Global Trade Outlook Driving Markets

GBPUSD – technical overview

Setbacks have been very well supported in 2018, with the market confined to a well defined uptrend. A break above the 2018 high at 1.4346 will confirm the next meaningful higher low at 1.3712, opening a measured move upside extension to the 1.5000 area. However, the major pair may not be ready to extend the run just yet in 2018, with a recent bearish reversal ahead of the 2018 high opening the door for another round of setbacks, possibly back down towards some rising bull channel trendline support in the 1.3600s.

• R2 1.4145– 16Feb high – Strong
• R1 1.4106 – 6Apr high – Medium
• S1 1.3966 – 5Apr low – Medium
• S2 1.3890 – 16Mar low – Strong

GBPUSD – fundamental overview

The Pound has done a good job holding onto gains in the aftermath of the US jobs report. The Dollar had taken a hit on the weaker headline reading, but managed to recover on a broad basis on higher US hourly earnings and downplayed fear of trade wars between the US and China. Still, the UK currency held up well, with many market participants looking to the Pound as an attractive diversification currency amidst risk for a deterioration in global sentiment. The improved outlook towards Brexit has also been a boost for the Pound, though at this stage, the major pair isn’t ready to get back to those 2018 highs from January and could still be exposed to weakness against the Buck, especially if the Fed continues to consider that fourth rate hike in 2018. Looking at today’s calendar, absence of first tier data out of the UK and US will leave the focus on bigger picture themes of Brexit headlines and trade tension updates.

GBPUSD – Technical charts in detail

USDJPY – technical overview

A multi-month range trade was broken in February after the market sunk below 107.30. This has opened the door for deeper setbacks, possibly down towards a measured move extension target of 100.00 after the market had consolidated for much of 2017 between 107.00 and 114.00. At this point, a daily close back above 107.91 would be required at a minimum to take the immediate pressure off the downside.

• R2 107.91 – 21Feb high – Strong
• R1 107.50 – 5Apr high – Medium
• S1 106.72 – 5Apr low – Medium
• S2 105.67 – 2Apr low – Strong

USDJPY – fundamental overview

Not much of a reaction to the smaller surplus out of Japan early Monday, and the market will look to digest the latest BOJ Kuroda speak. Overall, USDJPY has been well capped into rallies on a broad deterioration in global sentiment, with central bank policy normalisations and global trade war fears driving the flow. The US employment report didn’t do much to factor, with the softer headline readings offset by an uptick in hourly earnings. We have since seen some demand, with the market trying to feel better about President Trump’s weekend optimism towards working out a deal with China. Looking ahead, the market will continue to focus on the bigger picture themes with the US economic calendar empty on Monday.

USDJPY – Technical charts in detail

EURCHF – technical overview

The market continues to trend higher, recently extending gains to a fresh multi-month high. The bullish price action has the market thinking about a retest of that major barrier at 1.2000 further up. In the interim, look for the current round setbacks to be very well supported, while only back below 1.1652 would delay the overall constructive tone.

• R2 1.1834 – 15Jan/2018 high – Strong
• R1 1.1807 – 5Apr high – Medium
• S1 1.1652 – 22Mar low – Strong
• S2 1.1448 – 8Feb/2018 low – Strong

EURCHF – fundamental overview

The SNB will need to be careful right now, as its strategy to weaken the Franc could face headwinds from the US equity market in 2018. The record run in the US stock market has been a big boost to the SNB’s strategy with elevated sentiment encouraging Franc weakness. Of course, the SNB is no stranger to this risk, given a balance sheet with massive exposure to US equities. But any signs of a more intensified liquidation on that front into Q2 2018, will likely invite a very large wave of demand for the Franc, which will put the SNB in a more challenging position to weaken the Franc.  And so, we speculate the SNB continues to be active buying EURCHF in an attempt to build some cushion ahead of what could be a period of intense Franc demand.

AUDUSD – technical overview

The market has been in the process of rolling over after failing to sustain a break above 0.8100 earlier this year. This has set up a sequence of lower tops and lower lows on the daily chart, with deeper setbacks seen towards the 0.7500 barrier over the coming sessions. A break back above 0.7917 would be required to negate the structure and force a shift in the outlook.

• R2 0.7786 – 22Mar high – Strong
• R1 0.7727 – 5Apr high – Medium
• S1 0.7644 – 29Mar low – Medium
• S2 0.7628 – 14Dec low – Strong

AUDUSD – fundamental overview

While the Australian Dollar has found some demand into Monday on the back of President Trump’s weekend optimism towards a trade deal with China, rallies continue to find solid offers. Overall, the currency faces resistance from the escalation in global trade tension and ongoing White House drama. Ultimately, any signs of continued capitulation in risk assets, particularly on the back of US-China tension, will be what drives this market, with the Australian Dollar at risk for additional declines. Looking ahead, absence of first tier data out of the US will leave the focus on the bigger picture themes. Friday’s US jobs report was a wash, with the softer headline components offset by an uptick in hourly earnings.

USDCAD – technical overview

There are signs of basing after months of downside pressure, with the market recently pushing back above critical psychological resistance at 1.3000. Look for any setbacks to now be well supported ahead of 1.2500, with a higher low sought out in favour of the next major upside extension through 1.3125 and towards 1.3500 further up.

• R2 1.2949– 22Mar high – Strong
• R1 1.2848 – 4Apr high – Medium
• S1 1.2734 – 6Apr low – Medium
• S2 1.2616 – 26Feb low – Strong

USDCAD – fundamental overview

Offsetting data within the Canada and US jobs reports resulted in some mostly directionless trade for the Loonie on Friday. But ultimately, the contrasting hourly earnings components is what should have been the takeaway, with US hourly earnings ticking up, leaving the door open for a fourth rate hike in 2018, and Canada hourly earnings sliding, to likely keep the Bank of Canada from wanting to get overly hawkish. Overall, with global trade war fears front and centre, NAFTA risk remains a major threat to the Loonie. As far as today’s calendar goes, we get Canada housing starts and the Bank of Canada business outlook survey.

NZDUSD – technical overview

The market looks to be in the process of topping out, with the daily chart slowly rolling over in 2018. Rallies are now expected to be very well capped below 0.7400, with only a break back above the figure to negate. Look for deeper setbacks in the sessions ahead, with a break back below 0.7154 to strengthen the outlook and accelerate declines towards 0.7000.

• R2 0.7355 – 13Mar high – Strong
• R1 0.7323 – 5Apr high – Medium
• S1 0.7244 – 6Apr low – Medium
• S2 0.7189 – 29Mar low – Strong

NZDUSD – fundamental overview

The Kiwi rate has been bid up into Monday, getting help from softer headline components in the US jobs report and weekend tweets from President Trump expressing optimism for a trade deal with China. Still, the Fed Chair isn’t ready to rule out the possibility for a fourth rate hike in 2018, which should result in decent Kiwi offers into rallies, while global sentiment has been mostly in deterioration mode in 2018, which should be a negative for the risk correlated Kiwi rate. We would also highlight less than stellar economic data out of New Zealand in recent weeks, including four consecutive negative GDT auction prints. Looking ahead, absence of first tier data out of the US will leave the focus on the bigger picture themes.

US SPX 500 – technical overview

A severely overbought market is finally showing signs of rolling over off the January record high, allowing for stretched monthly readings to unwind. Any rallies should now be very well capped ahead of 2800 in favour of continued weakness towards the 2015 high at 2138.

• R2 2743 – 21Mar high – Strong
• R1 2659 – 23Mar high – Medium
• S1 2589 – 23Mar low – Medium
• S2 2533 – 6Feb/2018 low – Strong

US SPX 500 – fundamental overview

Investor immunity to downside risk is not looking as strong these days and there’s a clear tension out there as the VIX starts to rise from unnervingly depressed levels. The combination of Fed policy normalisation and ramped up US protectionism, have been driving the market lower. Setbacks are now at risk of intensifying on the prospect of added rate hikes and trade wars. President Trump’s weekend comments expressing optimism for a trade deal with China have helped to calm the market a little into the new week, though there is chatter of decent sell interest now building into rallies.

GOLD (SPOT) – technical overview

Setbacks have been well supported over the past several months, with the market continuing to put in higher lows and higher highs. Look for some more chop followed by an eventual push above massive resistance in the form of the 2016 high at 1375. This will then open the door for a much larger recovery in the months ahead. In the interim, setbacks are expected to be well supported around 1300.

• R2 1375 – 2016 high – Very Strong
• R1 1366 – 25Jan/2018 high – Medium
• S1 1325 – 22Mar low – Strong
• S2 1303 – 2Mar low  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players persists, with these players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity well supported, 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. Certainly the US Dollar under pressure has added to the metal’s bid tone as well, but there is a growing sense that even in a scenario where the US Dollar is bid for an extended period, GOLD will hold up on risk off macro implications. The 2016 high at 1375 is a massive level that if broken and closed above, could be something that triggers a widespread panic and rush to accumulate more of the hard asset.

BTCUSD – technical overview

Bitcoin has come under intense pressure since topping out at a record high just shy of 20,000 in December. The market has exceeded a measured move downside objective that had targeted a drop to 7,000, with deeper setbacks now on the cards for a move to retest the September 2017 peak around 5,000. At this point, it will take a daily close back above recent highs at 12,000, which also coincide with the top of the Ichimoku cloud, to take the pressure off the downside.

• R2 12,000 – Ichimoku Top – Strong
• R1 10,000 – Psychological – Medium
• S1 7,000 – Round Number – Medium
• S2 6,000 – 6Feb/2018 low  – Strong

BTCUSD – fundamental overview

The crypto asset has come under pressure in 2018, with ramped up regulatory oversight and potential government crackdowns forcing many holders to exit positions. The market is also coming back to earth after a euphoric 2017 run that had bubble written all over. Bitcoin has struggled on the transaction side as well, with transactions per second a major drawback, along with a mining community that has been less willing to process transactions due to the lower fees. The Lightning network has been a welcome development and is helping to ramp up transaction speed, which has been behind some of the recovery off the 2018 low, though it seems the combination of a massive bubble, more regulatory oversight, a market that is still trying to convince of its proof of concept, and the threat of a reduction in global risk appetite, could all result in even deeper setbacks ahead.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

Ether continues to extend declines since topping out at a record high back in January, with setbacks extending below 500. Short term resistance comes in at 590 and a break back above this level will be required at a minimum to take the immediate pressure off the downside. Until then, the market will consider another extension, with a daily close below 450 to expose a measured move decline into 300.

• R2 590 – 21Mar high – Strong
• R1 545 – 24Mar high – Medium
• S1 452 – 18Mar/2018 low – Strong
• S2 400 – Psychological  – Strong

ETHUSD – fundamental overview

Setbacks in the price of ETH have been more intense than those of Bitcoin in 2018. Though both markets are going through a period of shakeup following bubble activity in 2017, there has been a bigger exodus from ETH with this cryptocurrency more heavily correlated to risk in global markets. The reduction in global risk appetite has put a strain on the investment in projects on the blockchain and with most of the blockchain projects built on the Ethereum protocol, it makes sense to see this market more negatively impacted than bitcoin, which is considered to be the store of value digital currency.