It Isn’t All Adding Up

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 1.4279 – 13Apr high – Strong
• R1 1.4207 – 14Apr high – Medium
• S1 1.4104 – 11Apr low – Medium
• S2 1.4005 – 6Apr low – Strong

GBPUSD – fundamental overview

Local traders will be thinking a lot about the Brexit overhang on Thursday, particularly with the Bank of England on tap. While no policy change is expected, market participants will be interested to hear what the central bank has to say about the upcoming risk. Certainly, the expectation is that the BOE will need to err on the side of caution until the risk is out of the way, which continues to keep the Pound under pressure. Also out on Thursday is an important US CPI release and US initial jobless claims. Earlier today, the UK RICS March house price balance fell to a 9 month low of 42% versus 50% expected, which could be adding to downside pressure on the UK currency.

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 109.55 – 14Apr high – Medium
• S1 108.51 –13Apr low – Medium
• S2 107.63 – 11Apr/2016 low – Strong

USDJPY – fundamental overview

A softer round of Wednesday US economic data, highlighted by disappointing retails sales, did nothing to derail this latest recovery in the major pair. It seems the combination of technical buying, risk on flow from solid China trade data and some above consensus JP Morgan earnings, were what helped to keep the USDJPY recovery going into Thursday. Still, with the Fed capable of scaling back policy normalisation and with the BOJ not committing to any intervention or additional stimulus, there is risk for another downturn in the major pair over the coming sessions. Looking ahead, US CPI and initial jobless claims data are the major standouts on today’s calendar.

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 renewed 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 little 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 employment report came in on the better side of expectation, which has helped to support Aussie setbacks into Thursday, despite broad based US Dollar demand. More new jobs added and a healthy drop in the unemployment rate were the sources of Aussie outperformance and this is likely to further solidify prospects the RBA will be content to leave policy on hold. However, it’s worth noting the data wasn’t all roses, with a pickup in part time jobs acounting for the better than expected number. Looking ahead, US CPI and initial jobless claims are the major standouts for the remainder of the day.

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 1.2900 – Figure – Medium
• S1 1.2745 – 13Apr/2016 low – Strong
• S2 1.2700 – Figure – Medium

USDCAD – fundamental overview

No real surprises from the Bank of Canada on Wednesday, with the central bank leaving policy on hold as was widely expected. Initially, the balanced decision triggered a wave of Cad demand, taking USDCAD down to another 2016 low. However, broad based US Dollar interest and some weakness in the price of OIL, were enough to inspire some profit taking on this impressive Loonie run. It’s also possible, the market was a little jittery after BoC Poloz said “weaker global growth and a not so rosy US outlook would have clouded the economic outlook if not for the boost from the government at its recent budget.” Looking ahead, the Canada new housing price index is scheduled, though most of the attention will be on US CPI and initial jobless claims.

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 0.6967 – 31Mar/2016 high – Strong
• R1 0.6900 – Figure – Medium
• S1 0.6791 – 11Apr low – Medium
• S2 0.6759 – 5Apr low – Strong

NZDUSD – fundamental overview

An RBNZ investigation confirming the March easing had been leaked, did nothing to inspire confidence in the New Zealand Dollar, while calls for additional rate cuts in the months ahead, acted as a further weight. Kiwi has emerged as one of the underperformers in Thursday trade, and perhaps the selling has been intensified after the market was unable yet again to conquer the 0.7000 barrier. But with the RBNZ quite vocal about its discomfort with Kiwi at elevated levels, and with inflation still quite subdued, calls for another 50bps of cuts seem to be quite realistic. This comes in contrast to an RBA more likely to remain on hold over the coming months, which ultimately could result in a critical shift in yield differentials, with Aussie rates higher than New Zealand rates for the first time in a long time. This has been reflected in AUDNZD buying. Looking ahead, US CPI and initial jobless claims are the key standouts.

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 2100.00 – Psychological – Strong
• R1 2084.00 – 13Apr/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 much of a done deal as the market may be pricing. This has been reflected in recent more upbeat comments from the Fed Chair herself, along with this week’s run of hawkishness from Fed’s 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 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. Meanwhile, on the global front, the market has shrugged off IMF growth warnings, instead choosing to focus on the better than expected China trade data and JP Morgan earnings. But as much as the market has been bid back up to fresh 2016 highs, the rally continues to feel like it has very little behind it. Looking ahead, US CPI and initial jobless claims stand out.

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

Wednesday’s combination of higher stocks and a stronger US Dollar was not a good one for the yellow metal, with GOLD pulling back as a result. But overall, 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. Renewed weakness on this front will continue to bolster the yellow metal.

Feature – technical overview

USDSGD finally looks poised to turn back up after a period of intense correction from earlier this year. Overall, the structure remains constructive, with the most recent dip supported ahead of 1.3400. Look for a break and close back above 1.3735 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 1.3400 would give reason for pause.

• R2 1.3735 – 25Mar high – Strong
• R1 1.3700 – Figure – Medium
• S1 1.3532 – 13Apr high – Strong
• S2 1.3410 – 31Mar/2016 low – Strong

Feature – fundamental overview

A big surprise out of Singapore on Thursday, after the MAS came out and announced it was shifting to a neutral policy stance and zero appreciation path for the Singapore Dollar. This is the first time the central bank has made such a move since October 2008, at the onset of the global financial crisis. The Singapore Dollar has traded sharply lower in response, with the move shaking up yield differentials, pushing them decidedly back in the US Dollar’s favor. Flat Singapore GDP data didn’t really factor into trade.