US Dollar Gaining Momentum Ahead of FOMC

GBPUSD – technical overview

The recovery rally out from a recent 7 year low continues to  stall out above 1.4500, potentially setting the stage for the next major lower top and bearish resumption. But a daily close back below 1.4000 will be required to strengthen this outlook and expose a retest of 1.3836, which guards against the multi-year base at 1.3500 further down. Back above 1.4668 would negate and take the immediate pressure off the downside.

• R2 1.4668 – 4Feb high – Strong
• R1 1.4550 – Mid-Figure – Medium
• S1 1.4403 – 25Apr low – Medium
• S2 1.4300 – 21Apr low – Strong

GBPUSD – fundamental overview

Brexit risk continues to play a major role in the Pound’s direction, with this latest surge in the UK currency coming on the back of President Obama’s weighing in on the matter. Obama has come out in support of the remain camp, which has helped sway momentum back in its favor. Obama’s warnings that any negotiations for a new trade deal in the event of an exit, would probably take up to ten years to negotiate, have done a good job of rattling the ‘leave camp’ for now. Looking ahead, lack of data in the UK will leave the market positioning into US durable goods and consumer confidence later in the day.

USDJPY – technical overview

The market has entered a period of correction out from the recent yearly and multi-month low at 107.63. However, while the price holds below critical resistance around 115.00, the overall pressure remains on the downside and scope exists for another topside failure ahead of a fresh downside extension towards a measured move in the 106.50 area.

• R2 112.80 – 30Mar high – Strong
• R1 111.87 – Previous Support – Medium
• S1 110.00 –Psychological – Medium
• S2 109.26 – 22Apr low – Strong

USDJPY – fundamental overview

The major pair received a bit of a prop on comments from Abe aide Etsuro Honda that although recent market moves have helped alleviate pressure on the BOJ, he believes there is room for the BOJ to act this week by way of additional stimulus in the form of bond and ETF purchases. At the same time, Honda has dismissed the possibility of any changes to negative rates. Overall, this leaves the Yen chopping around ahead of the event risk, with any setbacks well supported on broader risk off flow and renewed downside pressure on equities markets. Looking ahead, US durable goods and consumer confidence comes into focus.

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 1.0810 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

Many traders have assigned last week’s recovery in the cross rate to SNB action that ultimately will have a hard time supporting the market should risk sentiment roll over. There have been signs of potential topping in equities markets and if this intensifies, it will invite renewed unwanted demand for the safe haven Franc. Dealers cite sizable offers into 1.1000 with no buy stops reported until above 1.1025.

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 0.7774 – 22Apr high – Medium
• S1 0.7619 – 14Apr low – Medium
• S2 0.7477 – 24Apr low – Strong

AUDUSD – fundamental overview

A quiet economic calendar in the early week has left the Australian Dollar confined to choppy trade. However, activity will pick up this week, with Aussie inflation data on tap Wednesday, followed by critical central bank event risk in the form of the Fed, RBNZ and BOJ policy decisions. The RBA is expected to maintain an easing bias when it meets next week, though the central bank should stop short of signaling any need to ease further unless Wednesday’s inflation comes in well below expectation. Odds for a May rate cut sit at a very low 15%, while only 17bps of easings are priced in for the December meeting. In the interim, US durable goods and consumer confidence will be the primary focus for Tuesday.

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 1.2758 – 22Apr high – Medium
• S1 1.2623 – 22Apr low – Medium
• S2 1.2593 – 20Apr/2016 low – Strong

USDCAD – fundamental overview

For the moment, the fate of the Canadian Dollar mostly rests on the direction in the OIL market, with the recovery in the black gold fueling a good deal of demand in the correlated commodity currency. Still, economic data has also been solid as reflected through last week’s impressive Canada retail sales and hotter CPI. Looking ahead, the key focus for Tuesday will be on a Bank of Canada Governor Poloz speech New York and US data featuring durable goods and consumer confidence.

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 0.6936 – 22Apr high – Medium
• S1 0.6835 – 22Apr low – Medium
• S2 0.6759 – 5Apr low – Strong

NZDUSD – fundamental overview

Kiwi has seen relatively thin trade in the early week, as the market returns from ANZAC Day. The key focus for the commodity currency this week will be on the early Thursday RBNZ policy decision, where the central bank is expected to leaves rates on hold at 2.25%. Still, there are plenty of good reasons for the RBNZ to consider another cut to 2.00%, including low dairy, subdued inflation and an elevated Kiwi rate above the central bank’s TWI. Also influencing the currency this week will be the outcomes of the other Fed and BOJ decisions. For today, the focus will be on US durable goods and consumer confidence.

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 in the previous 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. Looking ahead, US durable goods and consumer confidence come into focus.

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

Firmer Mexico retail sales hasn’t done anything to inspire bids in the Peso, with the emerging market currency more focused on renewed downside in risk correlated assets. The market will also take in Mexican growth data later this week but will give precedence to the fallout from the major central bank event risk in the form of the Fed and BOJ decisions. As risk goes, so will the Peso. Looking ahead, US durable goods and consumer confidence stand out.