US Dollar Rallies with Reluctance

Special report: Is the Buck on the verge of another big run?

Next 24 hours: Dollar at Yearly Highs, Stocks Under Pressure

Today’s report: US Dollar Rallies with Reluctance

The market continues to buy US Dollars, though the move has been less than convincing to this point, with the Buck unable to really gain much momentum despite the rally. It seems many out there are keeping an eye on the Euro, which to this point, is still holding up above the yearly low.

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Wake-up call

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month low in April. But with the downtrend looking exhausted, the prospect for a meaningful higher low is more compelling, with a higher low sought out above the multi-year low from 2017, ahead of the next major upside extension. Only a weekly close back below the psychological barrier at 1.1000 would compromise this outlook. Back above 1.1450 will strengthen the view.

  • R2 1.1324 – 12 April high – Strong
  • R1 1.1264 - 13 May high – Medium
  • S1 1.1130 - 23 May low – Medium
  • S2 1.1111 – 26 April/2019 low – Medium

EURUSD – fundamental overview

The Euro has extended declines back towards the yearly low from April, though volatility remains exceptionally subdued and there has been no real catalyst accounting for the latest round of setbacks. European elections will get some attention, though the market will be taking in a healthy batch of data today. Today's calendar features, German GDP, German and Eurozone manufacturing PMIs, German IFO, the ECB Minutes, US initial jobless claims, US manufacturing PMIs, US new home sales and some Fed speak.

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 1.2500. Look for a weekly close back above 1.3400 to strengthen the outlook.

  • R2 1.2814 – 21 May high – Strong
  • R1 1.2720– 22 May high – Medium
  • S1 1.2605 – 23 May low – Medium
  • S2 1.2500 – Psychological  – Strong

GBPUSD – fundamental overview

Theresa May's last attempt to push through a deal is looking like it will be her last, as reports break of am imminent resignation. All of this has Brexit uncertainty back on the rise and the Pound under renewed pressure. Economic data out of the UK has also been less GBP supportive, highlighted by recent softness in earnings and this latest below forecast CPI. Looking at today's calendar, absence of first tier UK data will leave the focus on all things Theresa May and Brexit. We also get data out of the US that features, initial jobless claims, manufacturing PMIs and new home sales.

USDJPY – technical overview

Another topside failure has led to a sharp pullback, with the market unable to establish above a formidable resistance zone in the 112s. Last week's drop below 109.70 strengthens the bearish case, exposing the next major downside extension towards a retest of the January flash crash low in the 104s. Any rallies should now be well capped below 112.00, with only a break back above the yearly high at 112.40 to delay the bearish outlook.

  • R2 111.70 – 3 May high – Strong
  • R1 110.68 – 21 May high – Medium
  • S1 109.81 – 20 May low – Medium
  • S2 109.02 – 13 May low – Strong

USDJPY – fundamental overview

Most of the movement in the major pair is being directed by investor appetite, with the Yen still tracking with traditional correlations. We haven't seen much going on in US equities this week, which helps to reconcile the consolidation we're seeing in USDJPY. Japan manufacturing PMIs slipped, but haven't factored into price action. BOJ Amamiya was on the wires reiterating the need to continue with a persistent easing. Looking ahead, we get a US docket that features initial jobless claims, manufacturing PMIs, new home sales and Fed speak.

EURCHF – technical overview

The market continues to do a good job adhering to a medium-term range, with rallies well capped towards 1.1500 and dips well supported into the 1.1200 area. At this stage, there is no clear trend, and it will take a sustained break back above 1.1500 or below 1.1200 for directional insight.
  • R2 1.1477 – 23 April/2019  high – Strong
  • R1 1.1330 – 14 May high – Medium
  • S1 1.1210 – 10 January low – Medium
  • S2 1.1200 – Psychological – 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. In the interim, look for setbacks to continue to be well supported ahead of 0.6800.

  • R2 0.6960 – 14 May high – Strong
  • R1 0.6933 – 16 May high – Medium
  • S1 0.6865 – 17 May low – Medium
  • S2 0.6800 – Figure – Strong

AUDUSD – fundamental overview

The Australian Dollar hasn't been able to do anything with an upbeat PMI print, instead weighed down towards the yearly low from January. The weakness comes on the back of a more dovish leaning RBA, willing to consider a rate cut in June, and on the back of ongoing broad based demand for the US Dollar from flight to safety flow. Looking at the calendar for the remainder of the day, we get a US docket that features initial jobless claims, manufacturing PMIs, new home sales and Fed speak.

USDCAD – technical overview

Despite breaking to a fresh yearly high in recent days, overall, the market has entered a period of choppy consolidation in 2019. However, the longer-term 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 1.3522 – 24 April/2019 high – Strong
  • R1 1.3500 - Psychological – Medium
  • S1 1.3377 – 1 May low – Medium
  • S2 1.3336 – 18 April low – Strong

USDCAD – fundamental overview

The Canadian Dollar has fared better than its commodity currency cousins, getting a relative boost from last week's news the US would be removing steel and aluminum tariffs and continued upbeat talk from Bank of Canada Governor Poloz. However, broad based US Dollar demand and another pullback in the price of OIL can not be ignored, which is keeping USDCAD at elevated levels, just under its recent yearly high. Looking ahead, absence of first tier data out of Canada will leave the focus on a US docket that features initial jobless claims, manufacturing PMIs, new home sales and Fed speak.

NZDUSD – technical overview

Despite recent weakness, there's a case to be made for a meaningful low in place at 0.6425 (2018 low). As such, look for setbacks to be well supported above the latter, in anticipation of renewed upside, with only a close below to compromise the outlook. At the same time, a push back above 0.6700 will be required to take pressure off the downside.

  • R2 0.6694 – 19 April high – Strong
  • R1 0.6631 –  7 May high – Medium
  • S1 0.6485 – Today/2019 low – Medium
  • S2 0.6465 – 26 October low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has suffered its way down to yearly lows on the back of softer local data, a recent RBNZ rate cut, and downturn in global sentiment. Tuesday's GDT auction disappointment has been followed up with news of a downward revision to Fonterra's milk price forecasts. Looking at the calendar for the remainder of the day, we get a US docket that features initial jobless claims, manufacturing PMIs, new home sales and Fed speak.

US SPX 500 – technical overview

There have been signs of a major longer term top, after an exceptional run over the past decade. Any rallies from here, are expected to be very well capped, in favour of renewed weakness targeting an eventual retest of strong longer-term previous resistance turned support in the form of the 2015 high at 2140. The initial level of major support comes in around 2786, with a break below to strengthen the outlook. A sustained move above 3000 would be required to delay the outlook.

  • R2 2961 – 1 May/Record high – Very Strong
  • R1 2892 – 16 May high – Medium
  • S1 2798 – 14 May low – Medium
  • S2 2786 – 25 March low – Strong

US SPX 500 – fundamental overview

Although we've seen the market extend to another record high in recent days, mostly on the back of the Fed's dovish shift in 2019, exhausted monetary policy tools post 2008 crisis suggest the prospect for a meaningful extension of this record run at this point in the cycle is not realistic. Meanwhile, ramped up tension on the global trade front, should continue to be a drag on investor sentiment. 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 a recovery out from sub-1200 levels can extend back through big resistance in the form of the 2016 high at 1375. In the interim, look for setbacks to be well supported, with only a close back below 1250 to compromise the constructive outlook.

  • R2 1325 – 25 March high – Strong
  • R1 1311 – 10 APril high – Medium
  • S1 1266 – 23 April/2019 low – Medium
  • S2 1233 – 14 December 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

The market has enjoyed a nice run since breaking out above a consolidation between Q4 2018 and Q1 2019. But the rally has now resulted in extended technical readings after overshooting a previous support zone in the 6k area. As such, look for additional upside to be limited, to allow for these technical readings to unwind from stretched readings. Setbacks should ideally be supported ahead of 5,000, in favour of the next push through the July 2018 high at 8,500.

  • R2 8,491 – July 2018 high – Strong
  • R1 8,329 – 16 May/2019 high – Medium
  • S1 7,000 – 17 May low – Medium
  • S2 5,669 – 24 April high – Strong

BTCUSD – fundamental overview

Bitcoin has enjoyed a stellar rally over the past few weeks, with demand increasing along the way. This month's resiliency in the face of the hack at a major exchange has given the crypto asset a huge credibility boost, while reports of mainstream adoption haven't hurt the cause either. Household names like Starbucks, Microsoft, TD Ameritrade and Whole Foods are all making moves in the space, while governments have been more receptive to working with the crypto asset.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The recovery has recently accelerated to a fresh 2019 high, surging through medium-term resistance at 255. The upside break suggests the market is now looking to establish a meaningful base, in favour of continued upside in the weeks and months ahead. Still, shorter-term, the run is looking stretched and a period of consolidation is expected, to allow for extended readings to unwind.

  • R2 300 – Psychological – Strong
  • R1 279 – 16 May/2019 high – Medium
  • S1 227 – 17 May low – Medium
  • S2 200 – Psychological  – Strong

ETHUSD – fundamental overview

There has been a lot more buzz around adoption as the price of Bitcoin surges, with many mainstream names coming out in support of blockchain integration. Demand for web 3.0 applications is on the rise, and the blockchain with the biggest front end application potential is Ethereum. We've started to see some catch up as well, with ETH finding relative strength off cycle lows versus its older cousin.  At the same time, worry associated with fallout in the global economy, is worry that should weigh more heavily on risk correlated crypto assets like ETH. And considering the possibility an overextended Bitcoin runs into profit taking, there is risk we soon see a healthy adjustment back to the downside.

Peformance chart: This week's performance v. US dollar

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