Next 24 hours: US Dollar getting slammed
Today’s report: Geopolitical tension resurfaces
Geopolitical tension is back in the headlines as the new weeks gets going. This includes US-China and US-Russia tension, though one wouldn’t really know it from US equity futures which continue to post record highs at an unrelenting pace.
Wake-up call
- construction output
- equity inflows
- Yen demand
- SNB policy
- recent data
- Struggling Loonie
- macro themes
- Stocks vulnerable
- Dealers report
- Bigger money
- risk appetite
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Oil Markets Are a Long Way From Back to Normal, J. Lee, Bloomberg (April 18, 2021)
- The Digital Revolution Is Eating Its Young, M. Esposito, Project Syndicate (April 14, 2021)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, this next higher low is sought out ahead of 1.1600 in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up.EURUSD – fundamental overview
The Euro comes into the new week with a bid tone, mostly on the back of broad based US Dollar weakness from rallying equities prices. Still, there are plenty of sellers up into the 1.2000 area, with rising US yields playing a role. Monday’s economic calendar is rather light, with only Eurozone construction output and the Eurozone current account standing out.EURUSD - Technical charts in detail
GBPUSD – technical overview
Technical studies are in the process of unwinding from stretched levels after the push to fresh multi-month highs. This leaves room for additional consolidation, before the market considers a meaningful bullish continuation towards a retest of the 2018 high. But look for setbacks to now be very well supported into the 1.3500 area.GBPUSD – fundamental overview
All has been rather quiet for the Pound of late, though we have seen interest on the back of broad based US Dollar selling and UK equity inflows at a 69-week high for the week ending April 14. Looking ahead, there is no first tier data on Monday's docket and the focus will be on the bigger picture themes.USDJPY – technical overview
The major pair has run into massive resistance in the form of the monthly Ichimoku cloud, and has since rolled back over below the cloud. This translates to a longer-term trend that is still bearish despite the run up we saw in 2021, with risk for deeper setbacks ahead. It would take a clear break back above 113.00 to negate the outlook.USDJPY – fundamental overview
Been interesting to see all of the Yen demand we've been seeing despite US equities marching on to fresh record highs. With stocks so extended and with the market at risk of a reversal, this could open more demand for Yen over the coming days and weeks. Looking ahead, there is no first tier data on Monday's docket and the focus will be on the bigger picture themes.EURCHF – technical overview
Lots of sideways price action here, with no clear directional insight. For the most part, price action has been confined between 1.0600 and 1.1200, and it will take a weekly close above or below for an indication of the next big move.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 renewed risk liquidation 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
Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.7400.AUDUSD – fundamental overview
The combination of ongoing record highs in US equities, bid commodities prices and last week's Aussie employment data showing the labour market back to pre-pandemic levels, have all helped to prop up the Australian Dollar of late. Looking ahead, there is no first tier data on Monday's docket and the focus will be on the bigger picture themes.USDCAD – technical overview
Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2300-1.2500 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2400 would suggest otherwise. Back above 1.2743 will strengthen the outlook.USDCAD – fundamental overview
Economic data out of Canada hasn't been impressive of late, while concerns about coronavirus management in Canada continue to be an issue. However, we have seen demand for the Loonie on dips from broad based US Dollar outflow and the resurgence in demand for oil. Looking ahead, Canada housing starts is the only notable standout on Monday's economic calendar.NZDUSD – technical overview
Finally signs of topping out after a nice multi-month rally. Look for a weekly close below 0.7000 to strengthen the bearish outlook and expose deeper setbacks towards the 0.6500 area. Back above 0.7300 would be required to take the immediate pressure off the downside.NZDUSD – fundamental overview
Kiwi is coming off a nice week of gains from record high US equities, rallying commodities prices and impressive local data. Looking ahead, there is no first tier data on Monday's docket and the focus will be on the bigger picture themes.US SPX 500 – technical overview
Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped above of 4200, with a break back below 4000 to strengthen the outlook.US SPX 500 – fundamental overview
We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout should weigh more heavily on investor sentiment in 2021.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600. Longer-term technical studies are however in the process of unwinding, with the market in search of a higher low ahead of a bullish continuation.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, and coronavirus fallout. 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
Monthly technical readings are still tracking in severe overbought territory heading into Q2 2021. Risk for any meaningful bullish continuation beyond the recent record high at $64,900 should be limited over the coming days and weeks, with the higher probability leaning towards more correction and consolidation. There is now room for the correction to extend back down into the $40,000 area, where a higher low would ideally be sought out for a resumption of the bigger picture uptrend.BTCUSD – fundamental overview
Heading into 2021, there was a great anticipation for institutional adoption. And as we saw follow through on this anticipation, the bitcoin price tripled in value, exploding to a record high beyond $60,000. But with much of that now priced into the market, and with short-term bitcoin fundamentals still correlating with global risk sentiment, there does appear to be room for somewhat of an adjustment lower in the price before we see that next wave of renewed demand. We also believe bitcoin's emergence into the mainstream will invite more challenge and scrutiny from central banks and governments, which could translate to a bumpy ride in Q2 2021 before the asset once again finds its legs on the compelling longer-term value proposition.BTCUSD - Technical charts in detail
ETHUSD – technical overview
Despite the latest run to a fresh record high through $2,000, the market is looking quite extended following a massive run higher in 2021. At this stage, additional upside should be limited to allow for extended studies to unwind, before the market considers a meaningful bullish continuation. Look for setbacks to be well supported ahead of $1,500.ETHUSD – fundamental overview
Ether is getting closer and closer to entering a phase of meaningful correction and consolidation after an explosive start to 2021 that has resulted in fresh record highs beyond $2,000. There are already signs of overvaluation in the defi space and this in conjunction with an anticipated deterioration in global risk sentiment are been behind a lot of the reasoning for the anticipated downside pressure. Still, we believe there will be plenty of demand for ether down into the $1,500 area.