Doha Breakdown Sours Risk Appetite

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 1.4242 – 15Apr high – Medium
• S1 1.4143 – 15Apr low – Medium
• S2 1.4091 – 14Apr low – Strong

GBPUSD – fundamental overview

A softer round of Friday US data opened some demand for the Pound, with the UK currency rallying on the back of disappointing industrial production and Michigan confidence. However, ongoing Brexit risk continues to keep any rallies very well capped, with the pressure still tilted to the downside, given the tight polls. Moreover, this latest breakdown of the Doha talks and OIL pullback hasn’t helped the Pound’s cause, back under pressure into Monday. Looking ahead, the only notable standout on today’s calendar is some US NAHB housing data.

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. The recent 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 109.73 – 15Apr high – Strong
• R1 108.60 – 15Apr low – Medium
• S1 107.63 –11Apr/2016 low – Strong
• S2 107.00 – Figure – Medium

USDJPY – fundamental overview

The major pair is back under pressure in the early week and could be considering the next major breakdown to fresh multi-month lows. The weakness has come from the combination of soft Friday US economic data, dovish comments from Fed Bullard over the weekend, and the breakdown in the Doha talks, with no global output freeze agreement stuck. Looking ahead, the economic calendar is exceptionally thin, with only US NAHB housing standing out.

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

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 continues to trade near fresh 2016 highs posted in the previous week, with the market having held up well on softer US data and some dovish weekend comments from Fed Bullard. However, there has been a wave of offsetting risk off trade into Monday, following the oil producers failure to reach a production freeze agreement. Looking ahead, the economic calendar is exceptionally thin, with only US NAHB housing standing out.

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 1.3219 would be required to take the immediate pressure off the downside.

• R2 1.3219 – 5Apr high – Strong
• R1 1.3016 – 11Apr high – Medium
• S1 1.2903 – 15Apr high – Medium
• S2 1.2745 – 13Apr/2016 low – Strong

USDCAD – fundamental overview

Not much of a surprise to see the Canadian Dollar a good deal lower into the new week, with the oil producers’ failure to reach a production freeze agreement, opening  a sharp pullback in the price of oil. The Canadian Dollar has also already enjoyed a nice run since January and could already be positioned for a material correction after gaining well over 10% in that time. Looking ahead, the Canada economic calendar is empty, with only US NAHB housing standing out.

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 0.6930 – 18Apr high – Medium
• S1 0.6824 – 14Apr low – Medium
• S2 0.6759 – 5Apr low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been bid up in the early week, with the commodity currency finding a fresh wave of demand following the release of this latest inflation data, which came in slightly firmer than expected. Odds for an April 28 rate cut have been scaled back quite a bit over the past week, with the market only pricing in a 36% chance for an April cut versus 48% previous. A full cut isn’t priced now until the August meeting. Rallies have however been well capped by medium-term players expecting the RBNZ to jawbone the currency lower. Meanwhile, a wave of risk off trade into Monday on the back of the Doha talks breakdown, has also kept the rally contained for now. Looking ahead, the economic calendar is exceptionally thin, with only US NAHB housing standing out.

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. A break back below 2021 will strengthen this outlook and accelerate declines.

• 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

Stocks have reversed quite sharply in the early week as investors get the jitters on the weekend news of the Doha talks breakdown. But the stock market has already been looking vulnerable at lofty heights in 2016, with the rally continuing 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, the economic calendar is exceptionally thin, with only NAHB housing standing 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

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. Whether the US Dollar is bid is becoming less relevant, with risk sentiment likely to be the primary driver going forward. 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 17.8360 – 11Apr high – Medium
• S1 17.3200 – 14Apr low – Medium
• S2 17.0950 – 31Mar/2016 low – Strong

Feature – fundamental overview

The Doha talks breakdown and subsequent reversal in equities markets has not been a welcome development to correlated emerging market FX in the early week. 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.