Market Settles as Euro Reaches Key Levels

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 1.2506 – 22Mar 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. Even Wednesday’s tragic terror attack in London has failed to derail this impressive recovery. 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, UK retail sales will be a volatility generator ahead of a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari. But the biggest risk to the Pound may come from another source. All eyes will be on the US House to see what comes of the Obamacare repeal Bill vote. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out.

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. Wednesday’s daily close below 111.60 strengthens this bearish outlook and any rallies should be very well capped ahead of 114.00. Ultimately, only back above 115.60 would force a bullish structural shift.

• R2 112.90 – 20Mar high – Strong
• R1 111.79 – 22Mar high – Medium
• S1 110.73 – 22Mar low – Medium
• S2 110.27 – 22Nov low – Strong

USDJPY – fundamental overview

There has been a notable pickup in Yen demand this week, with the market rushing into the Japanese currency as risk liquidation flow intensifies on the back of the first legitimate pullback in US equities this year. 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. As far as today goes, all eyes will be on the US House to see what comes of the Obamacare repeal Bill vote. If the vote passes, it will be viewed as risk positive and could invite renewed Yen weakness, if it doesn’t pass, we could see USDJPY easily below 110.00. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out. Other calendar events of note on Thursday include a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari.

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 0.7640 – 22Mar low – Medium
• S2 0.7600 – Figure – Strong

AUDUSD – fundamental overview

The Australian Dollar has been knocked back down over the past 48 hours after stalling out yet again ahead of critical medium-term resistance at 0.7800, feeling the pressure of some risk liquidation flow and nasty pullbacks in iron ore and copper. At the same time, the persistence of broad based US Dollar declines has been helping to offset some of this weakness. As far as today goes, all eyes will be on the US House to see what comes of the Obamacare repeal Bill vote. If the vote passes, it will be viewed as risk positive and could invite a fresh wave of Aussie demand, if it doesn’t pass, we could see an acceleration of Aussie declines. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out. Other calendar events of note on Thursday include a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari.

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 1.3410 – 22Mar high – Medium
• S1 1.3264 – 21Mar low – Medium
• S2 1.3165 – 28Feb low – Strong

USDCAD – fundamental overview

While the Canadian Dollar has been tracking with the rest of the currency market, benefiting from a wave of broad based US Dollar weakness, there are other factors at play that have made price action in the Loonie more than one dimensional. The renewed volatility in the price of OIL has been a big driver of Canadian Dollar direction, with the Loonie having underperformed other currencies in recent days on a notable pullback in the price of the commodity. But OIL is attempting to recover which could be giving the Loonie a bit of a prop. Meanwhile, the Canada budget has come out and has underwhelmed, offering little in the way of any add on to current fiscal stimulus and overall significantly more vague than Trudeau’s initial budget. Looking ahead, absence of data on the Canada docket will leave the market focused on OIL price action, a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari. Of course, we’ve also got the important US House Obamacare repeal vote, which will likely influence the US Dollar and risk markets. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out.

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 0.7010 – 20Mar low – Medium
• S2 0.6969 – 16Mar low – Strong

NZDUSD – fundamental overview

Earlier today, the RBNZ came out and left rates on hold at 1.75% as was widely expected, while also continuing to talk down the New Zealand Dollar, while committing to leave monetary policy accommodative for longer. The New Zealand Dollar has however managed to hold up well in the aftermath, partially on an offsetting upbeat RBNZ outlook for growth and inflation and partially on the back of ongoing broad based weakness in the US Dollar. As far as today goes, all eyes will be on the US House to see what comes of the Obamacare repeal Bill vote. If the vote passes, it will be viewed as risk positive and could invite a fresh wave of Kiwi demand, if it doesn’t pass, we could see a bout of renewed Kiwi declines. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out. Other calendar events of note on Thursday include a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari.

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. The politics come into focus on Thursday with the US House Obamacare repeal Bill vote. If the vote passes, it will be viewed as risk positive, as it will give more confidence to the market on Trump’s ability to deliver on tax cut and fiscal spending policies in the pipeline. But if it doesn’t pass, we could see renewed downside pressure. On Wednesday, we did a special report covering this US political risk event and we welcome you to check it out. Other calendar events of note on Thursday include a Fed Yellen speech, US initial jobless claims, US new home sales and more Fed speak from Kashkari. It’s worth noting that even if the bill does pass, stocks have already had a nice run and could still be exposed.

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 1251.35 – 22Mar high – Medium
• S1 1226.95 – 21Mar low – Medium
• S2 1195.05 – 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 have fueled 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 US themes over the past several days. At the top of the list are the more dovishly perceived FOMC decision and a diminished confidence in President Trump’s ability to deliver US Dollar supportive policies. Local data has been less relevant, though we have seen some Singapore Dollar selling on Thursday after core CPI eased. This week’s pullback in US equities has also managed to slow the recent recovery in the emerging market currency and if the stock market comes under added pressure, it could opened the door for a resumption of Singapore Dollar weakness. Dealers have been talking of US Dollar demand below 1.4000.