House of Cards

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 1.4242 – 15Apr high – Medium
• S2 1.4131 – 18Apr low – Strong

GBPUSD – fundamental overview

In a reversal of fortune, the Pound was actually the leading performer amongst the major currencies in Monday trade. The impressive recovery in the price of OIL post the weekend Doha talks breakdown, helped to fuel gains, while warnings from George Osborne that a Brexit would have a major negative impact on GDP, perhaps threw some cold water on the ‘leave’ camp’s momentum. Looking ahead, there is no first tier economic data scheduled out of the UK or US and the key focus will be on a 15:30GMT Governor Carney speech at the Lords Economic Affairs Committee hearing on the general economic outlook.

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 109.50 – Mid-Figure – Medium
• S1 108.00 –Figure – Medium
• S2 107.63 – 11Apr/2016 low – Strong

USDJPY – fundamental overview

The Yen has done a good job selling off over the past 24 hours, in sync with the broader recovery in risk assets and OIL. The Japanese currency continues to inversely correlate with risk, with some added downside perhaps coming from less dovish Fed Rosengren comments. On Monday, Rosengren was out once again warning the shallow Fed rate hike path priced by the market is not justified. But for now, as risk appetite goes, so does the direction in this major pair. US equities are testing critical resistance levels and if there is any pullback after these levels are tested, it is likely to once again weigh on the major pair. As far as economic data goes, the calendar is exceptionally thin, with no first-ted releases due.

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

Over the weekend, SNB Jordan was out suggesting the central bank could reduce the amount of cushion it grants banks on the negative deposit rate, in a further effort to stem unwanted Franc appreciation. While Jordan conceded there were no immediate plans to change the threshold, he believed banks could handle deeper sub-zero rates. For the time being, the SNB has been able to relax a bit, with risk assets supported. However, it is worth noting that weakness in the Franc in response to this latest wave of risk on trade has been less than impressive, which could be a concern if the market rolls over.

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. Until then, a test of next key medium-term resistance at 0.7850 should not be ruled out.

• R2 0.7849 – 18Jun high – Strong
• R1 0.7800 – Figure – Medium
• S1 0.7700 – Figure – Medium
• S2 0.7619 – 14Apr low – Strong

AUDUSD – fundamental overview

The market hasn’t seemed to care about the more dovish RBA Minutes, with the release clearly highlighting the central bank’s concern with the elevated Aussie rate and willingness to ease further if necessary. It seems, for the time being, it’s broader risk on flow that is dictating direction, though with RBA Stevens on the wires tomorrow, we could see some profit taking on an expectation the CB governor will use his appearance as an opportunity to jawbone Aussie lower. Looking ahead, lack of first-tier economic data will leave the market trading on these broader themes.

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 1.2990 – 18Apr high – Strong
• R1 1.2903 – 15Apr high – Medium
• S1 1.2745 – 13Apr/2016 low – Strong
• S2 1.2700 – Figure – Medium

USDCAD – fundamental overview

A wacky and wild session for the Canadian Dollar on Monday. The currency initially gapped open significantly lower on the back of the 5% OIL slide post the Doha talks breakdown, but then managed a share recovery into the close of the day, with OIL’s recovery and a broader recovery in risk assets fueling the strength. Perhaps the OIL workers strike in Kuwait helped to slow the pace of Loonie gains, though the Canadian currency sits just off recent 2016 highs against the Buck. Looking ahead, lack of first tier economic data will leave the market focused on OIL direction, broader risk related themes and a BoC Poloz speech.

NZDUSD – technical overview

Despite gains to fresh 2016 highs, the market still remains confined to a broader downtrend with rallies expected to be well capped around the key psychological barrier at 0.7000. Still, a break back below 0.6759 will be required to strengthen the bearish 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 0.7100 – Figure – Medium
• R1 0.7005 – 19Apr/2016 high – Strong
• S1 0.6948 – 19Apr low – Medium
• S2 0.6824 – 14Apr low – Strong

NZDUSD – fundamental overview

A very impressive start to the week for the New Zealand Dollar, racing to fresh 2016 highs beyond the critical 0.7000 barrier. The combination of firmer New Zealand inflation data, a recovery in OIL and surge in US equities, have all contributed to the bullish price action. However, at current levels, there is likely to be decent sized medium-term offers that emerge, particularly with the RBNZ unlikely to be welcoming of the elevated Kiwi rate. Looking ahead, there is also downside risk to the currency if the GDT auction disappoints, as it has done so many times in recent months.

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 2097.00 – 19Apr/2016 high – Medium
• S1 2065.00 –18Apr low – Medium
• S2 2021.00 – 24Mar low – Strong

US SPX 500 – fundamental overview

Stocks continue to extend the impressive rally out from the February low, breaking to fresh yearly highs. But the stock market is 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 also trading close to the 2015 record high. 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. On Monday, Fed Rosengren was out warning that the shallow Fed rate hike path priced by the market is not justified.

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 Monday recovery in OIL prices, post the weekend Doha talks breakdown and concurrent resurgence in demand for risk assets, have most definitely helped to keep the Peso supported. Still, there is plenty of good reason to be doubting the odds for any meaningful Peso gains from current levels. Although the swaps market is still pricing two more Banxico rate hikes between now and year end, it’s possible participants will scale back from this more hawkish pricing. Despite what stock markets might have investors believe, the global outlook is rather shaky, as recently expressed by the IMF. Meanwhile, 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.