Investors Struggle with Mixed Fed Messages

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 1.4000 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.

• R2 1.4171 – 6Apr high – Strong
• R1 1.4100 – Figure – Medium
• S1 1.4005 – 6Apr low – Medium
• S2 1.3836 – 29Feb/2016 low – Strong

GBPUSD – fundamental overview

The Pound continues to take its hits on the Brexit overhang, with the gap narrowing in favour of the exit camp. This in conjunction with some more hawkishly leaning Thursday Fed comments from Esther George and the Fed Chair herself, helped to keep the UK currency weighed down into Friday. George was quite clear about her desire to see higher rates, while Yellen was more upbeat on the economy than in recent appearances and talked about the economy being on a path to further rate hikes. Looking ahead, the key standouts on Friday’s calendar comes in the form of UK industrial and manufacturing production and UK trade.

USDJPY – technical overview

This latest break below the previous multi-month low from March is a significant development, as it potentially warns of a fresh downside extension and measured move into the 106.00s following a period of multi-day bearish consolidation. Wednesday’s daily close below 110.00 strengthens this prospect, with any rallies now seen well capped ahead of 112.00. But ultimately, only back above 115.00 would force a shift in the structure and take the pressure off the downside.

• R2 110.64 – 6Apr high – Strong
• R1 109.91 – 7Apr high – Medium
• S1 108.08 – 8Apr low – Medium
• S2 107.67 – 7Apr/2016 low – Strong

USDJPY – fundamental overview

It’s safe to safe that Friday’s round of Japanese trade data hasn’t really factored into to price action, with bigger issues in focus here. The Yen surge over the past week has been intense and is turning many heads, with the break in USDJPY below 110.00 getting the market a little nervous about the fact that even negative interest rate policy isn’t enough to weaken a currency. Into Friday, we are getting more official comments, with both Aso and Suga saying the Yen appreciation is being closely monitored, action will be taken and we aren’t far off from intervention levels. But as things generally go, until there is an actual intervention, the market is likely to keep testing the administration’s resolve. Setbacks in stocks have only invited additional Yen demand and it will be interesting to see how we close out the week.

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.

• R2 1.1024 – 17Feb high – Strong
• R1 1.0955 – 31Mar high – Medium
• S1 1.0844 – 7Apr low – Medium
• S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

Economic data out of Switzerland has been better of late, and there could be signs of an alleviation of intense deflationary pressures. And yet, with the Franc still deemed to be well overvalued, the SNB remains committed to its current policy strategy of intervention and negative rates. The SNB’s job has been a lot easier of late, with the EURCHF rate stable despite warnings of more ECB stimulus and accommodations elsewhere, and this should give the central bank the flexibility it needs to keep from making any additional easing moves. But the global backdrop is still shaky and any signs of an intensification of downside pressure on equities, could invite unwanted CHF appreciation, something the SNB needs to continue to closely monitor.

AUDUSD – technical overview

An impressive run for this pair over the past several days, with gains extending to fresh 2016 highs. However, the run is starting to look a little stretched and there is risk for a pullback and potential bearish resumption. Still, a break back below 0.7477 would be required to strengthen this outlook and take the immediate pressure off the topside.

• R2 0.7678 – 4Apr high – Strong
• R1 0.7638 – 7Apr high – Medium
• S1 0.7492 – 7Apr low – Medium
• S2 0.7477 – 24Mar low – Strong

AUDUSD – fundamental overview

The latest wave of risk off trade has been negatively impacting the Australian Dollar, which has retreated from recent 2016 highs against the Buck. Meanwhile, comments from the Fed Chair late Thursday have given bears an added excuse to be looking sell, after Yellen sounded much less dovish than recent appearances, saying the economy is on solid course and a path for further rate increases. Looking ahead, the economic calendar is rather light for the remainder of the day, with no meaningful releases scheduled in the US. Broader macro flow and risk sentiment will likely dictate direction.

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 1.3296 to strengthen this outlook and accelerate gains, setting up a possible double bottom and bullish resumption. But while the market holds below 1.3296, a deeper drop to test the October 2015 base at 1.2832 should not be ruled out.

• R2 1.3296 – 24Mar high – Strong
• R1 1.3219 – 5Apr high – Medium
• S1 1.3019 – 7Apr low – Medium
• S2 1.2968 – 1Apr low – Strong

USDCAD – fundamental overview

A fresh wave of risk off trade, mild weakness in the price of OIL and a round of more upbeat Fed speak, all factored into this most recent selling of the Canadian Dollar. Perhaps also contributing a bit was the well received US initial jobless claims data. Looking ahead, Canada employment will be the major volatility generator for this pair on Friday, though sentiment flow and the direction in the price of OIL will also dictate direction.

NZDUSD – technical overview

Despite gains over the past several days, the market still remains confined to a broader downtrend with rallies continuing to be very well capped ahead of the key psychological barrier at 0.7000. However, a break back below 0.6668 will be required to strengthen the outlook and expose fresh declines towards next key support at 0.6546 further down. Ultimately, only a weekly close above 0.7000 compromises the bearish outlook.

• R2 0.6904 – 4Apr high – Strong
• R1 0.6863 – 7Apr high – Medium
• S1 0.6759 – 5Apr low – Medium
• S2 0.6668 – 28Mar low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come under renewed pressure after recently trading to fresh 2016 highs, with the combination of dovish RBNZ Deputy Governor Bascand comments and more upbeat Fed speak weighing on the commodity currency. On Thursday, the Fed Chair was less dovish than recent appearances, while Fed George was outright hawkish, saying the Fed shouldn’t delay hikes. Meanwhile, risk assets have also come back under pressure, something that is not a help to the correlated Kiwi. Looking ahead, the economic calendar is rather light for the remainder of the day, with no meaningful releases scheduled in the US. Broader macro flow and risk sentiment will likely dictate direction.

US SPX 500 – technical overview

This latest multi-day rally is classified as corrective, with any additional upside expected to be well capped below 2100 on a weekly close basis in favour of the next major downside extension below 1800 and towards a measured move at 1500 further down. Ultimately, only a weekly close back above 2100 will delay the bearish outlook.

• R2 2083.00 – 29Dec high – Strong
• R1 2080.00 – 4Apr/2016 high – Medium
• S1 2021.00 –24Mar low – Strong
• S2 2004.00 – 15Mar low – Medium

US SPX 500 – fundamental overview

There is clearly a debate going on within the Fed and the case for slowing down the normalisation process is not as clear cut as the market may be pricing. Investors did not like the more upbeat comments from the Fed Chair late Thursday, with Yellen saying the economy could handle further rate hikes. Moreover, the fact that monetary policy is exhausted on a global scale is not something that should be a comfort to stocks still trading relatively close to 2015 record highs.

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 1191. 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 1244.10 – 30Mar 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. Overall, whether the US Dollar is bid or not is becoming less relevant, with risk sentiment likely to be the primary driver. Any weakness on this front will continue to bolster the yellow metal.

Feature – technical overview

USDSGD is finally poised to turn back up after a period of intense correction. Overall, the structure remains constructive, with the most recent dip 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 a 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.

• R2 1.3650 – Mid-Figure – Medium
• R1 1.3590 – 5Apr high – Medium
• S1 1.3425 – 78.6% Fib Retrace – Strong
• S2 1.3412 – 31Mar/2016 low – Strong

Feature – fundamental overview

Very little on the domestic front driving the Singapore Dollar at the moment, with most of the price action driven off the US Dollar side of the equation. This is a market that continues to be highly sensitive to the Fed policy outlook and risk appetite. And so, with Yellen less dovish and Esther George more hawkish on Thursday, we have seen renewed downside pressure on the emerging market currency. Overall, there is also every sense that with monetary policy exhausted across the globe, any meaningful upside in the Singapore Dollar from current levels could very well be limited, with risk markets on the verge of rolling over on fear nothing is left in the tank to support.