USD Weakness Justified?

GBPUSD – technical overview

Despite signs of the potential for a medium-term base, rallies continue to stall out ahead of 1.4800, keeping the pressure on the downside. This latest topside failure has opened a drop back into key support around 1.4300, below which exposes a more direct retest of critical psychological barriers at 1.4000. A daily close above 1.4770 would now be required to officially take the pressure off the downside and force a shift in the structure.

• R2 1.4582 – 3Jun high – Medium
• R1 1.4508 – 1Jun high – Strong
• S1 1.4386– 1Jun low – Medium
• S2 1.4333 – 16May low – Strong

GBPUSD – fundamental overview

Price action in the Pound is going to be all about Brexit risk over the next couple of weeks, with economic data releases brushed aside. This most recent momentum shift in favour of the leave camp has opened renewed downside pressure on the UK currency, though setbacks did manage to find some bids ahead of 1.4300 on Monday, with the Pound helped along by ongoing broad based liquidation of US Dollar longs in the aftermath of Friday’s horrid US employment report. Looking ahead, there are no first tier releases due out of the UK or US on Tuesday EU referendum headlines and US Dollar sentiment are likely to dictate direction.

USDJPY – technical overview

Overall, the pressure still remains on the downside after the market recently stalled out ahead of the previous lower top at 111.89. A fresh lower top is now potentially in place at 111.45 ahead of the next major downside extension through 105.55. Ultimately, only back above 111.89 would negate and take the pressure off the downside. Look for any rallies to be well capped ahead of 109.50.

• R2 109.14 – 3Jun high – Strong
• R1 108.52 – 2Jun low – Medium
• S1 107.22 – 7Jun low – Medium
• S2 106.37 – 6Jun low – Strong

USDJPY – fundamental overview

Stock markets have been responding more favourably to dovish implications from last Friday’s soft US employment report, and this has been helping to generate fresh demand for the correlated USDJPY pair into Tuesday. Still, all of this makes yield differentials less attractive for the US Dollar and with equities once again looking extended, any signs of another topside failure could open the door for a fresh wave of USDJPY declines towards the current yearly low at 105.55. Looking ahead, lack of first tier data will leave the market focused on broader macro flow and risk sentiment.

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 maintaining recent weakness against the Euro over the past several weeks, with the price action well received by an SNB looking to force a weaker currency. Overall, 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 global risk liquidation. The stock market is showing signs of overextension again and this could inspire unwanted renewed safe haven demand for the Franc despite the unattractive yield differentials.

AUDUSD – technical overview

The market has entered a period of correction after recently breaking down to fresh multi-day lows at 0.7145. However, any additional upside should be well capped below 0.7500 on a daily close basis, with a lower top sought out ahead of the next major downside extension below 0.7145 and towards the 2016 base at 0.6827 further down.

• R2 0.7415 – Previous Support – Strong
• R1 0.7403 – 11May high – Medium
• S1 0.7315 – 6Jun low – Medium
• S2 0.7201 – 2June low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a good job extending gains in early Tuesday trade after the RBA went ahead and left rates on hold at 1.75% as was widely expected. Many had been looking for the on hold decision to be accompanied by a dovish easing bias that proved to be absent in the monetary policy statement. Instead, the central bank said the “board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.” Looking ahead, lack of first tier economic data for the remainder of the day will leave participants continuing to digest the RBA decision while also focusing on broader macro flow.

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 above 1.2772 on a daily close basis.

• R2 1.2982 – 6Jun high – Strong
• R1 1.2915 – 3Jun low – Medium
• S1 1.2772 – 12May low – Strong
• S2 1.2700 – Figure – Medium

USDCAD – fundamental overview

Ongoing demand for OIL and this latest scaled back hawkishness from the Fed Chair in the aftermath of last Friday’s awful US employment report, have invited renewed demand for the Canadian Dollar over the past few sessions. And yet, with OIL looking a tad overextended and with the Fed Chair maintaining an outlook that favours rate hikes ahead, there is good reason to expect additional Canadian Dollar demand will be met with stiff resistance. Looking ahead, Canada Ivey PMIs and US consumer credit are the key standouts.

NZDUSD – technical overview

Despite recent gains, the market remains confined to a broader downtrend with rallies expected to continue to be well capped. The latest topside failure ahead of 0.7000 strengthens this outlook, opening the door for a deeper drop towards next key support at 0.6675, which guards against 0.6546 further down. Only a daily close back above 0.7000 would delay.

• R2 0.7000 – Psychological – Strong
• R1 0.6961 – 3Jun high – Strong
• S1 0.6848 – 12May high – Medium
• S2 0.6801 – 3Jun low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has run into solid resistance ahead of 0.7000, with the post US NFP rally finally showing signs of fizzling out. It seems that with the RBNZ policy decision due later this week, there could be additional pressure on the RBNZ to consider cutting rates given the unwanted appreciation in the Kiwi rate. Fonterra had already expressed concern with the elevated exchange rate when it was trading a good deal lower several days back and this in conjunction with subdued inflation could very well inspire renewed sell interest in anticipation of a more dovish policy decision.

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 to fresh 2016 highs. If the market can now establish a daily close back above this previous 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 2114.00 – 6Jun/2016 high – Strong
• S1 2085.00 –1Jun low – Medium
• S2 2076.00 – 25May low– Strong

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, especially after dovish implications from Friday’s worrying US employment report have done little to materially extend gains. Indeed, stocks are at 2016 highs and now within a stone’s throw of the 2015 record high, with Yellen’s scaled back hawkishness contributing to the move. But the follow through has been unimpressive and it doesn’t look like the market will be able to push much higher on this lower for longer monetary policy fuel.

GOLD (SPOT) – technical overview

The market has recently 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 1248.90 – 5Jun high – Medium
• S1 1200.00 – Psychological – Medium
• S2 1191.70 – Previous Resistance – Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported into the latest dip, with the yellow metal finding solid demand from medium-term players in 2016, on the back of fears over the limitations of exhausted monetary policy and extended global equities. Risk sentiment likely to be a major driver going forward. Renewed weakness on this front will almost certainly continue to keep the commodity supported ahead of $1190. But it’s this latest slide in the Buck in the aftermath of Friday’s horrid US jobs report, that has been a major prop for the metal.

Feature – technical overview

USDTRY remains exceptionally well supported on dips, with the latest round of setbacks propped around 2.9000. From here, look for a higher low 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 2.8960 would delay the constructive outlook.

• R2 3.0120 – 24May high – Strong
• R1 2.9685 – 30May high – Medium
• S1 2.8960 –5May low – Strong
• S2 2.8435 – 4May low – Medium

Feature – fundamental overview

Domestic fundamentals have taken a back seat since last Friday, with the market dominated by the fallout from the US employment report, which came in much softer than expected. The resulting price action has seen a major swing in the Lira’s favour, as emerging market currencies benefit from yield differentials and renewed appetite for risk assets. Still, stock are looking quite stretched at current levels and the CBRT is expected to cut rates some more over the coming months. Both of these storylines are expected to keep the Lira very well offered into additional rallies.