Pound Heads South, US Core PCE on Tap

GBPUSD – technical overview

Extended studies have opened the door for a much needed corrective decline. There is risk for a deeper setback in the days ahead, with the market potentially gravitating to rising channel support off the 2017 uptrend which comes in around the 1.3700 area. Still, overall, the structure remains highly constructive on a medium to longer term basis and a higher low is sought out ahead of a bullish continuation.

• R2 1.4247 – 19Apr high – Medium
• R1 1.4032 – 23Apr high – Medium
• S1 1.3748 – 27Apr low – Medium
• S2 1.3700 – Trendline – Strong

GBPUSD – fundamental overview

The Pound has been cooling off from a run of outperformance in 2018, with the currency taking some big hits on the back of less hawkish Carney speak, softer UK GDP and renewed tension surrounding the Brexit overhang. Amber Rudd’s resignation has shaken things up, while other threats of resignation are creating an unsettling overall feeling that has not been good for the Pound. Still, we believe the Brexit bumps will continue to smooth out going forward and expect the current weakness to be well supported on medium term demand. Looking ahead, absence of first tier UK data will leave the focus on the bigger themes, while the market will also take in US releases that include an important core PCE reading, personal income and spending and pending home sales.

GBPUSD – Technical charts in detail

USDJPY – technical overview

The major pair has been attempting to bottom out after trading down to a 2018 low in the 104s. The latest break and close back above 108.00 strengthens the recovery outlook and opens the door for a bigger recovery back into the next key resistance zone in the 110.50-111.50 area. Back below 108.00 would be required to shift the focus to the downside.

• R2 110.49 – 2Feb high – Strong
• R1 109.50 – 27Apr high – Medium
• S1 108.55 – 24Apr low – Medium
• S2 107.91 – 21Feb low – Strong

USDJPY – fundamental overview

Not much of a reaction to Friday’s Bank of Japan hold decision, that produced a notable tweak in the statement removing guidance calling for inflation to reach its 2% target in fiscal year 2019. Overall, the Yen has come under pressure in recent weeks, with the currency falling victim to broad based US Dollar demand as US protectionism rhetoric is dialed down and the focus shifts back over to yield differentials. Last week’s moves in US tens and twos did not gone unnoticed and turned heads. Meanwhile, there is talk of month end related Yen selling that could open additional downside pressure (USDJPY upside). Looking ahead, the focus will be on US releases that include an important core PCE reading, personal income and spending and pending home sales.

USDJPY – Technical charts in detail

EURCHF – technical overview

The market has recently pushed to a fresh multi-month high back through the massive 1.2000 level. This is the first time the market has traded 1.2000 since January 2015. However, studies are now extended across the major time frames and there is risk building for a sizable corrective decline before considering a bullish continuation.

• R2 1.2100 – Figure – Strong
• R1 1.2006 – 20Apr/2018 high – Medium
• S1 1.1927 – 23Apr low – Medium
• S2 1.1842 – 12Apr 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.

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 0.7814 would be required to negate the structure and force a shift in the outlook.

• R2 0.7683 – 23Apr high – Strong
• R1 0.7622 – 24Apr low – Medium
• S1 0.7533 – 27Apr/2018 low – Medium
• S2 0.7502– 8Dec low – Medium

AUDUSD – fundamental overview

The Australian Dollar has come under renewed pressure, mostly on the back of broad based Dollar demand as the conversation shifts back to yield differentials that favour the Buck. We have however seen some Aussie demand against its Kiwi cousin, which has helped to slow the pace of Aussie declines against the Buck somewhat. A solid run of Aussie data, including Monday’s uptick in Aussie inflation and private sector credit and better China PMIs have accounted for this latest Aussie demand against Kiwi. Overall, Aussie will continue to monitor developments on the global front, with any escalation in tension to add to the downside pressure. Looking ahead, the focus will be on US releases that include an important core PCE reading, personal income and spending and pending home sales.

USDCAD – technical overview

Despite a recent 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. A daily close above 1.2949 will strengthen the constructive outlook.

• R2 1.2949– 22Mar high – Strong
• R1 1.2901 – 27Apr high – Medium
• S1 1.2800 – Figure – Medium
• S2 1.2749 – 23Apr low – Strong

USDCAD – fundamental overview

The Canadian Dollar has come under pressure over the past few weeks, suffering from a combination of softer local data and broad based US Dollar demand. We also continue to believe the Loonie had gotten ahead of itself with NAFTA risk a big deal (despite some positive talk this week) and still well capable of giving the Bank of Canada a big headache if it gets too aggressive with policy normalization. There was some relief for the Loonie last week after Bank of Canada Governor Poloz said tightening was still warranted even though the central bank would remain cautious. Looking ahead, we get Canada industrial product and raw materials prices along with US readings that include an important core PCE reading, personal income and spending and pending home sales.

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 the latest break back below 0.7154 strengthening the bearish outlook and prospect for a drop back down towards 0.7000.

• R2 0.7219 – 23Apr high – Strong
• R1 0.7158 – 24Apr high – Medium
• S1 0.7041 – 27Apr/2018 low – Medium
• S2 0.7000 – Psychological – Strong

NZDUSD – fundamental overview

April’s Kiwi inflation data was already discouraging, with the dip in tradable goods prices and drop to the lowest year on year print since Q3 2016 putting the RBNZ in a position to consider a less hawkish path going forward. We’ve since seen a run of softer trade data and this latest deterioration in the business confidence and activity outlook. This has resulted in a period of relative Kiwi underperformance. Overall, the combination of global trade tension, fallout from an end to a near decade long post crisis global monetary policy accommodation and less than stellar economic data out of New Zealand in recent weeks is all starting to weigh on the Kiwi rate after the market had pushed into some medium term resistance towards 0.7500 several days back. It’s worth noting, we’ve also seen cross related Kiwi selling against Aussie. Looking ahead, the focus will be on US releases that include an important core PCE reading, personal income and spending and pending home sales.

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 2718 – 18Apr high – Medium
• S1 2553 – 2Apr 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, ramped up US protectionism, and geopolitical tension have been capping the market into rallies, with any renewed setbacks at risk of intensifying on the prospect for the reemergence of inflationary pressure. Overall, we expect the bigger picture theme of policy normalisation to 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 1315 – 26Apr 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

A recent break back above short term resistance at 9,200 has strengthened the recovery outlook, with scope for a correction further up towards 10,000. Still, the overall pressure remains on the downside and it is going to take a recovery back above 12,000 to suggest otherwise.

• R2 9,900 – 12Mar high – Strong
• R1 9,750 – 25Apr high – Medium
• S1 8,460 – 16Apr high – Medium
• S2 7,820 – 17Apr 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 once the current correction fades away.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

Signs of recovery, with the market rallying out from the 2018 low and pushing back above some consolidation resistance. This has opened the door for a more significant recovery, though the market will need to establish a daily close back above 712 to suggest we are seeing a more constructive shift in the trend.

• R2 895 – 27Feb high – Medium
• R1 712 – 24Apr high – Strong
• S1 575 – 21Apr low– Medium
• S2 537 – 16Apr high  – 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.