It’s Back to Those Traditional Drivers

Next 24 hours: Selling the Fact

Today’s report: It’s Back to Those Traditional Drivers

Sunday's Macron victory in the France election has closed the book on a period of uncertainty that had posed significant structural risk to the EU and systemic risk to the global economy. The market can now get back to focusing on more traditional drivers including ECB policy, which will help determine the Euro’s direction forward.

Download complete report as PDF

Wake-up call

Chart talk: Major markets technical overview video

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The market has now cleared major resistance at 1.0906, breaking to a fresh 2017 high, while confirming a higher low at 1.0570. The break strengthens the case for a major bottom and opens the next upside extension towards the 1.1400 area. Setbacks at this point are to be expected but should also be very well supported ahead of 1.0700, with only a break back below 1.0570 to compromise the constructive outlook.

  • R2 1.1067 – 8Nov 2016 high – Strong
  • R1 1.1022 – 8May/2017 high– Medium
  • S1 1.0937 – 3May high – Medium
  • S2 1.0821 – 24Apr low – Strong

EURUSD – fundamental overview

The Euro got a quick boost to a fresh 2017 high in early Monday trade on confirmation of the Macron victory on the France election. The market has since pulled back however, seemingly on a sell the fact reaction after the outcome had been all but priced in the previous week. The focus now will shift back to traditional drivers, with central bank policy to dictate direction. There could be more pressure on the ECB to need to be thinking more hawkish in light of the reduced risk, though with inflation still below target, it’s likely the ECB will err on the side of accommodation, especially with the Euro so bid up of late. For today, the market takes in German factory orders, Eurozone Sentix investor confidence, the US labor market conditions index and some Fed speak.

GBPUSD – technical overview

This latest push through 1.2775, the December 2016 peak, is a significant development as it potentially ends a period of bearish consolidation, warning of the formation of a more meaningful longer-term base. The break ends a multi week consolidation mostly ranging between 1.2000-1.2700 with the bullish move paving the way for a measured moved upside extension equal in size back into the 1.3500 area in the days ahead. Still, there is rise for a short-term pullback, though any declines are now classified as corrective and should be well supported ahead of 1.2500 in favour of a higher low and bullish resumption.

  • R2 1.3000 – Psychological – Strong
  • R1 1.2985 – 5May/2017 high – Medium
  • S1 1.2900 – 5May low – Medium
  • S2 1.2831 – 4May low – Strong

GBPUSD – fundamental overview

The Pound has extended its run to fresh 2017 highs, with this latest boost coming from the US jobs report. Although the headline NFP print was strong and unemployment was low, the softer hourly earnings and drop in the participation rate were enough to keep the market thinking about the Fed perhaps scaling back hawkish bets. Of course, going forward, talks between EU officials and the May government are expected to heat up, which could be a strain on the UK currency going forward, especially after enjoying a healthy rally of late. Looking ahead, key standouts come in the form of the US labor market conditions index and some Fed speak.

USDJPY – technical overview

The recent break and daily close back above 112.20 took the immediate pressure off the downside, though the market has now run into falling trend-line resistance around 113.00 that still warns we could see a topside failure and medium-term lower top ahead of a bearish continuation back towards and below the 2017 low ahead of 108.00. A daily close above 113.05 would negate this prospect, while a close below 111.75 will strengthen it.

  • R2 113.55 – 16Mar high– Strong
  • R1 113.05 – 4May high – Medium
  • S1 111.96 – 3May low – Medium
  • S2 117.78 – 2May low – Strong

USDJPY – fundamental overview

Price action in the major pair continues to be dictated mostly on risk flow, with Friday’s pop to fresh record highs in US equities, helping to keep the major pair supported near multi-session highs. At the same time, there has been some diverging flow capping gains, with broad based USD selling in the aftermath of softer wage and participation rate components in Friday’s US jobs report. Looking ahead, risk sentiment flow will continue to be the primary driver, with the market also taking in the US labor market conditions index and some Fed speak later 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 rallies have stalled above 1.0800 and a fresh medium-term lower top is sought below 1.0900 ahead of the next major downside extension through the 2016 base at 1.0624 and towards 1.0400 further down. Ultimately, only back above 1.0900 would negate the overall bearish outlook.


  • R2 1.0900 – 8Dec high– Strong
  • R1 1.0889 – 8May/2017 high – Medium
  • S1 1.0782 – 24Apr low – Medium
  • S2 1.0722 – 20Apr high – Strong

EURCHF – fundamental overview

Now that Macron has been confirmed as the next President of France, the SNB will need to focus elsewhere in terms of where it may get more help to weaken the Franc. Macron’s win has been a big help to the SNB, committed to weakening its overvalued currency. But with global risk sentiment highly elevated, as reflected through stock markets, there should be worry that any capitulation on that front could invite massive safe haven Franc demand the central bank will be unable to offset. For now, the SNB is hoping the ECB will take on a more hawkish policy approach, though with inflation in the Zone running low, it’s likely the ECB will keep with its more accommodative track for now.

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 0.7500 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. Last week’s drop below 0.7475 strengthens the bearish outlook and any rallies should be very well capped ahead of that previous support now turned resistance at 0.7600.

  • R2 0.7557 – 2May high – Strong
  • R1 0.7431 – 4May high – Medium
  • S1 0.7368 – 5May low – Medium
  • S2 0.7332 – 10Jan low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been struggling in the early hours of the week following an abysmal building approvals showing and some distressing components within the China trade data. Overall, the currency has suffered of late on the drop in commodities prices and worry over the impact of the US administration’s protectionist policies. Looking ahead, we get the US labor market conditions index and some Fed speak.

USDCAD – technical overview

The uptrend in this market remains firmly intact, getting added confirmation following this latest break to a fresh 2017 high and through a key peak from December 2016 at 1.3600. But the market is looking super stretched at the moment which has invited this short-term correction. But any setbacks should now be very well supported above 1.3224 on a daily close basis in favour of an eventual push towards the next measured move upside extension objective in the 1.4000 area. Ultimately, only back below 1.3224 would give reason for pause and delay the constructive outlook.

  • R2 1.3860 – 24Feb 2016 high– Strong
  • R1 1.3794 – 5May/2017 high – Medium
  • S1 1.3625 – 28Apr low – Medium
  • S2 1.3600 – Figure– Strong

USDCAD – fundamental overview

Finally some welcome relief for the Canadian Dollar which had been hit hard in recent weeks on a confluence of drivers including lower OIL, tariffs from the US and troubles at a Canada mortgage lending giant. But Friday’s softer components within the US jobs report managed to offset weakness in the Canada employment report, while an impressive recovery in the price of OIL resulted in a nice recovery for the ailing Loonie. Looking ahead, we get the US labor market conditions index and some Fed speak.

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, with outlook strengthened on this week’s breakdown to a fresh 2017 low. 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 0.7100 compromises the outlook.

  • R2 0.7000 – Psychological – Strong
  • R1 0.6969 – 3May high – Medium
  • S1 0.6839 – 4May low – Medium
  • S2 0.6800 – Figure– Strong

NZDUSD – fundamental overview

Last week’s run of data out of New Zealand was solid, as highlighted by the GDT auction, employment and inflation expectations. This helped to prop an ailing Kiwi, weighed down on broader risk associated with declining commodities and worry over the impact of the US administration’s protectionist policies. Meanwhile, softer components in Friday’s US jobs report and a run to fresh record highs in US equities, offered additional support. Looking ahead, we get the US labor market conditions index and some Fed speak.

US SPX 500 – technical overview

The market was unable to break down below major support at 2320, leaving the pressure on the topside and opening the door for this latest run to a fresh record high. The push back above 2400 opens a measured move extension to 2480. At this point, a break back below 2368 would be required at a minimum to alleviate immediate topside pressure.

  • R2 2480.00 – Measured Move – Strong
  • R1 2406.00 – 8May/Record high – Medium
  • S1 2368.00 – 24Apr low – Medium
  • S2 2321.00 – 27Mar low – Strong

US SPX 500 – fundamental overview

Friday’s US employment report was a Goldilocks report for the stock market. Investors got everything they wanted with NFPs and the unemployment rate looking healthy, while at the same time, the softer hourly earnings pointed to a Fed that would not be as pressured to be raising rates going forward. So in the end, strong headline numbers to bolster sentiment and softer underlying components to keep rates lower for longer.

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 1215, with only a break back below 1195 to compromise the constructive outlook.

  • R2 1295.60 – 17Apr/2017 high – Strong
  • R1 1257.80 – 2May high – Medium
  • S1 1220.00 – Round Number – Medium
  • S2 1226.95 – 21Mar low  – Strong

GOLD (SPOT) – fundamental overview

The US Dollar recovery in recent sessions has contributed to this latest decline, with setbacks accelerating after the Fed downplayed a recent run of softer data, giving the Buck an added boost. Meanwhile, a broad based capitulation in commodities markets is adding to downside pressure. Still, 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, 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

USDTRY has been in a period of choppy consolidation since topping out at a fresh record high earlier this year. At this point, despite the latest pullback, the structure continues to favour the topside, with scope still existing for a bullish continuation to yet another record high. At a minimum, a daily close back below 3.5000 would be required to potentially force a shift in the outlook and open the door for a more significant bearish corrective phase.

  • R2 3.7880 – 9Mar high – Strong
  • R1 3.7510 – 7Apr high – Medium
  • S1 3.5000 – Psychological – Strong
  • S2 3.4020 – 8Dec low – Strong

Feature – fundamental overview

A lot of positives for the Lira of late including this latest news of S&P affirming Turkey’s ratings (the rating agency was considering a downgrade) and string of hawkish moves by the CBRT. But overall, despite recent gains, the currency market is still taking time to digest the latest result in the Turkish referendum which produced a narrow “Yes” victory for President Erdogan. On the one hand, the result can be viewed as Lira supportive as it reduces political uncertainty which should translate into more stable economic policy. On the other hand, the move to grant an unlimited amount of power to the President could pose risk on the global stability front, which would be viewed as Lira bearish.

Peformance chart: Five day performance v. US dollar

Suggested reading

Daily Reports Global FX Insights   Daily   LMAX Exchange  

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.