RBA On Hold, Euro Thinking About French Election

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Today’s report: RBA On Hold, Euro Thinking About French Election

The FX market hasn't been in a hurry to make any new moves in the early week, more comfortable adhering to familiar ranges. Aussie is digesting the latest RBA decision with no change to rates but some noted outlook concerns. UK construction PMIs, Eurozone retail sales, US trade and the New Zealand GDT auction ahead.

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EURUSD – technical overview

Inability to establish above resistance at 1.0875 has kept the pressure on the downside, with the market stalling out into medium-term range resistance and rolling back over. While this could be a minor setback ahead of the next upside extension, it could also be the start to a resumption of the broader downtrend. At this point, a break back above 1.0900 or below 1.0500 will be required for clearer directional insight. It’s worth noting a strong confluence of Fibonacci, Ichimoku support in the 1.0580-1.0650 area.

  • R2 1.0827 – 29Mar high – Strong
  • R1 1.0770 – 30Mar high – Medium
  • S1 1.0643 – 3Apr low – Medium
  • S2 1.0601 – 14Mar low – Strong

EURUSD – fundamental overview

Tuesday’s round of EMU employment and manufacturing data was solid, but was unable to do much to bolster the Euro, which was more comfortable trading sideways. It seems dovish comments from ECB chief economist Praet that the reduction in asset purchases from April should not be taken as a sign of the start to a gradual reduction of QE, and renewed worry over the outlook of the French election have been more than offsetting any demand for the single currency. Looking ahead, key standouts on the calendar include Eurozone retail sales, US factory orders, US durable goods, some more Fed speak and an appearance from ECB Draghi.

GBPUSD – technical overview

Despite the recent bounce, the market remains confined to a well defined downtrend while it holds below the December 2016 peak at 1.2775. Ultimately, rallies should continue to be very well capped ahead of 1.2775, with only a break above 1.2775 to compromise the bearish structure. Look for a daily close back below 1.2324 to strengthen the outlook, opening the door for a retest of the 2017 low just under 1.2000, which guards against the +30 year low from October 2016 at 1.1840.

  • R2 1.2616 – 27Mar high – Strong
  • R1 1.2558 – 31Mar high– Medium
  • S1 1.2403 – 30Mar low – Medium
  • S2 1.2377 – 29Mar low – Strong

GBPUSD – fundamental overview

Although the Pound has been supported in the aftermath of the Article 50 trigger, the buy the fact reaction is now fading away, with the market once again finding strong offers into rallies ahead of major medium-term resistance at 1.2775. With negotiations expected to be quite tough in the early stages, there doesn’t appear to be any reason to be getting overly optimistic about the outlook for the UK currency just yet. Looking ahead, UK construction PMIs, US trade, US factory orders and some more Fed speak stand out.

USDJPY – technical overview

The market has broken down below critical range support at 111.60 which could signal the end of a 400 point bearish consolidation that now opens the next major downside extension towards a 400 point measured move that targets 107.60 in the days ahead. Look for any rallies to be well capped ahead of  114.00, while ultimately, only back above 115.60 would force a bullish structural shift.

  • R2 112.20 – 31Mar high – Strong
  • R1 111.59 – 3Apr high – Medium
  • S1 110.37 – 4Apr low – Medium
  • S2 110.11 – 27Mar/2017 low – Strong

USDJPY – fundamental overview

The market continues to buy Yen on dips and it appears as though the USDJPY rate wants to finally break down below the illusive 110.00 psychological barrier. For the most part, the driving force behind the Yen demand has been coming from some risk off flow, with the traditional safe haven currency benefiting from the flow. However, there is another story on the wires today that could also be inspiring Yen demand. Nobuyuki Nakahara, and adviser to PM Abe, has expressed his critique of BOJ policy, saying it’s time to pull the plug on QE. However, the comments should be taken with a grain of salt as Nakahara’s opposition to current policy as already been well known. Looking ahead, we get US trade and factory orders along with some more Fed speak.

EURCHF – technical overview

Rallies continue to be very well capped, with the market adhering to a broader downtrend of lower tops and lower lows. The most recent rally has stalled at 1.0826 where a fresh lower top is now sought ahead of the next major downside extension below the 2016 base at 1.0624 and towards 1.0400 further down. Only back above 1.0826 delays the bearish outlook.


  • R2 1.0826 – 13Mar/2017 high – Strong
  • R1 1.0764 – 21Mar high – Medium
  • S1 1.0650 – Mid-Figure – 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 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 a meaningful pullback in equities could easily offset that advantage.

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 will need to hold below 0.7750 to keep the prospect of the bearish shift alive, with a subsequent break back below 0.7492 to confirm.

  • R2 0.7680 – 30Mar high – Strong
  • R1 0.7641 – 3Apr high – Medium
  • S1 0.7534 – 13Mar low – Medium
  • S2 0.7492 – 9Mar low – Strong

AUDUSD – fundamental overview

Although headline Aussie trade data came in much better than expected, beneath the surface, there was some reason for concern on a softer import component. Meanwhile, the RBA left policy on hold as widely expected, but kept with a more dovish leaning tone on expressed concern over the China economy, low inflation, softer labor market conditions and the exchange rate. Looking ahead, key standouts for the remainder of the day come in the form of US trade, US factory orders and some more Fed speak.

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 1.3496 – 14Mar high – Strong
  • R1 1.3415 – 28Mar high – Medium
  • S1 1.3278 – 30Mar low – Medium
  • S2 1.3264 – 21Mar low – Strong

USDCAD – fundamental overview

There hasn’t been a whole lot of love for the Canadian Dollar in 2017. While the Loonie was higher against the Buck in Q1, it was also at the bottom of the pack, up only about 1%. Overall, the currency continues to be very well offered into any rallies and this latest round of setbacks is reflective, with USDCAD rebounding on Monday despite the much better than expected Friday Canada GDP showing. It seems renewed downside pressure in the price of OIL could be spooking some long Canadian Dollar exposure, while signs of a broader reduction in risk appetite may also be factoring. Looking ahead, we get Canada trade, US trade, US factory orders and some more Fed speak.

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 0.7100 – Figure – Strong
  • R1 0.7090 – 21Mar high – Medium
  • S1 0.6969 – 16Mar low – Medium
  • S2 0.6890 – 9Mar low – Strong

NZDUSD – fundamental overview

New Zealand economic data and fundamentals haven’t been all that impressive of late, and this in conjunction with some risk off flow, ongoing solid US economic data and hawkish Fed speak, have all kept the Kiwi rate on the defensive. Later today, we get the GDT auction results. This series has not been kind to the New Zealand Dollar over the past several months and if the data fails to impress again, we could see the currency come under added pressure. As far as other standouts on today’s calendar go, we get US trade, US factory orders and some more Fed speak.

US SPX 500 – technical overview

An extended run to record highs is finally showing signs of exhaustion in 2017, with the market rolling over, taking out critical short-term support at 2350. This now opens the door for an acceleration of declines towards 2300 in the sessions ahead, with a daily close below this psychological barrier to suggest the possibility of a more significant structural shift. In the interim, rallies should now be well capped below 2380.

  • R2 2402.00 – 1Mar/Record high – Strong
  • R1 2382.00 – 21Mar high – Medium
  • S1 2321.00 – 27Mar low – Medium
  • S2 2305.00 – 26Jan high– Strong

US SPX 500 – fundamental overview

Investors were shaken early last week after President Trump’s healthcare bill failed to pass, casting doubts on his ability to deliver market supportive policies investors have been counting on. But there has been a renewed confidence since on talk Trump will be looking to push through tax cut and fiscal spending reform all at once, which has helped to inspire a fresh round of bids. Still, there is plenty of doubt that Trump will actually be able to follow through and the market also shouldn’t forget about the influence of Fed policy in the process of normalisation on the back of solid US data and rising inflation. Higher US rates means less attractive valuations and considering where this market is trading, there is a strong possibility that a mass exodus could inspire an intensified liquidation.

GOLD (SPOT) – technical overview

The market has been very well supported since basing out around 1120 in 2016. A recent bounce out from the 1200 area strengthens the outlook, opening the door for the next major upside extension towards a measured move into the 1330 area. Look for any setbacks to be well supported ahead of 1200, with only a break back below 1180 to compromise the constructive outlook.

  • R2 1264.00 – 27Feb/2017 high – Strong
  • R1 1261.10 – 27Mar high – Medium
  • S1 1226.95 – 21Mar low – Medium
  • S2 1195.05 – 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, declines in the US Dollar post a dovishly perceived FOMC decision and worry over Trump policies have fueled additional gains in the metal.

Feature – technical overview

USDSGD has been in the process of correcting out from the critical high 1.4545 from earlier this year, putting in a series of lower highs and lower lows. However, the market has finally traded down into a strong previous resistance turned support area in the 1.3900s that could warn of the resumption of the more prominent uptrend. Look for a daily close back above 1.4100 to strengthen prospects for a bullish reversal. Ultimately, while the market holds above 1.3800, risk is tilted to the topside.

  • R2 1.4160 – 14Mar high – Strong
  • R1 1.4130 – 6Mar low – Medium
  • S1 1.3907 – 27Mar/2017 low – Medium
  • S2 1.3818 – 2Nov low – Strong

Feature – fundamental overview

The Singapore Dollar was bolstered on US Dollar negative themes in Q1 2017. At the top of the list were the more dovishly perceived FOMC (despite higher rates), a diminished confidence in President Trump’s ability to deliver US Dollar supportive policies and concurrent conflicting, soft US Dollar protectionist Trump messages. Meanwhile, local Singapore data has been mixed and less relevant. But going forward, it will be very difficult for the Singapore Dollar to ignore the combination of still favourable US Dollar yield differentials, solid US economic data and risk for a deterioration in global sentiment, all weighing themes that could easily put the emerging market currency back under pressure. Dealers have also been talking of healthy US Dollar demand ahead of 1.3900.

Peformance chart: Five day performance v. US dollar

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