A Gross Miscalculation

GBPUSD – technical overview

Although the recent surge may suggest this market is getting ready to carve a more meaningful base, inability to establish a daily close above 1.4670 is keeping broader pressure on the downside. Ultimately, a break back above 1.4770 will now be required to force a meaningful shift in the structure and strengthen the case for the formation of a material base. Until then, the structure remains bearish, with scope another topside failure ahead of renewed declines towards 1.4000.

• R2 1.4668 – 4Feb high – Strong
• R1 1.4635 – 18May high – Medium
• S1 1.4524– 17May high – Medium
• S2 1.4455 – 13May high – Strong

GBPUSD – fundamental overview

The Pound was the one currency that was able to even outperform the mighty US Dollar on Wednesday, with the UK currency surging on the back of a well received UK employment report and more news revealing a sizable lead for the remain camp. The positives from this flow were able to do a good job of keeping the Pound well bid, even in the aftermath of a surprisingly hawkish Fed Minutes showing the Fed’s willingness to seriously consider a June rate hike. Looking ahead, we get more UK data on Thursday, with retail sales featured. This is followed up by US data featuring initial jobless claims and the Philly Fed. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

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 through 105.00. Only back above 111.89 would negate and take the pressure off the downside. 

• R2 111.00 – Figure – Medium
• R1 110.67 –17Mar low – Strong
• S1 109.00 – Figure – Medium
• S2 108.72 – 18May low – Strong

USDJPY – fundamental overview

The wave of broad based US Dollar buying was not lost on the Yen, with even this risk sensitive currency selling off on the back of the hawkish Fed Minutes revealing the central bank’s willingness to hike rates in June if data permitted. Still, if setbacks in the equity market intensify over the coming hours, there is risk the Yen will find renewed bids, opening another downside extension in USDJPY. Looking ahead, the market will continue to digest the Fed Minutes while also taking in US initial jobless claims and the Philly Fed. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

EURCHF – technical overview

Setbacks continue to be very well supported, with the market turning back up in recent trade, clearing key resistance at 1.1000. Look for this latest push back above 1.1000 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 1.1110 – 11May high – Medium
• S1 1.1016 – 13May low – Medium
• S2 1.0955 – 29Apr low – Strong

EURCHF – fundamental overview

Certainly, the Franc has done a good job weakening over the several days, 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 in the aftermath of the hawkish Fed Minutes.

AUDUSD – technical overview

Setbacks have extended well off the recent 2016 peak, with the market breaking back below the 200-Day SMA. At this point, the focus has shifted back on the downside, though there is risk for a decent corrective bounce or period of consolidation now that the longer-term moving average has been tested and broken. Still, any rallies should be well capped ahead of 0.7500 in favour of additional declines, potentially back towards the 2016 base at 0.6827.

• R2 0.7332 – 18May high – Medium
• R1 0.7258 – 200-Day SMA – Strong
• S1 0.7165 – 2Mar low – Medium
• S2 0.7109 – 29Feb low – Strong

AUDUSD – fundamental overview

The Australian Dollar had already come under intense pressure in Wednesday trade following the release of the hawkish Fed Minutes. Setbacks have now extended on Thursday, with the slightly softer Aussie employment report fueling the latest round of declines. Still, while the employment data undershot expectations, it wasn’t all that bad and shouldn’t do anything to force the RBA into more dovish thinking. Looking ahead, US initial jobless claims and the Philly Fed are due. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

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. The recent break back above 1.3000 strengthens this outlook and opens an acceleration of gains towards next key resistance at 1.3219 further up. Any setbacks from here should ideally be supported ahead of 1.2772.

• R2 1.3219 – 5Apr high – Strong
• R1 1.3100 – Figure – Medium
• S1 1.3000 – Psychological – Medium
• S2 1.2895 – 18May low – Strong

USDCAD – fundamental overview

The Canadian Dollar had already been feeling the pressure of a pullback in OIL prices early on in Wednesday trade, before finally succumbing to the larger pressure of a hawkish Fed Minutes. The Minutes revealed the Fed’s willingness to move on rates in June if data permitted and this revelation fueled buy-stops through 1.3000. Looking ahead, Canada wholesale sales will be in the background with US initial jobless claims and the Philly Fed due. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

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. The latest topside failure and impressive bearish reversal strengthens this outlook, opening a deeper correction in the sessions ahead. Look for a daily close below 0.6716 to strengthen the outlook, exposing next key support at 0.6546 further down. Any rallies should now be well capped ahead of 0.7000.

• R2 0.6848 – 9May high – Strong
• R1 0.6800 – Figure – Medium
• S1 0.6716 – 10May low – Strong
• S2 0.6668 – 28Mar low – Strong

NZDUSD – fundamental overview

An early Thursday New Zealand consumer confidence disappointment could be adding to downside pressure on Kiwi, while softer Aussie employment may also be factoring. But overall, the New Zealand Dollar has been finding renewed offers following the surprising Fed Minutes which revealed the central bank’s willingness to move on rates in June if data warranted. This has fueled a wave of USD demand and risk liquidation that is having a direct impact on the commodity currency. Looking ahead, US initial jobless claims and the Philly Fed are due. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

US SPX 500 – technical overview

The market looks to be in the process of carving the right shoulder of a head & shoulders top on the daily chart. Any additional upside expected to be well capped below 2100 in favour of the next major downside extension. Look for a break back below 2021 to strengthen this outlook and accelerate declines towards a measured move in the 1930 area.

• R2 2112.00 – 20Apr/2016 high – Strong
• R1 2086.00 – 10May high – Medium
• S1 2021.00 –24May low – Strong
• S2 2000.00 – Psychological – 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, investors are certainly not comforted by the fact that this latest Fed Minutes release has come out on the hawkish side, with the central bank signaling a willingness to move on rates in June if data permits. This will remove incentive to be long stocks and could open the door for a more intensified liquidation as the Fed moves further towards normalization. Looking ahead, US initial jobless claims and the Philly Fed are due. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release.

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 above 1200, 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 constructive outlook.

• R2 1307.00 – 22Jan/2015 high – Very Strong
• R1 1304.00 – 2May/2016 high – Medium
• S1 1250.00 – Psychological – 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 in the process of turning back up after a period of intense correction. The recent break back above 1.3737 strengthens the outlook and opens a measured move upside extension coinciding with next key resistance at 1.4117. Any setbacks should now be well supported ahead of 1.3650, while ultimately, only a weekly close below 1.3300 would give reason for pause.

• R2 1.4000 – Psychological – Strong
• R1 1.3883 – 10Mar high – Strong
• S1 1.3737 – Previous Resistance – Medium
• S2 1.3645 – 12May low – Strong

Feature – fundamental overview

Wednesday wasn’t a good day for emerging market FX, with these currencies taking big hits on the hawkish Fed Minutes open to the possibility of a June rate hike. Not only did this fuel EM outflows on the favourable US Dollar yield differential implication, but it also triggered a flight to safety, with the prospect of higher US rates in a still struggling global economy not all the encouraging. Moreover, scope for Singapore Dollar upside has already been limited given recent MAS efforts to stem a appreciation in the local currency. Looking ahead, US initial jobless claims and the Philly Fed are due. But perhaps more importantly, speeches from Fed’s Fischer and Dudley will be watched closely in light of this latest Fed release. If these Fed members continue along with this latest trend of hawkish Fed speak, it could very well invite additional downside pressure in the Singapore Dollar.