Investors Desperate for Positive Catalyst

GBPUSD – technical overview

The recent reversal off a near 7-year low at 1.4080 has opened the door for a bounce that has room to extend into the 1.4800-1.5000 area over the coming sessions before the market considers a lower top and meaningful bearish resumption. Look for any setbacks to be well supported above 1.4350, with only a daily close below to put the immediate pressure back on the downside.

• R2 1.4668 – 4Feb high – Strong
• R1 1.4579 – 10Feb high – Medium
• S1 1.4400 – Figure  – Medium
• S2 1.4352 – 8Feb low  – Strong

GBPUSD – fundamental overview

The Pound has been locked in some choppy trade over the past few sessions but was weighed down Thursday on the back of the record low 10-year gilt move and some better than expected US initial jobless claims. There had been some signs of the UK currency starting to benefit from broader risk liquidation flows, but these inflows have been mitigated by concerns over the UK economy and ongoing Brexit risk. Looking ahead, lack of first-tier data out of the UK on Friday will leave the currency trading on broader sentiment flow and some US data which features retail sales, Michigan confidence and business inventories. Fed Dudley will be out on the wires late in the day.

USDJPY – technical overview

The latest breakdown below critical support in the form of the December 2014 low at 115.57 is a significant development and now opens the door for deeper setbacks, potentially all the way down into the 105.00s. While it would be premature to call for a retest of the 105.00s, the monthly chart is showing scope for a retracement back towards this area, which should not be ruled out. Overall, the broader, longer-term uptrend remains intact and this round of weakness is ultimately expected to be supported in favour of the next major higher low and bullish resumption. But for now, the pressure is firmly on the downside.

• R2 114.21 – 9Feb low – Strong
• R1 113.59 – 11Feb high – Medium
• S1 111.90 – 12Feb low – Medium
• S2 110.98 – 11Feb/2016 low – Strong

USDJPY – fundamental overview

Clearly the Yen’s ascendancy has been problematic for Japan, with the currency moving in the opposite direction of where the BOJ wants it to move if the central bank has any hopes of reaching its inflation target. But traditional correlation with risk off flow is problematic and the Yen has emerged as a major outperformer in the FX market over the past week, up some 4% against the Buck. There has been a lot of chatter about a potential response from the government. Reports of meetings between Kuroda, Abe and FX chief Asakawa have inspired some profit taking off the USDJPY lows. However, with no such response manifesting as of yet and with Kuroda saying he didn’t discuss FX matters, rallies in USDJPY have been finding offers. Bets are now increasing for a March policy response from the BOJ, but for today, the focus will be on risk sentiment flow and a batch of data out of the US featuring retail sales, Michigan confidence and business inventories. Fed Dudley speaks late in the day.

EURCHF – technical overview

The latest round of setbacks from fresh multi-month highs at 1.1200 are viewed as corrective, with the broader outlook still highly constructive. Look for any additional weakness in the sessions ahead to be well supported above 1.0900 on a daily close basis, in favour of a higher low and the next major upside extension through 1.1200 and towards 1.1400 further up. Only a close below 1.0900 would delay the outlook.

• R2 1.1200 – 4Feb/2016 high – Strong
• R1 1.1097 – 8Feb high – Medium
• S1 1.0940 – Previous Resistance – Medium
• S2 1.0910 – 20Jan low – Strong

EURCHF – fundamental overview

Clearly, the SNB strategy of weakening the Franc has been highly effective these past several months. But now with risk liquidation flow intensifying and with the other traditional safe haven currencies rallying sharply to their detriment, the SNB battle is getting tougher. We have already seen EURCHF come under pressure off recent highs from the other week and should other central banks ramp up their own dovish rhetoric, this could make the Franc more attractive again. Also inviting additional safe haven Franc bids this time round is the fact that this week’s risk off flow has been less about China and more about the decline in European banks, which hits a lot closer to home. The SNB has been committed to offsetting Franc inflows at every turn, and it will be interesting to see what this next turn brings.

AUDUSD – technical overview

The market has entered a period of correction out from the recent multi-year low at 0.6827. However, any additional upside should be limited to the 0.7265 area, with a lower top sought out ahead of a fresh downside extension and bearish continuation below 0.6827 and towards the next key barrier at 0.6500 further down. Ultimately, only back above 0.7385 would force a shift in the bearish structure.

• R2 0.7242 – 4Feb high – Strong
• R1 0.7153 – 11Feb high – Medium
• S1 0.7037 – 10Feb low – Medium
• S2 0.6973 – 9Feb low – Strong

AUDUSD – fundamental overview

RBA Stevens was out with some upbeat comments, saying the Australian economy would expand at a moderate pace. However, the central banker also welcomed currency weakness given its ability to stimulate growth. Overall, a lot of choppy directionless trade for the Australian Dollar at the moment. Risk liquidation flows are weighing on the correlated currency, while a surge in the price of GOLD and an expectation for a scaled back Fed, have been supporting the market into dips. Looking ahead, sentiment flow will continue to dictate direction, while the market will also focus on a batch of US data featuring retail sales, Michigan confidence and business inventories. Not to be overlooked is a late day Fed Dudley speech.

USDCAD – technical overview

The market has entered a period of intense correction following the recent surge to a near 13 year high at 1.4690. This most recent setback below 1.3800 opens the door for a deeper drop towards 1.3500, which coincides with medium-term rising trend line support. At this point, only back above 1.4103 would suggests the correction has run its course, with the market poised for bullish resumption.

• R2 1.4103 – 3Feb high – Strong
• R1 1.4017 – 11Feb high – Medium
• S1 1.3820 – 10Feb low – Medium
• S2 1.3787 – 9Feb low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been comfortable trading in a tight consolidation over the past week, with the currency unsure of its next big move and for the moment, caught between diverging flows. On the one hand, the downturn in global sentiment is a negative for the Loonie and has invited renewed offers in the currency. However, at the same time, a recovery in the price of OIL out from Thursday’s multi-year low, surging GOLD and expectation the Fed will scale back its rate hike timeline, have all been supportive of the Canadian Dollar. Looking ahead, lack of first tier economic data out of Canada will leave this market focused on OIL, sentiment flows and a batch of data out of the US featuring retail sales, Michigan confidence and business inventories. Not to be overlooked is a late day Fed Dudley speech.

NZDUSD – technical overview

The market has entered a period of correction following an intense wave of declines in early 2016. Still, overall, the broader downtrend remains intact and any rallies should be well capped below 0.6800 in favour of a fresh lower top and the next downside extension towards the 2015 multi-year low at 0.6130. Only back above 0.6900 would force a shift in the structure.

• R2 0.6752 – 5Feb high– Strong
• R1 0.6739 – 12Feb high – Medium
• S1 0.6605 – 10Feb low – Medium
• S2 0.6563 – 9Feb low – Strong

NZDUSD – fundamental overview

The RBNZ has already expressed its discomfort with Kiwi at elevated levels and this has been backed up by the IMF this week after the fund said Kiwi may still be overvalued by about 10%, while adding the RBNZ should stand ready to ease further. And yet, setbacks have been mitigated by the fact that the Fed may be forced to scale back with its rate hike timeline. But with risk markets broadly under pressure, this could finally open an intensification of Kiwi declines. Looking ahead, sentiment flow will continue to dictate direction, while the market will also focus on a batch of US data featuring retail sales, Michigan confidence and business inventories. Not to be overlooked is a late day Fed Dudley speech.

US SPX 500 – technical overview

Signs of a critical structural shift following an impressive multi-year rally to a fresh record high in 2015. The market has finally stalled out at 2137, with the recent break back below the critical August base at 1834 strengthening the outlook. From here, any rallies are expected to be well capped below previous support at 1993, in favour of the next major downside extension towards 1700. Only a daily close back above 1947 will take the immediate pressure off the downside.

• R2 1947.00 – 1Feb high – Strong
• R1 1883.00 – 10Feb high – Medium
• S1 1808.00 –11Feb/2016 low – Medium
• S2 1800.00 – Psychological – Strong

US SPX 500 – fundamental overview

Ongoing weakness in the price of OIL, worry over bank creditworthiness and sub-par corporate earnings have all been adding to the exodus from the equity market this week, with setbacks likely to continue if participants feel central banks no longer can do much to support a faltering global economy. It is becoming increasingly apparent in 2016 that even if the Fed opts to scale back its rate hike timeline, this might not be as supportive as many had thought. The fact that central bank strategies are exhausted coupled with the threat of rising inflation in the US is not something that will get investors too excited going forward. Looking ahead, sentiment flow will continue to dictate direction, while the market will also focus on a batch of US data featuring retail sales, Michigan confidence and business inventories. Not to be overlooked is a late day Fed Dudley speech.

GOLD (SPOT) – technical overview

The market continues to show signs of a major structural shift, with the impressive recovery from the multi-year low in late 2015 at 1046 now extending above the critical October 2015 peak at 1192. From here, there is risk for additional upside into next medium-term resistance at 1307, though with daily studies looking extended, don’t rule out the possibility for a quick retracement back into the 1150-1190 area before the market begins its next ascent. Ultimately, only back below 1100 negates the constructive outlook.

• R2 1307.00 – 2015 High – Strong
• R1 1263.00 – 11Feb/2016 high – Medium
• S1 1200.00 – Psychological – Medium
• S2 1181.00 – 10Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD has surged to 12 month highs and has emerged as the clear outperformer over the past week. Massive outflows across equities, high yield and emerging markets have left investors looking for an alternative home for these funds, with the yellow metal the ideal candidate. GOLD has become increasingly attractive in the current market environment. The intense wave of risk liquidation has catapulted the metal on its status as a compelling hedge against uncertainty. Meanwhile, the recent pickup in US hourly earnings is starting to sound some alarm bells over the prospect of rising inflation in a still struggling global economy that can’t handle higher rates. So right now, it’s a one way street got the GOLD market.

Feature – technical overview

USDTRY has entered a period of consolidation after pulling back from the recent record high from 2015. Overall, the structure remains highly consecutive, with dips well supported for now into the 2.9000 area. Look for any additional setbacks to continue to be well supportive above 2.9000 on a daily close basis in favour of an eventual resumption of the uptrend and retest of the 3.0750 record high. Ultimately, only back below 2.7580 would negate the highly constructive outlook.

• R2 3.0345 – 26Jan high – Strong
• R1 2.9695 –9Feb high – Medium
• S1 2.9000 – Psychological – Medium
• S2 2.8700 – 7Dec low – Strong

Feature – fundamental overview

The recovery in the Lira off recent record lows is finally showing signs of potentially waning. The latest widening in the Turkish trade deficit has not helped the Lira’s cause, though this has been somewhat offset by a narrower full year deficit which has benefited from the lower price of OIL. But also seen weighing on the Lira a bit is the reemergence of geopolitical risk in relation to Syria, after President Erdogan was out this past weekend expressing his readiness to join the war if asked. Overall, with global risk sentiment shaky, local inflation at elevated levels, and rate differentials favouring the US Dollar, any additional Lira gains should prove hard to come by. Looking ahead, sentiment flow will continue to dictate direction, while the market will also focus on a batch of US data featuring retail sales, Michigan confidence and business inventories. Not to be overlooked is a late day Fed Dudley speech.