Bearish US Dollar Outlook in Question

Next 24 hours: Fear of Commitment in the FX Market

Today’s report: Bearish US Dollar Outlook in Question

A return of geopolitical risk, solid US employment data as reflected through ADP, and a hawkish Fed Minutes, and yet the USD is only moderately higher into Thursday. The market has been reluctant to hold US Dollars in recent weeks, though the confluence of these events may make it increasingly difficult to avoid doing so.

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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 the strong confluence of Fibonacci, Ichimoku support in the 1.0580-1.0650 area.

  • R2 1.0770 – 30Mar high – Strong
  • R1 1.0702 – 31Mar high – Medium
  • S1 1.0636 – 4Apr low – Medium
  • S2 1.0601 – 14Mar low – Strong

EURUSD – fundamental overview

The Euro has done a good job holding up in the face of some flight to safety bids, French election risk, solid US ADP employment and a more hawkish Fed Minutes. It will be interesting to see if the single currency continues to hold up going forward, with the market taking in the ECB Minutes, and ECB Draghi speech and an important Trump-Xi meeting. Other calendar events on Thursday include Eurozone construction PMIs, US initial jobless claims and a Fed Williams speech. Dealers report sell stops below 1.0630.

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

The Pound managed to hold gains on Wednesday despite ongoing worry over Brexit talks, another solid round of US employment data and a hawkish Fed Minutes. Earlier on Wednesday, UK services PMIs came in above forecast, which was seen propping the UK currency a bit, though medium-term offers are quite strong, which should continue to cap additional upside, especially with recent developments favouring the US Dollar. Moreover, BOE Vlieghe expressed concern that the UK consumer slowdown would intensify, adding a premature rate hike would be worse than a late one. Looking ahead, absence of UK data will leave the market focused on any headlines relating to Brexit negotiations, the Trump-Xi meeting, US initial jobless claims and a Fed Williams speech.

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. Below 110.00 strengthens the outlook and should accelerate declines.

  • R2 112.20 – 31Mar high – Strong
  • R1 111.59 – 3Apr high – Medium
  • S1 110.27 – 4Apr low – Medium
  • S2 110.11 – 27Mar/2017 low – Strong

USDJPY – fundamental overview

It’s rather clear at the moment, the primary driver of the Yen is safe haven flow, with the Japanese currency outperforming even the US Dollar as risk off intensifies. Geopolitical tension is back on the rise, fueling the Yen demand. Missile launches from North Korea, Syria gas attacks and the upcoming Trump-Xi meeting are all making investors nervous. Meanwhile, although the Fed Minutes were hawkish, they also highlighted discussions of shrinking the balance sheet and concerns over elevated equities, once again, a risk off development making the Yen more attractive. Looking ahead, the market will be monitoring all of these developments, particularly the Trump-Xi meeting. Other standouts on the calendar include US initial jobless claims and a Fed Williams speech.

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 break back below 0.7492 to confirm the bearish outlook.

  • R2 0.7680 – 30Mar high – Strong
  • R1 0.7588 – 5Apr high – Medium
  • S1 0.7500 – Psychological – Medium
  • S2 0.7492 – 9Mar low – Strong

AUDUSD – fundamental overview

Today’s weaker than expected China services PMIs showing has done nothing to help an already ailing Australian Dollar. This only reinforces the RBA’s concern over the China outlook which was articulated in this week’s more dovish policy decision. Meanwhile, a rise in geopolitical tension is further contributing to Aussie downside, with North Korea, Syria and the upcoming Trump-Xi meeting all fueling Aussie offers. Adding insult to injury has been another impressive US employment reading and a hawkish Fed Minutes. Looking ahead, aside from the Trump-Xi meeting, we also get US initial jobless claims and a Fed Williams speech.

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 1.3456 – 4Apr high – Medium
  • S1 1.3374 – 4Apr low low – Medium
  • S2 1.3264 – 21Mar low – Strong

USDCAD – fundamental overview

The Canadian Dollar hasn’t had much of a chance in recent sessions, with a Canada trade data miss, solid US ADP report, pullback in the price of OIL and hawkish Fed minutes all weighing on the Loonie. Meanwhile, the rise in geopolitical tensions is also not doing the Canadian Dollar any favours as risk off flow inspires profit taking. Looking ahead, most of the focus will be on OIL prices and the Trump-Xi meeting, but we also get Canada building permits, US initial jobless claims and a Fed Williams speech.

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 0.7090 – 21Mar high – Strong
  • R1 0.7022 – 4Apr high – Medium
  • S1 0.6940 – 5Apr low – Medium
  • S2 0.6890 – 9Mar low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar continues to get sold into rallies as broader themes weigh on the commodity currency. The combination of a rise in geopolitical tension, solid US data and a hawkish Fed Minutes warning of equity market overvaluation and shrinking the balance sheet, are all adding to the bearish Kiwi case, with dealers now talking about some major sell stops below 0.6850. Looking ahead, all eyes will be on the Trump-Xi meeting, though other standouts on the calendar include US initial jobless claims and a Fed Williams speech.

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

Bulls remain in control, though there have been some cracks at the surface in recent days, with uncertainty around President Trump policies worrying the market. Meanwhile, geopolitical risk is back on the rise as North Korea fires off more rockets, and news surfaces of Syrian gas attacks. All of this should be far more unnerving to investors when considering a new US administration’s alternative take on diplomacy. The stock market will also be thinking about today’s Trump-Xi meeting, which could result in another crack, if it further highlights the President’s protectionist stance. Of course, 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 another hawkish Fed Minutes discussing shrinking the balance sheet and warning of equity overvaluation.

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 1261.30 – 4Apr 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 and geopolitical threats. All of this should continue to keep the commodity in demand, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

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

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. Looking ahead, the key standout on today’s calendar is the Trump-Xi meeting.

Peformance chart: Five day performance v. US dollar

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