UK Growth, ECB Minutes, Canada Retail Sales

GBPUSD – technical overview

The market has entered a corrective phase since pushing to a 2018 high at around 1.4350 and rallies should be well capped ahead of the 2018 high for additional corrective activity. There is still scope for additional declines into the 1.3400-1.3600 area, though setbacks should then be very well supported in favour of that next meaningful higher low and bullish continuation.

• R2 1.4145– 16Feb high – Strong
• R1 1.4010 – 21Feb high – Medium
• S1 1.3900 – Figure – Medium
• S2 1.3765 – 5Feb high – Strong

GBPUSD – fundamental overview

The Pound has been holding up well on a relative basis, but this hasn’t kept it from sliding against the US Dollar in recent sessions, as the Buck continues to recover in 2018. Most of the Pound’s slide has come from the broad Dollar demand, as market participants reconsider short Dollar bets on account of the pickup in US inflation and favourable implications for USD yield differentials. But we have also seen some selling in the Cable rate on UK drivers, after Wednesday’s UK jobs report wasn’t all that great and stress emerged on the Brexit front relating to UK cabinet Ministers backlash from the PMs transition strategy. Looking ahead, UK growth data will be in the spotlight, with US initial jobless claims and some Fed speak due later in  the day.

USDJPY – technical overview

The major pair has just taken out the 2017 low, with the break a significant one, as it also compromises a range that has been in play for many months. This could now open the door for an accelerated decline in the days ahead, down towards the 102-103s, an area that coincides with a measured move extension target and the 78.6% fib retrace off the 2016 low to high move.

• R2 108.29 – 26Jan low – Strong
• R1 107.91 – 21Feb high – Medium
• S1 107.28 – 21Feb low – Medium
• S2 106.56 – 20Feb low – Strong

USDJPY – fundamental overview

The combination of renewed demand for the US Dollar and recent warnings out of Japan that the government is closely watching FX developments, have been contributing to this latest bounce in the major pair. But overall, the Yen has been well bid in early 2018, with the Dollar taking a big hit from US administration soft Dollar policy and risk for a capitulation in global equities driving additional Yen demand. Though we have seen a healthy rebound in risk appetite off the 2018 lows, there has also been a clear downturn in 2018, which could invite additional Yen demand if the market rolls over again. Stops were taken out below the 107.30 area 2017 low last week, with the market dropping to a fresh multi-month low into the 105s thus far. Looking ahead, we get US initial jobless claims and some Fed speak.

EURCHF – technical overview

Despite this latest round of setbacks, overall, the market continues to trend higher, recently extending gains to a fresh multi-month high. The bullish price action has the market thinking about a retest of that major barrier at 1.2000 further up. In the interim, look for the current round setbacks to be very well supported, while only back below 1.1260 would delay the overall constructive tone.

• R2 1.1834 – 15Jan/2018 high – Strong
• R1 1.1640 – 5Feb high – Medium
• S1 1.1450 – 8Feb low – Medium
• S2 1.1390 – 2Oct low – Strong

EURCHF – fundamental overview

The SNB will need to be careful right now, as its strategy to weaken the Franc could face headwinds from the US equity market in 2018. The record run in the US stock market has been a big boost to the SNB’s strategy with elevated sentiment encouraging Franc weakness. Of course, the SNB is no stranger to this risk, given a balance sheet with massive exposure to US equities. But any signs of capitulation on that front into this new year, will likely invite a very large wave of demand for the Franc, which will put the SNB in a more challenging position to weaken the Franc.  And so, we speculate the SNB continues to be active buying EURCHF in an attempt to build some cushion ahead of what could be a period of intense Franc demand ahead. Recent outperformance in the Swiss Franc despite flows which should have otherwise been supportive of a higher EURCHF, could already be offering up a red flag.

AUDUSD – technical overview

The market has been in the process of rolling over after failing to sustain a break above the 2017 high. The recent daily close back below 0.8000 strengthens this outlook and opens the door for a renewed wave of declines back towards 0.7500. At this point, only a daily close back above 0.8000 would delay.

• R2 0.7989 – 16Feb high – Strong
• R1 0.7903 – 21Feb high – Medium
• S1 0.7760 – 9Feb low – Strong
• S2 0.7700 – Figure – Medium

AUDUSD – fundamental overview

Earlier this week, the RBA Minutes came out and produced a mostly mixed message, in line with what was to be expected from the central bank. The RBA was upbeat on growth but balanced this out with concerns about inflation and wages. Overall, the Australian Dollar has managed to hold up on dips in recent months, with the supportive price action more a function of broad based US Dollar weakness than anything else. But this is changing right now. Risk sentiment is showing signs of deteriorating in 2018, while softer Aussie data has left room for the RBA to take a more cautious approach as reflected in its February decision. Soft US Dollar policy has been a drag but signs of rising inflation in the US could soon more than offset, especially if global risk sentiment deteriorates. Looking ahead, we get US initial jobless claims and some Fed speak.

USDCAD – technical overview

Despite a recent round of setbacks, there are signs of basing in this pair. This sets the stage for additional upside, with the next focus on a retest of the psychological barrier at 1.3000. In the interim, any setbacks should now be well supported above 1.2450.

• R2 1.2921– 19Dec high – Strong
• R1 1.2797 – 22Dec high – Medium
• S1 1.2557 – 20Feb low – Medium
• S2 1.2451 – 16Feb low – Strong

USDCAD – fundamental overview

Overall, Canada’s recovery is already somewhat fragile, and this coupled with an unstable macro picture and plenty of uncertainty around the fate of NAFTA, should be keeping the Canadian Dollar pressured, especially after the Bank of Canada opted to go ahead with another rate hike last month, which will only add to the strain if the global sentiment picture deteriorates even further. Looking ahead, Canada retail sales will be the big focus, though we also get US initial jobless claims and some Fed speak.

NZDUSD – technical overview

The market looks to be in the process of rolling over, with the daily chart showing a possible double top formation. Right now, it will take a clear break above 0.7400 to take the pressure off the downside and negate the bearish outlook. Until then, there is risk for continued weakness back towards 0.7000.

• R2 0.7438 – 16Feb/2018 high – Strong
• R1 0.7400 – Figure – Medium
• S1 0.7241 – 14Feb low – Medium
• S2 0.7178 – 8Feb low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been bid up in recent weeks, on the back of broad based US Dollar declines. However, earlier this month, the RBNZ took on a more dovish outlook and this coupled with signs of rising inflation in the US and the possibility for equity market capitulation, could easily offset any of the recent demand, ushering in a wave of Kiwi underperformance. This week’s discouraging GDT auction result has also not done anything to help Kiwi’s cause.  Looking ahead, we get US initial jobless claims and some Fed speak.

US SPX 500 – technical overview

A severely overbought market has finally at long last relented, allowing for stretched readings to unwind. There’s plenty of room for these setbacks to extend following the break back below the 2675 area January low, with the market at risk for a further intensification of declines. Any rallies should now be very well capped ahead of 2800.

• R2 2882 – 29Jan/Record high – Strong
• R1 2765 – 5Feb high – Strong
• S1 2624 – 12Feb low – Medium
• S2 2534 – 6Feb low – Strong

US SPX 500 – fundamental overview

Investor immunity to downside risk is not looking as strong these days and there’s a clear tension out there as the VIX starts to rise from unnervingly depressed levels. The fact that Fed policy is normalising, however slow, could start to resonate a little more, with stimulus efforts exhausted, balance sheet reduction coming into play and the Fed finally following through with forward guidance. Certainly, the Fed’s more hawkish tone and subsequent jumps in hourly earnings and CPI, are the types of things that could weigh more heavily on sentiment in the sessions ahead.

GOLD (SPOT) – technical overview

Setbacks have been well supported over the past several months, with the market continuing to put in higher lows and higher highs. Look for the current run to break through and establish above massive resistance in the form of the 2016 high at 1375, with the push to suggest a major bottom has formed, opening the door for a much larger recovery in the months ahead. Any setbacks should now be well supported ahead of 1300.

• R2 1375 – 2016 high – Very Strong
• R1 1367 – 25Jan high – Medium
• S1 1306 – 4Jan low – Strong
• S2 1294 – 29Dec low  – Medium

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players persists, with these players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity well supported, 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. Certainly the US Dollar under pressure has added to the metal’s bid tone as well, but there is a growing sense that even in a scenario where the US Dollar is bid for an extended period, GOLD will hold up on risk off macro implications. The 2016 high at 1375 is a massive level that if broken and closed above, could be something that triggers a widespread panic and rush to accumulate more of the hard asset.

Feature – technical overview

Bitcoin has come under intense pressure since topping out at a record high just shy of 20,000 in December. The market has now exceeded a measured move downside objective that had targeted a drop to $7,000, with deeper setbacks now on the cards for a move to retest the September 2017 peak around $5,000. At this point, it will take a daily close back above $13,000 at a minimum, to take the pressure off the downside.

• R2 13,000 – 20Jan high – Strong
• R1 12,000 – Figure – Medium
• S1 9,000 – Figure – Strong
• S2 6,000 – 6Feb/2018 low – Strong

Feature – fundamental overview

The crypto asset has come under pressure in 2018, with ramped up regulatory oversight and potential government crackdowns forcing many holders to exit positions. The market is also coming back to earth after a euphoric 2017 run that had bubble written all over. Bitcoin has struggled on the transaction side as well, with transactions per second a major drawback, along with a mining community that has been less willing to process transactions due to the lower fees. The Lightning network has been a welcome development and will ramp up transaction speed, which has been behind some of the recovery off the 2018 low, though it seems the combination of a massive bubble, more regulatory oversight, a market that is still trying to convince of its proof of concept, and the threat of a reduction in global risk appetite, could all suggest even deeper setbacks ahead.