any possible demand from Tuesday’s round of softer US retail sales data was more than offset by the earlier revelation of a Telegraph Brexit poll showing 52% supporting a UK exit from the EU. This ultimately drove relative underperformance in the Pound, with the UK currency also weighed down on broader risk off flow. UK jobs data and Chancellor Osborne’s Budget are the major standouts in European trade, before the market takes in another batch of US data and the highly anticipated FOMC event risk. US data ahead of the Fed includes CPI, housing starts, building permits and industrial production.

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 112.63 – 15Mar low – Medium
• S2 112.23 – 9Mar low  – Strong

USDJPY – fundamental overview

Nobel Prize winning economist Joseph Stiglitz has been moving the market a bit into Wednesday after advocating for a delay in the sales tax hike and urging Japan to take a different course to stimulate the economy. HFTs were reported as buyers of USDJPY on the back of the comments, while Governor Kuroda’s concession there would be room for additional moves into negative rate territory, to -0.5% if needed, also helped to drive USDJPY higher. But gains have been mild thus far, with the major pair still confined to a consolidation and weighed down on risk off flow. Looking ahead, we get the highly anticipated FOMC event risk. US data ahead of the Fed includes CPI, housing starts, building permits and industrial production.

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 tomorrow, 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. It’s worth noting that all the fifteen forecasters polled by Bloomberg are looking for SNB policy to remain on hold.

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 0.7427 – 10Mar low – Medium
• S2 0.7385 – Previous Resistance – Strong

AUDUSD – fundamental overview

Tuesday’s risk off flow and safe haven US Dollar demand on the back of a discouraging US retail sales print have been weighing on the Australian Dollar off recent 2016 highs, while today’s early release of a slightly weaker Westpac leading index hasn’t helped much. Looking ahead, we get the highly anticipated FOMC event risk. US data ahead of the Fed includes CPI, housing starts, building permits and industrial production.

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 1.3402 – 15Mar high – Medium
• S1 1.3300 – Figure– Medium
• S2 1.3262 – 15Mar low– Strong

USDCAD – fundamental overview

The Canadian Dollar has come back under pressure this week, with the Loonie suffering from FOMC position squaring, a pullback in the price of OIL and safe haven US Dollar demand on disappointing US retail sales. Looking ahead, we get the highly anticipated FOMC event risk. The only notable Canada release comes in the form of international securities transactions. US data ahead of the Fed includes CPI, housing starts, building permits and industrial production.

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 0.6684 – 15Mar high– Medium
• S1 0.6577 – 16Mar low – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come under a lot of pressure since last week’s surprise RBNZ rate cut. Tuesday’s disappointing GDT auction has only extended the decline, while broader risk off flow has also contributed. However, setbacks have been finding mild support into Wednesday, perhaps on the back of a slightly better than expected New Zealand current account. Position squaring into the FOMC rate decision is also influencing calmer trade. US data out ahead of today’s FOMC should not be overlooked and includes CPI, housing starts, building permits and industrial production.

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 an impressive recovery run in stocks since early February. 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 later today. The market is currently pricing a 47% chance of a June rate hike and 80% chance of a 25bp hike by year end. It will be interesting to see what comes of the Fed’s dot plot this time round, which had previously signaled 4 rate hikes in 2016. The market will be expecting a downgrade of this forecast but just how much remains to be seen and will likely influence price action.

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 resurrected 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 1.3850 – Mid-Figure – 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 this week we are seeing the Singapore Dollar back under pressure as it weakens on position squaring ahead of today’s Fed. Softer weekend China data and news China has drafted rules for a Tobin tax on FX has also been weighing on the Asian EM currency. Singapore’s biggest export client is China and so naturally, any signs of slowdown in China are a negative for the Singapore Dollar.