Trade talks and US Dollar policy

Next 24 hours: Plenty of caution, but interesting nonetheless

Today’s report: Trade talks and US Dollar policy

We haven’t seen much going on in the early week. What little price action we've seen, has been pointing to US Dollar weakness and mild selling in the global equities space. We’re currently waiting for more clarity on US-China trade talks and Brexit, though the Pound has caught some renewed bids after an amended Cooper-Letwin bill passed into law.

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Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has been confined to choppy trading conditions over the past several weeks. We are however coming off an intense round of setbacks since topping out at a +3 year high in 2018, with the drop taking the price back into an area that coincides with the 61.8% fib retrace off the 2017-2018 move, and a bullish breakout zone from 2017. This suggests additional setbacks could continue to be very well supported, with the greater risk from here, for the formation of a meaningful higher low, ahead of a push back to the topside. At this point, we will need to see setbacks holding up above 1.1100 on a weekly close basis, and a break back above the current 2019 high around 1.1570 to encourage this prospect.

  • R2 1.1449 – 20 March high – Strong
  • R1 1.1332- 25 March low – Medium
  • S1 1.1200 - Figure – Medium
  • S2 1.1176 – 7 March/2019 low – Strong

EURUSD – fundamental overview

The single currency has managed to do a relatively good job holding up into dips, despite an overall softer batch of data out of the Zone of late. Dealers continue to report demand from medium and longer-term accounts, with these players considering a bigger accommodative adjustment at the Fed and US trade policy intent on weakening the Buck. Last Friday's US jobs report has inspired more Euro demand, after the hourly earnings component in the data came in subdued. Looking ahead, Tuesday's calendar is exceptionally thin, with only US JOLTS job openings standing out.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The major pair has put in an impressive recovery off the multi-month low in early January, helping to support the case for a longer-term developing uptrend off the 2016 low. Pullbacks are now viewed as corrective on the daily chart, with dips expected to be supported ahead of 1.2700. Look for a weekly close back above 1.3400 to strengthen the outlook.

  • R2 1.3270– 27 March high – Strong
  • R1 1.3197 – 3 April high – Medium
  • S1 1.3000 – Psychological – Medium
  • S2 1.2978 – 29 March low  – Strong

GBPUSD – fundamental overview

The Pound has performed well in 2019 as intense downside risk associated with a disorderly Brexit has been priced out, and now, all but eliminated, after the amended Cooper-Letwin bill went through. The government is back to debating next steps, while Theresa May is expected to request an extension from the EU through June. There have been hopes of a May-Corbyn compromise, though given the distance apart and bad blood, it would be hard to see substantive progress on this front. Looking ahead, the market will continue to monitor Brexit headlines, while taking in US JOLTS job openings later in the day.

USDJPY – technical overview

The major pair has run into resistance in the 112 area, after an impressive run off the 2019 flash crash low. Look for this area to continue to cap rallies, setting the stage for the next major downside extension back towards that 2019 flash crash low, down in the 104.00s. Ultimately, only a daily close back above 112.15 delays the bearish outlook.

  • R2 112.14 – 5 March high – Strong
  • R1 111.83– 5 April high – Medium
  • S1 110.81 – 1 April low – Medium
  • S2 109.71 – 25 March low – Strong

USDJPY – fundamental overview

Overall, the major pair should continue to place a bigger focus on global risk sentiment and US Dollar yield differentials. Updates on the US trade policy front are expected to have a major influence on direction as a consequence. US-Japan trade talks will kick off later this month, scheduled April 15-18. There has been some demand for Yen in the aftermath of the softer hourly earnings component in the US jobs report this past Friday, which has forced yield differentials back in the Yen's favour. Looking ahead, Tuesday's calendar is exceptionally thin, with only US JOLTS job openings standing out.

EURCHF – technical overview

The market has broken down below an important consolidation base, opening the door for the possibility of the start to an intensified wave of bearish momentum back down towards the 1.0600 area. At this stage, it will be important to see how the market responds to trading below 1.1200, with any quick recovery above to put the market back into this medium-term consolidation.
  • R2 1.1394 – 27 February high – Strong
  • R1 1.1299 – 22 March high – Medium
  • S1 1.1163 – 29 March/2019 low – Strong
  • S2 1.1130– May 2016 high – 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 continue to be well supported ahead of 0.7000.

  • R2 0.7207 – 21 February high – Strong
  • R1 0.7169 – 21 March high – Medium
  • S1 0.7053 – 2 April low – Medium
  • S2 0.7004 – 8 March low – Strong

AUDUSD – fundamental overview

Aussie has done a good job recuperating from setbacks in the previous week that came after the RBA shifted its stance to a more neutral outlook. Unlike the RBNZ, the RBA stopped short of calling for that next move to be a rate cut and was actually more balanced in its outlook than anything else. Positive US-China trade talk updates and bid equities have also helped to support Aussie, while broad based USD selling in the aftermath of last week's subdued US hourly earnings component has further contributed to Aussie demand on dips. It's worth noting, PM Morrison is expected to wait another week before calling for a federal election (May 18 election date speculation). Looking ahead, Tuesday's calendar is exceptionally thin, with only US JOLTS job openings standing out.

USDCAD – technical overview

Overall, the structure remains constructive, with dips expected to be well supported for fresh upside back above the 2018/multi-month high at 1.3665. Back below the psychological barrier at 1.3000 would be required to delay the outlook.

  • R2 1.3468 – 7 March/2019 high – Strong
  • R1 1.3404 - 5 April high – Medium
  • S1 1.3296 – 3 April low – Medium
  • S2 1.3251 – 19 March low – Strong

USDCAD – fundamental overview

The Canadian Dollar has seen a good amount of two way flow over the past several days. On the one side, it has benefitted from rallying OIL, solid Canada growth data, and the dovish shift in Fed policy. At the same time, the Loonie has been held up on ongoing uncertainty relating to US trade policy, and some softer economic economic data components, including last Friday's unimpressive Canada jobs report and Monday's Canada housing starts and building permits. Looking ahead, Tuesday's calendar is exceptionally thin, with only US JOLTS job openings standing out.

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 0.7000 will strengthen the constructive outlook.

  • R2 0.6942 – 1 February/2019 high – Strong
  • R1 0.6838 –  1 April high – Medium
  • S1 0.6719 – 5 April low – Medium
  • S2 0.6700 – Figure – Strong

NZDUSD – fundamental overview

A bout of relative underperformance in the New Zealand Dollar has kicked in, in recent days, with the commodity currency hit on a dovish RBNZ policy shift and subsequent round of softer than expected Kiwi data. Still, the New Zealand Dollar is trying to hold up in the face of all of this, with the currency broadly supported in 2019 on rallying global equities and the dovish shift in Fed policy, which was further backed up this past Friday after US hourly earnings came in subdued. Looking ahead, Tuesday's calendar is exceptionally thin, with only US JOLTS job openings standing out.

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, 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. Next key support comes in at 2722, with a break to strengthen the outlook.

  • R2 2900 – Psychological – Strong
  • R1 2896 – 8 April/2019 high – Strong
  • S1 2765 – 21 February low – Medium
  • S2 2722 – 8 February low – Strong

US SPX 500 – fundamental overview

Although we've seen attempts to push the market higher in 2019, with the Fed's more cautious outlook keeping the market propped up, exhausted monetary policy tools post 2008 crisis suggest the prospect for fresh record highs at this point in the cycle are not realistic. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that could be a major stress to the financial markets looking out.

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.

  • R2 1347– 20 February/2019 high – Strong
  • R1 1321 – 21 March high – Medium
  • S1 1281 – 4 April low – Medium
  • S2 1277 – 4 January/2019 low – 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

A major breakout in the price of Bitcoin this week, with the price clearing the top of a range that had contained the market since November 2018. The break takes the immediate pressure off the downside and opens the door for a continuation of gains back into a critical previous support turned resistance zone in the $6,000 area. Look for setbacks to now be well supported ahead of $3,500.

  • R2 5,740 – 18 November high – Strong
  • R1 5,365 – 8 April/2019 high – Medium
  • S1 4,820 – 3 April low – Medium
  • S2 4,280 – Previous range high  – Strong

BTCUSD – fundamental overview

Bitcoin has rocketed higher, to clear some major levels, breaking back above a consolidation high from back in December, to suggest it could be thinking about turning back up again in a more meaningful way. At a time when central banks have exhausted themselves with the unprecedented printing of money to keep sentiment running high and the global economy afloat, over a decade after the crisis of 2008, it would seem, a peer to peer decentralized currency, with limited supply, and an attractive technology that it rests on, could be a compelling alternative option.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The latest break back above $170 takes the immediate pressure off the downside and opens the door for the possibility of a bullish break over the coming sessions. Look for a weekly close above $170 to strengthen the outlook, encouraging a run up towards next major resistance at $255. Setbacks are expected to be well supported ahead of $125.

  • R2 200 – Psychological – Strong
  • R1 188 – 8 April/2019 high – Medium
  • S1 155 – 4 April low – Strong
  • S2 126 – 4 March low  – Strong

ETHUSD – fundamental overview

Ongoing regulatory challenges and technological obstacles are some of those headwinds that are being fleshed out into 2019. Meanwhile, fear of broad based risk liquidation in global financial markets now that the monetary policy accommodation well has dried up, is yet another worry for the more risk correlated Ether. At the same time, longer term prospects are looking quite bright and valuations are increasingly attractive with adoption showing signs of ramping up over the longer term.

Peformance chart: 5-Day Performance v. US dollar

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