Signs of Stability into Weekend

GBPUSD – technical overview

Despite signs of the potential for a longer-term base, the marker remains well capped into rallies, 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 which guard against the multi-year low from earlier this year at 1.3836. At this point, a daily close back above previous support at 1.4333 would be required to delay the bearish outlook.

• R2 1.4333 – Previous Support – Strong
• R1 1.4295 – 17Jun high – Medium
• S1 1.4197– 17Jun low – Medium
• S2 1.4090 – 15Jun low – Strong

GBPUSD – fundamental overview

Lots of volatility in the Pound over the past 24 hours, with the currency initially dropping to fresh multi-day lows just shy of 1.4000 before rallying sharply into Friday trade. The initial round of setbacks came on more referendum jitters after the Bank of England upgraded its risk assessment of the risks associated with an EU exit. However, it seems this also did a good job swaying some voters back over to remain on fear of disruption in the event of an exit, while the tragic death of MP Jo Cox also seemed to influence momentum back towards the remain camp. Other factors supporting Cable on Thursday included some polls showing remain on top and more solid economic data, this time in the form of UK retail sales. Looking ahead, there is no data scheduled in the UK, with only US housing starts and building permits standing out. Most of the day will be spent positioning ahead of next week’s referendum.

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 or period of consolidation before the market thinks about materially extending declines.

• R2 105.55 – Previous Base – Strong
• R1 105.00 – Psychological – Medium
• S1 104.00 – Figure – Medium
• S2 103.55 – 16Jun/2016 low – Strong

USDJPY – fundamental overview

A late Thursday recovery in risk sentiment and subsequent comments from FinMin Aso warning against one-sided, abrupt, speculative FX moves, helped bolster the major pair out from the fresh yearly low posted earlier in Thursday trade. However, with plenty of uncertainty still out there into next week’s EU referendum and with the potential for a Brexit still very real, it seems there is still scope for additional downside in USDJPY towards 100.00. The initial wave of USDJPY weakness came early Thursday after the BOJ decided to leave policy unchanged, failing to upgrade its easing bias. This also suggests the BOJ isn’t prepared to step in with any interventions just yet, preferring to wait and see if the market wants to test critical levels at 100.00 first. Looking ahead, the economic calendar is exceptionally thin, with only US housing starts and building permits standing out.

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 1.0875 – 16Jun high – Medium
• S1 1.0778 – 16Jun low – Strong
• S2 1.0713 – 19Aug low – Very Strong

EURCHF – fundamental overview

No changes from the SNB on Thursday as was widely expected. The Swiss central bank did however talk a little tougher on unwanted currency appreciation saying it was prepared to do more if necessary to curb additional upside in the Franc. But as has been the case with all of the central bank decisions this week, the preferred course is to wait and see what comes of next week’s EU referendum before thinking about what type of response may be warranted. Certainly there has been talk and preparation for the necessary response in the event of a Brexit.

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 0.7600 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 0.7285 – 16June low – Strong

AUDUSD – fundamental overview

On the surface, this week’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 showing a small chance for a July cut. Looking ahead, the economic calendar is exceptionally thin on Friday, with only US housing starts and building permits standing out.

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 1.3086 – 16Jun high – Strong
• R1 1.3000 – Psychological – Medium
• S1 1.2895 – 16Jun low – Medium
• S2 1.2815 – 14Jun low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been relying much less on economic data this week and far more on the price of OIL and broader risk sentiment relating to a potential UK exit from the EU. The healthy pullback in the price of OIL over the past several days has forced the Loonie lower, while elevated uncertainty surrounding next week’s referendum result has been weighing on sentiment which has fueled additional Canadian Dollar weakness on its correlation with risk off flow. Still, the Loonie did manage to recover a bit off Thursday’s lows against the Buck, with a late Thursday surge in sentiment driving the gains. Looking ahead, economic data will come back into focus with Canada inflation data due along with US housing starts and building permits.

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

Kiwi has struggled to extend gains this week despite a stronger growth showing and this latest solid business PMI reading. It seems that with Kiwi’s trade weighted index tracking at uncomfortably elevated levels, with dairy struggling and with inflation still quite subdued, there is plenty of downside risk that should keep the market from trying to push much higher than the recent 2016 peak. Looking ahead, the economic calendar is exceptionally thin with only US housing starts and building permits standing out.

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. The recent daily close back below 2085 takes the immediate pressure off the topside and now opens the door for deeper setbacks ahead. But ultimately, a break below 2020 will be required to officially force a shift in the structure.

• R2 2121.00 – 8Jun/2016 high – Strong
• R1 2099.00 – 13Jun high – Medium
• S1 2050.00 –16Jun low – Medium
• S2 2044.00 – 24May low– Strong

US SPX 500 – fundamental overview

US equities posted an impressive recovery out from Thursday’s low, with the market managing to shake off Brexit risk fear late in the day. It seems one of the drivers behind the recovery may have come from reports the Fed, ECB and BOJ were planning a coordinated emergency injection of liquidity in the event of Brexit. And yet overall, 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. 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.

GOLD (SPOT) – technical overview

The recent break above the 2015 peak at 1307 strengthens the case for a longer term base with the market confirming a medium-term higher low in the 1200 area, opening the door for the next major upside extension towards a measured move at 1400. Any setbacks should be very well supported ahead of 1200.

• R2 1350.00 – Psychological – Medium
• R1 1315.80 – 16Jun/2016 high – Strong
• 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 a fresh batch of interest now reported ahead of 1250 as the market prepares for the next big push to 1400 after setting fresh 2016 highs on Thursday.

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 as the market positions into next week’s critical EU referendum.