A Warm Blanket from Central Banks?

GBPUSD – technical overview

Despite signs of the potential for a medium-term base, rallies continue to stall out ahead of 1.4800, keeping the overall pressure on the downside. This latest topside failure has opened a drop back below key support at 1.4333, exposing a more direct retest of critical psychological barriers at 1.4000 in the sessions ahead. Rallies should be very well capped ahead of 1.4500 with only a break above 1.4770 to force a shift in the outlook.

• R2 1.4266 – 14Jun high – Strong
• R1 1.4200 – Figure – Medium
• S1 1.4089– 15Jun low – Medium
• S2 1.4005 – 6Apr low – Strong

GBPUSD – fundamental overview

It’s all about Brexit risk in the UK, with the leave vote pulling ahead in the polls and weighing heavily on the UK currency over the past several days. Economic data has taken a backseat, with the market paying little attention to Tuesday’s softer CPI readings. Unless today’s UK employment data deviates significantly on either end of expectation, the market will once again shrug off the data with the primary focus remaining on referendum polls. But the Fed event risk later in the day will generate attention as far as it relates to any updates Yellen might offer relating to concern over the risks associated with an exit and fallout impact on the global economy.

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 and towards 100.00. Ultimately, only back above 111.89 would negate and take the pressure off the downside. Look for any intraday rallies to be well capped ahead of 109.50.

• R2 107.39 – 8Jun high – Strong
• R1 106.86 – 13Jun high – Medium
• S1 105.55 – 3May/2016 low – Strong
• S2 105.00 – Psychological – Strong

USDJPY – fundamental overview

JGB yields have extended their slide to fresh record lows as the fear of systemic risk associated with a Brexit fuels the flow. USDJPY now hovers just over the critical yearly low from May at 105.55, with heavy stops reported below the level. The focus now shifts to today’s Fed policy decision and tomorrow’s BOJ announcement. Both central banks are expected to leave policy on hold, though any additional insights from the Fed on Brexit risk and its own policy trajectory, and any hints from the BOJ at additional easing will surely inspire volatility. There has been chatter of the BOJ easing further though it would seem the central bank would be better off waiting to see how things play out with the EU referendum next week before making any changes to policy.

EURCHF – technical overview

The market has come back under intense pressure in recent trade, with the cross gravitating towards critical medium-term support in the 1.0800 area. Previous dips into this area have been well supported and with setbacks starting to look extended on the daily chart, it’s quite possible the market will once again look to bounce ahead of 1.0700. A daily close below 1.0700 would however hint at a more significant bearish structural shift.

• R2 1.0923 – 13Jun high – Strong
• R1 1.0840 – 13Jun low – Medium
• S1 1.0756 – 18Dec low – Strong
• S2 1.0713 – 19Aug low – Very Strong

EURCHF – fundamental overview

Renewed downside pressure on this cross rate over the past few sessions, with the price action starting to turn heads. We are coming off the weakest week for the cross rate since the January 2015 collapse, and while this doesn’t even come close to comparing, it’s definitely worthy of attention. Ongoing Brexit risk and exhausted monetary policy have been sourced as primary drivers behind the Franc appreciation, which could already be forcing the SNB into action to defend against unwanted appreciation in the local currency.

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. Last Thursday’s bearish outside formation strengthens the bearish outlook.

• R2 0.7438 – 10Jun high – Strong
• R1 0.7404 – 14Jun high – Medium
• S1 0.7330 – 14Jun low – Medium
• S2 0.7315 – 6June low – Strong

AUDUSD – fundamental overview

The Australian Dollar is holding up relatively well into Wednesday considering all of the risk out there associated with Brexit. Moreover, Westpac consumer confidence readings have come in soft, while iron ore and crude price have come back under pressure. Looking ahead, the market will be watching to see what the Fed has to say about all of the risk in markets right now and how it will impact it rate hike timeline trajectory.

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 1.2655 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. Back under 1.2655 negates and opens a direct retest of the yearly low.

• R2 1.2982 – 6Jun high – Medium
• R1 1.2915 – 3Jun low – Strong
• S1 1.2800 – Figure – Medium
• S2 1.2750 – 13Jun low – Strong

USDCAD – fundamental overview

More weakness for the Canadian Dollar in recent trade, with the Loonie hit on broader risk off flow and this latest pullback in the price of OIL. Tuesday’s better than expected US retail sales print is also factoring into price action a bit, further contributing to the Canadian Dollar weakness. Looking ahead, all eyes on the Fed decision, as the market looks for additional insights from the central bank relating to external risk and the rate hike timeline trajectory.

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. Daily studies have recently rolled over from overbought territory, though a break back below 0.6963 would be required to take the immediate pressure off the topside.

• R2 0.7148 – 9Jun/2016 high – Strong
• R1 0.7082 – 13Jun high – Medium
• S1 0.6963 – 14Jun low– Strong
• S2 0.6945 – 8Jun low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has done a good job cooling off from last week’s 2016 highs against the Buck, with the market finally responding to broader risk off flow and the worry of the impact of a higher Kiwi exchange rate on the local economy. Risk flow will continue to dictate trade going forward, while the market will also be paying close attention to today’s GDT auction results and any additional insights offered from the Fed in its policy decision.

US SPX 500 – technical overview

The market continues to show signs of exhaustion on rallies above 2100, with the most recent attempt once again stalling out ahead of the 2133, 2015 record high. Monday’s daily close below 2085 takes the immediate pressure off the topside and now opens the door for deeper setbacks ahead. But ultimately, a break below 2020 would be required to officially force a shift in the structure.

• R2 2121.00 – 8Jun/2016 high – Strong
• R1 2099.00 – 13Jun high – Medium
• S1 2063.00 –14Jun low – Medium
• S2 2050.00 – Psychological– 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 the June US employment report have done little to bolster sentiment. The upside 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. The systemic risk associated with Brexit is only adding to a further deterioration in risk appetite and the market will look to see if it can get any relief from the Fed today given all of this uncertainty that has crept back in.

GOLD (SPOT) – technical overview

The market has done a formidable job recovering out from an intense round of setbacks into the 1200 area. Overall, while the price holds above critical previous medium term resistance at 1191, the structure remains constructive, with scope for the formation of the next medium term higher low ahead of a resumption of gains back through 1300 and towards 1400 further up.

• R2 1303.90 – 2May/2016 high – Strong
• R1 1290.05 – 14Jun high – Medium
• S1 1234.95 – 7Jun low – Medium
• S2 1199.90 – 30May low – Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium-term players on the back of fears over the limitations of exhausted monetary policy, a downturn in sentiment on Brexit risk and extended global equities. All of this will almost certainly continue to keep the commodity supported ahead of of an eventual push beyond the 2015 peak at 1307 and towards 1400 further up.

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

The Lira has been tracking with the rest of emerging market FX over the past several days, as systemic risk associated with Brexit weighs on this risk sensitive bloc of currencies. Still, on a relative basis, the Lira weakness has been rather subdued, perhaps somewhat offset by a recent run of solid local data including better than expected growth readings. Looking ahead, risk flow will continue to dictate direction, while the market will be very curious to see what comes of the Fed decision later in the day.