Where we’re at as the week winds down

GBPUSD – technical overview

The major pair has put in an impressive recovery in recent weeks, helping to support the case for a longer-term developing uptrend off the 2016 low, with a higher low sought out by the multi-month low from early January. Pullbacks are now viewed as corrective on the daily chart, with dips expected to be supported above the daily Ichimoku cloud top. The latest break back above the September 2018 high at 1.3300 strengthens the outlook, with the market also pushing back into the weekly Ichimoku cloud.

• R2 1.3364 – 9Jul high – Strong
• R1 1.3351 – 27Feb/2019 high – Medium
• S1 1.3234 – 27Feb low – Medium
• S2 1.3110 â€“ 20Feb high  â€“ Strong

GBPUSD – fundamental overview

The Pound has been the standout performer this week, with the relative strength coming from the ongoing reduction in risk associated with the possibility for a no-deal Brexit in March. At this stage, the most likely scenario is a delay of some form, to allow for an acceptable deal to be worked out. In the days ahead, there will be more clarity on this front. Of course, another possibility is another referendum, though any one of these scenarios is decidedly better for the UK economy than the walk off a cliff with no deal scenario at the end of the month. We have seen some selling after stops were cleared above 1.3300, with the run capped off on the back of an impressive economic data out of the US on Thursday, as reflected in the GDP print and Chicago PMIs. Looking at the Friday calendar, we get UK consumer credit and manufacturing PMIs, followed up by US core PCE, US ISM manufacturing and Michigan sentiment. We also get a Fed Bostic appearance late in the day.

USDJPY – technical overview

The major pair is in the process of correcting within a bigger picture downtrend. Look for the recovery rally to be capped below 111.50 on a daily close basis, in favour of the next major downside extension below the 104.63, 2018 low. This would expose a very important psychological barrier at 100.00 further down, which guards against the 2016 low at 99.00. Ultimately, only back above 113.00 delays the bearish outlook.

• R2 112.00 – Figure  – Medium
• R1 111.47 – 21Dec high – Strong
• S1 110.26 â€“ 15Feb low – Medium
• S2 109.56 â€“ 6Feb low – Strong

USDJPY – fundamental overview

Overall, the major pair should continue to track along with risk sentiment and yield differentials. The massive recovery rally in the US equity market off the December low has been the primary driver behind the run, though the US Dollar has managed to also find bids, which was responsible for the added boost on Thursday. Solid US GDP and well above forecast Chicago PMI readings resulted in the major pair’s run back through 111.00. Still, in a world where risk assets are exposed to the realities of exhausted monetary policy and government stimulus post 2008 financial markets crisis, it will be a tall task to expect sustained Yen weakness from current levels. Japan manufacturing PMIs were out earlier, but haven’t factored into price action. Looking ahead, the Yen will be looking out for any new risks in global markets, while also taking in a batch of US data that includes core PCE, ISM manufacturing and Michigan sentiment. We also get a Fed Bostic appearance late in the day.

EURCHF – technical overview

The market has been in the process of consolidating off the 2018 low, which coincided with critical support in the 1.1200 area. However, at this stage, there is no clear directional bias, with the price action deferring to a neutral state. Back above 1.1500 would get some bullish momentum going for a push to 1.2000, while back below 1.1185 would be quite bearish.

• R2 1.1502– 22Oct high â€“ Strong
• R1 1.1445 â€“ 5Feb/2019 high – Medium
• S1 1.1310 – 11Feb low – Medium
• S2 1.1185– 7Sep/2018 low â€“ Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation in 2019, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we’re at in the monetary policy cycle.

AUDUSD – technical overview

The market has been very well supported since breaking down in early January to multi-year lows. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7400 to strengthen this outlook. Look for setbacks to now be well supported ahead of 0.7000.

• R2 0.7296 â€“ 31Jan high – Medium
• R1 0.7207 – 21Feb high – Medium
• S1 0.7070 – 21Feb low â€“ Medium
• S2 0.7055 – 2Feb low â€“ Strong

AUDUSD – fundamental overview

Renewed concerns about the prospects for a US-China trade deal had already been weighing on the correlated Australian Dollar this week, before Aussie took on more selling pressure in Thursday trade after US data in the form of GDP and Chicago PMIs came out on the strong side. Aussie has however done a good job finding demand into dips, with these players looking for higher commodities prices and the start to a bigger broad based US Dollar decline. Earlier today, Aussie took in manufacturing PMIs and new home sales, but any fallout from this data isn’t expected to dictate meaningful flow, with the Australian Dollar far more sensitive to updates on US-China trade and the US equity market. Looking ahead, the Yen will be looking out for any new risks in global markets, while also taking in a batch of US data that includes core PCE, ISM manufacturing and Michigan sentiment. We also get a Fed Bostic appearance late in the day.

USDCAD – technical overview

A period of consolidation has kicked in after a run at the end of 2018 to its highest levels since May 2017. Overall, the structure remains constructive, with dips expected to be well supported ahead of a medium-term higher low from September 2018 around 1.2780.

• R2 1.3341– 14Feb high – Strong
• R1 1.3243 – 22Feb high – Medium
• S1 1.3100 – Figure – Medium
• S2 1.3069 â€“ 1Feb/2019 low â€“ Strong

USDCAD – fundamental overview

The Canadian Dollar took a hit earlier this week on President Trump comments calling for lower oil, but has since stabilised as the market is distracted with other big picture themes including global trade and broader risk sentiment. Economic data hasn’t proven to be much of a driver of late, though Friday’s calendar is sure to shake things up a bit with so many releases out. Key standouts come in the form of Canada GDP, Canada manufacturing PMIs, US core PCE, US ISM manufacturing and Michigan sentiment. We also get a Fed Bostic appearance late in the day.

NZDUSD – technical overview

While the bigger picture outlook still shows the market in a downtrend, as per the weekly chart, there’s a case to be made for a meaningful low in place at 0.6425. As such, look for setbacks to be well supported ahead of 0.6500 in anticipation of additional upside, with only a break back below 0.6500 to put the focus back on the multi-month low from October at 0.6425. A push through 0.6970 will strengthen the constructive outlook.

• R2 0.6942 â€“ 1Feb/2019 high – Strong
• R1 0.6903–  25Feb high – Medium
• S1 0.6758 – 22Feb low â€“ Medium
• S2 0.6720 â€“ 12Feb low – Strong

NZDUSD – fundamental overview

A run in the New Zealand Dollar stalled out this week after sentiment around the outlook for a US-China trade deal deteriorated. This was followed up with more downside pressure from a healthy batch of US readings in the form of GDP and Chicago PMIs. Looking ahead, the Yen will be looking out for any new risks in global markets, while also taking in a batch of US data that includes core PCE, ISM manufacturing and Michigan sentiment. We also get a Fed Bostic appearance late in the day.

US SPX 500 – technical overview

There have been legitimate signs of a major longer term top, with deeper setbacks projected in the months ahead. Any rallies should now continue to be very well capped ahead of 2800, in favour of renewed weakness that targets an eventual retest of strong longer-term resistance turned support in the form of the 2015 high at 2140. The projection is based off a measured move extension derived from the previous 2018 low from February to the record high move.

• R2 2824 – 17Oct high â€“ Strong
• R1 2815 – 25Feb/2019 high – Medium
• S1 2764 – 21Feb low – Medium
• S2 2730 – 15Feb low – Strong

US SPX 500 – fundamental overview

Investor immunity to downside risk is not as strong into 2019. The lag effect of Fed policy normalisation, US protectionism, ongoing White House drama and geopolitical tension are all warning of deeper setbacks ahead. The Fed has also finally acknowledged inflation no longer running below target, something that could very well result in even less attractive equity market valuations this year, given the implication on rates. Although we have seen attempts to push the market higher in early 2019, on the Fed’s more cautious outlook, exhausted monetary policy tools post 2008 crisis suggest the prospect for fresh record highs at this point in the cycle are not a realistic prospect. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that will continue to stress the market in 2019.

GOLD (SPOT) – technical overview

There are signs that we could be seeing the formation of a more significant medium to longer-term structural shift that would be confirmed if this latest recovery can extend back through big resistance in the form of the 2016 high at 1375. Look for setbacks to be well supported, with only a close back below 1250 to compromise the constructive outlook. The latest push through 1300 strengthens the outlook.

• R2 1375– 2016 high – Very Strong
• R1 1347 – 20Feb high – Medium
• S1 1302 â€“ 14Feb low â€“ Medium
• S2 1277 â€“ 4Jan/2019 low â€“ Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and trade war threats. All of this should 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.

BTCUSD – technical overview

At this stage, any upside moves are classified as corrective ahead of what could be the next downside extension and bearish continuation. It would take a break back above previous support in the 6,000 area to take the pressure off the downside. Next critical support comes in the form of the July and September 2017 lows, around 2,000 and 2,975 respectively.

• R2 4,480 â€“ 29Nov high – Strong
• R1 4,380 â€“ 24Dec high – Strong
• S1 3,400– Round number –Medium
• S2 3,212 â€“ 15Dec/2018 low  â€“ Strong

BTCUSD – fundamental overview

Bitcoin has just gone through a tough 2018, with the cryptocurrency suffering on a number of fronts. Still, overall, the cryptocurrency and the technology it rests on continue to show a lot of potential looking out and we expect the market will regain composure over the medium to longer term.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

The latest recovery rally has stalled out into a meaningful previous support zone, to keep the pressure on the downside, with risk for a bearish continuation to next critical support in the 50-75 area. At this point, it would take a sustained break back above 170 to take the immediate pressure off the downside.

• R2 200 â€“ Psychological – Medium
• R1 170 – 24Feb high – Strong
• S1 100 â€“ Psychological – Medium
• S2 83 â€“ 7Dec/2018 low  â€“ Strong

ETHUSD – fundamental overview

We’re coming off a year of dramatic weakness in 2018 and the cryptocurrency continues to face headwinds into 2019. Ongoing regulatory challenges and a global economic downturn are some of those headwinds that need to be considered in the weeks and months ahead. At the same time, longer term prospects are looking quite bright and valuations are increasingly attractive with adoption showing signs of ramping up again. There was a good wave of optimism out of the ETHDenver conference the other week that has also been sourced as a contributor to recent outperformance.