Draghi on the Wires, US Market Closed

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 1.4443 – 12Feb low  – Medium
• S2 1.4352 – 8Feb low  – Strong

GBPUSD – fundamental overview

The Pound has held up rather well in the aftermath of Friday’s solid US retail sales print, with the UK currency focused more on the EU Summit and optimism over the prospect for a deal that will keep the UK in the EU. Lack of first-tier data out of the UK and the US holiday closure for the Presidents’ Day holiday should keep activity rather light on Monday.

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. Still, 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, with rallies seen well capped into the 116.00 area.

• R2 115.26 – 10Feb high – Strong
• R1 114.21 – 9Feb low – Medium
• S1 113.27 – 15Feb low – Medium
• S2 111.66 – 12Feb low – Strong

USDJPY – fundamental overview

China markets have opened back up and despite the horrid China trade data, risk assets have help up rather well in early Monday trade. This has been supportive of the correlated USDJPY pair, with the market finding added bids on the back of the much weaker than expected Japan GDP print which now further increases the likelihood the BOJ will ease further in the weeks ahead. Looking ahead, the economic calendar is quiet for the remainder of the day, with the US market closed for the Presidents’ Day holiday.

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 1.1097 – 8Feb high – Strong
• R1 1.1044 – 11Feb 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 with risk liquidation flow intensifying in 2016 and with the other traditional safe haven currencies rallying sharply to their detriment, the SNB battle is getting tougher. We’ve already seen EURCHF come under pressure off recent highs and should other central banks move to looser policy, this could make the Franc more attractive again. 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 0.7200 – Figure – Medium
• S1 0.7100 – 15Feb low – Medium
• S2 0.7063 – 12Feb low – Strong

AUDUSD – fundamental overview

Interestingly enough, despite the horrid round of China trade data early Monday, the Australian Dollar has managed to perform quite well, with the currency paying more attention to the broader recovery in risk assets this past Friday, aided by a rebound in the price of OIL. Looking ahead, trade is expected to be rather thin on Monday, with the US market closed for the Presidents’ Day holiday.

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 into the 1.3500s, 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 1.4017 – 11Feb high – Strong
• R1 1.3879 – 15Feb high – Medium
• S1 1.3787 – 9Feb low – Medium
• S2 1.3710 – 5Feb low – Strong

USDCAD – fundamental overview

Talk of OIL production cuts has ramped up in recent days and this has unquestionably been a help to help to the Canadian Dollar, which is in the throws of a recovery rally off recent  near 13 year lows against the Buck. OIL’s rebound on Friday has directly correlated with the Canadian Dollar and this in conjunction with some renewed appetite for risk assets is keeping the Loonie in demand into Monday. Looking ahead, there is no first-tier data due out of Canada on Monday, while the US market will be closed for the Presidents’ Day holiday. This should keep trade rather light for the remainder of the day.

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 0.6700 – Figure – Medium
• S1 0.6586 – 11Feb low – Medium
• S2 0.6563 – 9Feb low – Strong

NZDUSD – fundamental overview

The China correlated New Zealand Dollar has done a fabulous job shrugging off the highly disappointing round of China trade data early Monday. It seems this market has been benefitting more from Friday’s recovery in risk sentiment and rebound in the price of OIL. Still, plenty of offers are reported into rallies given the RBNZ’s bearish view of the local currency and risk for disappointment in the upcoming New Zealand retail sales print and dairy auction. Otherwise, trade is expected to be rather light for the remainder of Monday, with the US out for the Presidents’ Day holiday.

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 1891.00 – 8Feb high – Medium
• S1 1808.00 –11Feb/2016 low – Medium
• S2 1800.00 – Psychological – Strong

US SPX 500 – fundamental overview

Friday’s recovery in the price of OIL and the emergence of dip buyers, have been helping to support the beaten down stock market into the early week. But overall, with central bank monetary policy exhausted and with fears escalating over a deterioration in China, it feels as though any rallies should continue to be well capped in favour of additional downside in the days and weeks ahead. Throw in the emergence of uncertainty over bank creditworthiness and subpar corporate earnings and there is very little to get too excited about right now. It is also 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. Looking ahead, trade is expected to be rather thin on Monday with the US markets closed for the Presidents’ Day holiday.

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

USDSGD has entered a period of correction after pulling back from the recent multi-year high from early January at 1.4445. But overall, the structure remains highly constructive, with dips well supported for now into the 1.3800s. Look for any additional setbacks to continue to be well supportive above 1.3800 in favour of an eventual resumption of the uptrend and retest of 1.4445. Ultimately, only back below 1.3730 would negate the highly constructive outlook.

• R2 1.4170 – 4Feb high – Strong
• R1 1.4105 –8Feb high – Medium
• S1 1.3930 – 15Feb low – Medium
• S2 1.3860 – 11Feb/2016 low – Strong

Feature – fundamental overview

Not a lot happening on the local front that would influence the Singapore Dollar at the moment, with the emerging market Asia currency more focused on broader flows. For now, it seems the combination of stronger Friday US retail sales, increased risk for additional BOJ easing on the back of today’s much weaker Japanese GDP showing and a horrid China trade print is what is driving this market, more than offsetting the latest recovery in global equities. Looking ahead, light trade is expected for the remainder of the day, with the US market closed for the Presidents’ Day holiday.