A Momentum Driven Market

GBPUSD – technical overview

A strong recovery rally rally out from multi-year lows has stalled out just shy of the 2015 high at 1.5552 to leave leave the broader underlying downtrend firmly intact. The market has now dropped back into the middle of the 2015 range and from here, there is risk for some choppy consolidation before the next major move. Below 1.4950 will open the door for a retest of the 1.4565 yearly low, while back above 1.5552 could signal a structural shift.

• R2 1.5397 – 1May high – Strong
• R1 1.5304 – 30Apr low – Medium
• S1 1.5089 – 5May low  – Medium
• S2 1.4950 – 23Jan low  – Strong

GBPUSD – fundamental overview

A lot of choppy trade is to be expected over the coming sessions as we lead up to the anticipated UK election. This is the most uncertain UK election in some time, and the uneasiness surrounding the result has opened fresh offers in the Pound. With no clear winner projected, the government is likely to be in a period of gridlock for many weeks until the dust settles. In the interim, local data hasn’t been helpful, with UK construction PMIs coming in at a near two year low and well below expectation on Tuesday. However, softer US trade data has been offsetting, with broader US Dollar weakness helping to support the Pound. Dovish comments from Fed Kocherlakota have also helped to support Cable, though looking ahead, we get more Fed speak on Wednesday, with Fed Chair Yellen, Fed George and Fed Lockhart all due. US ADP will also be watched closely.

USDJPY – technical overview

Although the market remains locked within a well defined uptrend, lack of upside follow through has been discouraging of late, with the pair more content on deferring to a period of consolidation. Still, overall, the broader trend remains highly constructive and any setbacks should continue to be very well supported in favour of the next major upside extension through 122.03 and towards key psychological barriers at 125.00 further up. At this point, only a close below 118.00 would delay, while a break below 115.55 would be required to negate the constructive outlook.

• R2 120.84 – 13Apr high – Strong
• R1 120.50 – 5May high – Medium
• S1 119.37 – 1May low – Medium
• S2 118.23 – 17Feb low – Strong

USDJPY – fundamental overview

Another round of soft US economic data, highlighted by Tuesday’s unimpressive US trade numbers, has opened the door for a modest pullback in the major pair. Weakness in global equities, which still share traditional correlations with the Yen, and dovish Fed Kocherlakota comments have also been driving price action. Still, this is a market that has mostly been confined to rangebound trade, with any dips into the 118.00s well supported. Looking ahead, US ADP is the big event for the day, with the market looking for a print of 185k versus 189k in March. On the official circuit, Fed Chair Yellen, Fed George and Fed Lockhart are all on the docket later in the day.

EURCHF – technical overview

The market has finally put in an impressive rebound after a multi-day drop out from the February, 1.0815 recovery high. From here, there is risk for additional upside back towards 1.0815 in the days ahead, with any setbacks expected to be very well supported ahead of 1.0300. Ultimately, only below 1.0235 negates.

• R2 1.0605 – 23Mar high – Strong
• R1 1.0525 – 30Apr high – Medium
• S1 1.0347 – 5May low– Medium
• S2 1.0315 – 23Apr low – Strong

EURCHF – fundamental overview

Faded optimism for a Greek deal has resulted in a reduction in global risk appetite, which has ultimately weighed on this market over the past few sessions. Chatter the IMF is prepared to withhold bailout funds, Greek officials blaming creditors for the current impasse, and fear there won’t be any breakthrough at the May 11 FinMin meeting, have all been driving this market lower, though recent SNB actions are helping to support. The recent reduction on the group of sight deposit account holders exempted from negative rates should keep the Franc from running too far, while SNB Jordan has reiterated the central bank’s commitment to act to curb excessive overvaluation in the Franc.

AUDUSD – technical overview

Despite a recent surge through 0.8000, the bearish structure remains intact with the market positioning for a medium-term lower top and next major downside extension. The rally has stalled out just over previous support turned resistance at 0.8033 and this opens the door for a bearish resumption back towards and eventually below the recent multi-year low at 0.7533. Only back above 0.8075 would delay.

• R2 0.8075 – 29Apr high – Strong
• R1 0.8000 – Psychological – Medium
• S1 0.7918 – 6May low – Medium
• S2 0.7787 – 5May low – Strong

AUDUSD – fundamental overview

A Tuesday RBA rate cut to a record low 2.00% has been followed up on Wednesday with a softer than expected Aussie retail sales print. But one wouldn’t know it from looking at the price action in this pair, with Aussie driving higher and outperforming, largely on the back of a repricing of AUDNZD expectations and a resurgence in demand for this market off record lows. Aussie has also benefitted from broad based US Dollar weakness following a soft US trade print and some dovish comments from Fed Kockerlakota who has said it would be inappropriate for the Fed to raise rates in 2015. Looking ahead, US ADP and more Fed speak will be the focus for the remainder of the day.

USDCAD – technical overview

While the broader uptrend is still firmly intact, the market has entered a period of healthy correction following a recent break below support at 1.2350. But now that the market has finally traded into the measured move downside objective area in the 1.1900s, look out for the formation of the next meaningful higher low and resumption of the broader uptrend. Ultimately, only a weekly close below 1.1900 would compromise the constructive outlook.

• R2 1.2205 – 1May high – Strong
• R1 1.2131 – 5May high – Medium
• S1 1.2000 – Psychological – Medium
• S2 1.1945 – 29Apr low – Strong

USDCAD – fundamental overview

The Canadian Dollar isn’t ready just yet to give up its recent run, with a combination of much weaker US trade data and another surge in OIL prices helping to fuel Loonie gains back towards recent multi-day highs against the Buck. Still, with the OIL rebound looking like it could be a little tired and with the Fed seen raising rates in 2015, despite dovish Kocherlakota comments, there is plenty of demand for USDCAD report in the 1.1900s. For today, the focus will be on Canada Ivey PMIs, US ADP and more Fed speak.

NZDUSD – technical overview

The market remains locked within a broader, well defined downtrend and looks to be in the process of carving out the next medium-term lower top. As such, look for a more pronounced bearish reversal in the sessions ahead, back towards the key low of 0.7176, below which opens the next major downside extension towards psychological barriers at 0.6500. Ultimately, only back above 0.7890 would compromise and give reason for pause.

• R2 0.7615 – 1May high – Medium
• R1 0.7577 – 5May high– Strong
• S1 0.7459 – 6May low – Medium
• S2 0.7422 – 13Apr low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been one of the standout underperformers of late after the RBNZ shifted its policy outlook in the previous week, opening the door to the possibility for a rate cut, while also maintaining its discomfort with the elevated Kiwi rate. And since then, this repricing has been backed up by another Fonterra payout cut, dovish FinMin English comments, a negative GDT auction print, and weaker than expected New Zealand Q1 employment. Perhaps this repricing and structural shift has been most apparent on the AUDNZD cross, which has enjoyed a formidable recovery off record lows over the past several days. Looking ahead, US ADP and Fed speak are the key focus for the remainder of Wednesday.

US SPX 500 – technical overview

The most recent rally is stalling after only slightly exceeding critical resistance in the form of the previous record high from February at 2120. This suggests we could be in the process of carving out a more meaningful top. Still, while the market holds above 2040, the broader uptrend remains firmly intact, with a break below 2040 ultimately required to confirm a topping structure and accelerate declines. Initially, the market will need to close below 2070 to encourage the reversal prospect.

• R2 2150.00 – Psychological – Medium
• R1 2126.00 – 27Apr/Record – Strong
• S1 2071.00 – 17Apr low – Medium
• S2 2040.00 – 11Mar low – Strong

US SPX 500 – fundamental overview

There is a growing sense that with equities so elevated, any additional upside should be limited with a potential capitulation in the works. At this point, the market has yet to really relent, but should last week’s less dovish FOMC decision be backed up by a solid Friday monthly employment report, this could be the final straw that breaks the overinflated market’s back. We may get an indication later today of which way Friday’s NFPs will lean, with the release of US ADP.

GOLD (SPOT) – technical overview

The market has been in a consolidation mode since recovering out ahead of the 2014 base. The bounce suggests the market could now be poised for additional upside in the sessions ahead in an attempt to carve out a more meaningful longer-term base. Still, a daily close above 1224 will be required to strengthen the constructive prospect. Meanwhile, a daily close back below 1175 delays the recovery and puts pressure back on the downside.

• R2 1246.00 – 10Feb high – Medium
• R1 1224.00 – 6Apr high – Strong
• S1 1170.00 – 1May low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

The gold market continues to show signs of demand since stalling ahead of the 2014 base. Many investors already feel that with currencies across the board in a downward spiral, and global equities at risk for major capitulation, there is no better place to be invested than in the yellow metal. Gold has since pulled back a bit since rallying to $1224, but there is healthy demand reported into current dips, with no real sell-stops seen until below $1170.

Feature – technical overview

USDSGD has been in corrective mode over the past few weeks, with the market pulling back sharply from the 1.3937, 2015 peak from March. However, the broader uptrend remains intact and a medium-term higher low is now sought out at 1.3148 ahead of the next major upside extension. Ultimately, only back below 1.3148 would compromise the outlook.

• R2 1.3434 – 24Apr high – Strong
• R1 1.3378 – 5May high – Medium
• S1 1.3222 – 1May low – Medium
• S2 1.3148 – 29Apr low – Strong

Feature – fundamental overview

A much softer than expected US trade data showing has helped to inspire fresh short-term demand for the Singapore Dollar, though SGD gains aren’t expected to be sustained with more risk associated with Asian currencies at the moment. The Singapore Dollar has been suffering from a cooling off in China and some weaker local data this week after manufacturing PMIs came in below forecast, putting in the fifth consecutive monthly contraction for this series. Overall, the ongoing expectation for the Fed to move sooner than later, despite dovish overnight comments from Fed Kocherlakota, is also playing a role, and the outlook for this market continues to favour Singapore Dollar weakness.