Busy Economic Calendar, End of Month Flow

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 1.4770 is keeping broader pressure on the downside. Ultimately, the establishment 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 initial key support at 1.4333.

• R2 1.4770 – 3May high – Strong
• R1 1.4740 – 26May high – Medium
• S1 1.4624– 31May low – Medium
• S2 1.4588 – 30May low – Medium

GBPUSD – fundamental overview

UK markets are coming off a long holiday weekend and although the economic calendar is still empty in the UK on Tuesday, the Pound has managed to rally back towards the 1.4770 range high, with yet another poll showing a decisive lead for the remain camp, this time with a much smaller margin of undecideds. Rallies are however expected to be well capped with the market not wanting to get too ahead of itself before the June 23rd vote, and with the Fed leaning more to the hawkish side. Looking ahead, end of month flow and a batch of US data are likely to dictate trade, with the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence all due.

USDJPY – technical overview

The market has entered a healthy period of correction since stalling out a fresh multi-month lows ahead of the major psychological barrier at 105.00. There are now signs emerging of a more significant bullish structural shift. However, the market will need to establish back above the previous lower top at 111.89 to confirm this shift, while inability to do so will keep the pressure on the downside.

• R2 111.89 – 28Apr high – Strong
• R1 111.50 –Mid-Figure – Medium
• S1 110.36 – 30May low – Medium
• S2 109.42 – 26May low – Strong

USDJPY – fundamental overview

A well received round of Japanese economic data on Tuesday, featuring household spending and industrial production, hasn’t really factored into trade all that much, with the market more focused on the recent shift in hawkish Fed sentiment and the outlook for BOJ policy. Risk markets have however been well supported of late, which has been a big help to the correlated major pair. Looking ahead, end of month flow and a batch of US data are likely to dictate trade, with the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence all due.

EURCHF – technical overview

Setbacks continue to be very well supported, with the market putting in a series of higher lows and higher highs. Look for this most recent push back above 1.1100 to strengthen the constructive outlook and open the door for the next set of gains towards a retest of the 1.1200 yearly and 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 1.1130 – 20May 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 past several weeks, though the price action continues to be suspect, with much of the weakness coming at a time when risk markets are more 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 event of another round of risk liquidation and this more hawkish leaning Federal Reserve.

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 0.7260 – 23May high – Strong
• S1 0.7200 – Figure – Medium
• S2 0.7145 – 24May low – Strong

AUDUSD – fundamental overview

Any pressure on the RBA to be thinking about cutting rates has been alleviated a bit on Tuesday, with a run of Australian data coming in on the whole better than expected. The Aussie current account was solid, while building approvals offered a nice upside surprise. Aussie has also been bid back up on some broad based profit taking on USD longs into the fuller Tuesday, post holiday weekend trade. Looking ahead, end of month flow and a batch of US data are likely to dictate trade, with the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence all due.

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 the door for gains towards next key resistance in the 1.3219-1.3296 area further up. Any setbacks from here should ideally be supported ahead of 1.2772.

• R2 1.3189 – 24May high – Strong
• R1 1.3095 – 30May high – Medium
• S1 1.2967 – 27May low – Medium
• S2 1.2911 – 26May low – Strong

USDCAD – fundamental overview

The Canadian Dollar suffered from a mild round of setbacks on Monday, after Canada data came in weaker than forecast. This was highlighted by the wider current account deficit reading. Overall, the Canadian Dollar has come back under pressure in recent weeks on the hawkish shift in Fed sentiment. Still, higher OIL prices are helping to offset some of this negative price action. Looking ahead, Tuesday should be a volatile session with Canada GDP due, along with a batch of US data featuring the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence. We also get end of month flow.

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 drop towards next key support at 0.6546, which guards against the 2016 low at 0.6347 further down. Any rallies should now be well capped ahead of 0.6900.

• R2 0.6807 – 23May high – Strong
• R1 0.6759 – 27May high – Medium
• S1 0.6668 – 28Mar low – Strong
• S2 0.6600 – Figure – Medium

NZDUSD – fundamental overview

Upbeat New Zealand building consents and better than expected business confidence readings, have helped contribute to the Tuesday Kiwi recovery. We have also been seeing some broad based profit taking on US Dollar longs following this latest US Dollar run post last Friday’s hawkish Yellen comments. Looking ahead, end of month flow and a batch of US data are likely to dictate trade, with the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence all due.

US SPX 500 – technical overview

The prospect for the formation of an imminent top has faded, with the price rallying back above critical psychological resistance at 2100. If the market can now break back above the 2016 peak at 2112, this will open the door for a direct retest of the record high from 2015 at 2037. However, inability to establish a daily close above 2112, could warn of another topside failure and bearish reversal.

• R2 2133.00 – 20Jul 2015/Record – Very Strong
• R1 2112.00 – 20Apr/2016 high – Strong
• S1 2090.00 –27May low – Strong
• S2 2076.00 – 25May low– Medium

US SPX 500 – fundamental overview

The stock market is once again looking vulnerable at lofty heights, with 2016 rallies continuing to feel like they have very little behind them. The fact that monetary policy is exhausted on a global scale is not something that should be a comfort to investors. Moreover, investors should certainly not be comforted by this latest shift in Fed sentiment, with the central bank signaling a clear willingness to move on rates in the months ahead if data permits. This should remove incentive to be long stocks, leaving the door open for a more intensified liquidation as the Fed moves further towards policy normalization. Plenty of US data out on Tuesday, highlighted by the personal consumption expenditure, Case Shiller, Chicago PMIs, and consumer confidence all due. We also get end of month flow.

GOLD (SPOT) – technical overview

The market has undergone an intense round of setbacks since stalling out just shy of the 2015 peak above 1300. Still, while the price holds above 1191 on a daily close basis, the overall structure remains constructive, with scope for the formation of the next medium term base ahead of a resumption of gains back through 1300 and towards 1400 further up.

• R2 1252.40 – 24May high – Strong
• R1 1234.50 – 26May high – Medium
• S1 1200.00 – Psychological – Medium
• S2 1191.70 – Previous Resistance – Strong

GOLD (SPOT) – fundamental overview

GOLD has taken quite a hit over the past several days but ultimately is expected to be very well supported into the current dip, with the yellow metal finding solid demand form medium-term players 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 almost certainly keep the commodity supported ahead of $1180 and invite fresh upside in the sessions ahead. Dealers report buy-stops above $1230.

Feature – technical overview

USDTRY remains exceptionally well supported on dips, with the latest round of setbacks propped ahead of 2.9200. From here, look for a higher low at 2.9250 in favour of the next major upside extension through 3.0120 and back towards a retest of the 2016 high from January at 3.0610. Ultimately, only a break back below 2.9250 would delay the constructive outlook.

• R2 3.0610 – 20Jan 2016 high – Very Strong
• R1 3.0120 – 24May high – Strong
• S1 2.9250 – 26May low – Strong
• S2 2.8960 – 5May low – Strong

Feature – fundamental overview

The Lira is coming off a week where the currency had initially been very well supported on news that Mehmet Simsek had maintained his position of Deputy Prime Minister in the Turkish Cabinet. However the force of broader macro flow and US Dollar demand could not be ignored, with the US Dollar bid back up on hawkish Fed sentiment, backed up by the Fed Chair’s Friday comment that a rate hike could be appropriate over the coming months. Interestingly, President Erdogan’s chief adviser has come out with comments that he does not expect the Fed to hike this summer and the Fed may even have to wait until December. These comments could be nothing more than an attempt to continue to pressure the CBRT into lowering rates.