Door Still Not Closed On March Fed Hike

GBPUSD – technical overview

The recent reversal off a near 7-year low at 1.4080 has opened the door for a bounce that has room to extend into the 1.4800-1.5000 area over the coming sessions before the market considers a lower top and meaningful bearish resumption. Look for any setbacks to be well supported ahead of 1.4350, with only a break back below to put the immediate pressure back on the downside.

• R2 1.4668 – 4Feb high – Strong
• R1 1.4591 – 5Feb high – Medium
• S1 1.4452 – 5Feb low  – Medium
• S2 1.4384 – 3Feb high  – Strong

GBPUSD – fundamental overview

Last week’s BOE event risk has come and gone, and with the policy decision mostly delivering an as expected result, the reaction was relatively muted, with the market holding on to most of its recovery gains in the lead up to what had been a priced in dovish decision. We have since seen some selling off the recovery highs, though this price action has come from the latest employment report out of the US, which despite the softer NFP print, produced another drop in the unemployment rate to a near 8 year low and a healthy jump in wage growth. This still leaves the door open for a March rate hike and as such, has been US Dollar supportive. We are off to a quiet start in the new week, with most of Asia out for the Lunar New Year and the economic calendar lacking in any meaningful first tier data out of the UK and US. This will leave the market looking ahead to Fed Chair Yellen’s semi-annual Congressional testimony on February 10-11.

USDJPY – technical overview

Rallies continue to be very well capped, with the latest rejection ahead of 122.00 opening a sharp reversal back to recent multi-month range lows. Look for a daily close below 116.00 to open the door for the next major downside extension into the 112.00 area in the days ahead. At this point, only back above 122.00 would force a shift in the outlook.

• R2 118.24 – 4Feb high – Strong
• R1 117.65 – 26Jan low – Medium
• S1 116.29 – 5Feb low – Medium
• S2 115.97 – 20Jan/2016 low– Strong

USDJPY – fundamental overview

Mixed Japanese data hasn’t factored into price action, with the market trading in a quiet consolidation with most of Asia out for the Lunar New Year. The BOJ summary of opinions from the latest opinion did however show some members concerned with the implementation of negative interest rate policy, citing  possible confusion and a strategy that lacked logical consistency. Overall, the Yen has come back into favour in recent days, giving back all of its post BOJ declines, with broader risk liquidation themes driving most of the price action. Any US Dollar demand from Friday’s on the whole better US employment report, were offset by safe haven Yen demand on the pullback in stocks. Looking ahead, no first-tier data for the remainder of the day and participants will start to look ahead to Fed Chair Yellen’s semi-annual Congressional testimony on February 10-11.

EURCHF – technical overview

A period of multi-week consolidation has finally been broken, with the market clearing critical range resistance at 1.1050 to signal a bullish continuation. Given the fact that the previous consolidation range was about 350 points, the push above 1.1050 opens a measured move upside extension of the equivalent size, projecting gains towards 1.1400. Any setbacks should be very well supported ahead of 1.0900, while only below 1.0715 negates the constructive outlook.

• R2 1.1200 – 4Feb/2016 high – Medium
• R1 1.1115 – 4Feb low – Strong
• S1 1.1035 – 5Feb low – Medium
• S2 1.0985 – 26Jan low – Strong

EURCHF – fundamental overview

SNB Zurbruegg was back on the wires last week talking the highly overvalued Franc and lack of demand for the currency even in this safe haven environment. The combination of negative interest rates and the SNB’s willingness to intervene in the market have proven to be productive tools in making the Franc less attractive, effectively altering its status in the currency market. Certainly recent price action would agree, with the EURCHF pushing to multi-month highs, despite an intensification in risk liquidation flow in early 2016 and a more dovish ECB looking to expand its monetary easing. Dealers cite strong demand around 1.1000.

AUDUSD – technical overview

The market has entered a period of correction out from the recent multi-year low at 0.6827. However, any additional upside should be limited to the 0.7265 area, with a lower top sought out ahead of a fresh downside extension and bearish continuation below 0.6827 and towards the next key barrier at 0.6500 further down. Ultimately, only back above 0.7385 would force a shift in the bearish structure.

• R2 0.7242 – 4Feb high – Strong
• R1 0.7153 – 4Feb low – Medium
• S1 0.7034 – 2Feb low – Medium
• S2 0.7003 – 3Feb low – Strong

AUDUSD – fundamental overview

The pickup in ANZ job adverts could be helping to prop Aussie a bit in the early week, after the currency had come back under some intense pressure this past Friday in the aftermath of the on the whole solid US employment report. The near 8 year low US unemployment print and jump in wage growth were enough of a good reason to keep the door open for a possible Fed rate hike in March, and this fueled a recovery in the Buck. But we are off to  quiet start this week, with most of Asia out for the Lunar New Year and the economic calendar lacking in first-tier releases. It is worth noting, Moody’s has come out and downgraded Western Australia’s credit rating, citing “the ongoing deterioration in Western Australia’s financial and debt metrics.” However, this also hasn’t factored into Monday trade. Looking ahead, no first-tier data for the remainder of the day and participants will start to look ahead to Fed Chair Yellen’s semi-annual Congressional testimony on February 10-11.

USDCAD – technical overview

The market has entered a period of intense correction following the recent surge to a near 13 year high at 1.4690. This most recent setback below 1.3800 opens the door for a deeper drop towards 1.3500, which coincides with medium-term rising trend line support. At this point, only back above 1.4103 would suggests the correction has run its course, with the market poised for bullish resumption.

• R2 1.4103 – 3Feb high – Strong
• R1 1.4050 – Mid-Figure – Medium
• S1 1.3797 – 4Feb high – Medium
• S2 1.3639 – 4Feb/2016 low – Strong

USDCAD – fundamental overview

The Canadian Dollar had been enjoying a welcome recovery over the past several days off near 13 year lows against the Buck, with a bounce in OIL prices and some broad based selling in the Buck inviting renewed Loonie demand. However, Friday’s diverging employment reports were enough to reignite downside pressure on the Canadian Dollar, with Canada employment disappointing, while US employment came out on the whole better than expected. Equity markets also came back under pressure on Friday, which was of no help to the risk correlated Loonie. Looking ahead, Monday’s economic calendar is all about Canada, with housing starts and building permits due, followed by a Bank of Canada Lane speech.

NZDUSD – technical overview

Setbacks have been well supported on dips into the 0.6350 area and the market has entered a period of correction following an intense wave of declines in early 2016. Still, overall, the broader downtrend remains intact and any rallies should be well capped below 0.6800 in favour of a fresh lower top and the next downside extension towards the 2015 multi-year low at 0.6130. Only back above 0.6900 would force a shift in the structure.

• R2 0.6752 – 5Feb high– Strong
• R1 0.6700 – Figure – Medium
• S1 0.6600 – Figure – Medium
• S2 0.6559 – 21Jan high – Strong

NZDUSD – fundamental overview

New Zealand was out for the Waitangi Day holiday on Monday, while most of Asia was off for the Lunar New Year. This resulted in some thin, quiet price action to start the week. Still, the risk correlated New Zealand Dollar has come back under intense pressure since last Friday, with the on the whole better than expected US employment report leaving the door open for a possible Fed rate hike in March. This also weighed on stocks, adding to the downside pressure in Kiwi. The RBNZ is likely to welcome this price action, with the central bank expressing its distaste for the higher Kiwi exchange rate and negative impact a higher Kiwi has on the economy’s recovery prospects. Looking ahead, no first-tier data for the remainder of the day and participants will start to look ahead to Fed Chair Yellen’s semi-annual Congressional testimony on February 10-11.

US SPX 500 – technical overview

Signs of a critical structural shift following an impressive multi-year rally to a fresh record high in 2015. The market has finally stalled out at 2137, with the recent break back below the critical August base at 1834 strengthening the outlook. From here, any rallies are expected to be well capped below previous support at 1993, in favour of the next major downside extension towards 1700. Only a daily close back above 1993 will take the pressure off the downside.

• R2 1993.00 – 14Dec low – Strong
• R1 1947.00 – 1Feb high – Medium
• S1 1858.00 –26Jan low – Medium
• S2 1811.00 – 20Jan low – Strong

US SPX 500 – fundamental overview

A solid US employment report and lower stocks? Well, this wasn’t to be unexpected given the state of the economy and investor worry over the Fed normalisation process. Fear of the Fed continuing to remove ultra accommodation that had acted as an incentive to be long risk assets over the past several years, opened intense downside pressure in equities at the outset of 2016. There had been a decent recovery off the January lows on a ramped up expectation the Fed would scale back its more aggressively perceived 2016 rate hike timeline, though the solid US employment report on Friday is now casting doubt over this prospect and has in turn, weighed on the market. Looking ahead, investors will be looking for more colour on the Fed’s outlook in the aftermath of this employment data, with Fed Chair Yellen set to give her semi-annual Congressional testimony on February 10-11.

GOLD (SPOT) – technical overview

The latest surge through previous resistance at 1112 is a significant development and suggests the market is in the process of a bullish structural shift. Look for a meaningful base to now be in place down at 1046, with fresh upside projected towards the 1200 area over the coming sessions. Any setbacks should be well supported above previous resistance at 1112, with only a close back below 1070 to compromise the newly adopted bullish outlook.

• R2 1192.00 – 15Oct high – Strong
• R1 1175.00 – 5Feb/2016 high – Medium
• S1 1145.00 – 5Feb low – Medium
• S2 1112.00 – Previous Resistance – Strong

GOLD (SPOT) – fundamental overview

The fact that the US Dollar recovered on Friday in the aftermath of the solid US employment report, had some weighing influence on GOLD’s impressive recovery over the past several days. However, on the whole, this is a market environment that is more supportive of GOLD than not, with deteriorating global sentiment making the yellow metal an attractive hedge against an overinflated equity market that could be on the verge of a more significant decline.

Feature – technical overview

USDTRY is showing signs of exhaustion after stalling shy of the December record peak at 3.0750. The latest drop back below 2.9825 strengthens the corrective outlook and now opens the door to the possibility of a more pronounced decline towards 2.8500. Still, overall, the broader uptrend remains firmly intact and only below 2.7580 would compromise the constructive outlook.

• R2 3.0345 – 26Jan high – Strong
• R1 2.9770 –1Feb high – Medium
• S1 2.9000 – Psychological – Medium
• S2 2.8700 – 7Dec low – Strong

Feature – fundamental overview

The recovery in the Lira over the past several days off recent record lows could soon be coming to an end. Friday’s on the whole better than expected US employment data has opened the door back up for a potential Fed rate hike in March and this is not only a benefit to the Buck on the yield side, but is an equal detriment to the the Lira on the negative risk implication. Overall, with global risk sentiment shaky, local inflation at elevated levels, and rate differentials favouring the US Dollar, any additional Lira gains should prove hard to come by in the days ahead.