Plunge or Plunge Protection?

GBPUSD – technical overview

Although the recent surge through key resistance at 1.4670 may suggest this market is getting ready to carve a more meaningful base, inability to establish a daily close above the level keeps the pressure on the downside. Tuesday’s bearish outside day formation suggests we could be poised for additional setbacks in the sessions ahead.

• R2 1.4670 – Previous range high – Strong
• R1 1.4600 – Figure – Strong
• S1 1.4474 – 27Apr low – Medium
• S2 1.4403 – 25Apr low – Strong

GBPUSD – fundamental overview

A nasty reversal of fortunes for the Pound on Tuesday, with the UK currency not only getting hit by broader forces including US Dollar demand, risk liquidation and OIL weakness, but also relatively underperforming on local developments. The discouraging round of UK manufacturing PMIs, below the 50 boom-bust level and a referendum poll showing the Brexit camp ahead, did nothing to help Sterling’s cause, with the Cable market plunging over 200 points off the high. Looking ahead, plenty of data to take in on the Wednesday calendar that could influence direction, highlighted by UK construction PMIs and a batch of US data featuring ADP employment, ISM non-manufacturing and trade.

USDJPY – technical overview

Setbacks have accelerated, with the market trading down through a measured move objective in the 106s and into the 105s, following the previous multi-day consolidation break. This puts the focus on the psychological barrier at 105.00. In the interim, look for the current corrective rally to be well capped ahead of 109.00, with only a break back above 111.89 to take the immediate pressure off the downside.

• R2 109.26 – 22Apr low – Strong
• R1 108.20 – 29Apr high – Medium
• S1 106.53 – 4May low – Medium
• S2 105.55 – 3May/2016 low – Strong

USDJPY – fundamental overview

Broad based US Dollar demand, a softer Yuan fixing, OIL weakness and profit taking on Yen longs from leveraged and momentum names and a Japan holiday, have all contributed to this latest bounce in the major pair from 8 month lows. But dealers cite plenty of offers into this rally, with last week’s BOJ inaction and downside pressure in risk markets expected to keep the Yen in demand. Still, it’s worth highlighting the fact the Yen is not a safe haven currency and there is a possibility that at some point, risk liquidation flow will no longer be supportive. Japanese FinMin Aso has voiced his displeasure with the rapid Yen appreciation, which also could be contributing to this latest round of weakness. Looking ahead, the key focus for Wednesday is on a batch of US data featuring ADP employment, ISM non-manufacturing and trade.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 have been well supported, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to continue to be supported above 1.0800, in favour of a higher low and the next major upside extension through 1.1200, towards 1.1500 further up. Only a close below 1.0810 would delay the outlook.

• R2 1.1062 – 17Feb high – Strong
• R1 1.1024 – 10Mar high – Strong
• S1 1.0904 – 19Apr low – Medium
• S2 1.0844 – 7Apr low – Strong

EURCHF – fundamental overview

Many traders have assigned the latest recovery in the cross rate to SNB action that ultimately could have a very hard time supporting the market should risk sentiment continue to roll over. There have been signs of potential topping in equities markets and if this intensifies, it will invite renewed unwanted demand for the safe haven Franc. Dealers cite sizable offers around 1.1000 with no buy stops reported until above 1.1025. The SNB remains committed to a policy of weakening the Franc, but it will be interesting to see how the central bank’s efforts fair in the face of further risk liquidation.

AUDUSD – technical overview

An impressive run for this pair is finally stalling out after extending gains to fresh 2016 highs. The run had been looking stretched and this latest topside failure for additional weakness and a potential bearish resumption. Still, a daily close below 0.7477 would be required to strengthen this outlook and take the immediate pressure off the topside.

• R2 0.7591 – 2May low – Strong
• R1 0.7548 – 27Apr low – Medium
• S1 0.7467 – 3May low – Medium
• S2 0.7415 – 16Mar low – Strong

AUDUSD – fundamental overview

If there was any doubt over the RBA’s mandate, there certainly wasn’t any after the central bank’s Tuesday policy decision, in which it slashed rates 25bps to another record low of 1.75%. Any positives from a recent slew of healthy economic data, were more than offset by the RBA’s concern over last week’s super subdued inflation reading and the recent surge in the Australian Dollar. This has weighed heavily on Aussie, with the currency standing out as a clear underperformer. Additional downside pressures have since emerged on external flow, with risk liquidation, broad US Dollar demand, OIL weakness and position squaring into Friday’s US NFPs also factoring into price action. Looking ahead, we get a batch of US data featuring ADP employment, ISM non-manufacturing and trade.

USDCAD – technical overview

The market could finally be poised for a healthy corrective reversal after taking out barriers at 1.2500 and trading to a fresh 2016 low. Tuesday’s impressive bullish outside day formation strengthens this prospect and opens the door for additional upside in the sessions ahead. Still, a break back above 1.2990 would be required to officially take the pressure off the downside.

• R2 1.2798 – 19Apr high – Strong
• R1 1.2758 – 22Apr high – Medium
• S1 1.2600 – Figure – Medium
• S2 1.2461 – 3May/2016 low – Strong

USDCAD – fundamental overview

Quite a nasty reversal of fortune for the Canadian Dollar on Tuesday. The Loonie had extended gains to fresh 10 month highs early on, before getting hit hard on a confluence of factors including broad US Dollar demand, risk liquidation flow and lower OIL. IMF warnings of slower China and Japan growth did nothing to help the Canadian Dollar, which had been looking a little extended and almost waiting for any catalyst to spark the overdue correction. Looking ahead, Wednesday’s calendar features a good amount of data which includes Canada trade, US ADP employment, US ISM non-manufacturing and US trade.

NZDUSD – technical overview

Despite recent gains to fresh 2016 highs, the market remains confined to a broader downtrend with rallies expected to continue to be well capped in the 0.7000s. Tuesday’s topside failure and impressive bearish outside day formation strengthens this outlook, opening a deeper correction in the sessions ahead. Still, a break back below 0.6759 will be required to officially take the immediate pressure off the topside.

• R2 0.7000 – Psychological – Strong
• R1 0.6941 – 4May high – Medium
• S1 0.6873 – 28Apr low – Medium
• S2 0.6807 – 27Apr low – Strong

NZDUSD – fundamental overview

Although New Zealand employment data was solid on the whole, it seems the higher unemployment rate and subdued hourly earnings, were enough to offset any of the positives. Moreover, Tuesday’s disappointing GDT auction result got the market thinking more about recent improved showings being more of a fluke, with soft dairy prices still a major concern. Clearly Kiwi has also been dragged lower in sympathy with the Australian Dollar, following Tuesday’s RBA cut, with all of this increasing risks the RBNZ will follow up with another cut of its own when it next meets. Risk off trade, OIL weakness and broad US Dollar demand haven’t done anything to help Kiwi’s cause either. Looking ahead, we get a batch of US data featuring ADP employment, ISM non-manufacturing and trade.

US SPX 500 – technical overview

This latest multi-day rally is classified as corrective, with any additional upside expected to be well capped below 2100 on a weekly close basis in favour of the next major downside extension below 1800 and towards a measured move at 1500 further down. Look for a break back below 2021 to strengthen this outlook and accelerate declines. Ultimately, only a weekly close above 2100 will delay.

• R2 2112.00 – 20Apr/2016 high – Strong
• R1 2084.00 – 2May high – Medium
• S1 2052.00 –29Apr low – Medium
• S2 2021.00 – 24Mar low – Strong

US SPX 500 – fundamental overview

The stock market is once again looking vulnerable at lofty heights, with the 2016 rally continuing to feel like it has very little behind it. The fact that monetary policy is exhausted on a global scale is not something that should be a comfort to investors. Moreover, there is clearly a debate going on within the Fed and the case for slowing down the normalisation process may not be as much of a done deal as the market is pricing, something that could once again spook investors. Looking ahead, we get a batch of data featuring ADP employment, ISM non-manufacturing and trade.

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 1191. From here, any setbacks should be well supported, in favour of a higher low and the next major upside extension through medium-term resistance at 1307 and towards 1400 further up. Ultimately, only a weekly close back below 1191 would delay the newly adopted constructive outlook.

• R2 1307.00 – 22Jan/2015 high – Very Strong
• R1 1304.00 – 2May/2016 high – Medium
• S1 1265.10 – 29Apr low – Medium
• S2 1223.85 – 14Apr low – Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported in recent dips, with the yellow metal finding solid demand in 2016 on the back of fears over the limitations of exhausted monetary policy and extended global equities. Whether the US Dollar is bid is becoming less relevant, with risk sentiment likely to be the primary driver going forward. Renewed weakness on this front will continue to bolster the yellow metal.

Feature – technical overview

USDSGD finally looks poised to start thinking about turning back up after a period of intense correction from earlier this year. Overall, the structure remains constructive, with the most recent dip supported ahead of 1.3000. Look for a break and close back above 1.3668 over the coming sessions to strengthen the outlook. Ultimately, only a weekly close below 1.3000 would give reason for pause.

• R2 1.3668 – 14Apr high – Strong
• R1 1.3562 – 27Apr high – Medium
• S1 1.3350 – 19Apr/2016 low – Strong
• S2 1.3284 – 18Jun low – Strong

Feature – fundamental overview

Scope for additional Singapore Dollar upside should be limited given recent MAS efforts and the prospect the central bank will step in to intervene in an effort to stem a further appreciation in the local currency. Meanwhile, with global equities starting to falter, this will put added strain on correlated emerging market FX, which ultimately should invite renewed downside pressure in the Singapore Dollar. Certainly these latest comments from Fed’s Lockhart and Williams, both supportive of a June rate hike, have not done anything the help the Singapore Dollar’s cause. Looking ahead, we get a batch of US data featuring ADP employment, ISM non-manufacturing and trade.