UK Employment, Fed Minutes in Focus

GBPUSD – technical overview

The corrective rally in the major pair has stalled out for now at 1.4668, with this most recent break and close below 1.4350 suggesting the market could already be poised for the next major downside extension below 1.4080. A daily close below 1.4300 would strengthen this outlook and accelerate declines back to the near 7 year low, while back above 1.4668 would be required to negate and take the immediate pressure off the downside.

• R2 1.4413 – 15Feb low – Strong
• R1 1.4353 – 8Feb low – Medium
• S1 1.4228 – 1Feb low  – Medium
• S2 1.4149 – 29Jan low  – Strong

GBPUSD – fundamental overview

The Pound took a turn for the worse in Tuesday trade, with the market weighed down by dovish comments from the notoriously hawkish BOE McCafferty, softer UK inflation and some unsettling details in a Brexit Poll that showed plenty of room for the vote to result in an exit of the EU. Plenty of risk ahead for this major pair, with UK employment and the Fed Minutes due. Also out today is a batch of US data featuring housing starts, building permits, PPI and industrial production.

USDJPY – technical overview

The market has entered a period of correction after dropping to a multi-month low just under 111.00. From here, there is still risk for this correction to extend into the 116.00-118.00 area before looking for a fresh lower top and bearish continuation. But overall, the pressure remains on the downside with only a break back above 122.00 to negate.

• R2 115.97 – 20Jan low – Strong
• R1 114.87 – 16Feb high – Medium
• S1 113.27 – 15Feb low – Strong
• S2 113.00 – Figure – Medium

USDJPY – fundamental overview

Any recovery in the major pair has been met with solid resistance into the mid-week, with a pullback in OIL, softer round of US data and dovish comments from Fed Harker and Rosengren opening renewed Yen bids. Setbacks have been supported somewhat into Wednesday after Abe advisor Honda said additional BOJ stimulus could come in March. Looking ahead, we get a batch of US data featuring housing starts, building permits, PPI and industrial production. But it’s the Fed Minutes late in the day that will get most of the attention.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 are viewed as corrective, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to be well supported above 1.0900 on a daily close basis, in favour of a higher low and the next major upside extension through 1.1200 and towards 1.1400 further up. Only a close below 1.0900 would delay the outlook.

• R2 1.1097 – 8Feb high – Strong
• R1 1.1044 – 11Feb high – Medium
• S1 1.0940 – Previous Resistance – Medium
• S2 1.0910 – 20Jan low – Strong

EURCHF – fundamental overview

Clearly, the SNB strategy of weakening the Franc has been highly effective these past several months. But with risk liquidation flow intensifying in 2016 and with the other traditional safe haven currencies rallying sharply to their detriment, the SNB battle is getting tougher. We’ve already seen EURCHF come under pressure off recent highs and should other central banks move to looser policy, this could make the Franc more attractive again. The SNB has been committed to offsetting Franc inflows at every turn, and it will be interesting to see what happens if risk sentiment takes another turn for the worse.

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 0.7182 – 16Feb high – Medium
• S1 0.7063 – 12Feb low – Medium
• S2 0.7037 – 10Feb low – Strong

AUDUSD – fundamental overview

Tuesday’s pullback in OIL and the early Wednesday retreat in equities has not been a help to Aussie, which has come back under pressure in recent trade. While the Westpac leading index did manage to come out better than expected, this was offset by a higher China fixing. Looking ahead, we get a batch of US data featuring housing starts, building permits, PPI and industrial production. But it’s the Fed Minutes late in the day that will get most of the attention.

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 into the 1.3500s, which coincides with medium-term rising trend line support. At this point, only back above 1.4017 would suggests the correction has run its course, with the market poised for bullish resumption.

• R2 1.3965 – 12Feb high – Strong
• R1 1.3900 – Figure – Medium
• S1 1.3800 – Figure – Medium
• S2 1.3707 – 16Feb low – Strong

USDCAD – fundamental overview

Clearly the market was disappointed with developments on the OIL front on Tuesday. Initial reports had Russia, Saudi Arabia, Venezuela and Qatar all meeting to discuss production cuts, and this opened a nice jump in the price of the commodity, which in turn benefitted the highly correlated Canadian Dollar. But the revelation these producers would only be freezing output at January’s record high level proved to be a letdown, which opened a reversal in OIL and the Loonie. Looking ahead, we get Canada international securities transactions and a batch of US data featuring housing starts, building permits, PPI and industrial production. But it’s the Fed Minutes late in the day that will get most of the attention.

NZDUSD – technical overview

The market remains confined to a broader downtrend with any rallies seen very well capped. A recent correction has stalled out around 0.6750 with the market looking like it is in the process of carving a fresh lower top ahead of the next major downside extension. The latest break below 0.6563 strengthens the outlook and should now accelerate declines towards next key support at 0.6347 lower down. Ultimately, only back above 0.6900 negates the bearish outlook.

• R2 0.6677 – 15Feb high– Strong
• R1 0.6600 – Figure – Medium
• S1 0.6508 – 3Feb low – Medium
• S2 0.6449 – 1Feb low – Strong

NZDUSD – fundamental overview

It hasn’t been a great week for the New Zealand Dollar, which has been the standout underperformer amongst the developed currencies. The combination of softer New Zealand retail sales, sinking 2-year inflation expectations and another disappointing GDT auction have really hurt the risk correlated commodity currency, while the latest pullback in the price of OIL has only added insult to injury. Looking ahead, we get a batch of US data featuring housing starts, building permits, PPI and industrial production. But it’s the Fed Minutes late in the day that will get most of the attention.

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 recent break back below the critical August base at 1834 strengths the newly adopted bearish outlook and from here, any rallies are expected to be well capped below 1950 in favour of the next major downside extension towards 1700. But ultimately, only a daily close back above 1993 will take the immediate pressure off the downside.

• R2 1947.00 – 1Feb high – Strong
• R1 1921.00 – 5Feb high – Medium
• S1 1865.00 –12Feb high – Medium
• S2 1808.00 – 11Feb/2016 low – Strong

US SPX 500 – fundamental overview

Another round of dovish rhetoric, this time from Feds Harker and Rosengren, and yet this recovery in the stock market has been less than impressive considering. Much of the attention for risk markets on Wednesday will be on the release of the Fed Minutes, to see if there is any added dovishness suggesting the Fed will be more inclined to scale back with its normalisation.But overall, with central bank monetary policy exhausted and with fears escalating over a deterioration in China, it feels as though any rallies should continue to be well capped in favour of additional downside in the days and weeks ahead. Throw in the emergence of uncertainty over bank creditworthiness and subpar corporate earnings and there is very little to get too excited about right now. It is also becoming increasingly apparent in 2016 that even if the Fed opts to scale back its rate hike timeline, this might not be as supportive as many had thought.

GOLD (SPOT) – technical overview

The market continues to show signs of a major structural shift, with the impressive recovery from the multi-year low in late 2015 at 1046, extending above the critical October 2015 peak at 1192. From here, any setbacks should be well supported ahead of 1130, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only back below 1100 negates the constructive outlook.

• R2 1263.00 – 11Feb/2016 high – Strong
• R1 1217.00 – 16Feb high – Medium
• S1 1191.00 – 16Feb low – Medium
• S2 1164.00 – 8Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD has pulled back a bit in recent trade, though the yellow metal still stands out as the clear outperformer over the past week. Massive outflows across equities, high yield and emerging markets have left investors looking for an alternative investment. GOLD has become increasingly attractive in the current market environment. The wave of risk liquidation in 2016 has catapulted the metal on its status as a compelling hedge against uncertainty and negative interest rate policy. Dealers cite strong bids into dips.

Feature – technical overview

USDSGD has entered a period of correction after pulling back from the recent multi-year high from early January at 1.4445. But overall, the structure remains highly constructive, with dips well supported for now into the 1.3800s. Look for any additional setbacks to continue to be well supportive above 1.3800 in favour of an eventual resumption of the uptrend and retest of 1.4445. Ultimately, only back below 1.3730 would negate the highly constructive outlook.

• R2 1.4170 – 4Feb high – Strong
• R1 1.4105 –8Feb high – Medium
• S1 1.3965 – 16Feb low – Medium
• S2 1.3860 – 11Feb/2016 low – Strong

Feature – fundamental overview

A round of dovish Fed commentary and softer US data haven’t done much to slow the US Dollar’s appreciation against this emerging market currency. For now, it seems the Fed’s path to normalisation, increased risk for additional BOJ easing and a deteriorating China outlook, are the broader themes driving Singapore Dollar weakness. Looking ahead, we get a batch of US data featuring housing starts, building permits, PPI and industrial production. But it’s the Fed Minutes late in the day that will get most of the attention.