Yen Hit On Reports BOJ Considering New Measures

GBPUSD – technical overview

The recovery rally out from a recent 7 year low has stalled out above 1.4500, 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 1.4441 – 21Apr high – Medium
• S1 1.4300 – 21Apr low – Medium
• S2 1.4271 – 19Apr low – Strong

GBPUSD – fundamental overview

Although the Pound traded marginally lower against the Buck on Thursday, giving back a good deal of gains, overall performance in the UK currency has actually been rather impressive. This week’s round of UK data was highly disappointing, with Wednesday’s softer employment followed up by Thursday’s disturbing retail sales. And yet, for the week, the UK currency is leading the other developed currencies and is up nicely against the Buck. Thursday’s solid US initial jobless claims print at a 43 year low was yet another reason to be selling the Pound, though once again, dips were well supported. It seems a momentum shift back in favor of the ‘Bremain Camp’ could ultimately be what is supporting this market right now. Looking ahead, lack of first tier data will leave the market focused on broader flow.

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 111.00 – Figure – Medium
• R1 110.67 – Previous Support – Strong
• S1 109.26 –22Apr low – Medium
• S2 108.75 – 19Apr low – Strong

USDJPY – fundamental overview

A decent round of Yen weakness early Friday on news the BOJ is exploring the possibility of lending to local banks at a negative rate, while also considering another cut to existing negative rates. Clearly the market is a little jittery at the moment in the face of this latest Yen run and the market is starting to look ahead to next week’s anticipated BOJ policy decision. It seems there is more of a case for the central bank to consider additional stimulus, particularly with economic data soft as most recently highlighted by today’s manufacturing PMI miss. This has managed to offset some of the broader risk off flow supporting the Yen, though ultimately, it’s far from certain the BOJ will actually commit to expanding stimulus next week, given highlighted concern over the impact such measures. Looking ahead, lack of first tier economic data will leave the market focused on broader risk sentiment and flow.

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 1.1062 – 17Feb high – Strong
• R1 1.1024 – 10Mar high – Strong
• S1 1.0844 – 7Apr low – Medium
• S2 1.0810 – 29Feb/2016 low – Strong

EURCHF – fundamental overview

Thursday’s round of Franc weakness was somewhat suspect, given renewed downside pressure on risk markets. This price action had many speculating over the possibility of the SNB being the primary culprit behind the move. For the time being, the SNB has been able to relax a bit, with risk assets supported and the VIX trading near its lowest levels in months. However, it is worth noting that weakness in the Franc in response to this impressive run of risk on trade since February, has been less than impressive, which could be a concern if the market rolls over. This may explain why the SNB would have wanted to step in on Thursday with risk coming off.

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 in the 0.7850-0.8000 area should not be ruled out.

• R2 0.7835 – 21Apr/2016 high – Strong
• R1 0.7800 – Figure – Medium
• S1 0.7700 – Figure – Medium
• S2 0.7619 – 14Apr low – Strong

AUDUSD – fundamental overview

An upbeat NAB quarterly business confidence report early Thursday and ongoing strength in commodities helped to push Aussie to another 2016 high against the Buck, before the market finally relented into the latter half of the day. Overall, the market has been tracking alongside better bid commodities and higher equities, led by US stocks back towards record high levels from 2015. But with the US Dollar mounting a broad comeback, perhaps helped along by the lowest US initial jobless claims print in 43 years, and with US equities showing signs of topping out, this was enough to open profit taking after a nice run in the commodity currency. Looking ahead, lack of first tier data will leave the market focused on broader sentiment flow.

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 1.2500s 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 1.2990 would be required to take the immediate pressure off the downside.

• R2 1.2798 – 19Apr high – Strong
• R1 1.2750 – 21Apr high – Medium
• S1 1.2628 – 21Apr low – Medium
• S2 1.2593 – 20Apr/2016 low – Strong

USDCAD – fundamental overview

A nice recovery in the price of OIL, improving Canada economic data, fiscal stimulus from the Canadian government and better bid US equities have all been supporting the Canadian Dollar in recent months. But there is a sense this run could be a little stretched at this point and we have already seen some profit taking off this week’s fresh 2016 highs in the Canadian Dollar. Thursday’s pullback in OIL and the lowest US initial jobless claims print in 43 years may also be contributing to the price action, while traders have been lightening up long Cad exposure into today’s key risk which features Canada retail sales and CPI.

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 0.7054 – 19Apr/2016 high – Strong
• R1 0.7000 – Psychological – Medium
• S1 0.6900 – 21Apr low – Medium
• S2 0.6824 – 14Apr low – Strong

NZDUSD – fundamental overview

It seems the risks associated with a higher Kiwi rate are finally getting recognition from the market, which has sold recent rallies above 0.7000 despite some broader flow, supportive of the risk correlated commodity currency. This includes supportive flow from the well received GDT auction this week. And yet, there is still a good deal of dovishness priced into the RBNZ over the coming months. Even if risk assets remain supported, the prospect of additional rate cuts and RBNZ jawboning, seem to be what is getting taken more seriously of late. Looking at the RBNZ’s TWI, it shouldn’t be comforting that Kiwi is trading a good deal above where it was trading after the RBNZ eased policy at its last decision. Looking ahead, lack of first tier data will leave the market focused on broader sentiment flow.

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. Look for a break back below 2021 to strengthen this outlook and accelerate declines.Ultimately, only a weekly close above 2100 will delay.

• R2 2117.00 – 3Nov high – Strong
• R1 2112.00 – 20Apr/2016 high – Medium
• S1 2065.00 –18Apr low – Medium
• S2 2021.00 – 24Mar low – Strong

US SPX 500 – fundamental overview

Stocks have extended the impressive rally out from the 2016 low in February, breaking to fresh yearly highs this week back above 2100, within a stone’s throw from the 2015 record high. But the stock market is also once again looking vulnerable at lofty heights, 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 investors. 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, something that could once again spook investors. Thursday’s US initial jobless claim drop to its lowest level in 43 years could be something that shifts the balance back towards the case for a less cautious path to Fed rate hikes.

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 1270.25 – 21Apr high – Medium
• S1 1223.90 – 14Apr low – Medium
• S2 1208.35 – 28Mar low – 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 start thinking about turning 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 17.0000 would give reason for pause.

• R2 17.9900 – 16Mar high – Strong
• R1 17.7610 – 18Apr high – Medium
• S1 17.0950 – 31Mar/2016 low – Strong
• S2 17.0000 – Psychological – Strong

Feature – fundamental overview

A recovery in OIL prices and concurrent resurgence in demand for risk assets, have most definitely helped to keep the Peso supported in recent weeks. Still, there is plenty of good reason to be doubting the odds for any meaningful Peso gains from current levels. On the domestic front, although the swaps market is still pricing two more Banxico rate hikes between now and year end, it’s quite 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.