Quiet Start But Fireworks to Come

GBPUSD – technical overview

The market hasn’t been able to establish above the January high, with extended studies opening the door for a much needed corrective decline. There is risk for a deeper setback in the days ahead, with the market potentially gravitating to rising channel support off the 2017 uptrend which comes in around the 1.3700-1.3900 area. Still, overall, the structure remains highly constructive on a medium to longer term basis and a higher low is sought out ahead of a bullish continuation.

• R2 1.4247 – 19Apr high – Medium
• R1 1.4100 – Figure – Medium
• S1 1.3985 – 23Apr low – Medium
• S2 1.3966 – 5Apr low – Strong

GBPUSD – fundamental overview

The Pound comes into the new week singing a different tune, with the UK currency sliding aggressively after failing to establish above the January peak. The weakness comes on the back of a soft run of UK data including earnings, CPI and retail sales, more cautious BOE Carney comments and some broad based US Dollar demand. All of this has thrown a dent in what had been a near certain BOE rate hike in May, with the Pound at risk for more weakness in the sessions ahead. Today’s calendar is exceptionally thin, with only US existing home sales standing out.

GBPUSD – Technical charts in detail

USDJPY – technical overview

The major pair has been attempting to bottom out after trading down to a 2018 low in the 104s. Still, a daily close back above 108.00 will be required to suggest the downside pressure has come off. Until then, risk remains for another topside failure and reversal back down towards the 2018 low.

• R2 108.90 – 12Feb high – Strong
• R1 108.00 – Figure – Medium
• S1 107.36 – 20Apr low – Medium
• S2 106.62 – 9Apr low – Strong

USDJPY – fundamental overview

The Yen is caught between flows at the moment, with the currency unsure if it should be more reactive to risk off flow or broad based US Dollar demand. For the moment, it’s the US Dollar demand that is winning out, with buy stops cleared above 107.90. Still, any intensification of declines in the global equities market will likely offset the USD demand and invite renewed Yen interest on its traditional correlation with risk off flow. As far as today’s docket goes, we get US existing home sales as the only notable standout.

USDJPY – Technical charts in detail

EURCHF – technical overview

The market continues to trend higher, recently extending gains to a fresh multi-month high back through the massive 1.2000 level. This is the first time the market has traded 1.2000 since January 2015. However, studies are now extended across all major time frames and there is risk building for a sizable corrective decline before considering a bullish continuation.

• R2 1.2100 – Figure – Strong
• R1 1.2006 – 20Apr/2018 high – Medium
• S1 1.1946 – 18Apr low – Medium
• S2 1.1842 – 12Apr 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 a more intensified liquidation on that front into Q2 2018, 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. SNB Jordan was on the wires this week, once again reaffirming policy strategy, even with the rate pushing back through 1.2000.

AUDUSD – technical overview

The market has been in the process of rolling over after failing to sustain a break above 0.8100 earlier this year. This has set up a sequence of lower tops and lower lows on the daily chart, with deeper setbacks seen towards the 0.7500 barrier over the coming sessions. A break back above 0.7917 would be required to negate the structure and force a shift in the outlook.

• R2 0.7814 – 19Apr high – Strong
• R1 0.7732 – 20Apr low – Medium
• S1 0.7644 – 29Apr low – Strong
• S2 0.7600– Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has come under renewed pressure as global equities turn back down and weigh on the risk correlated commodity currency. Last week’s Aussie employment data was also discouraging and could be another weighing factor. However, setbacks have been less intense as it seems cross related Aussie demand against its Kiwi cousin is helping to slow the pace of the drop. Overall, Aussie will continue to monitor developments on the global front, with any escalation in tension to add to the downside pressure. Looking ahead, the economic calendar is quiet, with only US existing home sales standing out.

USDCAD – technical overview

Despite the latest round of weakness, overall, there are signs of basing after months of downside pressure. Look for any setbacks to now be well supported ahead of 1.2500, with a higher low sought out in favour of the next major upside extension through 1.3125 and towards 1.3500 further up. A daily close above 1.2800 will strengthen the constructive outlook.

• R2 1.2820– 9Apr high – Strong
• R1 1.2800 – Figure – Medium
• S1 1.2677 – 19Apr high – Medium
• S2 1.2634 – 20Apr low – Strong

USDCAD – fundamental overview

The Canadian Dollar has come under intense pressure over the past few sessions, with the Loonie suffering from a combination of negative developments on the local front and broad based US Dollar demand. On the local front, last week’s more cautious Bank of Canada meeting got the selling going, with setbacks intensifying after Friday’s Canada retail sales and CPI came in soft. We also continue to believe the Loonie had gotten ahead of itself with NAFTA risk a big deal and still well capable of giving the Bank of Canada a big headache if it gets too aggressive with policy normalization. Looking ahead, we get Bank of Canada Governor Poloz testimony late in the day which could shed more light on the outlook. We also get Canada wholesale sales and US existing home sales.

NZDUSD – technical overview

The market looks to be in the process of topping out, with the daily chart slowly rolling over in 2018. Rallies are now expected to be very well capped ahead of 0.7500, with only a break back above the psychological barrier to negate. Look for a renewed weakness in the sessions ahead, with the latest break back below 0.7200 strengthening the bearish outlook and prospect for a drop back down towards 0.7000.

• R2 0.7345 – 18Apr high – Strong
• R1 0.7273 – 20Apr high – Medium
• S1 0.7154 – 21Mar low – Strong
• S2 0.7100 – Figure – Medium

NZDUSD – fundamental overview

Last week’s Kiwi inflation data was discouraging, with the dip in tradable goods prices and drop to the lowest year on year print since Q3 2016 putting the RBNZ in a position to consider a less hawkish path going forward. This has resulted in a period of relative Kiwi underperformance. Overall, the combination of escalating trade tension, fallout from an end to a near decade long post crisis global monetary policy accommodation and less than stellar economic data out of New Zealand in recent weeks is all starting to weigh on the Kiwi rate after the market had pushed into some medium term resistance towards 0.7500. It’s worth noting, we’ve also seen cross related Kiwi selling against Aussie. Looking ahead, the economic calendar is quiet, with only US existing home sales standing out.

US SPX 500 – technical overview

A severely overbought market is finally showing signs of rolling over off the January record high, allowing for stretched monthly readings to unwind. Any rallies should now be very well capped ahead of 2800 in favour of continued weakness towards the 2015 high at 2138.

• R2 2743 – 21Mar high – Strong
• R1 2726 – 22Mar high – Medium
• S1 2585 – 6Apr low – Medium
• S2 2533 – 6Feb/2018 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 combination of Fed policy normalisation, ramped up US protectionism, and geopolitical tension have been capping the market into rallies, with any renewed setbacks at risk of intensifying on the prospect for the reemergence of inflationary pressure. Overall, we expect the bigger picture theme of policy normalisation to continue to weigh on investor sentiment into rallies.

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 some more chop followed by an eventual push above massive resistance in the form of the 2016 high at 1375. This will then open the door for a much larger recovery in the months ahead. In the interim, setbacks are expected to be well supported around 1300.

• R2 1375 – 2016 high – Very Strong
• R1 1366 – 25Jan/2018 high – Medium
• S1 1320 – 6Apr low – Medium
• S2 1303 – 2Mar low  – Strong

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.

BTCUSD – technical overview

A break back above short term resistance at 7500 has taken the immediate pressure off the downside, with scope for a correction further up towards 9200. Still, the overall pressure still leaves the market in a downtrend and it is going to take a recovery back above 12000 to suggest otherwise.

• R2 9,200 – 21Mar high – Strong
• R1 8,643 – 26Mar high – Medium
• S1 6,420 – 1Apr low – Medium
• S2 6,000 – 6Feb/2018 low  – Strong

BTCUSD – 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 is helping to 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 result in even deeper setbacks ahead.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

Signs of recovery, with the market rallying out from the 2018 low and pushing back above some consolidation resistance. This opens the door to more significant resistance at 590, though a clear break back above the 590 level will be required to officially take the immediate pressure off the downside. Until then, the pressure remains on the downside and the market could be looking for a lower top ahead of a bearish resumption.

• R2 745 – 10Mar high – Strong
• R1 590 – 21Mar high – Medium
• S1 412 – 12Apr/2018 low – Strong
• S2 358 – 1Apr/2018 low  – Strong

ETHUSD – fundamental overview

Setbacks in the price of ETH have been more intense than those of Bitcoin in 2018. Though both markets are going through a period of shakeup following bubble activity in 2017, there has been a bigger exodus from ETH with this cryptocurrency more heavily correlated to risk in global markets. The reduction in global risk appetite has put a strain on the investment in projects on the blockchain and with most of the blockchain projects built on the Ethereum protocol, it makes sense to see this market more negatively impacted than bitcoin, which is considered to be the store of value digital currency.