Stimulus-sentiment correlation breaking down

GBPUSD – technical overview

The market looks to be in the process of trying to bottom out from the lowest levels since 2016, with setbacks expected to be well supported down towards the 1.2000 psychological barrier. Ultimately, only a monthly close back below 1.2000 handle would compromise the constructive outlook.

• R2 1.2422 – 16 March high – Strong
• R1 1.2274 – 17 March high – Medium
• S1 1.2001 – 17 March/2020 low – Medium
• S2 1.1900 – Figure – Strong

GBPUSD – fundamental overview

The Pound is doing its best to recover out from critical lows, with the currency getting a boost from news of a GBP 350 billion stimulus package of loans, grants, tax cuts to businesses, including support for airlines, shops and hospitality. The BOE has also responded with additional efforts, saying it will buy commercial paper of up to 1-year maturity to support firms and relieve cash flow pressures. Wednesday’s calendar features US housing starts and building permits.

USDJPY – technical overview

We're seeing a pickup in volatility in the major pair, with the market breaking out of a multi-year triangle. The break to the downside suggests we could now see deeper setbacks, eventually below 100.00, towards initial meaningful support in the form of the 2016 low at 98.97. It would take a clear break back above 110.00 to take the immediate pressure off the downside.

• R2 110.00 – Psychological – Strong
• R1 108.51 – 13 March high – Medium
• S1 105.72 – 16 March high – Medium
• S2 104.51 – 13 March low  – Strong

USDJPY – fundamental overview

The major pair was boosted on the news of the latest stimulus efforts out of the US, but hasn't been able to sustain gains, with investors still selling risk assets, despite the additional liquidity injection. Secretary Mnuchin comments about US unemployment rising towards 20% and economic fallout being worse than the GFC in 2008, haven't done anything to help sentiment either. The BOJ has been doing what it can to prop up markets, but efforts are a struggle there as well, as far as it translates into propping sentiment. Wednesday’s calendar features US housing starts and building permits.

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 1.0710 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 1.0834 – 13 January high – Medium
• R1 1.0710 – 3 March high – Strong
• S1 1.0542 – 9 March/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

Aussie has recently extended declines to its lowest levels against the Buck since 2003. At the same time, technical studies are looking stretched and any additional setbacks below 0.6000 should be a difficult task, at least over the coming months. Back above the December 2019 high at 0.7032 would be required to take the immediate pressure off the downside.

• R2 0.6540 – 11 March high – Strong
• R1 0.6326 – 13 March high – Medium
• S1 0.5960 – 16 March/2020 low – Medium
• S2 0.5900  Figure – Strong

AUDUSD – fundamental overview

The Australian Dollar is trying to recover out from its lowest levels since 2003, as it continues to feel the pressure of the downturn in global sentiment from coronavirus fallout. The RBA has injected more liquidity into the market through its daily operations, in an attempt to stabilise conditions. Westpac now sees unemployment rising towards 7% as the economy slows from the virus fallout. Meetings are also underway to discuss a second stimulus package. Wednesday’s calendar features US housing starts and building permits.

USDCAD – technical overview

The market has continued to be well supported on dips, extending its run to fresh multi-month highs. The recent push back above the 2017 high now exposes the next upside extension towards a retest of massive resistance in the form of the 2016 high at 1.4690. Look for setbacks to be well supported ahead of 1.3500.

• R2 1.4300 – Figure – Strong
• R1 1.4277 - 17 March/2020 high – Medium
• S1 1.4000 – Psychological – Medium
• S2 1.3728 – 16 March low – Strong

USDCAD – fundamental overview

Canada has upgraded its stimulus offering in a big way, with the government expected to unveil a C$30 billion package, while the Bank of Canada said it will buy up to C$10b of bankers acceptances. The Canadian Dollar has been trying to recover from its lowest levels against the Buck since 2016, but continues to struggle mightily with the downturn in global sentiment and massive hit to the price of OIL. Wednesday’s calendar features Canada CPI, US housing starts and building permits.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom ahead, with the market looking quite extended as it dips below major psychological support at 0.6000. As such, look for setbacks to be well supported in the days ahead, in anticipation of another rebound. Only a weekly close below 0.6000 would give reason for rethink. Back above 0.6500 would now be required to take the immediate pressure off the downside.

• R2 0.6400 – Figure – Medium
• R1 0.6276 –  12 March high – Strong
• S1 0.5915 – 17 March/2020 low – Strong
• S2 0.5900 – Figure – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been trying to find some comfort on the news of Tuesday's Kiwi bazooka stimulus package, but is having a hard time thus far, sinking to its lowest levels since 2009. In response to the latest monetary policy efforts, RBNZ Orr said the central bank would rather overdo monetary stimulus than fall short. Wednesday’s calendar features US housing starts and building permits.

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 deeper setbacks targeting an eventual test of the 2018 low at 2315. Rallies should now be well capped ahead of 3000.

• R2 3000 – Psychological – Strong
• R1 2774 – 12 March high – Medium
• S1 2384 – 16 March/2020 low – Strong
• S2 2315 – 2018 low – Strong

US SPX 500 – fundamental overview

Although we've seen the market extend 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 additional runs to the topside, 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 in 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 1800 (measured move extension target), while in the interim, look for any setbacks to be well supported above 1500.

• R2 1800 – Measured move target – Strong
• R1 1703 – 9 March/2020 high – Strong
• S1 1485– 16 March/2020 low – Strong
• S2 1400 – 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, coronavirus fallout, 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 ahead of the 2018 low, 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 5,000 would compromise the constructive outlook. Back above 10,500 further encourages the bullish prospect.

• R2 10,477– 9 February/2020 high – Strong
• R1 6,470 – Previous Support – Strong
• S1 3,995 – 13 March/2020 low– Strong
• S2 3,215 – 2018 low – Strong

BTCUSD – fundamental overview

Bitcoin is finally feeling the impact of global macro pressures, with the new currency falling victim to broad based risk liquidation. However, despite the recent slide, there continues to be good demand from players looking out to the medium and longer term, who see Bitcoin as a safe haven, store of value asset.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above the 2018 low, in favour of another big bounce, eventually back towards and through the 2019 high up at 363.

• R2 253 – 7 March high – Strong
• R1 200 – Psychological – Medium
• S1 90 – 13 March/2020 low – Strong
• S2 83 – 2018 Low  – Strong

ETHUSD – fundamental overview

While 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, macroeconomics will likely play a negative role in 2020, with Ether expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.