China Data Trumping IMF Growth Concerns….For Now

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 1.4515 would be required to take the immediate pressure off the downside.

• R2 1.4459 – 30Mar high – Strong
• R1 1.4348 – 12Apr high – Medium
• S1 1.4197 – 12Apr low – Medium
• S2 1.4104 – 11Apr low – Strong

GBPUSD – fundamental overview

It continues to be a tough go for the Pound, with the UK currency mounting an impressive rally in Tuesday trade on the back of hotter than expected inflation data, before giving back most of the gains on news of a Brexit poll showing the ‘leave’ camp in the lead. Perhaps hawkish comments from Fed’s Lacker, Williams and Harker also contributed to Cable declines, though cautious remarks from Fed Kaplan were offsetting. Looking ahead, absence of data on the UK calendar will leave the market focused on US retail sales and the Fed Beige Book.

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. Last week’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 109.91 – 7Apr high – Strong
• R1 109.10 – 8Apr high – Medium
• S1 107.87 –12Apr low – Medium
• S2 107.63 – 11Apr/2016 low – Strong

USDJPY – fundamental overview

The major pair finally showed signs of life on Tuesday, with a resurgence in demand for risk assets helping to prop USDJPY off this week’s 2016 low. Gains have extended into Wednesday trade, with the very well received China trade data opening another round of bids. But overall, with the market looking for the Fed to take a slower path to policy normalisation, and with the Japanese administration not stepping in with any official response to this latest wave of Yen strength, there is risk for renewed downside pressure into rallies. Moreover, any rallies in stocks this year have been met with stiff resistance, and another downturn will also invite Yen demand. Looking ahead, US retail sales and the Fed Beige Book are the key standouts.

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

News of cash climbing to a record high over at the SNB could be helping to support this latest dip in EURCHF, with the market perhaps thinking the SNB has more room to be able to step in  and intervene to weaken the Franc. Overall, the SNB’s job has been 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. It certainly won’t be a comfort to the SNB that EURCHF has received more support from this latest bounce in stocks.

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. At the same time, a daily close above 0.7723 will open the next upside extension towards next key medium-term resistance at 0.7850.

• R2 0.7800 – Figure – Strong
• R1 0.7723 – 31Mar/2016 high – Medium
• S1 0.7583 – 12Apr low – Medium
• S2 0.7492 – 7Apr low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been a primary beneficiary of this latest run up in commodities prices, resurgence in demand for global equities and well received China trade data. The market is back to tracking at 2016 high levels, though rallies from here could prove difficult, with other less encouraging fundamentals worthy of consideration. The IMF has been out warning of slower growth, while the latest reading of Aussie consumer confidence has disappointed. Looking ahead, key standouts on the day come in the form of US retail sales and the Fed Beige Book.

USDCAD – technical overview

Overall, pressure remains on the downside, with the market taking out next major support in the form of the October 2015 base at 1.2832 and extending into the 1.2700s thus far. The breakdown now opens the door for the possibility of a fresh downside extension towards a measured move at 1.2500 before any form of a base and meaningful bounce. Back above 1.3217 would be required to take the immediate pressure off the downside.

• R2 1.2921 – 12Apr high – Strong
• R1 1.2886 – 11Apr low – Medium
• S1 1.2751 – 13Apr/2016 low – Medium
• S2 1.2700 – Figure – Strong

USDCAD – fundamental overview

The market has been feeling really good about the Canadian Dollar of late, with this most recent upbeat Canada employment data and surge in the price of OIL, driving the Loonie to fresh 2016 highs against the Buck. Reports Saudi Arabia and Russia are in agreement to freeze production have been responsible for this latest push in OIL prices, while expectations are now building for a more upbeat assessment from the Bank of Canada when it meets later today. Clearly the Bank of Canada event risk will be a primary source of volatility on Wednesday, though price action in OIL and US releases in the form of retail sales and the Fed Beige Book should not be overlooked.

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 0.6759 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 0.7000 – Psychological – Very Strong
• R1 0.6967 – 31Mar/2016 high – Strong
• S1 0.6879 – 11Apr high – Medium
• S2 0.6851 – 12Apr low – Strong

NZDUSD – fundamental overview

Lack of first tier economic data this week has the New Zealand Dollar trading on broader macro flow. The US Dollar has come under broad pressure into Wednesday, while commodities have been very well bid, which has helped to support Kiwi back towards key resistance in the 0.6900-0.7000 area. Meanwhile, well received China trade data has further contributed to Kiwi gains. However, with the RBNZ unlikely to welcome strength above 0.7000, medium-term offers are likely to emerge into any additional strength. The IMF has been out warning of slower growth, which could also weigh as Wednesday trade progresses. Looking ahead, key standouts on the day come in the form of US retail sales and the Fed Beige Book

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. This has been reflected in recent more upbeat comments from the Fed Chair herself, along with Tuesday’s run of hawkishness from Harker, Williams and Lacker. Moreover, the fact that monetary policy is exhausted on a global scale is not something that should be a comfort to stocks trading relatively close to 2015 record highs. Still, we continue to get comments from the other side, with dovish speak from Dudley and Kaplan helping to support stocks. On the global front, the market has shrugged off IMF growth warnings, instead choosing to focus on the better than expected China trade data. Looking ahead, US retail sales and the Fed Beige Book are the key standouts.

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 1262.70 – 12Apr 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 extended global equities. Overall, whether the US Dollar is bid 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. But certainly, this latest wave of Dollar selling has further contributed to GOLD demand.

Feature – technical overview

USDMXN finally looks poised to turn back up after a period of intense correction off the record high from earlier this year. Overall, the structure remains constructive, with the most recent dip well supported ahead of 17.0000. Look for a break and close back above 18.0000 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 17.0000 would give reason for pause.

• R2 18.3940 – 18Feb high – Strong
• R1 17.9900 – 16Mar high – Medium
• S1 17.2940 – 4Apr low – Strong
• S2 17.0950 – 31Mar/2016 low – Strong

Feature – fundamental overview

Although the swaps market is still pricing two more Banxico rate hikes between now and year end, there is increasing risk market participants will scale back from this more hawkish pricing. The global outlook is shaky, as recently expressed by the IMF, the local economy is still struggling and Mexican inflation has been rather tame. All of this would be supportive of a more cautious Banxico going forward, which ultimately, should weigh more heavily on the Peso. However, into the mid-week, the Peso has found demand on the back of this latest run in commodities, mild US Dollar selling and resurgence in risk appetite, aided by solid China trade data.