Next 24 hours: USD Builds Momentum, Yen Slides
Today’s report: The Aftermath of a Mixed US Jobs Report
The US Dollar is coming off an impressive week, mounting a solid recovery after having taking some big hits this year. Although Friday's softer NFP print may have some thinking this will keep the Fed from holding off on rates, this is far from a guarantee, with hourly earnings continuing to show signs of picking up.
Chart talk: Major markets technical overview video
- factory orders
- Brexit risk
- BOJ Minutes
- Plunging imports
- housing starts
- Wheeler speech
- NFP print
- preferred investment
Chart talk: Technical & fundamental highlights
EURUSD â€“ technical overview
An extended market finallyÂ relented lastÂ weekÂ after trading to a fresh 2016 high through 1.1600. AÂ sharp bearish reversal and inability to hold above 1.1500 suggests the major pair could be poised for additional weakness in the sessions ahead. Ultimately, the combination of major resistance in the 1.1500-1.1700 area and overbought studies, have opened the door for an overdue pullback. Still, a break below 1.1217 would be required to officially take the pressure off the topside.
- R2 1.1494Â â€“ 5May highÂ â€“ Strong
- R1 1.1465Â – 12Apr highÂ â€“Â Medium
- S1 1.1347Â – 29Apr low â€“Â Medium
- S2 1.1297Â â€“28Apr low â€“Â Strong
EURUSD â€“ fundamental overview
Not much of a Euro reaction to the latest round of employment data out of the US, with the single currency unsureÂ whether to pay more attention to the NFP miss or the rise in annual hourly earnings. But it did seem as though the recovery in risk assets into Friday’s close, helped to keep the Euro offered into rallies. Looking ahead, German factory orders and Eurozone Sentix investor confidence are the key standouts, while on the official circuit, we get speeches from Fed Evans and Fed Kashkari.
GBPUSD â€“ technical overview
Although the recent surge through key resistance at 1.4670 may suggest this market is gettingÂ ready to carve a more meaningful base, inability to establish a daily close above the level keeps the pressure on the downside. Last week’s bearish reversalÂ suggests we could beÂ poised for additional setbacks in the sessions ahead.
- R2 1.4546Â â€“ 6May highÂ â€“Â Strong
- R1 1.4500 â€“Â Psychological â€“Â Strong
- S1 1.4350â€“ Mid-FigureÂ â€“Â Medium
- S2 1.4300Â â€“ 21Apr lowÂ â€“Â Strong
GBPUSD â€“ fundamental overview
The Pound has come under a good amount of renewed downside pressure since stalling above 1.4670 last week, with the UK currency extending declines on Friday following the release of the US employment report. While the US employment report produced a mixed result, it seems like this market was more focused on the higher hourly earnings than the NFP miss. Meanwhile, with the UK referendum approaching, there continues to be a good amount ofÂ uncertainty surrounding the event, with the in and out camps running neck and neck. Looking ahead, the UK and US dataÂ calendarsÂ are empty, with only speeches from Fed Evans and KaskariÂ standing out.
USDJPY â€“ technical overview
Setbacks have accelerated, with the market trading down through a measured move objective in the 106s and into the 105s, following the previous multi-day consolidation break. This putsÂ the focus on the psychological barrier at 105.00. In the interim, look for the current corrective rally to be well capped ahead of 109.00, with only a break back above 111.89 to take the immediate pressure off the downside.
- R2 108.20Â â€“ 29Apr high â€“Â Strong
- R1 107.63Â â€“ 9May high â€“Â Medium
- S1 106.44Â â€“ 6May lowÂ â€“Â Medium
- S2 105.55Â â€“ 3May/2016 lowÂ â€“ Strong
USDJPY â€“ fundamental overview
Not muchÂ activity from the Yen since the mixed US employment report, with anyÂ Yen weakness in the aftermath supported onÂ lowerÂ China equities and a firmer Yuan fixing. The BOJ Minutes also failed to inspire any material movement, with the release producingÂ little in the way of any new insights after the BOJ left policy unchanged at its previous decision. However it’s worth noting that some members felt the introduction of negative ratesÂ had created excessive expectations for more easing, clearlyÂ weighing on the Yen a little. Looking ahead, theÂ economic calendar is empty, with only some Fed speak from Evans and Kashkari standing out.
EURCHF â€“ technical overview
Setbacks continue to be very well supported, with the market turning back up in recent trade, clearing short-term resistance in the 1.1000 area. Look for this latest push back above 1.1063 to strengthen theÂ constructive outlook and accelerate gains towards a retest of the 1.1200 multi-month high from February. Ultimately, only below 1.0800 would compromise theÂ structure.
- R2 1.1200Â â€“ 4Feb/2016 highÂ â€“Â Strong
- R1 1.1095Â â€“ 6May highÂ â€“Â Medium
- S1 1.0995Â â€“ 5May lowÂ â€“Â Medium
- S2 1.0955Â â€“ 29Apr lowÂ â€“Â Strong
EURCHF â€“ fundamental overview
Many traders have assigned the latestÂ recovery in the cross rate to SNB action that ultimately could have a very hard timeÂ supporting the market should risk sentiment continue to roll over. Franc weakness has intensified over the past few sessions, and yet, there have been signs of potential topping in equities markets. If this weakness in stocks intensifies, it will invite renewed unwanted demand for the safe haven Franc. 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 face of further risk liquidation. Looking ahead, Swiss inflation data is on tap.
AUDUSD â€“ technical overview
An impressive run for this pair has finally stalledÂ out after extending gains to fresh 2016 highs. The run had been looking stretched and this latest topside failure opens the door for additional weakness and a potential bearish resumption. Still, a daily close below the 100-Day SMA in the 0.7330 areaÂ would be required to strengthen this outlook and force a shift in the structure.
- R2 0.7517Â â€“ 4May high â€“Â Strong
- R1 0.7447 â€“Â 4May low â€“Â Medium
- S1 0.7335Â â€“ 100-Day SMAÂ â€“Â Strong
- S2 0.7259Â â€“ 23Feb highÂ â€“Â Strong
AUDUSD â€“ fundamental overview
It’s been a tough go for the Australian Dollar these past several days. The currency has taken a big hit on super subdued inflation, a record low RBA rate cut and more dovish RBA SOMP. It now appears as though the door is wide open for additional rate cuts, given this latest dramatic lowering of the RBA’s underlying inflation outlook. Setbacks have managed to stall out for now by some technical support around the 100-Day moving average, with the market seeing a muted reaction to the latest monthly employment report out of the US. The early Monday release of China trade data which showed imports plunging by over 10% also hasn’t had much of an impact on the market. Looking ahead, theÂ economic calendar is exceptionally thin, with only Fed speeches from Evans and Kashkari standing out.
USDCAD â€“ technical overview
The marketÂ could finally be poised for a healthy corrective reversal after taking out barriers at 1.2500 and trading to a fresh 2016 low. Tuesday’s impressive bullish outside day formation strengthens this prospect and opens the door for additional upside in the sessions ahead. Still, a break back above 1.2990 would be required to officially take the pressure off the downside.
- R2 1.3050Â â€“ Mid-FigureÂ â€“Â Medium
- R1 1.2990Â – 18Apr highÂ â€“Â Strong
- S1 1.2831Â â€“ 6May low â€“Â Medium
- S2 1.2786Â â€“ 5May high â€“Â Strong
USDCAD â€“ fundamental overview
The Canadian Dollar remains under pressure into the new week, with the Loonie contending with a record trade deficit, Alberta wildfire and softer Canada jobs. While the weaker US NFP number may have helped the Loonie a bit, US hourly earnings picked up, to offset the negatives from the NFP showing. Into the early week, the Canadian Dollar is feeling additional pressure from theÂ disappointing China trade numbers, with imports plunging by more than 10%. Looking ahead, Canada housing starts is the only release on the calendar. Otherwise, the market will look to Fed speak from Evans and Kashkari.
NZDUSD â€“ technical overview
Despite recent gains to fresh 2016 highs, theÂ market remains confined to a broader downtrend with rallies expected to continue to beÂ well capped in the 0.7000s. Last week’s topside failure and impressive bearish reversalÂ strengthens this outlook, opening a deeper correction in the sessions ahead. Still,Â a break back below 0.6759 will be required to officially take the immediate pressure off the topside.
- R2 0.6941Â â€“ 4May high â€“Â Strong
- R1 0.6891 â€“Â 6May highÂ â€“Â Medium
- S1 0.6807Â â€“ 27Apr lowÂ â€“Â Medium
- S2 0.6759Â â€“ 5Apr lowÂ â€“Â Strong
NZDUSD â€“ fundamental overview
Weakness in the New Zealand DollarÂ has been a function of a broader recovery in the US Dollar, last week’s disappointing GDT auction and setbacksÂ in sympathy with the Australian Dollar. Last Tuesday’s RBA cut and subsequent dramatic lowering of inflation forecasts, increase odds of a similar fate in New Zealand, with an expectation the RBNZ will need to follow up with another cut of its own when it next meets in June. This could be reflected in this week’s RBNZ financial stability report and speech from RBNZ Governor Wheeler. Looking ahead, theÂ economic calendar is exceptionally thin, with only Fed speeches from Evans and Kashkari standing out.
US SPX 500 â€“ technical overview
This latestÂ 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 aÂ break back below 2021 to strengthen this outlook and accelerate declines. Ultimately, only a weekly close above 2100 will delay.
- R2 2112.00 â€“ 20Apr/2016 highÂ â€“ Strong
- R1 2084.00 â€“ 2May highÂ â€“Â Medium
- S1 2033.00 â€“7Apr low â€“ Medium
- S2 2021.00 â€“ 24Mar lowÂ â€“Â Strong
US SPX 500 â€“ fundamental overview
The stock market is once again looking vulnerable at lofty heights, with the 2016 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.Â Initially, it seems as though investors are paying more attention to the drop in the NFP print from this latest monthly employment report, betting it will keep the Fed from moving on rates next month. However, hourly earnings continue to show signs pf picking up, something that warns of higher inflation, which the Fed will not be too keen on falling behind. But even if the Fed holds off, there is still the issue of this exhausted policy accommodation that ultimately could weigh heavily on stocks going forward.
GOLD (SPOT) â€“ technical overview
TheÂ 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 1191Â would delay the newly adoptedÂ constructive outlook.
- R2 1307.00Â â€“ 22Jan/2015 high â€“ Very Strong
- R1 1304.00Â â€“ 2May/2016 highÂ â€“Â Medium
- S1 1265.10Â â€“ 29Apr lowÂ â€“Â Medium
- S2 1223.85Â â€“ 14Apr lowÂ â€“Â Strong
GOLD (SPOT) â€“ fundamental overview
Overall, GOLDÂ 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 â€“ technical overview
USDSGDÂ finally looks poisedÂ 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 1.3300.Â Look for a break and close back above 1.3668 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 1.3300 would give reason for pause.
- R2 1.3737Â â€“ 28Mar highÂ â€“Â Strong
- R1 1.3668Â â€“ 14Apr highÂ â€“Â Strong
- S1 1.3505Â â€“ 4May lowÂ â€“Â Medium
- S2 1.3350Â – 19Apr/2016 low â€“ Strong
Feature â€“ fundamental overview
Scope for additional Singapore Dollar upside should be limited given recent MAS efforts and the prospect the central bank will step in toÂ interveneÂ in an effort to stem a further appreciation in the local currency. Meanwhile, with global equitiesÂ starting to falter, this will put added strain on correlated emerging market FX, which ultimately should invite renewed downside pressure in the Singapore Dollar. Certainly last week’s comments from many Fed officials open to aÂ June rate hike, have not done anything the help the Singapore Dollar’s cause, while higher hourly earnings in the US employment report and an early Monday softer China trade showing, have kept the currency under pressure against the Buck.