Light Monday Calendar, US Out for Holiday

GBPUSD – technical overview

This latest impressive run to the topside has stalled out ahead of critical resistance in the form of the December peak at 1.2775. While we could still see a test and overshoot beyond 1.2775 in the sessions ahead, the market would need to establish a weekly close above this level to suggest a major base in place and force a bullish structural shift. Until then, expect any moves into or through 1.2775 to stall out. A daily close below 1.2400 will increase bearish prospects.

• R2 1.2549 – 14Feb high – Strong
• R1 1.2524 – 16Feb high– Medium
• S1 1.2400 – Figure – Medium
• S2 1.2346 – 7Feb low – Strong

GBPUSD – fundamental overview

Friday’s round of softer UK retail sales data hasn’t done anything to help the Pound, which is already suffering from ongoing Brexit concerns and more hawkish Fed speak. UK Rightmove house price data has come in softer on Monday and the market will now look ahead to UK CBI trends and the start to a fresh round of Brexit negotiations.

USDJPY – technical overview

The market has seen a nice bounce, though the short-term pressure remains on the downside despite this bounce in light of a recent break of multi-session consolidation that projects weakness into the 109.50 area in the days ahead. At this point, it would take a push back above 115.62 to officially alleviate short-term downside pressure and as such, the current rally is expected to stall out ahead of 115.00.

• R2 114.31 – 16Feb high – Strong
• R1 113.50– 17Feb high – Medium
• S1 112.62 – 17Feb low – Medium
• S2 111.59 – 7Feb low – Strong

USDJPY – fundamental overview

Two major drivers of USDJPY bids at the moment. First, the market has regained a bid tone into Monday on the back of a fresh push in global equities, with US futures pushing to another record high. Second, ongoing hawkish Fed speak leaving the door open for a March hike is pushing yield differentials further in the US Dollar’s favour. Looking ahead, trading conditions will thin out with the US market closed for the President’s Day holiday.

EURCHF – technical overview

A recent close below 1.0800 which had been defined as the bottom of a multi-week range has strengthened the bearish outlook, opening the door for additional declines towards the 2016 low at 1.0624. At this point, a daily close back above 1.0763 would be required to take the immediate pressure off the downside.

• R2 1.0763 – 30Dec high – Strong
• R1 1.0708 – 3Feb high – Medium
• S1 1.0633 – 8Feb low – Medium
• S2 1.0624 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The SNB is in a quiet battle with the market, forced to contend with an ongoing wave of demand for the Swiss Franc in a less certain global environment, especially with the weapon of monetary policy worn down. The central bank has been committed to its mandate of ensuring the Franc does not appreciate further. But despite all efforts, the Franc continues to want to appreciate. It seems the central bank’s strategy has been to sell Francs when risk comes off and to do nothing when risk is back on and natural flows should be CHF bearish. But the trouble is, even with global equities elevated, arguably reflecting global appetite for risk, the Franc barely depreciating, if at all. This is an added concern with the SNB’s holding of US equities hitting a fresh record of its own at $63.4 Billion. Of course, the reemergence of Eurozone political risk is only further contributing to SNB stress, with the Franc finding even more demand on the back of these developments.

AUDUSD – technical overview

The market has entered a healthy bullish phase after setbacks stalled shy of key medium-term support at 0.7145 in late December. Still, overall, rallies continue to be very well capped on a medium-term basis, with only a daily close back above 0.7800 to compromise this outlook. Look for a daily close below 0.7600 to officially put the pressure back on the downside.

• R2 0.7779 – 8Nov high – Strong
• R1 0.7733 – 15Feb high– Medium
• S1 0.7606 – 7Feb low – Medium
• S2 0.7578 – 2Feb low – Medium

AUDUSD – fundamental overview

The Australian Dollar has benefited of late from stronger local data, broad based selling in the US Dollar on Trump protectionism, rallying base metals and a rotation back into the long side of the AUDNZD trade. But the currency is starting to look overdone after breaking above 0.7700 and could be on the verge of rolling back over. Ongoing hawkish Fed speak leaving the door open for a March hike could be one of those things that continues to inspire a rethink at current levels and the market will be looking ahead for more colour this week from the Fed Minutes. As far as today goes, the economic calendar is thin and the US markets are out for the President’s Day holiday.

USDCAD – technical overview

Despite recent setbacks, look for the market to continue to be well supported on dips into the 1.3000 area ahead of the next major upside extension back towards the December peak at 1.3600. In the interim, a daily close back above 1.3213 will help take the immediate short-term pressure off the downside.

• R2 1.3213 – 7Feb high – Strong
• R1 1.3169 – 9Feb high – Medium
• S1 1.3010 – 16Feb low – Medium
• S2 1.3000 – Psychological – Strong

USDCAD – fundamental overview

The Loonie has been trading on US fundamentals and macro flow of late, with local data taking a backseat. Ultimately, the Canadian Dollar has been finding renewed offers ahead of USDCAD 1.3000 and there is an expectation that with the Fed continuing to talk hawkish, this could open the door for a fresh uptick in USDCAD. This week’s Fed Minutes could be the catalyst for that next push. As far as Monday goes, expect a subdued session of trade with only Canada wholesale sales due and the US market closed for the President’s Day holiday.

NZDUSD – technical overview

Despite this latest upside correction in 2017, the overall pressure remains on the downside with the market expected to be very well capped on rallies into the 0.7400 area. The weekly chart is reflective of this fact as it looks like we are seeing the formation of a major top off the 2016 high. As such, expect the market to continue to roll over in favour of that next lower top. A weekly close below 0.7200 will help strengthen this outlook.

• R2 0.7265 – 9Feb high – Strong
• R1 0.7243 – 15Feb high – Medium
• S1 0.7135 – 14Feb low – Medium
• S2 0.7130 – 100-Day SMA– Strong

NZDUSD – fundamental overview

There has been a notable shift in sentiment towards the New Zealand Dollar in recent days. Softer local employment, a more dovish RBNZ, a rotation into AUDNZD, hawkish Fed speak leaving the door open for a March hike and this latest disappointing New Zealand retail sales and manufacturing are some of the major drivers behind the Kiwi bearishness. Of course, an ongoing bid for equities and rallying commodities have been helping to slow Kiwi declines. But ultimately, if the US Dollar pushes back to focusing on Trump reflation and hawkish Fed policy, and if US equities falter, we could very well see a more intense liquidation of Kiwi longs. Looking ahead, Monday’s calendar is exceptionally thin with the US out for the President’s Day holiday.

US SPX 500 – technical overview

The latest break to yet another record high following a healthy period of consolidation, has opened the door for the next big push towards 24000. While technicals are severely stretched and there are definitive signs of exhaustion on the horizon, given the intensity of this uptrend, a break back below 2300 would be required at a minimum to alleviate immediate topside pressure.

• R2 2400.00 – Psychological – Strong
• R1 2354.00 – 15Feb/Record high – Medium
• S1 2300.00 – Psychological – Strong
• S2 2254.00 – 12Jan low– Medium

US SPX 500 – fundamental overview

The record run in US equities has been more than impressive, particularly at a time when the Fed is embarking on a hawkish path to policy normalisation and the Trump administration is lacking the type of stability that would inspire confidence. This leaves financial markets vulnerable to any shocks and exposed to intense periods of risk liquidation going forward. The fact that monetary policy around the rest of the globe is exhausted with very little left in the tank to artificially support risk assets is yet another major concern. Of course, expectation of fresh tax reform and the revival of the Trump reflation play have contributed to this latest record high push, but overall, there are plenty of red flags out there, warning of a major capitulation ahead.

GOLD (SPOT) – technical overview

The market has been very well supported since basing out around 1120 in 2016. This latest break through 1220 confirms a fresh higher low at 1180 and opens the next major upside extension towards a measured move into the 1260 area. Only back below 1180 would delay the constructive outlook, while ultimately, below 1120 would be required to negate.

• R2 1260.00 – Measured Move – Strong
• R1 1244.80 – 8Feb high – Medium
• S1 1200.00 – Psychological – Medium
• S2 1180.60 – 27Jan low  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players continues to emerge on dips, with these players more concerned about the limitations of exhausted monetary policy, extended global equities, political uncertainty and systemic risk. All of this should continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDMXN has been in the process of correcting out from recent record highs earlier this year. The market is now coming back into critical psychological support in the 20.00 area and is expected to be well supported around the barrier in favour of a resumption of the uptrend and push back through the record high just over 22.00. Only a daily close below 20.00 would give reason for pause and open the possibility for a more meaningful structural shift.

• R2 22.0380 – 11Jan/Record – Strong
• R1 21.3900 – 11Nov high – Medium
• S1 20.1290 – 17Nov low – Medium
• S2 20.0000 – Psychological – Strong

Feature – fundamental overview

The Peso has managed to stabilise in the aftermath of the latest Banxico decision in which the central bank raised rates by 50bps. A fresh wave of risk on flow as Trump turns away, at least for a moment from focusing on policies attacking prospects for the Mexican economy and CFTC positioning showing a reduction in Peso shorts have also helped to stall Peso declines. Still, the Peso is far from out of the woods, with Trump uncertainty running high and Fed speak leaving the door open for a March hike. Of course, the fact that global equities look like they could come off the rails is yet another serious variable that could undermine any recovery in the Peso and emerging market FX. Looking out, the market is pricing another 100bps of Banxico hikes in 2017.