The inflation factor

GBPUSD – technical overview

The recent breakout through the 2019 high at 1.3515 is significant and now sets the stage for the next major upside extension back towards 1.4000. Technical studies are however extended, leaving room for some setbacks over the coming sessions, before the market considers a meaningful bullish continuation. But look for setbacks to now be very well supported ahead of 1.3000.

• R2 1.4000 – Figure – Strong
• R1 1.3953 – 16 February/Multi-month high – Medium
• S1 1.3776 – 12 February low – Medium
• S2 1.3566 – 4 February low – Medium

GBPUSD – fundamental overview

The rally in the US Dollar has been weighing on the Pound, though we've also seen downside pressure from the UK side as well. On Wednesday, BOE Ramsden was out keeping the negative rate debate alive, adding QE could also be ramped up if needed. Key standouts on today’s calendar include US data in the form of initial jobless claims, housing starts, and the Philly Fed.

USDJPY – technical overview

The recent breakdown below 104.00 opens the door for a deeper round of setbacks. Initial support comes in just ahead of 101.00, in the form of the 2020 low, which guards against the major psychological barrier at 100.00 and the 2016 low around 99.00. At this point, it would take a clear break back above 106.00 to take the immediate pressure off the downside.

• R2 106.23 – 17 February high – Strong
• R1 106.00 – Figure – Strong
• S1 104.41 – 10 February low – Strong
• S2 103.33 – 21 January low – Strong

USDJPY – fundamental overview

After pushing through 106.00 on Wednesday, we are seeing a turnaround in the major pair, as risk off flow works into play into the latter half of the week. Key standouts on today’s calendar include US data in the form of initial jobless claims, housing starts, and the Philly Fed.

EURCHF – technical overview

Lots of sideways price action here, with no clear directional insight. For the most part, price action has been confined between 1.0600 and 1.0900, and it will take a clear break above or below for an indication of the next big move.

• R2 1.0916 – 5 June/2020 high – Strong
• R1 1.0900 – Figure – Medium
• S1 1.0736 – 10 December low – Medium
• S2 1.0660 – 4 November low – Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of renewed risk liquidation will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.

AUDUSD – technical overview

Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Next big resistance comes in at 0.8000. Setbacks should now be well supported ahead of 0.7000.

• R2 0.7821 – 6 January/Multi-month high – Strong
• R1 0.7806 – 16 February high – Medium
• S1 0.7564 – 2 February low – Medium
• S2 0.7462 – 21 December low – Strong

AUDUSD – fundamental overview

Aussie employment data came in mixed earlier today, though the Australian Dollar has been finding increased selling pressure on the back of broad US Dollar demand and the onset of some risk off flow. Key standouts on today’s calendar include US data in the form of initial jobless claims, housing starts, and the Philly Fed.

USDCAD – technical overview

Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2500 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2500 would suggest otherwise. Back above 1.3000 will strengthen the outlook.

• R2 1.2957 – 21 December high – Strong
• R1 1.2882 – 28 January high – Medium
• S1 1.2610– 16 February low – Medium
• S2 1.2600 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar hasn't come under as much pressure as other currencies against the Buck, with Wednesday's hotter Canada inflation reads and an ongoing surge in the price of OIL offsetting. Key standouts on today’s calendar include Canada ADP employment, and US data in the form of initial jobless claims, housing starts, and the Philly Fed.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom, after the market bottomed out in 2020. The recent break back above 0.7000 further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud and focused on pushing back towards longer-term resistance in the 0.7500 area. Any setbacks are expected to be well supported ahead of 0.6500.

• R2 0.7316 – 6 January/Multi-month high – Strong
• R1 0.7266 – 16 February high – Medium
• S1 0.7096 – 18 January low – Medium
• S2 0.7003 – 21 December low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar appears to be a little more at risk into the latter half of the week as signs of risk off flow and broad US Dollar demand work into the mix. Key standouts on today’s calendar include US data in the form of initial jobless claims, housing starts, and the Philly Fed.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4000, with a break back below 3600 to strengthen the outlook.

• R2 4000 – Psychological – Strong
• R1 3965 – 16 February/Record high – Medium
• S1 3700 – Round number – Medium
• S2 3663 – 4 January low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout should weigh more heavily on investor sentiment in 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1700. Longer-term technical studies are however in the process of consolidating, with the market in search of a higher low ahead of a bullish continuation.

• R2 1966 – 9 November high – Strong
• R1 1960 – 6 January high – Medium
• S1 1770 – 17 February low – Medium
• S2 1765 – Previous resistance – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should 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.

BTCUSD – technical overview

The short-term outlook should be less constructive in the aftermath of this latest wave of parabolic price action through $50,000. Key indicators are tracking in extreme overbought territory across multiple timeframes, warning of a period of deeper correction and consolidation before any meaningful bullish continuation can be expected. At the same time, look for setbacks to now be well supported into the $30,000 area.

• R2 55,000 – Measured move target – Strong
• R1 52,640 – 18 February/Record high – Medium
• S1 37,370 – 7 February low – Medium
• S2 27,680 – 4 January/2021 low – Strong

BTCUSD – fundamental overview

Overall, ongoing adoption, continued innovation in the space, a warmer regulatory environment and healthy institutional investor appetite have all contributed to this latest wave of strong demand leading to fresh record highs into 2021. Market participants are also drawn to the asset as it proves to be an attractive store of value at a time when governments and central banks continue to print money at unprecedented rates. Still, the market has run a little too far and fast into February and we suspect we should be seeing a round of profit taking kicking in.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market has extended its run of record highs, since exceeding the previous peak from January 2018. At the same time, with medium-term and longer-term studies showing overextension, there could be a period of deep correction and consolidation that sets in before a meaningful bullish continuation through 2,000. Setbacks should now be well supported ahead of 1,000.

• R2 2000 – Psychological – Very Strong
• R1 1920 – 18 February/Record high – Medium
• S1 1480 – 25 January high – Medium
• S2 1205 – 27 January low – Strong

ETHUSD – fundamental overview

Bitcoin is getting all of the attention, though it's Ether that's outperformed its older cousin over the past several months. All of the healthy investor risk appetite in global markets has helped to fuel demand for innovation and the Ethereum blockchain is very much at the centre of this when it comes to cryptocurrencies. At the same time, we would be concerned about a bubble in the defi space, with valuations for these projects soaring to alarming heights. We've also warned that any downturn in global sentiment is likely to have a more significant negative impact on the more risk correlated Ether.