Correction Underway in Light Monday Trade

GBPUSD – technical overview

The market continues to extend its correction out from the recent 7 year low at 1.3836, with the latest push back above 1.4440 exposing the next key resistance point in the form of a previous lower top at 1.4668. A break above 1.4668 would signal a bullish structural shift, while inability to take out the level will keep the medium-term pressure on the downside.

• R2 1.4578 – 10Feb high – Strong
• R1 1.4514 – 18Mar high – Medium
• S1 1.4400 – Figure  – Medium
• S2 1.4274 – 16Mar high – Strong

GBPUSD – fundamental overview

The latest CFTC positioning data shows a record number of GBP contracts being bought up, with long positions nearly doubling from 33.5k to 62.9k, perhaps on expectations for the UK to remain in the EU. We’ve also seen a recovery in the Pound in reaction to last week’s more dovish Fed policy decision. But looking ahead, the market could come back under pressure as Brexit risk remains in the spotlight. For today, we could just see some quiet consolidation with the economic calendar light. UK CBI trends, Chicago Fed national activity index and US existing home sales are due. On the official circuit, we get speeches from Fed Lacker and Lockhart.

USDJPY – technical overview

Last week’s break below the previous multi-month low from February was a significant development, as it potentially warns of a fresh downside extension ahead following a period of multi-day consolidation. At this point, a daily close below 111.00 would be required to strengthen this prospect, while inability to establish below 111.00 could invite another bounce off the range low back towards the 115.00 area.

• R2 112.96 – 17Mar high – Strong
• R1 112.00 – Figure – Medium
• S1 110.67 – 17Mar/2016 low– Medium
• S2 110.00 – Psychological  – Strong

USDJPY – fundamental overview

Liquidity conditions are thin on Monday with Japanese markets closed for holidays. HFT and leveraged names have however been reported on the offer and have been helping to cap any rallies. Overall, the Yen has been bid on the back of the latest dovish FOMC policy decision, which has moved yield differentials out of the Buck’s favour. There is additional risk for Yen gains going forward, if an extended equity market now shows signs of coming off again. The economic calendar for Monday is quite light and more consolidation is expected. The Chicago Fed national activity index and US existing home sales are the only notable standouts. On the official circuit, we get speeches from Fed Lacker and Lockhart.

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

The cross rate has come back under mild pressure in recent trade, weighed down by last week’s unchanged SNB policy decision and these most recent dovish comments from ECB Praet that the central bank could still move lower on rates. But overall, dips continue to be very well supported with the SNB remaining committed to weakening the Franc as necessary through negative interest rates and intervention. The SNB will need to keep a close eye on stocks in the days ahead, with the market extended and potentially at risk for renewed weakness, which could invite unwanted demand for the Franc.

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 the 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 0.7700 – Figure – Strong
• R1 0.7681 – 18Mar/2016 high – Medium
• S1 0.7569 – 21Mar low – Medium
• S2 0.7533 – 17Mar low – Strong

AUDUSD – fundamental overview

Data showing a dramatic increase in Australian mortgage debt over the past decade, now at record highs, has left many concerned about the current state of record low interest rates, which should add pressure on the RBA to avoid moving further into accommodative territory. Meanwhile, political instability is shaking the Aussie a bit, with the Australian PM threatening an early election. RBA Governor Stevens and Assistant Governor Edey will be on the wires tomorrow, and in the interim, quiet trade is to be expected, with the Monday economic calendar rather light. The Chicago Fed national activity index and US existing home sales are the only notable standouts. On the official circuit, we get speeches from Fed Lacker and Lockhart.

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 1.3133 – 17Mar high – Strong
• R1 1.3100 – Figure – Medium
• S1 1.2923 – 18Mar/2016 low – Medium
• S2 1.2832 – 15Oct low– Very Strong

USDCAD – fundamental overview

There are signs of this latest run in the OIL market starting to stall out and this has been taking some of the wind out of the sails of an impressive recovery in the Canadian Dollar since January. Equity markets have also run up quite a bit since mid-February and here too there is a sense that it all could start to fizzle out again. This has opened renewed selling in the Loonie, with technical accounts joining in, looking for a resumption of a longer-term downtrend in the Canadian Dollar. The economic calendar for Monday is exceptionally thin, with nothing of note out of Canada and only the Chicago Fed national activity index and US existing home sales due in the US. On the official circuit, we get speeches from Fed Lacker and Lockhart.

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. However, a break back below 0.6546 will be required to strengthen the outlook and expose fresh declines towards next key support at 0.6347 further down. Ultimately, only a weekly close back above 0.6900 compromises the bearish outlook.

• R2 0.6874 – 18Mar/2016 high – Strong
• R1 0.6800 – Figure – Medium
• S1 0.6718 – 17Mar low – Medium
• S2 0.6685 – 15Mar high – Strong

NZDUSD – fundamental overview

Softer New Zealand data in the form of Westpac consumer confidence and net migration have been weighing on the risk correlated commodity currency in the early week. Kiwi had already started to find offers into formidable medium-term resistance towards 0.6900 in the previous week, with buy side names and leveraged accounts on the offer. There has also been chatter about some official jawboning of the higher Kiwi rate and this has also factored into trade. Equities have enjoyed a nice run in recent weeks and if stocks start to roll over, this could put additional downside pressure going forward. The Chicago Fed national activity index and US existing home sales are the only notable standouts. On the official circuit, we get speeches from Fed Lacker and Lockhart.

US SPX 500 – technical overview

The latest rally is classified as corrective, with any additional upside expected to be well capped below 2050 on a daily close basis in favour of the next major downside extension below 1800 and towards a measured move at 1550 further down. Ultimately, only a daily close back above 2050 will delay the bearish outlook.

• R2 2083.00 – 29Dec high – Strong
• R1 2053.00 – 18Mar/2016 high – Medium
• S1 2004.00 –15Mar low – Medium
• S2 1968.00 – 10Mar low – Strong

US SPX 500 – fundamental overview

Investors are still buying into Fed and global central bank accommodative gestures despite exhausted monetary policy, with last week’s dovish FOMC decision fueling a fresh round of bids, extending this impressive recovery out from the early February multi-month low. The primary driver behind this latest push has been the Fed’s scaled back dot plot, with the central bank downgrading its rate hike timeline assessment from 4 to just 2 hikes in 2016. Still, despite the rally, there is a sense that with policy reaching its limits, the incentive to be buying risk assets isn’t what it once was, which could once again weigh over the coming sessions. The economic calendar for Monday is quite light which will leave the market trading on broader flow. The Chicago Fed national activity index and US existing home sales are the only notable standouts. On the official circuit, we get speeches from Fed Lacker and Lockhart.

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 1283.50 – 10Mar/2016 high – Strong
• R1 1270.90 – 17Mar high – Medium
• S1 1225.70 – 15Mar low – Medium
• S2 1191.50 – Previous Resistance – 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 compelling these days.

Feature – technical overview

USDSGD has entered a period of intense correction off the multi-year peak at 1.4442 from January. But overall, the structure remains constructive, with dips seen well supported into the 78.6% fib retrace off the 2015-2016 low to high move at 1.3425. Look for the market to find the next meaningful base around 1.3425 ahead of the next major upside extension. Ultimately, only a weekly close below 1.3400 would compromise the outlook.

• R2 1.3671 – 17Mar high – Strong
• R1 1.3619 – 21Mar high – Medium
• S1 1.3477 – 18Mar/2016 low – Medium
• S2 1.3425 – 78.6% Fib Retrace – Very Strong

Feature – fundamental overview

The Singapore Dollar has enjoyed a nice recovery run over the past several weeks, breaking to fresh 2016 highs. A resurgence in risk appetite has helped fuel the renewed demand for the emerging market currency, with the more dovish FOMC decision and scaled back Fed rate hike timeline fueling the move. But technicians cite major support ahead of 1.3400 which ultimately could inspire renewed Singapore Dollar selling. Global equities have also enjoyed a nice run in recent weeks and if investors start to lose confidence in the effectiveness of exhausted monetary policy, we could once again see a run on emerging market FX. China deterioration is another theme that could hurt the Singapore Dollar. Japanese holiday closure and a light economic calendar could keep price action subdued on Monday. The Chicago Fed national activity index and US existing home sales are the only notable standouts. On the official circuit, we get speeches from Fed Lacker and Lockhart.