Risk Currencies Diverge from Majors

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 1.4091 – 14Apr low – Medium
• S2 1.4005 – 6Apr low – Strong

GBPUSD – fundamental overview

The Pound continues to find strong offers into any rallies, with the Brexit overhang a major factor. On Thursday, while the Bank of England left policy on hold as was widely expected, it did continue to warn of the risks associated with Brexit and the extended period of uncertainty tied with the event. Looking ahead, we get UK construction data, along with a batch of US releases featuring Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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 110.67 – Previous Support – Strong
• R1 110.00 – Psychological – Medium
• S1 108.51 –13Apr low – Medium
• S2 107.63 – 11Apr/2016 low – Strong

USDJPY – fundamental overview

The Yen has managed to extend its weekly decline, with the release of as expected China GDP and above forecast China retail sales, helping to fuel risk correlated markets. However, gains have been rather modest, with the Yen still capable of another sharp rally on a downturn in sentiment or additional expectation the BOJ will do nothing when it meets later this month. There has been a lot of talk about the ineffectiveness of extended monetary policy, which has put the administration in the serious position of considering holding off on making any additional moves. Looking ahead, we get a batch of US data featuring Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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

No surprises from SNB Maechler, offering the familiar line that the Franc remains highly overvalued. Maechler also added negative interest rates were a necessity, and that it was unclear how low negative rates could go. Overall, the SNB’s job has been easier of late, particularly with equity markets holding up well. Still, the global backdrop is 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 0.7737 will open the next upside extension towards next key medium-term resistance at 0.7850.

• R2 0.7800 – Figure – Strong
• R1 0.7737 – 14Apr/2016 high – Medium
• S1 0.7619 – 14Apr low – Medium
• S2 0.7477 – 24Mar low – Strong

AUDUSD – fundamental overview

The Australian Dollar has performed well on the week, with the currency trading to a fresh 2016 high. A solid Aussie employment report and well received economic data out of China have helped to fuel the gains. Early Friday, the market took in consensus China GDP and above forecast China retail sales. Looking ahead, we get a batch of US data featuring Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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 1.2898 – 14Apr high – Medium
• S1 1.2745 – 13Apr/2016 low – Strong
• S2 1.2700 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar sits just off its recent 2016 high against the Buck into Friday. The Loonie has done well of late, with the impressive recovery in the price of OIL and solid local data fueling the demand. But after enjoying a nice run since January, there is risk additional Canadian Dollar upside will be a struggle going forward, with so many positives now priced in and the market once again vulnerable to any deterioration in global sentiment. Moreover, a good chunk of recent gains have come from OIL’s expectation that there will be a production freeze agreement at this weekend’s Doha meeting, and with this also priced in, we could see a sell the fact reaction, or even more pronounced decline if things don’t go the way the market expects. Looking ahead, Canada data features manufacturing shipments and existing home sales, while in the US we get Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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

The New Zealand Dollar is doing a 180 into Friday trade, with the currency outperforming early on after standing out as the laggard on Thursday. Kiwi had been hit Thursday on calls for two more rounds of cuts from the RBNZ, while cross related demand for Aussie also weighed after the release of solid Australia employment data. But into Friday, the risk correlated commodity currency is regaining its footing, perhaps on the run up in stocks and well received China data. Still, plenty of offers are waiting ahead of 0.7000, with many players viewing the psychological barrier as a line in the sand for the RBNZ. Looking ahead, we get a batch of US data featuring Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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 2088.00 – 14Apr/2016 high – Medium
• S1 2021.00 –24Mar low – Strong
• S2 2004.00 – 15Mar low – Medium

US SPX 500 – fundamental overview

Investor’s have shrugged off IMF global growth warnings, instead choosing to focus on the better than expected run of China trade data. Perhaps, Thursday’s softer US inflation print is also helping to support this risk rally. 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. 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. Moreover, there is clearly a debate going on within the Fed and the case for slowing down the normalisation process may not be as much of a done deal as the market is pricing. Looking ahead, US data features Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.

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

The combination of higher stocks and a stronger US Dollar has been 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

USDMXN 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 17.0000. Look for a break and close back above 17.9900 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 17.0950 would give reason for pause.

• R2 17.9900 – 16Mar high – Strong
• R1 17.6760 – 12Apr high – Medium
• S1 17.2940 – 4Apr low – Medium
• 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 Friday, the Peso has held up rather well, mostly on the back of fresh 2016 highs in US equities, solid China data and a softer Thursday US CPI print. Looking ahead, US data features Empire manufacturing, industrial production, Michigan confidence and TIC flows. On the official circuit, Fed Evans is slated to speak.