Aussie Hit Post CPI, UK GDP and FOMC Ahead

GBPUSD – technical overview

The latest break and daily close above 1.4515 suggests the market could finally be poised to carve a meaningful base. Look for this outlook to be strengthened on a push above 1.4668 in the sessions ahead. However, inability to establish back above 1.4668 will keep the medium-term pressure on the downside and open the door for another drop.

• R2 1.4668 – 4Feb high – Strong
• R1 1.4639 – 26Apr high – Medium
• S1 1.4479 – 26Apr low – Medium
• S2 1.4403 – 25Apr low – Strong

GBPUSD – fundamental overview

The is no doubt that we have been seeing a bit of an unwinding of what had been an aggressively priced Brexit trade. Momentum has clearly shifted back in the remain camp’s favor over the past few days, with Obama’s warnings against and exit resonating with the market. Tuesday’s round of softer US data in the form of durable goods and consumer confidence have only accentuated the Cable recovery. However, with UK GDP and FOMC risk ahead, there is likely to be some position squaring until all of this is fully digested. US pending home sales are also scheduled for release today.

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 110.67 –26Apr low – Medium
• S2 109.26 – 22Apr low – Strong

USDJPY – fundamental overview

The major pair has been confined to sideways trade this week, with traders unwilling to commit in either direction ahead of the Wednesday, Thursday FOMC, BOJ event risk. On balance, neither central bank is expected to make any changes and it will really come down to the underlying tone of the respective statements. On the one side, you have a market worried about the Fed being more aggressive with its normalisation path, and on the other side, you have a market expecting the BOJ to still add more stimulus in the months ahead. Of course, broader risk sentiment will also factor into trade, with any improvement in investor appetite to be supportive of the major pair, while any reversal on this front will invite renewed downside pressure.

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 1.0904 – 19Apr low – Medium
• S2 1.0844 – 7Apr low – Strong

EURCHF – fundamental overview

Many traders have assigned the latest 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. The SNB remains committed to a policy of weakening the Franc, but it will be interesting to see how the central bank’s efforts fair in the event of a risk liquidation.

AUDUSD – technical overview

An impressive run for this pair could finally be stalling out after extending gains to fresh 2016 highs. 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 0.7774 – 22Apr high – Strong
• R1 0.7691 – 25Apr low – Medium
• S1 0.7583 – 12Apr low – Medium
• S2 0.7477 – 24Mar low – Strong

AUDUSD – fundamental overview

A major repricing of RBA expectations on Wednesday, following the release of the shockingly subdued Aussie inflation. The data came in much softer across the board and has dramatically increased the odds of an RBA cut at next week’s meeting to 50% versus just 17% before the release. It comes as no surprise to see Aussie underperforming across the board as a result, and there is still plenty of risk ahead with the FOMC due, followed by the BOJ early Thursday. Next major support for this pair doesn’t come in until around 0.7475, where sizable sell-stops are built in.

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 1.2758 – 22Apr high – Strong
• R1 1.2648 – 25Apr high – Medium
• S1 1.2593 – 20Apr/2016 low – Strong
• S2 1.2500 – Psychological – Very 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. Meanwhile, on the other side, data out of the US has been less than impressive, with this latest below forecast durable goods and consumer confidence only adding to the Loonie’s bid tone. Looking ahead, the key focus for Wednesday will be the reaction to the FOMC rate decision. No change to policy is expected, though the tone of the Fed’s statement could have a major impact on direction.

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

While the Australian Dollar has received most of the attention in early Wednesday trade, Kiwi performance should not be overlooked, with the currency coming under pressure on the back of a weaker than expected round of trade data. This will only add more pressure on the RBNZ to think about additional easing when it meets early Thursday. There are already 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 over the next 24 hours are the outcomes of the Fed and BOJ decisions. Overall, as things stand right now, no change is expected to RBNZ policy this time round.

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 later today when the Fed meets. No change is expected on policy, but any hints of a rate hike in June could open the door for a major liquidation in stocks.

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. Looking ahead, FOMC event risk comes into focus.

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

The Peso has received a bit of a boost from this week’s solid Mexico retail sales and a disappointing round of Wednesday US data. However, all of the attention will shift to today’s FOMC event risk, in which emerging market FX will take its cue. Anything on the more hawkish side will unquestionably weigh on risk correlated FX, while anything leaning more dovish could trigger a fresh wave of Peso demand.