Too Early to Count Out the US Dollar?

GBPUSD – technical overview

Despite this latest bounce, the market remains confined to a well defined downtrend while it holds below the December 2016 peak at 1.2775. Ultimately, rallies should continue to be very well capped into the 1.2500-1.2600 area, with only a break above 1.2775 to compromise the bearish structure. Look for a daily close back below 1.2324 to strengthen the outlook, opening the door for a retest of the 2017 low just under 1.2000, which guards against the +30 year low from October 2016 at 1.1840.

• R2 1.2583 – 9Feb high – Strong
• R1 1.2495 – 21Mar high– Medium
• S1 1.2400 – Figure – Medium
• S2 1.2324 – 17Mar low – Strong

GBPUSD – fundamental overview

The Pound has done a wonderful job recovering over the past several days, getting a boost both from a dose of US Dollar weakness and from Sterling supportive developments in the form of a hawkish BOE dissent and hot inflation. But with the Article 50 trigger just one week out and with tensions expected to rise as Brexit becomes official, offers are expected to emerge into this run and well ahead of critical resistance up at 1.2775. Moreover, the hawkish BOE dissent and hotter UK CPI are more reflective of currency weakness that the majority of the central bank is less concerned about when it comes to making monetary policy decisions. Looking ahead, absence of UK data will leave the market focused on broader themes and US existing home sales later in the day.

USDJPY – technical overview

The market has broken down below critical range support at 111.60 which could signal the end of a 400 point bearish consolidation that now opens the next major downside extension towards a 400 point measured move that targets 107.60 in the days ahead. A daily close below 111.60 will strengthen this bearish outlook, while ultimately, only back above 115.60 would force a bullish structural shift.

• R2 112.90 – 20Mar high – Strong
• R1 112.00 – Figure – Medium
• S1 111.00 – Figure – Medium
• S2 110.27 – 22Nov low – Strong

USDJPY – fundamental overview

There has been a notable pickup in Yen demand over the past 24 hours, with the market rushing into the Japanese currency as risk liquidation flow intensifies on the back of a breakdown in US equities. This has resulted in USDJPY sell stops tripped up below 111.60, which could easily open the door for an acceleration below 110.00 in the sessions ahead. The combination of negative sentiment towards the US Dollar and flight to safety make the Yen, a traditional beneficiary of this flow, increasingly attractive. Looking ahead, the market will continue to monitor US Dollar and global risk sentiment, while also taking in US existing home sales later in the day.

EURCHF – technical overview

The latest surge through resistance at 1.0760 could threaten a broader downtrend and suggest we are in the process of seeing a bullish structural shift. However, a daily close above 1.0800 would be required to confirm, while inability to do so keeps the downtrend intact opening the door for a drop back towards and below the 2016 base at 1.0624.

• R2 1.0900 – 8Dec high – Strong
• R1 1.0826 – 13Mar high – Medium
• S1 1.0685 – 16Mar 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 appetite for risk, the Franc hasn’t been able to weaken all that much. There have been some signs of the SNB perhaps making a little headway on reports of a boost in SNB reserves, but this latest pullback in equities could easily offset that advantage.

AUDUSD – technical overview

The impressive rally in 2017 has stalled out into significant medium-term resistance ahead of 0.7800. A recent break back below 0.7600 strengthens the prospect for some form of a top and could open the door for a deeper drop back towards the 0.7000 area in the days ahead. However, the market will need to hold below 0.7750 to keep the prospect of the bearish shift alive, with a subsequent break back below 0.7492 to confirm.

• R2 0.7779 – 8Nov high – Strong
• R1 0.7750 – 21Mar high – Medium
• S1 0.7650 – Mid-Figure – Medium
• S2 0.7600 – Figure – Strong

AUDUSD – fundamental overview

The Australian Dollar has been knocked back down over the past 24 hours after stalling out yet again ahead of critical medium-term resistance at 0.7800 and also feeling the pressure of risk liquidation flow on a decline in US equities. Wednesday’s economic calendar is exceptionally light, with only US existing home sales featured, which should leave the primary focus on US Dollar and global risk sentiment.

USDCAD – technical overview

The market remains very well supported on dips, with the latest bounce out from 1.3000 warning of a more significant bullish resumption. Any setbacks should now be very well supported above 1.3200 on a daily close basis in favour of an eventual push back through the multi-day peak at 1.3599 and towards 1.4000 further up.

• R2 1.3422 – 10Mar low – Strong
• R1 1.3400 – Figure – Medium
• S1 1.3264 – 21Mar low – Medium
• S2 1.3165 – 28Feb low – Strong

USDCAD – fundamental overview

All of the Canadian Dollar gains on the back of an impressive Canada retail sales print this week have been given back, with the Loonie feeling the pressure of weakness in the price of OIL and setbacks in the US equity market. Looking ahead, absence of Canada data will leave the market focused on price action in OIL and US equities, while also taking in US existing home sales.

NZDUSD – technical overview

The overall pressure remains on the downside with the market expected to be very well capped on rallies. The weekly chart is reflective of this fact as it looks like we’re seeing the formation of a major top off the 2016 high. As such, expect the market to continue to roll over in the days ahead, with setbacks projected towards medium-term support in the 0.6600s. Only back above 0.7400 compromises the outlook.

• R2 0.7100 – Figure – Strong
• R1 0.7090 – 21Mar high – Medium
• S1 0.6969 – 16Mar low – Strong
• S2 0.6890 – 9Mar low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to hold up relatively well in the face of this latest slide in the US equity market, which is certainly not supportive of the risk correlated commodity currency. It seems the combination of a well received GDT auction and ongoing broad based declines in the US Dollar are helping to offset for the time being. Of course, the market is also trading more cautiously ahead of the early Thursday RBNZ policy decision where the central bank is expected to leave rates on hold but could move markets depending on the tone it decides to project. As far as today goes, US Dollar and risk sentiment will be important to watch, while we also get US existing home sales.

US SPX 500 – technical overview

An extended run to record highs is finally showing signs of exhaustion in 2017, with the market rolling over, taking out critical short-term support at 2350. This now opens the door for an acceleration of declines towards 2300 in the sessions ahead, with a daily close below this psychological barrier to suggest the possibility of a more significant structural shift. In the interim, rallies should now be well capped below 2375.

• R2 2402.00 – 1Mar/Record high – Strong
• R1 2382.00 – 21Mar high – Medium
• S1 2322.00 – 14Feb low – Medium
• S2 2305.00 – 26Jan high– Strong

US SPX 500 – fundamental overview

The latest pullback in the stock market is generating a lot of attention as investors begin to wonder if this is warning of a more significant reversal ahead. Stocks have been supported on easy Fed policy for so many years, but with the Fed now on course to normalise policy, this could finally be resonating with investors. Higher rates means less attractive valuations and considering where this market is trading, there is a strong possibility that a mass exodus could inspire an intensified liquidation. Moreover, with Trump policies failing to materialize, investors are worried they may have been too aggressive pricing it all in.

GOLD (SPOT) – technical overview

The market has been very well supported since basing out around 1120 in 2016. A recent bounce out from the 1200 area strengthens the outlook, opening the door for the next major upside extension towards a measured move into the 1330 area. Look for any setbacks to be well supported ahead of 1200, with only a break back below 1180 to compromise the constructive outlook.

• R2 1264.00 – 27Feb high – Strong
• R1 1250.00 – Psychological – Medium
• S1 1195.05 – 10Mar low – 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. Of course, the selloff in the the US Dollar post a dovishly perceived FOMC decision and worry over Trump policies are fueling additional gains in the metal.

Feature – technical overview

USDSGD has been in the process of correcting out from the critical high 1.4545 from earlier this year, putting in a series of lower highs and lower lows. However, the market has finally traded down into a strong previous resistance turned support area in the 1.3900s that could warn of the resumption of the more prominent uptrend. Look for a daily close back above 1.4100 to strengthen prospects for a bullish reversal. Ultimately, while the market holds above 1.3800, risk is tilted to the topside.

• R2 1.4160 – 14Mar high – Strong
• R1 1.4130 – 6Mar low – Medium
• S1 1.3953 – 20Mar low – Medium
• S2 1.3910 – 2Nov low – Strong

Feature – fundamental overview

The Singapore Dollar has been bolstered on many fronts over the past several days. At the top of the list is a more dovishly perceived FOMC decision which has tilted yield differentials back in the emerging market currency’s favour. At the same time, the latest Singapore trade data is fueling additional SGD demand, with the data set showing consistent growth. And early this week, pressure from the US at the G20 to drop its anti-protectionist pledge has encouraged additional SGD demand on the implication the G20 communique edit is a sign the US will be looking to promote a softer USD policy to make America great again via US manufacturing and exports. At the same time, a pullback in US equities is not supportive of the Singapore Dollar as the drop in stocks inspires safe haven flow that will weigh on emerging market currencies. If this risk liquidation intensifies, look for the Singapore Dollar to see renewed declines.