Mother Dove Flaps Her Wings

Next 24 hours: Dollar Lower But Closes Off Worst Levels

Today’s report: Mother Dove Flaps Her Wings

What a difference a day or even an hour makes, with a good chunk of US Dollar gains over the past several days wiped away on a dovish Yellen speech. Looking ahead, Eurozone confidence indicators, German CPI, and US ADP employment are the key standouts on today's calendar.

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Wake-up call

Chart talk: Major markets technical overview video

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The market remains well supported on dips and scope still exists for gains to extend towards the next key resistance zone in the form of the 2016 high from February and October 2015 peak at 1.1377 and 1.1495 respectively. Overall, price action remains rather choppy, but it will take a break back below 1.1058 to take the immediate pressure off the topside.

Screen Shot 2016-03-30 at 4.39.14 AM

  • R2 1.1377 – 11Feb/2016 high – Strong
  • R1 1.1343 – 17Mar high – Medium
  • S1 1.1220 – 28Mar high – Medium
  • S2 1.1145 –24Mar low – Strong

EURUSD – fundamental overview

Renewed bids for the Euro on Tuesday after the Fed Chair appeased doves, expressing more caution than anything else, citing unfavourable market conditions, weaker than expected overseas growth and an uncertain inflation outlook. Moreover, Yellen was quick to offset optimism in the jobs market and household spending, expressing concern over US manufacturers hard-hit by the stronger Dollar. The Euro has since been bid back up and could now be poised for a retest of the yearly high at 1.1377. Looking ahead, Eurozone confidence indicators, German CPI and US ADP employment are the key standouts on Wednesday’s calendar.

GBPUSD – technical overview

The recovery rally out from a recent 7 year low has stalled out ahead of key resistance at 1.4668, potentially setting the stage for the next major lower top and bearish resumption. A daily close below 1.4053 will strengthen this outlook and expose a retest of 1.3836, which guards against the multi-year base at 1.3500 further down. Back above 1.4668 would be required to take the immediate pressure off the downside.

Screen Shot 2016-03-30 at 4.39.41 AM

  • R2 1.4437 – 11Mar high – Strong
  • R1 1.4404 – 29Mar high – Medium
  • S1 1.4283 – 28Mar high  – Medium
  • S2 1.4195 – 29Mar low – Strong

GBPUSD – fundamental overview

The Pound was already supported in recent trade on an easing of Brexit fear and some solid UK data, but managed to get a nice boost on Tuesday, following the Fed Chair’s speech. Yellen appeased doves, expressing more caution than anything else, citing unfavourable market conditions, weaker than expected overseas growth and an uncertain inflation outlook. Moreover, Yellen was quick to offset optimism in the jobs market and household spending, expressing concern over US manufacturers hard-hit by the stronger Dollar. Looking ahead, the UK calendar is quiet Wednesday and the focus will shift to US ADP employment data.

USDJPY – technical overview

The recent 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, though any rallies in the interim should be very well capped ahead of 115.00. Ultimately, only back above 115.00 would force a shift in the structure and take the pressure off the downside.

Screen Shot 2016-03-30 at 4.41.17 AM

  • R2 113.80 – 29Mar high – Strong
  • R1 113.12 – 28Mar low – Medium
  • S1 112.14 – 23Mar low – Medium
  • S2 111.38 – 22Mar low – Strong

USDJPY – fundamental overview

The major pair had already been well capped in early Tuesday trade after PM Abe downplayed fiscal stimulus hopes and reiterated the sales tax would be moving forward. But setbacks accelerated later in the day, with the Yen gaining momentum after the Fed Chair delivered a dovish message to markets. Looking ahead, most of the Japanese fiscal year end flow has worked through the market, but we could still see added volatility on this front in the sessions ahead. As far as economic data goes, US ADP employment is the key standout 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 1.0800, 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.

Screen Shot 2016-03-30 at 4.41.32 AM

  • R2 1.1024 – 17Feb high – Strong
  • R1 1.1000 – Psychological – Medium
  • S1 1.0875 – 23Mar low – Medium
  • S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

The Swiss National Bank released its annual report  last Thursday, which to no surprise, showed a good deal of intervention in 2015, mostly from the historic moves in January 2015. In total, the SNB purchased foreign currency worth CHF 86.1 Billion. The SNB remains committed to its current policy strategy of intervention and negative rates but is now having to battle broader macro forces, which could invite unwanted appreciation in the Franc. For now, Tuesday’s dovish Yellen speech has been a help to the SNB, with the Fed Chair’s cautious tone opening a resurgence in demand for risk assets.

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 potential push towards next key resistance at 0.7849 further up. At this point, only a break back below the previous resistance at 0.7385 would take the pressure of the topside and open a broader resumption of the longer-term downtrend.

Screen Shot 2016-03-30 at 4.47.33 AM

  • R2 0.7681 – 18Mar/2016 high – Strong
  • R1 0.7649 – 23Mar high – Medium
  • S1 0.7558 – 28Mar high– Medium
  • S2 0.7477 – 24Mar low – Strong

AUDUSD – fundamental overview

Although the Australian Dollar has benefitted from this latest wave of broad based US Dollar selling on the back of a dovish Yellen speech, the currency has been well capped into rallies with RBA Stevens warning Aussie is getting ahead of itself. Solid offers are now reported up towards 0.7700, with sell stops below 0.7550. Looking ahead, US ADP employment data is the only notable standout on Wednesday’s calendar.

USDCAD – technical overview

Signs of a potential bottom after the market stalled ahead of the critical October base at 1.2832. The market will need to establish back above 1.3406 to strengthen this outlook and accelerate gains, setting up the next medium-term higher low and bullish resumption. But while the market holds below 1.3406, there is still risk for a drop towards 1.2832.

Screen Shot 2016-03-30 at 4.47.59 AM

  • R2 1.3216 – 29Mar high – Strong
  • R1 1.3168 – 28Mar low – Medium
  • S1 1.3029 – 22Mar low – Medium
  • S2 1.2923 – 18Mar low– Strong

USDCAD – fundamental overview

The recent pullback in the price of OIL has most certainly limited this latest recovery in the Canadian Dollar on the back of a dovish Fed Yellen speech. On Tuesday, Yellen appeased doves, expressing more caution than anything else, citing unfavourable market conditions, weaker than expected overseas growth and an uncertain inflation outlook. Moreover, Yellen was quick to offset optimism in the jobs market and household spending, expressing concern over US manufacturers hard-hit by the stronger Dollar. Looking ahead, the Canada economic calendar is empty, with only US ADP employment standing out.

NZDUSD – technical overview

The market remains confined to a broader downtrend with rallies continuing to be very well capped into medium-term resistance in the 0.6900 area. Look for this latest surge to stall out yet again in favour of a bearish reversal. A break back below 0.6546 over the coming days 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.

Screen Shot 2016-03-30 at 4.48.21 AM

  • R2 0.7000 – Psychological – Very Strong
  • R1 0.6965 – 30Mar/2016 high – Medium
  • S1 0.6841 – 30Mar low – Medium
  • S2 0.6792 – 21Mar high – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been very well bid in recent trade, breaking to a fresh 2016 high, aided by dovish comments from the Fed Chair. But additional upside could prove hard to come by, with chatter making the rounds of RBNZ jawboning and a potential rate cut in April. Plenty of medium-term offers are reported around the 0.6900 barrier, with heavy stops below 0.6800. Looking ahead, US ADP employment is the only notable standout on Wednesday’s calendar.

US SPX 500 – technical overview

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

Screen Shot 2016-03-30 at 4.49.36 AM

  • R2 2083.00 – 29Dec high – Strong
  • R1 2067.00 – 30Mar/2016 high – Medium
  • S1 2004.00 –15Mar low – Medium
  • S2 1968.00 – 10Mar low – Strong

US SPX 500 – fundamental overview

Investors continue to find comfort in dovish Fed speak, with Tuesday’s Yellen comments fueling this latest push to fresh 2016 highs. But how long investors find comfort in gestures of additional accommodation is an entirely different question and one that could ultimately become more important sooner than later. If the market loses confidence in the ability for exhausted monetary policy gestures to stimulate the economy, or if a fresh set of headwinds emerge, there won't be much the Fed can do – a distressing prospect even the Fed Chair recognizes. Looking ahead, US ADP employment is the key standout on Wednesday’s calendar.

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.

Screen Shot 2016-03-30 at 4.50.17 AM

  • R2 1283.50 – 10Mar/2016 high – Strong
  • R1 1249.40 – 23Mar high – Medium
  • S1 1208.35 – 28Mar low – Medium
  • S2 1191.50 – Previous Resistance – Very Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported in recent dips, with the yellow metal finding solid demand in 2016 on the back of fears over the limitations of exhausted monetary policy and broad based currency weakness. But it has been Tuesday’s sell-off in the Buck, following some dovish Yellen speak that has inspired this latest recovery in the inversely correlated asset.

Feature – technical overview

USDSGD is finally poised to turn back up after a period of intense correction. Overall, the structure remains constructive, with current 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 in the 1.3400s ahead of the next major upside extension. Ultimately, only a weekly close below 1.3400 would compromise the outlook.

Screen Shot 2016-03-30 at 4.50.50 AM

  • R2 1.3850 – 16Mar high – Strong
  • R1 1.3737 – 28Mar high – Medium
  • S1 1.3477 – 18Mar/2016 low – Medium
  • S2 1.3425 – 78.6% fib retrace – Strong

Feature – fundamental overview

Tuesday’s dovish speech from the Fed Chair has proven to be a major support for emerging market currencies. Contrary to recent Fed speak, Yellen has come out dismissing any sense of imminence for future rate hikes and this has been having a stabilising influence over risk correlated assets, with yield differentials concurrently widening back in favour of these markets. The Singapore Dollar has rallied back towards recent yearly highs in response, but could start to find stiff resistance as USDSGD drops back into the 1.3400. Looking ahead, US ADP employment is the only notable standout on Wednesday’s calendar.

Peformance chart: Five day performance v. US dollar

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