Pins and Needles

GBPUSD – technical overview

The market has seen a recovery out from the lowest levels since 2016, with the price now pushing back above the weekly Ichimoku cloud to signal a bullish structural shift. Ultimately, only back below the 1.2500 handle would compromise the newly established constructive medium and longer-term outlook. Next key resistance comes in the form of the monthly high from September 2017 at 1.3658, with setbacks expected to be well supported ahead of 1.2800.

• R2 1.3210 – 31 January high – Strong
• R1 1.3070 – 13 February high – Medium
• S1 1.2849 – 20 February/2020 low – Medium
• S2 1.2872 – 10 February low – Strong

GBPUSD – fundamental overview

The UK government confirmed it will move ahead with an election pledge to discard a cut in the corporate tax rate to 17% in the upcoming budget, but said some of its 'biggest decisions on tax and spending' will be delayed until the fall due to the coronavirus outbreak. The BoE said it will 'apply tougher haircuts on Libor-linked collateral' in its operations from October. Looking ahead, we get central bank speak from various BOE and Fed officials, and US releases in the form of durable goods, GDP, initial jobless claims and pending home sales.

USDJPY – technical overview

The major pair has seen a contraction in range over the past several years. We're getting closer to the market breaking out of the range one way or the other, but until then, look for rallies to be well capped above 112.00 and below 105.00. A monthly close above the 2019 high at 112.40 would change the picture and suggest the major pair was seeing a bullish breakout.

• R2 112.23 – 20 February/2020 High – Strong
• R1 111.04 – 25 February high – Medium
• S1 109.89 – 25 February low – Medium
• S2 109.30 – 5 February low  – Strong

USDJPY – fundamental overview

The Yen has come back into favour this week after taking a beating in the previous week. The currency has ultimately been unable to ignore traditional correlations with risk off, as fear of the coronavirus spread intensifies. Overall, if the downside pressure on US equities persists, we suspect the Yen demand will become even more pronounced, despite concerns about the Japanese economy and potential recession. Looking ahead we get central bank speak from Fed Evans, and US releases in the form of durable goods, GDP, initial jobless claims and pending home sales.

EURCHF – technical overview

The market remains very well capped into offers and the medium-term picture continues to favour the downside. A break back above 1.1060 would be required to take the immediate pressure off the downside. Technicals are however looking extended and the market should be well supported ahead of 1.0500.

• R2 1.0906 – 27 December high – Strong
• R1 1.0834 – 13 January high – Medium
• S1 1.0590 – 24 February/2020 low – Medium
• S2 1.0500 – 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, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, 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 under pressure over the past several months, but has also been well supported on dips. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7100 to strengthen this outlook. In the interim, look for setbacks to continue to be well supported above 0.6500 on a monthly close basis.

• R2 0.6700 – Figure – Medium
• R1 0.6623 – 25 February high – Medium
• S1 0.6542 – 27 February/Multi-Year low – Strong
• S2 0.6500 – Psychological – Strong

AUDUSD – fundamental overview

The plunge in US equities has not been kind to the risk correlated Australian Dollar, with the currency trading back down to multi-year lows. Also seen hurting Aussie this week has been economic data, with Wednesday's soft construction work done, followed up by a discouraging capex read. Looking ahead we get central bank speak from Fed Evans, and US releases in the form of durable goods, GDP, initial jobless claims and pending home sales.

USDCAD – technical overview

The market has been confined to a choppy consolidation, with no clear directional insight. At this stage, it will take a clear break back above the 2018 high at 1.3662, or below the 2019 low at 1.2952 for an indication of trend. Until then, look to play the range.

• R2 1.3400 – Figure – Medium
• R1 1.3348 - 3 October high – Strong
• S1 1.3267 – 25 February low – Medium
• S2 1.3202 – 21 February low – Strong

USDCAD – fundamental overview

The price of OIL remains under pressure, which has kept the Loonie well offered. We have however seen some positives for the Canadian Dollar, with economic data coming in more supportive of late. Earlier this week, Canada wholesale sales beat estimates and also saw an upward revision to the previous print. This follows last week's hotter Canada inflation reads. Looking ahead, we get central bank speak from Fed Evans, the Canada current account, and US releases in the form of durable goods, GDP, initial jobless claims and pending home sales.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom, with the market rallying out from longer-term cycle low area around 0.6200. As such, look for setbacks to be well supported in the days ahead, in anticipation of a continued recovery. Only a weekly close below 0.6200 would give reason for rethink. Back above 0.6800 strengthens the outlook and takes the medium to longer-term pressure off the downside.

• R2 0.6488 – 12 February high – Strong
• R1 0.6400 –  Figure – Medium
• S1 0.6284 – 27 February/2020 low – Medium
• S2 0.6269 – 3 September low – Strong

NZDUSD – fundamental overview

Kiwi remains weighed down into Thursday, unable to ignore the massive liquidation in US equities on the back of fear associated with the coronavirus. Making matters worse has been the release of a softer New Zealand business confidence reading. Looking ahead we get central bank speak from Fed Evans, and US releases in the form of durable goods, GDP, initial jobless claims and pending home sales.

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 a major correction targeting an eventual test of the 2018 low at 2339. The initial level of major support comes in at 3000, with a break below to strengthen the outlook.

• R2 3300 – Round number – Strong
• R1 3215 – 31 January/Previous support – Medium
• S1 3060 – 27 February low – Medium
• S2 3000 – Psychological – Strong

US SPX 500 – fundamental overview

Although we've seen the market extending to fresh record highs in 2020, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for a meaningful extension of this record run, on easy money policy incentives, should no longer be as enticing to investors as it once was. Meanwhile, tension on the global trade front, geopolitical risk, and worry associated with coronavirus fallout, should weigh more heavily on investor sentiment into 2020. 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

The 2019 breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1700 (measured move extension target), while in the interim, look for any setbacks to be well supported above 1500.

• R2 1700 – Measured move target – Strong
• R1 1690 – 24 February/2020 high – Medium
• S1 1547 – 5 February low – Strong
• S2 1500– Psychological – 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

Setbacks should be very well supported in the 6,000 area, with a higher low sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 5,750 would compromise the constructive outlook. Back above 10,500 further encourages the bullish prospect.

• R2 11,000– Psychological – Medium
• R1 10,477 – 13 February/2020 high – Strong
• S1 8,545 – 27 February low– Medium
• S2 8,235 – 24 January low – Strong

BTCUSD – fundamental overview

Bitcoin demand is expected to pick up in 2020, with market forces to likely make a stronger argument for the emerging cryptocurrency. In a world where rates are at historic lows and the equity market looks to be inching closer to major capitulation, the idea of owning a decentralised, limited supply currency, becomes increasingly attractive as a store of value. Moreover, there is plenty of development going on in the decentralised technology space, which should only add to the draw.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market is in the process of turning back up after stalling out in the latter half of 2019. Look for setbacks to be well supported above of previous resistance turned support at 180 on a weekly close basis, in favour of the next major higher low and bullish resumption back towards and through the 2019 high up at 363. Ultimately, only a weekly close below 180 would compromise the outlook.

• R2 300 – Psychological – Strong
• R1 287 – 15 February high – Medium
• S1 210 – 27 February low – Medium
• S2 155 – 24 January low  – Strong

ETHUSD – fundamental overview

There is plenty of Ether demand built up, with so much optimism around prospects for the blockchain given all of the development going on in the decentralised finance space. At the same time, macroeconomics will likely play a negative role in 2020, at least relative to the price of Bitcoin, with Eth expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.