Locked In A Holding Pattern

GBPUSD – technical overview

Although the recent surge through key resistance at 1.4670 may suggest this market is getting 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 reversal suggests we could be poised for additional setbacks in the sessions ahead.

• R2 1.4546 – 6May high – Strong
• R1 1.4480 – 9May high – Strong
• S1 1.4375– 9May low – Medium
• S2 1.4300 – 21Apr low – Strong

GBPUSD – fundamental overview

The Pound is coming off a solid performance in Tuesday trade in which the UK currency was able to close higher on the back of a well received UK trade release. Still, rallies were ultimately contained, with an impressive US JOLTS job openings offsetting some of the Cable gains. Looking ahead, more volatility is expected with the market taking in UK industrial and manufacturing production, along with some NIESR GDP estimates.

USDJPY – technical overview

The market has finally entered a healthy period of correction since stalling out a fresh multi-month lows ahead of the major psychological barrier at 105.00. Still, the overall pressure remains on the downside, with a lower top sought out below 111.89 ahead of the next major downside extension towards and below 105.00. Only back above 111.89 would negate and take the pressure off the downside. 

• R2 110.00 – Psychological – Strong
• R1 109.38 –11May high – Medium
• S1 108.28 – 10May low – Medium
• S2 107.50 – 5May high – Strong

USDJPY – fundamental overview

The Yen has come back under pressure over the past week, with plenty of official speak warning against excessive currency strength and the possibility of intervention. Japanese PM advisor Koichi Hamada is the latest on the wires, saying he doesn’t expect to see USDJPY much lower and that the BOJ could act if USDJPY dropped rapidly back to 100.00. Still, with global equities elevated and the Yen associated with safe haven status, there is risk for more upside pressure on the Japanese currency. Additionally, it’s worth noting that citing specific levels is never a great idea when talking currencies and this opens the possibility the market will look to test the 100 level now that it has been called out by Hamada.

EURCHF – technical overview

Setbacks continue to be very well supported, with the market turning back up in recent trade, clearing key resistance at 1.1062. Look for this latest push back above 1.1062 to strengthen the constructive outlook and accelerate gains towards a retest of the 1.1200 multi-month high from February. Any setbacks should be well supported ahead of 1,.0900, while ultimately, only below 1.0800 would compromise the structure.

• R2 1.1200 – 4Feb/2016 high – Strong
• R1 1.1105 – 10May high – Medium
• S1 1.1035 – 6May low – Medium
• S2 1.0955 – 29Apr low – Strong

EURCHF – fundamental overview

UBS Chairman and former Bundesbank President, Axel Weber was out saying he expected more downside risk to the Franc given the SNB’s current rate policy. Certainly, the Franc has done a good job weakening over the past week, though the price action continues to be suspect, with much of the weakness coming at a time when risk markets are fragile and there is demand for safe haven currencies. This begs the question just how much this latest round of Swiss Franc weakness has come by natural forces and how much has come from SNB efforts to weaken the currency. 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.

AUDUSD – technical overview

An impressive run finally stalled 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. The recent close back below the 100-Day SMA strengthens this outlook, potentially setting the stage for deeper setbacks towards the 0.7000 area in the days ahead. Any rallies are classified as corrective now and should be well capped ahead of 0.7600.

• R2 0.7463 – 6May high – Strong
• R1 0.7391 – 11May high – Medium
• S1 0.7300 – 10May low – Medium
• S2 0.7259 – 23Feb high – Strong

AUDUSD – fundamental overview

Some mixed data out of Australia early Wednesday, with consumer confidence readings exceeding expectation, while housing data disappointed. Overall, the Australian has been hit in recent days on the back of another RBA cut and downgraded inflation expectations, and the market is now pricing in another full rate cut by year end. But looking forward, with Aussie data out of the way, the market will probably turn its attention back to broader US Dollar sentiment and Fed outlook related headlines to gauge direction. Ultimately, if the Fed shows it is leaning more to the do nothing for now side, this will invite renewed Aussie demand. Alternatively, if the Fed leans hawkish and signals additional rate hikes this year, this will weigh on Aussie.

USDCAD – technical overview

The market could finally be in the process of establishing a meaningful base following this latest impressive reversal out from multi-month lows below 1.2500. Look for a daily close back above 1.2990 to help strengthen this outlook and open an acceleration of gains towards next key resistance at 1.3219 further up. Any setbacks from here should ideally be supported ahead of 1.2700.

• R2 1.3100 – Figure – Medium
• R1 1.3016 – 9May high – Medium
• S1 1.2900 – Figure – Medium
• S2 1.2831 – 6May low – Strong

USDCAD – fundamental overview

The Canadian Dollar appears to finally be consolidating a bit after an intense round of declines over the past week on the back of broad US Dollar demand, the Alberta wildfire and discouraging economic data out of Canada, as highlighted by the record deficit and below forecast jobs. It now seems like the Loonie is comfortable reverting back to its correlation with the price of OIL, after mirroring price action in the commodity on Tuesday. Looking ahead, lack of first tier data will leave this market continuing to focus on the direction in OIL.

NZDUSD – technical overview

Despite recent gains to fresh 2016 highs, the market remains confined to a broader downtrend with rallies expected to continue to be well capped in the 0.7000s. Last week’s topside failure and impressive bearish reversal strengthens this outlook, opening a deeper correction in the sessions ahead. The recent break below 0.6759 strengthens the outlook, exposing a deeper drop towards next key support at 0.6546 in the days ahead. Any rallies should now be well capped ahead of 0.6900.

• R2 0.6848 – 9May high – Strong
• R1 0.6827 – 11May high – Medium
• S1 0.6716 – 29Mar low – Medium
• S2 0.6668 – 28Mar low – Strong

NZDUSD – fundamental overview

The RBNZ financial stability report highlighted risks to the dairy and housing markets, and yet, the New Zealand Dollar managed to find a good deal of demand in the aftermath. RBNZ Wheeler’s comments that he was “increasingly concerned” by Auckland’s housing resurgence may have had something to do with Kiwi’s bid in that these concerns would impede the central bank’s ability to lower rates. Still with talk of macroprudential measures, the RBNZ uncomfortable with and elevated Kiwi rate and the market pricing additional rate cuts this year, the risks remain tilted to the downside for the New Zealand Dollar. Moreover, with broader risk markets looking vulnerable in the face of exhausted monetary policy across the globe, any intensified risk liquidation will also weigh on the correlated currency.

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 2086.00 – 10May high – Medium
• S1 2033.00 –7Apr 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 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. Just last Friday Fed Dudley was on the wires talking about the possibility of two more rate hikes this year. But even if the Fed holds off, there is still the issue of this exhausted policy accommodation that ultimately should weigh more heavily on stocks going forward.

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 1304.00 – 2May/2016 high – Medium
• S1 1256.90 – 10May low – Medium
• S2 1223.85 – 14Apr low – Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported on 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 1.3300. The recent break back above 1.3668 strengthens the outlook and opens a measured move upside extension towards 1.4000 further up. Ultimately, only a weekly close below 1.3300 would give reason for pause.

• R2 1.3800 – Figure – Medium
• R1 1.3737 – 28Mar high – Strong
• S1 1.3580 – 9May low – Medium
• S2 1.3505 – 4May low – Strong

Feature – fundamental overview

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 looking vulnerable at lofty heights, 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 additional hikes this year, have not done anything the help the Singapore Dollar’s cause, while ongoing concern over the China outlook is also a major drag on the correlated emerging market currency. China imports plunged by over 10% this week.