A High Bar for US Dollar Bulls

GBPUSD – technical overview

The market has come back under pressure since stalling out several days back ahead of critical resistance in the form of the December 2016 peak at 1.2775. The recent close below 1.2347 ends a period of choppy consolidation exposing a drop back towards a retest of the+30 year base from October 2016 at 1.1841. Ultimately, rallies should continue to be very well capped into the 1.2500 area, with only a break above 1.2775 to compromise the overall bearish outlook.

• R2 1.2347 – Previous Support – Strong
• R1 1.2310 – 15Mar high– Medium
• S1 1.2200 – Figure – Medium
• S2 1.2109 – 14Mar low – Strong

GBPUSD – fundamental overview

The distraction of the Fed decision was enough to get a worried Pound to stop thinking about an imminent Article 50 trigger. The market had been expecting some form of an upgraded assessment from the Fed and failure to offer anything other than a fully priced rate hike was enough to inspire a fresh wave of demand for the beaten down UK currency. Whether or not this rally holds up is a completely different story given all of this risk in the UK right now. Meanwhile, Wednesday’s UK wage data was unimpressive and should be a reminder that the Pound may not be able to run too far. Of course, all of the focus here shifts to the BOE decision, where the central bank isn’t expected to rock the boat. US data will also be watched today with US housing starts, US building permits, initial jobless claims the Philly Fed and JOLTS job openings due.

USDJPY – technical overview

The market continues to be very well capped on rallies into the 115.00 area, respecting a multi-day range resistance. This latest topside failure now sets the stage for a resumption of declines back towards the range low around 111.60 in the sessions ahead. There is also risk that if the market breaks down below 111.60 we could see an acceleration well below the 110.00 psychological barrier, possibly into the 107.00s on a measured move extension.

• R2 115.62 – 19Jan high – Strong
• R1 114.00 – Figure – Medium
• S1 113.00 – Figure – Medium
• S2 112.75 – 1Mar low – Strong

USDJPY – fundamental overview

The market hasn’t spent any time thinking about the BOJ decision which went off without a hitch, instead focusing on the intense wave of broad based US Dollar weakness in the aftermath of a dovishly perceived Fed decision. While the Fed did indeed go ahead and raise rates, this was fully priced, which left the market looking at a monetary policy statement and projections that showed no reflection of ramped up Fed speak in recent weeks. Clearly this was a major let down to Dollar bulls, opening the door for a sharp rally in the Yen. Technicals didn’t do the US Dollar any favours either with the USDJPY rate stalling ahead of major resistance above 115.00, already warning of the possibility for reversal in the Yen’s direction. Looking ahead, the Yen will probably be interested to see what comes from the BOE decision given a possible impact on global risk. The market will also be paying attention to a fresh batch of US data featuring US housing starts, US building permits, initial jobless claims the Philly Fed and JOLTS job openings.

EURCHF – technical overview

The latest surge through resistance at 1.0760 could threaten a broader downtrend and suggest we are in the process of seeing a bullish structural shift. However, a daily close above 1.0800 would be required to confirm, while inability to do so keeps the downtrend intact opening the door for a drop back towards and below the 2016 base at 1.0624.

• R2 1.0900 – 8Dec high – Strong
• R1 1.0826 – 13Mar high – Medium
• S1 1.0690 – 8Mar low – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB is in a quiet battle with the market, forced to contend with an ongoing wave of demand for the Swiss Franc in a less certain global environment, especially with the weapon of monetary policy worn down. The central bank has been committed to its mandate of ensuring the Franc does not appreciate further. But despite all efforts, the Franc continues to want to appreciate. It seems the central bank’s strategy has been to sell Francs when risk comes off and to do nothing when risk is back on and natural flows should be CHF bearish. But the trouble is, even with global equities elevated, arguably reflecting global appetite for risk, the Franc hasn’t been able to weaken all that much. There have been some signs of the SNB perhaps making a little headway on reports of a boost in SNB reserves, but we will need to see if this latest EURCHF rally holds up above 1.0700. More colour ahead with the SNB decision on tap.

AUDUSD – technical overview

The impressive rally in 2017 has stalled out into significant medium-term resistance ahead of 0.7800. A recent break back below 0.7600 strengthens the prospect for some form of a top and could open the door for a deeper drop back towards the 0.7000 area in the days ahead. However, the market would need to hold below 0.7741 to keep the prospect of the bearish shift alive, with a subsequent break back below 0.7492 to confirm.

• R2 0.7741 – 23Feb high – Strong
• R1 0.7720 – 15Mar high – Medium
• S1 0.7633 – 7Mar high – Medium
• S2 0.7556 – 15Mar low – Strong

AUDUSD – fundamental overview

The Australian Dollar has quickly become the most attractive currency over the past week after the currency skyrocketed on Wednesday in the aftermath of a dovishly perceived Fed decision. While the Fed went ahead and raised rates, this was already fully priced, leaving the market surprised the Fed did not accompany the interest rate rise with upgraded language and projections. Both the Fed’s policy statement and projections were virtually the same as the previous decision, with the dot plot still showing only 3 hikes this year despite more hawkish Fed speak in the lead up to the decision. Risk markets fell in love with the Fed’s dovishness and this has benefited the correlated Australian Dollar tremendously. Meanwhile, a strong move in commodities is also giving Aussie a boost. Interestingly, economic data out of Australia hasn’t been good, though the market isn’t bothered by this right now. Earlier today, Aussie employment was weak and this already follows Tuesday’s softer Aussie business conditions and business confidence readings and Wednesday less than impressive Westpac consumer confidence print. Looking ahead, the market will take in a batch of US data featuring US housing starts, US building permits, initial jobless claims the Philly Fed and JOLTS job openings.

USDCAD – technical overview

The market remains very well supported on dips, with the latest bounce out from 1.3000 warning of a more significant bullish resumption. Any setbacks should now be very well supported above 1.3200 on a daily close basis in favour of an eventual push back through the multi-day peak at 1.3599 and towards 1.4000 further up.

• R2 1.3422 – 10Mar low – Strong
• R1 1.3372 – 3Mar low – Medium
• S1 1.3213 – 7Feb high – Medium
• S2 1.3165 – 28Feb low – Strong

USDCAD – fundamental overview

Last Friday’s super impressive Canada employment report had been overshadowed by a strong US employment report and the expectation it would lead to a more hawkish Fed. Also offsetting any Canadian Dollar demand from the Canada jobs was the sharp reversal in the price of OIL. But now only days later, the Canadian Dollar is feeling a lot better, with the Fed letting down hawks on Wednesday and OIL recovering nicely off its lows. Looking ahead, we get Canada international securities transactions but this will be overshadowed by a wave of US data featuring US housing starts, US building permits, initial jobless claims the Philly Fed and JOLTS job openings.

NZDUSD – technical overview

The overall pressure remains on the downside with the market expected to be very well capped on rallies. The weekly chart is reflective of this fact as it looks like we’re seeing the formation of a major top off the 2016 high. As such, expect the market to continue to roll over in the days ahead, with setbacks projected towards medium-term support in the 0.6600s. Only back above 0.7400 compromises the outlook.

• R2 0.7066 – 3Mar high – Strong
• R1 0.7049 – 15Mar high – Medium
• S1 0.6987 – 16Mar low – Strong
• S2 0.6890 – 9Mar low – Strong

NZDUSD – fundamental overview

There is no denying the very healthy recovery in the New Zealand Dollar over the past 24 hours, with the currency rocketing on a dovish Fed decision, surging equities and rallying commodities. But overall, there has been a notable shift in sentiment towards the New Zealand Dollar in 2017 which could make it hard for the currency to build any serious upside momentum. Softer local data, a more dovish RBNZ, a rotation into AUDNZD, and unfavourable yield differentials are some of the major drivers behind the recent wave of Kiwi bearishness. Earlier today, Kiwi took a hit off the post FOMC high on the back of a disappointing New Zealand GDP report. Looking ahead, US data comes into focus, featuring US housing starts, US building permits, initial jobless claims the Philly Fed and JOLTS job openings.

US SPX 500 – technical overview

The latest break to yet another record high following a healthy period of consolidation, has opened the door for the next big push through 2400. While technicals are severely stretched and there are definitive signs of exhaustion on the horizon, given the intensity of this uptrend, a break back below 2350 would be required at a minimum to alleviate immediate topside pressure.

• R2 2450.00 – Psychological – Strong
• R1 2402.00 – 1Mar/Record high – Medium
• S1 2350.00 – 24Feb low – Medium
• S2 2304.00 – 26Jan high– Strong

US SPX 500 – fundamental overview

US equities haven’t been bothered by anything over the past several years, with even rate rises from the Fed doing nothing to dissuade equity investors. Instead, the focus has been on a still exceptionally low rate environment supportive of higher stocks and Trump policies that will fuel additional upside in the market. Market participants have dismissed the idea that the reversal of Fed policy will have negative impact on stocks, citing recent price action as a testament to this fact. The market hasn’t believed the Fed will hike at a consistent pace, given the fact that the only consistency investors have seen is the Fed’s consistency to back away from hawkish guidance. On Wedneday, the Fed proved investors right yet again. While the central bank delivered a rate hike that was fully priced, there was nothing in the Fed’s language or projections that offered any shift in the outlook, this despite all of the hawkish speak in the lead up to the event. And so, stocks are back to record highs and will seemingly continue to push on the accommodative Fed outlook.

GOLD (SPOT) – technical overview

The market has been very well supported since basing out around 1120 in 2016. A recent break above 1260 strengthens the outlook, opening the door for the next major upside extension towards a measured move into the 1300 area. Look for the latest setbacks to be very well supported around 1200, with only a break back below 1180 to compromise the constructive outlook.

• R2 1264.00 – 27Feb high – Strong
• R1 1236.85 – 6Mar high – Medium
• S1 1195.05 – 10Mar low – Medium
• S2 1180.60 – 27Jan low  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players continues to emerge on dips, with these players more concerned about the limitations of exhausted monetary policy, extended global equities, political uncertainty and systemic risk. All of this should continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax. Of course, this latest intense selloff in the the US Dollar post a dovishly perceived FOMC decision is further fueling gains in the metal.

Feature – technical overview

USDMXN has been in the process of correcting out from recent record highs earlier this year. The market has now dropped back into critical support in the 19.00-20.00 area and is expected to be well supported around this area in favour of a resumption of the uptrend and push back through the record high just over 22.00. Ultimately, only back below 19.00 would give reason for pause and open the possibility for a more meaningful structural shift.

• R2 20.1625 – 1Mar high – Strong
• R1 19.9030 – 9Mar high – Medium
• S1 19.2000 – Trendline – Medium
• S2 19.0000 – Psychological – Strong

Feature – fundamental overview

The Peso had been benefiting from a healthy wave of positive developments including higher Mexico rates, subsequent Banxico actions to curb Peso weakness, reduction in speculative Peso shorts, more conciliatory talk out of the White House and surging global equities. This latest dovishly perceived Fed decision has given the emerging market currency another injection of bids on the back of an intense wave of broad based US Dollar declines in the aftermath. Still, with Trump uncertainty running high and global equities looking dangerously extended, the Peso could be at risk for renewed weakness in the days ahead. Dealers have been talking about USDMXN demand towards 19.0000.