Next 24 hours: Market Buys Loonie But Mostly Quiet
Today’s report: NFP Miss No Bother to US Dollar
The US Dollar enjoyed a nice run of gains on Friday, despite a huge NFP miss. It seems a rise in geopolitical risk and ongoing hawkish Fed speak have been inspiring a fresh round of US Dollar bids, easily offsetting any negative flow from the US jobs report, which really wasn't all that bad. Fed Yellen ahead.
Wake-up call
Chart talk: Major markets technical overview video
- France election
- soft production
- Risk sentiment
- Geopolitical tension
- data disappoints
- Canada jobs
- hawkish Fed
- investors nervous
- high demand
- USDSGDÂ
Peformance chart: Five day performance v. US dollar
Suggested reading
- The Town that Turned to Le Pen, A. Chassany, Financial Times (March 31, 2017)
- The Battle For Quant Talent, N. Kumar, Bloomberg (March 6, 2017)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
Inability to establish above resistance at 1.0875 has kept the pressure on the downside, with the market stalling out into medium-term range resistance and rolling back over. While this could be a minor setback ahead of the next upside extension, it could also be the start to a resumption of the broader downtrend. At this point, a break back above 1.0900 or below 1.0500 will be required for clearer directional insight.
EURUSD – fundamental overview
A combination of some dovish ECB speak, worry over a potential Le Pen victory in the French election, rise in geopolitical risk and overall hawkish Fed speak have all been contributing to the Euro’s latest slide, with the single currency dropping back below 1.0600 on Friday. The market is now within a stone’s throw of major support at 1.0495, with dealers talking about big stops below the level. Looking ahead, key standouts on today’s calendar come in the form of Eurozone Sentix investor confidence, and ECB Constancio speech, the US labor market conditions index and a speech from Fed Chair Yellen.
GBPUSD – technical overview
Despite a recent 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 ahead of 1.2775, with only a break above 1.2775 to compromise the bearish structure. Look for a break 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.
GBPUSD – fundamental overview
Friday’s soft run of UK production data and dovish comments from BoE MPC member Vlieghe have been the primary source of this latest round of weakness in the Pound. US Dollar demand on safe haven flow from rising geopolitical risk and overall hawkish Fed speak has also been contributing the the UK currency’s weakness. The Pound wasn’t able to get much help even with the big miss on US NFPs, with the market less concerned about a one off print and other components within the jobs report that were as expected. Looking ahead, absence of first tier data will leave the market focused on any headlines relating to Brexit negotiations, geopolitical risk, the US labor market conditions index and a speech late in the day from the Fed Chair.
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. Look for any rallies to be well capped ahead of  114.00, while ultimately, only back above 115.60 would force a bullish structural shift. Below 110.00 strengthens the outlook and should accelerate declines.
USDJPY – fundamental overview
Yen flow continues to be dictated by broader risk sentiment, with the Japanese currency higher over the past week against even the US Dollar as geopolitical risk fuels the demand. Still, all of this flow has yet to result in a USDJPY break below that major psychological barrier at 110.00, with plenty of demand propping the major pair ahead of the level. The US Dollar was also bid across the board on Friday, despite a huge miss on NFPs, with the market seemingly ignoring the number, focusing more on the other components which were in line and ongoing hawkish Fed speak. Fed Bullard has come out with some dovish comments into Monday, but his stance is well known and hasn’t factored into price action. Dealers talk of USDJPY offers ahead of 112.00. As far as today’s calendar goes, the Yen will continue to monitor risk flow, while taking in the US labor market conditions index and a Fed chair speech late in the day.
EURCHF – technical overview
Rallies continue to be very well capped, with the market adhering to a broader downtrend of lower tops and lower lows. The most recent rally has stalled at 1.0826 where a fresh lower top is now sought ahead of the next major downside extension below the 2016 base at 1.0624 and towards 1.0400 further down. Only back above 1.0826 delays the bearish outlook.
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 a meaningful pullback in risk markets 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 see a daily close below 0.7492 to confirm the bearish outlook.
AUDUSD – fundamental overview
Monday’s Aussie home loan and investment lending data haven’t done anything to help the Australian Dollar’s cause, with both readings coming in on the negative side and significantly below previous prints. The Australian Dollar has already been under a good amount of pressure over the past week, underperforming against its peers on the back of risk off flow from geopolitical tensions, a more dovish RBA and Fed trajectory that continues to point to policy normalisation. Looking ahead, key standouts come in the form of the US labor market conditions index and a Fed Chair Yellen speech late in the day.
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.
USDCAD – fundamental overview
Clearly the market isn’t too excited about buying the Canadian Dollar. Friday’s price action was a perfect example of this fact after a major miss in the US NFP print, very strong Canada jobs beat and another push higher in the price of OIL. All of these Canadian Dollar supportive flows and yet into Monday, the Loonie is trading lower than where it was ahead of the Friday jobs reports. It seems the market is still concerned about a more dovish Bank of Canada and ongoing hawkish Fed speak that reflect yield differentials that continue to lean in the Buck’s favor. Looking ahead, key standouts on Monday’s calendar come in the form of Canada housing starts, the US labor market conditions index and a speech from Fed Chair Yellen late in the day.Â
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.
NZDUSD – fundamental overview
The New Zealand Dollar continues to find offers as broader themes weigh on the commodity currency. The combination of a rise in geopolitical tension, and ongoing hawkish Fed speak are the primary drivers behind the bearish Kiwi case, with dealers now talking about some major sell stops below 0.6850. Looking ahead, the risk correlated currency will continue to monitor the geopolitical tension, while also taking in the US labor market conditions index and a Fed Chair Yellen speech late in the day.
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 2380.
US SPX 500 – fundamental overview
Bulls remain in control, though there have been some cracks at the surface in recent days. Lat week’s Fed Minutes citing equity overvaluation and possible balance sheet shrinkage later this year haven’t been stock market positive, while the rise in geopolitical tension is only adding to the strain. The market is waking up to the fact that the new US administration’s alternative take on diplomacy could make for a less predictable path for equity markets. Stocks will continue to monitor these developments going forward. As far as today goes, the key standout comes in the form of a Fed Chair Yellen speech late in the day.
GOLD (SPOT) – technical overview
The market has been very well supported since basing out ahead of 1100 in 2016. This latest break to another yearly high through 1265 strengthens the outlook, confirming the next higher low at 1195, while opening the door for the next major upside extension towards a measured move into the 1335 area. Look for any setbacks to be well supported ahead of 1200, with only a break back below 1180 to compromise the constructive outlook.
GOLD (SPOT) – fundamental overview
Solid demand from medium and longer-term players continues to emerge, with these players more concerned about the limitations of exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity in demand, with many market participants also 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
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.
Feature – fundamental overview
Going forward, it will be very difficult for the Singapore Dollar to ignore the combination of still favourable US Dollar yield differentials, overall solid US economic data and risk for a deterioration in global sentiment, all weighing themes that could easily put the emerging market currency back under pressure. The rise in geopolitical tension has only further contributed to strain on the emerging market currency, while expectations for slower economic growth in Singapore aren’t helping.