BOJ Disappoints, Fresh Highs for Yen and Gold

GBPUSD – technical overview

Despite signs of the potential for a longer-term base, rallies continue to stall out well ahead of 1.5000, 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 1.4218 – 15Jun high – Medium
• S1 1.4089– 15Jun low – Medium
• S2 1.4005 – 6Apr low – Strong

GBPUSD – fundamental overview

An attempt at a recovery in the Pound over the past 24 hours, with the market benefitting from solid UK employment data and a more dovishly perceived Fed. Perhaps the Fed’s expressed concern with Brexit risk is also helping to support a bit as it may sway some voters back over to the remain side. Looking ahead, we get UK retail sales, US inflation and US initial jobless claims as the key data standouts. But it’s the Bank of England policy decision that will get most of the attention as the market waits to see what the BOE has to say about the upcoming referendum and severe risks to the UK economy if the leave vote triumphs.

USDJPY – technical overview

The latest breakdown below the previous 2016 low from May at 105.55 confirms this next lower top at 111.45 and opens the door for the next major downside extension towards a measured move in the 100.00 area. However, daily studies are now tracking in oversold territory, which could warn of a decent correction higher before the market thinks about materially extends declines.

• R2 106.42 – 14Jun high – Strong
• R1 105.55 – Previous Base – Medium
• S1 104.00 – Figure – Medium
• S2 103.50 – Mid-Figure – Medium

USDJPY – fundamental overview

Another big drop in the major pair in early Thursday trade, with the market clearing stops below 105.50 and breaking down to its lowest levels since September 2014 on the back of the unchanged BOJ policy decision. Many were expecting some form of upgraded easing bias and failure to provide such a message has fueled this intense round of setbacks that now threatens a potential assault on critical barriers at 100.00 further down. The combination of a steady BOJ and increasing risk in the global market is not a healthy combination for the major pair, particularly with equity markets under pressure and Brexit risk ahead. As far as the remainder of the day goes, we get US inflation readings and US initial jobless claims. The BOE will also be watched closely for any new insights on the EU referendum.

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 1.0862 – 15Jun high – Medium
• S1 1.0790 – 14Jun 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 have come out of 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. Certainly there has been a lot of hedging into the Franc ahead of the EU referendum that has been fueling the Franc appreciation and it will be interesting to see how the SNB responds in the weeks ahead. At the moment, a wait and see approach is the most likely outcome, with the central to leave policy unchanged 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 0.7504 – 9Jun high – Strong
• R1 0.7446 – 15Jun high – Medium
• S1 0.7330 – 14Jun low – Medium
• S2 0.7315 – 6June low – Strong

AUDUSD – fundamental overview

On the surface, Thursday’s Aussie employment data didn’t look all that bad, but the reality is that with no signs of full time jobs growth in consecutive months and with a downward revision to the previous month’s data, the data was on net weaker. Still with the RBA focused on inflation, the rise in consumer inflation expectations was a welcome development, perhaps helping to offset some of the employment data setbacks. In the end, no real change to OIS pricing, with the market pricing a small chance for a July cut. Looking ahead, US inflation and initial jobless claims come into focus, with the market also paying attention to the BOE decision as it relates to Brexit risk.

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 latest 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 1.3000 – Psychological – Medium
• R1 1.2982 – 6Jun high – Strong
• S1 1.2815 – 14Jun low – Medium
• S2 1.2750 – 13Jun low – Strong

USDCAD – fundamental overview

While most currencies managed to recover a bit against the US Dollar on Wednesday, following the more dovishly perceived FOMC policy decision, the Canadian Dollar continued to extend declines and was a relative underperformer. Weakness from this latest run of setbacks in the price of OIL was the primary driver, while ongoing risk off flow helped to keep the Loonie pressured. Looking ahead, we get Canada international securities transactions, US initial jobless claims and US CPI. The market will also be interested to see what comes of the BOE decision as it relates to Brexit risk.

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 0.7093 – 16Jun high – Medium
• S1 0.6963 – 14Jun low– Strong
• S2 0.6945 – 8Jun low – Medium

NZDUSD – fundamental overview

A healthy recovery in the New Zealand Dollar since Wednesday’s FOMC decision. The currency has benefitted from the more dovishly perceived Fed tone and a subsequent release of better than expected New Zealand growth data early Thursday. However, when taking into account the discomfort with a higher exchange rate, softer food prices, a not so hot GDT auction, and broader risk off flow on the back of Brexit fear, scope for additional upside should be limited with plenty of medium term players stepping in on the offer at elevated levels. Looking ahead, US initial jobless claims, US CPI and the BOE decision will be in focus.

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, something perhaps reflected after Wednesday’s dovishly perceived Fed decision. 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. Looking ahead, US initial jobless claims and inflation readings will be watched closely, while the BOE decision could also factor as far as the central bank’s message relating to Brexit risk is concerned.

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 a medium term higher low in the 1200 area ahead of the next major upside extension towards 1400 further up. Today’s surge through the 2015 peak at 1307 confirms the bullish outlook.

• R2 1350.00 – Psychological – Strong
• R1 1320.00 – Figure – Medium
• S1 1272.60 – 13Jun low – Medium
• S2 1234.95 – 7Jun 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 in demand, with stops now tripped above $1310 opening a fresh wave of buying interest for a run towards $1400.

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. There are domestic factors weighing on the Lira as well, with elevated prospects of snap elections and ongoing terrorist attacks making the currency less attractive. Looking ahead, risk flow will continue to dictate direction, with the market looking to the BOE for some reassurance as far as Brexit risk goes. US initial jobless claims and CPI are also scheduled for release.