Counterintuitive USD Weakness?

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 1.4245– 27Mar high – Strong
• R1 1.4224 – 11Apr high – Medium
• S1 1.4079 – 9Apr low – Medium
• S2 1.3966 – 5Apr low – Strong

GBPUSD – fundamental overview

The Pound hasn’t been too bothered about the latest run of soft UK data, after industrial production, manufacturing production and construction output all disappointed. This week’s hawkish BOE McCafferty comments that the board musn’t dally over the next rate hike, have offset the weaker data, while the Pound is also benefiting from broad based US Dollar weakness. The Buck has been sold across the board, despite diminished risk associated with US protectionism and despite a hawkish Fed Minutes that shows all members now looking for inflation to move up. Today, we get appearances from BOE Broadbent and BOE Governor Carney later in the day. US initial jobless claims is the only notable standout as far as economic data goes.

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 leaves the door open 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, rallies are viewed as corrective, with only a daily close back above 107.91 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

The major pair has been chopping around quite a bit, but is trying to put in a base as risk sentiment recovers on the back of defused trade tension between China and the US. Since the weekend, there have been conciliatory gestures (mostly) on both sides and the market has been selling Yen as a direct consequence on the traditional correlation with risk. Still, monetary policy normalisations should continue to invite investor rotation away from risk assets, which could open another downturn in USDJPY. The latest news about a potential airstrike on Syria has been getting some attention, though the market hasn’t shown any signs of reacting at this point. The broad based selling in the US Dollar has however been a source of Yen demand, with this flow offsetting some of Dollar demand from the improved risk appetite. As far as today goes, we get US initial jobless claims and an appearance from Fed Kashkari.

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 1.2000 – Psychological – Strong
• R1 1.1882 – 11Apr/2018 high – Medium
• S1 1.1768 – 9Apr low – Medium
• S2 1.1652 – 22Mar 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 0.7774 – 11Apr high – Medium
• S1 0.7644 – 29Mar low – Medium
• S2 0.7628 – 14Dec low – Strong

AUDUSD – fundamental overview

RBA Lowe was on the wires on Wednesday, reaffirming the central bank’s view of leaving rates on hold for the time being. Meanwhile, the market has also taken in a mostly discouraging economic data this week, with Aussie consumer inflation expectations the latest release to let down after dipping from the previous print. Still, Aussie has managed to recover from recent lows in the face of all of this, with the broad based selling of the US Dollar and renewed risk appetite on diminished US protectionism fear, helping to bolster the commodity currency. As far as today goes, we get US initial jobless claims and an appearance from Fed Kashkari.

USDCAD – technical overview

Despite the latest round of weakness, overall, there are signs of basing after months of downside pressure. 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 1.2708– 10Apr high – Strong
• R1 1.2624 – 11Apr high – Medium
• S1 1.2545 – 11Apr low – Medium
• S2 1.2500 – Psychological – Strong

USDCAD – fundamental overview

The Canadian Dollar has been in rally mode over the past week or so, recovering from a recent yearly low against the Buck. The latest jolt has come from the combination of conciliatory global trade talk, a Bank of Canada Q1 survey which showed the business sales outlook improving, solid Canada housing starts and a rally in the price of OIL. Overall however, more back and forth on trade is expected and this should keep the Loonie from wanting to run too far, with the fate of NAFTA remaining a major overhang that can not be dismissed. As far as today’s calendar goes, we get some second tier Canada housing data, along with US initial jobless claims and a speech from Fed Kashkari.

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 ahead of 0.7500, with only a break back above the [psychological barrier to negate. Look for a renewed weakness in the sessions ahead, with a break back below 0.7300 to strengthen the outlook and accelerate declines towards 0.7000.

• R2 0.7400 – Figure – Strong
• R1 0.7380 – 11Apr high – Medium
• S1 0.7304 – 10Apr low – Medium
• S2 0.7244 – 6Apr low – Strong

NZDUSD – fundamental overview

The Kiwi rate has been bid up into the mid-week, getting help from conciliatory trade talk out from the US and China and some broad based US Dollar selling. However, the less than stellar economic data out of New Zealand in recent weeks, including four consecutive negative GDT auction prints, should not encourage Kiwi bulls, while any signs of more pickup on the US inflation front or downturn in risk sentiment, will likely invite renewed downside pressure. Dealers have been talking decent sell orders between 0.7400-0.7500. As far as today goes, we get US initial jobless claims and an appearance from Fed Kashkari.

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 2680 – 27Mar high – Medium
• S1 2585 – 6Apr 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, with setbacks at risk of intensifying on the prospect for the reemergence of inflationary pressure. Conciliatory talk out from the US and China this week has helped to defuse short term downside risk, though the bigger picture theme of policy normalisation should continue to weigh on investor sentiment 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 1320 – 6Apr low – Medium
• 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 9,200 – 21Mar high – Strong
• R1 7,500 – 3Apr high – Medium
• S1 6,420 – 1Apr low – 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. Key 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 break back below 358 to expose a measured move extension target at 310.

• R2 590 – 21Mar high – Strong
• R1 450 – 18Mar low – Medium
• S1 358 – 1Apr/2018 low – Strong
• S2 310 – Extension Obective  – 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.