US Dollar Could Make Comeback in May

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 daily close above 1.4670 in the sessions ahead. However, inability to establish back above 1.4670 will keep the medium-term pressure on the downside and open the door for another drop.

• R2 1.4700 – Figure – Medium
• R1 1.4670 – 29Apr high – Strong
• S1 1.4523 – 28Apr low – Medium
• S2 1.4474 – 27Apr low – Strong

GBPUSD – fundamental overview

Last Friday’s softer round of Michigan confidence and Chicago PMIs opened the door for another push higher in the Pound, which has done a good job of recovering in recent days, mostly as Brexit risk is unwound. Still, with the market running into solid resistance, there is risk additional upside could prove more challenging, with many unwilling to completely rule out the possibility of an exit result in June. Perhaps this latest YouGov poll showing the Bremain lead cut is also weighing into this rally. Looking ahead, we get UK manufacturing PMIs, along with US ISM manufacturing and construction spending. It’s worth noting possible lighter trade given the UK bank holiday.

USDJPY – technical overview

Setbacks have accelerated, with the market trading down to a measured move objective in the 106.00s following the previous multi-day consolidation break. This puts the focus on the psychological barrier at 105.00. In the interim, look for any rallies to be well capped, with only a break back above 111.89 to take the immediate pressure off the downside.

• R2 108.20 – 29Apr high – Strong
• R1 107.00 – Figure – Medium
• S1 106.14 –2May/2016 low – Strong
• S2 105.00 – Psychological – Very Strong

USDJPY – fundamental overview

The Yen has continued its surge to fresh multi-month highs, with the currency extending gains from last week’s disappointing, unchanged BOJ policy decision. Friday’s softer round of US data in the form of Michigan confidence and Chicago PMIs, along with intensified selling in global equities, has opened additional upside in the Yen, with USDJPY dropping into the 106.00s thus far and closing in on the major psychological barrier at 105.00. The 105.00 level is however said to be a line in the sand for the BOJ and it will be interesting to see what kind of USDJPY demand emerges down at current levels. Looking ahead, US ISM manufacturing and construction spending are the standout economic releases. Trade has been lighter on Monday, with Hong Kong, Singapore and China out for holidays.

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 continue to 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 further 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 0.7668 – 29Apr high – Medium
• S1 0.7548 – 27Apr low – Medium
• S2 0.7477 – 24Mar low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been a standout underperformer over the past week, with Aussie the only developed currency to track lower against the US Dollar over this time frame. The major driver behind the relative weakness comes from last week’s much softer than expected Aussie inflation readings, which produced the first quarterly decline since 2008. The subdued result has significantly ramped up the chances for another rate cut from the RBA when it meets tomorrow, though the odds are still only about 50/50. On balance, it would seem the RBA will be more inclined to wait things out before making any new decisions on policy, with the central bank to likely focus on offsetting positives in the local economy since the last meeting. In the interim, the focus will be on some US data later today, featuring US ISM manufacturing and construction spending.

USDCAD – technical overview

Overall, pressure remains on the downside, with the market dropping to test critical psychological support at 1.2500. However, with daily studies tracking in oversold territory and the market having moved so far from the January peak, now that 1.2500 has been tested, risk for additional setbacks seems limited, with scope now for some form of a meaningful correction. Still, a break back above 1.2990 would be required to take the immediate pressure off the downside.

• R2 1.2695 – 27Apr high – Strong
• R1 1.2588 – 29Apr high – Medium
• S1 1.2499 – 29Apr/2016 low – Strong
• S2 1.2400 – Figure – Medium

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 to fresh 2016 highs. Still, economic data has also been solid as reflected through recent impressive Canada retail sales and hotter CPI. Meanwhile, on the other side, data out of the US has been less than impressive, as highlighted by last week’s below forecast durable goods, discouraging consumer confidence and disappointing Michigan confidence, only adding to the Loonie’s bid tone. Looking ahead, the key standouts on Monday’s economic calendar come in the form of Canada manufacturing PMIs, US ISM manufacturing and US construction spending.

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 medium-term bearish outlook.

• R2 0.7054 – 19Apr/2016 high – Strong
• R1 0.7021 – 2May high – Medium
• S1 0.6951 – 29Apr low – Medium
• S2 0.6873 – 28Apr low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has held up exceptionally well of late, with the currency benefitting from broad based US Dollar weakness, a run up in commodities and last week’s less dovish RBNZ policy decision. Though there was a smaller chance the RBNZ would cut rates last week, the market was looking for the central bank to upgrade its dovish bias. Failure to do so resulted in a scaling back of dovish RBNZ pricings and a push back into critical resistance around the 0.7000 barrier. However, the central bank isn’t going to be too happy with Kiwi trading at elevated levels and there is risk for some jawboning if these gains persist. Looking ahead, US ISM manufacturing and construction spending are the key standouts on today’s calendar.

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 2112.00 – 20Apr/2016 high – Strong
• R1 2082.00 – 29Apr high – Medium
• S1 2052.00 –29Apr low – Medium
• S2 2021.00 – 24Mar low – Strong

US SPX 500 – fundamental overview

The stock market is 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, plenty of earnings out this week, while on today’s economic calendar, the focus is on ISM manufacturing and construction spending.

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, in favour of a higher low and the next major upside extension through medium-term resistance at 1307 and towards 1400 further up. Ultimately, only a weekly close back below 1191 would delay the newly adopted constructive outlook.

• R2 1307.00 – 22Jan/2015 high – Very Strong
• R1 1296.90 – 29Apr/2016 high – Strong
• S1 1265.10 – 29Apr low – Medium
• S2 1223.85 – 14Apr 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

USDSGD 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 1.3000. Look for a break and close back above 1.3668 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 1.3000 would give reason for pause.

• R2 1.3668 – 14Apr high – Strong
• R1 1.3562 – 27Apr high – Medium
• S1 1.3350 – 19Apr/2016 low – Strong
• S2 1.3284 – 18Jun low – Strong

Feature – fundamental overview

The Singapore Dollar has caught a renewed wave of demand in recent trade, benefitting from the intense appreciation in the Yen on the back of last week’s BOJ hold. Still, scope for additional Singapore Dollar upside should be limited given recent MAS efforts and the prospect the central bank will step in to intervene in an effort to stem a further appreciation in the local currency. Meanwhile, with global equities starting to falter, this will put added strain on emerging market FX, which ultimately should invite renewed downside pressure in the Singapore Dollar.