Market Not Ready to Bite Just Yet

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 1.4770 – 3May high – Strong
• R1 1.4668 – 4Feb high – Strong
• S1 1.4524– 17May high – Medium
• S2 1.4455 – 13May high – Strong

GBPUSD – fundamental overview

It has been a very good week for the Pound, which has even managed to outperform the US Dollar into Friday. The driving forces behind the Pound’s relative outperformance have come from the more convincing poll results in favour of the remain camp and solid economic data highlighted by employment and retail sales. Inflation did come in on the softer side earlier in the week, though this has been an afterthought in light of all these other developments. Wednesday’s hawkish Fed Minutes have however managed to keep rallies somewhat in check, with the market also finding some technical resistance towards 1.4700. Looking ahead, we get UK CPI trends data followed by US existing home sales.

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 110.39 –19May high – Strong
• S1 109.00 – Figure – Medium
• S2 108.72 – 18May low – Strong

USDJPY – fundamental overview

Most of the flow in the Yen in the latter half of the week has been driven off movement and direction in risk markets. The major pair really hasn’t done much at all and seems caught between US Dollar supportive flows on the more hawkish Fed messages and Yen demand on the unnerving global macro implication of higher rates in the US. Looking ahead, the economic calendar is quite light, with only US existing home sales standing out. 

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 1.1150 – Mid-Figure – 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 past 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 – Strong
• R1 0.7282 – 17May low – Medium
• S1 0.7176 – 19May low – Medium
• S2 0.7109 – 29Feb low – Strong

AUDUSD – fundamental overview

Australian Dollar setbacks have finally found support into Friday, with the market doing a good job absorbing the more hawkish Fed Minutes and softer Aussie employment data. Overall, risks are tilted to the downside, with the RBA still needing to proceed with caution and err on the dovish side, while at the same time, the Fed is pushing in the opposite direction. Ongoing concerns over the China outlook are also a threat to the correlated Aussie, but for now, the market has settled in a bit. Looking ahead, the calendar is light, with only US existing home sales standing out.

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 1.3155 – 19May high – Medium
• S1 1.3011 – 19May low – Medium
• S2 1.2895 – 18May low – Strong

USDCAD – fundamental overview

The Canadian Dollar was one of the weaker currencies on Thursday, doing a good job extending declines against the Buck. The Loonie was more focused on the softer Canada wholesale sales and hawkish Fed speak from Laker and Dudley than it was on disappointing US releases and well bid OIL. Looking ahead, plenty of volatility risk in Friday trade with Canada retail sales and CPI due along with US existing home sales. Of course, the price action in OIL will play continue to play a role, while the direction in stocks will also factor.

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 0.6710 – 19May low – Strong
• S2 0.6668 – 28Mar low – Strong

NZDUSD – fundamental overview

Overall, the New Zealand Dollar has done a good job absorbing setbacks in the face of this week’s hawkish Fed Minutes showing the central bank’s willingness to move on rates in June if data warranted. Still, there are plenty of offers reported into rallies, with the RBNZ contending with super subdued inflation and forced to consider additional easing this year. Looking ahead, the economic calendar is exceptionally thin for the remainder of the day, with only US existing home sales standing out. It’s likely risk appetite flow will be the more significant driver into the weekly close.

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, the economic calendar is exceptionally thin on Friday, with only US existing home sales due.

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 1243.90 – 19May 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 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

The Singapore Dollar has come under additional pressure this week, taking a hit on the hawkish Fed Minutes signaling the possibility for a June rate hike. The prospect of higher US rates in a still struggling global economy is not something that should be comforting to emerging market investors. Meanwhile, ongoing concern over the China outlook is also a factor weighing on the correlated Sing. Moreover, scope for Singapore Dollar upside has already been limited given recent MAS efforts to stem a appreciation in the local currency. Looking ahead, risk flow is likely to dictate direction into the weekly close, with only US existing home sales standing out on the calendar.