Keep Pricing Out Those Fed Hikes

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 1.4601 – 8Jun high – Medium
• S1 1.4483– 6Jun high – Medium
• S2 1.4437 – 7Jun low – Strong

GBPUSD – fundamental overview

While the Pound has managed to outperform against the US Dollar over the past week, the UK currency continues to struggle overall, even in the face of some better data on Wednesday. UK industrial and manufacturing production exceeded expectations along with some NIESR GDP estimates. Still the overhang of Brexit risk has been too much to shake off, with the Pound unlikely to make any big moves to the topside until this event risk is out of the way later this month. Looking ahead, UK trade and US initial jobless claims stand out.

USDJPY – technical overview

Overall, the pressure 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 107.90 – 7Jun high – Strong
• R1 107.39 – 8Jun high – Medium
• S1 106.37 – 6Jun low – Medium
• S2 105.55 – 3May/2016 low – Strong

USDJPY – fundamental overview

The major pair remains pressured to the downside on the back of a mass exodus from the US Dollar, upward revisions to Japan GDP and a mild pullback in the Nikkei into Thursday. We have heard the regular lines of rhetoric out from BOJ officials relating to a willingness to respond to currency appreciation and add more stimulus, though these comments continue to fall on deaf ears. BOJ deputy governor Nakaso is the latest official to try his hand at slowing appreciation in the Yen. Looking ahead, US initial jobless claims is the only notable standout on the economic calendar.

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 1.1038 – 7Jun high – Strong
• R1 1.0986 – 8Jun high – Medium
• S1 1.0918 – 20Apr low – Strong
• S2 1.0900 – Figure – Strong

EURCHF – fundamental overview

Renewed downside pressure on this cross rate over the past few sessions, with the price action getting some attention given the ongoing bid tone in risk markets which is normally supportive. This has been the weakest week for the cross rate since the January 2015 collapse, and while this doesn’t even come close to comparing, it has definitely been a bit of a head scratcher. Talk of Polish mortgages in Francs being remarked, ongoing Brexit risk and political uncertainty in the US are all said to be contributing to this latest wave of appreciation in the Franc that could soon force the SNB off the sidelines.

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 0.7504 – 9Jun high – Medium
• S1 0.7430 – 8Jun low – 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. But there are signs of renewed offers into Thursday, with the market approaching critical medium-term resistance in the 0.7500 area. Also seen weighing a bit into the rally is the less dovish RBNZ policy decision which has fueled cross relating Aussie selling against the New Zealand Dollar. Looking ahead, US initial jobless claims is the only notable standout on the calendar.

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. However, the current round of setbacks will need to hold above 1.2650 on a daily close basis to keep this prospect alive. An eventual break back above 1.3189 will confirm the basing outlook and accelerate gains towards 1.3500 further up. A daily close below 1.2650 will negate and open a direct retest of the yearly low.

• R2 1.2840 – 7Jun high – Strong
• R1 1.2761 – 8Jun high – Medium
• S1 1.2655 – 8Jun low – Medium
• S2 1.2600 – Figure – Strong

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. The currency has also garnered additional support from an ongoing bid in the price of OIL at fresh yearly highs. Looking ahead, we get the Bank of Canada financial system review, subsequent BOC Poloz press conference, and US initial jobless claims.

NZDUSD – technical overview

The latest break to fresh 2016 highs beyond 0.7055 suggests the market could be in the process of a more significant structural shift. Still the market will need to establish above critical previous support around 0.7175 to strengthen the bullish prospect, while inability to do so could invite another topside failure.

• R2 0.7176 – February 2015 base – Strong
• R1 0.7139 – 9Jun/2016 high – Medium
• S1 0.7000 – Psychological – Medium
• S2 0.6945 – 8Jun low – Strong

NZDUSD – fundamental overview

Those expecting a cut from the RBNZ on Thursday were let down, with the central bank leaving rates on hold and policy unchanged. There was no real upgrade to the easing bias and this inspired a fresh round of bids, with Kiwi surging to 2016 highs. RBNZ Wheeler’s comments that there wasn’t a need for additional stimulus at this stage and that plans for another rate cut could change, didn’t do anything to help the case of the doves, with the pair then easily tripping stops above 0.7100. Looking ahead, US initial jobless claims is the only notable standout on the calendar.

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. This opens the door for a direct retest of the record high from 2015 at 2133. At this point, a break back below 2085 would be required to take the immediate pressure off the topside.

• R2 2133.00 – 20Jul 2015/Record – Very Strong
• R1 2121.00 – 8Jun/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 1266.50 – 9Jun 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 last Friday’s horrid US jobs report, that has been a major prop for the metal this time round.

Feature – technical overview

USDTRY remains exceptionally well supported on dips, with the latest round of setbacks propped around 2.8800. 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 2.8800 would delay the constructive outlook.

• R2 3.0120 – 24May high – Strong
• R1 2.9685 – 30May high – Medium
• S1 2.8795 –8Jun low – Strong
• S2 2.8435 – 4May low – Medium

Feature – fundamental overview

Domestic fundamentals and car bombings have taken a back seat, 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.