US Dollar Back on the Ropes

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 1.4660 – 7Jun high – Strong
• R1 1.4600 – Figure – Medium
• S1 1.4483– 6Jun high – Medium
• S2 1.4437 – 7Jun low – Strong

GBPUSD – fundamental overview

A wild day for Sterling on Tuesday, with the market racing nearly 200 points higher before almost instantly giving all of the gains back. Speculation attributed the move to a fat finger erroneous buy order, though ultimately, setbacks were supported and the UK currency did find gains against the Buck. A wave of poll momentum in favour of the leave camp was finally tempered after ORB showed the remainers back out in front. Looking ahead, EU referendum polls will continue to dictate trade, with the market also taking in UK industrial and manufacturing production.

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 107.90 – 7Jun high – Medium
• S1 106.72 – 8Jun low – Medium
• S2 106.37 – 6Jun low – Strong

USDJPY – fundamental overview

An upward revision of Japan GDP and some downside pressure in the Nikkei have been keeping the pressure on USDJPY into Wednesday, with the major pair still contemplating a full retracement back towards the recent 2016 base at 105.55. It seems the GDP revisions have resulted in a  paring back of BOJ easing bets and this in conjunction with a less hawkish Fed post last week’s horrid US employment report, are driving yield differentials back in the Yen’s favour.

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 pullback to be well supported ahead of 1.0900 in favour of a higher low and fresh upside extension through 1.1130, towards the yearly high at 1.12000 further up. Ultimately, only below 1.0800 would compromise the structure.

• R2 1.1130 – 20May high – Strong
• R1 1.1034 – 7Jun high – Medium
• S1 1.0955 – 29Apr low – Strong
• S2 1.0900 – Figure – Strong

EURCHF – fundamental overview

Certainly, the Franc has done a good job maintaining recent weakness against the Euro over the past several months, 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. Franc demand on Monday, Tuesday could be a warning sign of a tougher battle ahead for the SNB. Swiss CPI data digested today.

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 0.7570 – 61.8% Fib – Strong
• R1 0.7500 – Psychological – Strong
• S1 0.7400 – Figure – Medium
• S2 0.7360 – 7June low – Strong

AUDUSD – fundamental overview

The Australian Dollar has emerged as the strongest developed market currency over the past week, with Aussie benefitting from the combination of softer US employment data, a less dovish RBA decision and this latest China trade data which produced a better than expected import result. Looking ahead, lack of any first tier data for the remainder of the day, will leave the market focused on broader macro drivers.

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 1.3500 area further up. Any setbacks from here should ideally be supported above 1.2700 on a daily close basis.

• R2 1.2982 – 6Jun high – Strong
• R1 1.2840 – 7Jun high – Medium
• S1 1.2697 –4May low – Strong
• S2 1.2600 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar continues to extend gains off last week’s unimpressive US employment report, with the less hawkish Fed implications driving the US Dollar lower across the board. Tuesday’s softer than expected Canada Ivey PMIs haven’t done much to weigh on the Loonie, with the currency instead garnering more support from an ongoing bid in the price of OIL. Looking ahead, Canada housing starts and building permits stand out on Wednesday.

NZDUSD – technical overview

Despite recent gains, the market remains confined to a broader downtrend with rallies expected to continue to be well capped. Continued topside failures 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 0.7054 – 19Apr/2016 high – Strong
• R1 0.7000 – Psychological – Strong
• S1 0.6893 – 7Jun low – Strong
• S2 0.6801 – 3Jun low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar continues to extend gains off of last week’s US Dollar rout post NFPs though additional upside could prove hard to come by with the market once again back to critical levels around 0.7000. It seems there could now be additional pressure on the RBNZ to consider cutting rates on Thursday, 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 2120.00 – 7Jun/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 last 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 1303.90 – 2May/2016 high – Strong
• R1 1261.45 – 19May 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 daily close below 2.8900 would delay the constructive outlook.

• R2 3.0120 – 24May high – Strong
• R1 2.9685 – 30May high – Medium
• S1 2.8915 –7Jun 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, stocks are looking quite stretched at current levels and the CBRT is expected to cut rates some more over the coming months. Both of these themes should ultimately keep the Lira very well offered into additional rallies.