RBNZ Rate Cut Odds Increase, UK Inflation on Tap

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

Former lone BOE dissenter and notorious hawk, Ian McCafferty was out on the wires Monday, saying the upside risks to wages were pushed further out and no longer justified voting for a rate hike. This weighed on the UK currency, though setbacks were well supported on dips, perhaps on this new wave of optimism UK PM Cameron will be able to secure a deal keeping the UK in the EU. Looking ahead, UK inflation is the big release in Tuesday trade, with the market also taking in a batch of US data featuring empire manufacturing, NAHB housing and TIC flows.

USDJPY – technical overview

The market has entered a period of correction after dropping to a multi-month low just under 111.00. From here, there is still risk for this correction to extend into the 116.00-118.00 area before looking for a fresh lower top and bearish continuation. But overall, the pressure remains on the downside with only a break back above 122.00 to negate.

• R2 115.97 – 20Jan low – Strong
• R1 115.26 – 10Feb high – Medium
• S1 114.00 – Figure – Medium
• S2 113.27 – 15Feb low – Strong

USDJPY – fundamental overview

Last Friday’s solid US retail sales print got this major pair recovering from fresh multi-month lows, while the subsequent rebound in equities and softer Japanese GDP helped fuel additional gains. Early Tuesday comments from Japan FinMin Aso that the government is not considering additional stimulus at this stage could be weighing a bit, though with OIL extending its bid and equities still pushing higher, it seems there is still room for additional upside in the sessions ahead. Looking at the calendar, US data features empire manufacturing, NAHB housing and TIC flows.

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 happens if risk sentiment takes another turn for the worse.

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 0.7177 – 16Feb high – Medium
• S1 0.7100 – 15Feb low – Medium
• S2 0.7063 – 12Feb low – Strong

AUDUSD – fundamental overview

No real surprises from the RBA Minutes and if anything, perhaps even a little more upbeat than the market was expecting. While the central bank remained concerned with the outlook for China and potential impact on the Australian economy, there was a positive tone on employment and the recent decline in the Australian Dollar. Certainly no signs for additional rate cuts and more of a wait and see approach. So the on balance well received Minutes in conjunction with the recovery in the price of OIL and rebound in equities, have been supporting the Australian Dollar in the early week. Looking ahead, the market will take in a batch of data in the US featuring empire manufacturing, NAHB housing and TIC flows.

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 1.3879 – 15Feb high – Strong
• R1 1.3840 – 16Feb high – Medium
• S1 1.3710 – 5Feb low – Medium
• S2 1.3639 – 4Feb/2016 low – Strong

USDCAD – fundamental overview

The recovery in the price of OIL has been a major driver of direction in the Canadian Dollar. The latest news that Russia and Saudi Arabia, the world’s two largest OIL producers, are about to come to a deal that would cut production, has fueled upside in OIL, opening additional gains in the correlated Loonie. Technicians have been talking about major trend-line support for USDCAD in the 1.3550-1.3600 area, and if this OIL rebound continues, it could very well open the door for a test of this trend-line. Looking at the economic calendar, Canada manufacturing shipments are due, along with a batch of US data featuring empire manufacturing, NAHB housing and TIC flows.

NZDUSD – technical overview

The market remains confined to a broader downtrend with any rallies seen very well capped. A recent correction has stalled out around 0.6750 with the market looking like it is in the process of carving a fresh lower top ahead of the next major downside extension. Look for a daily close below 0.6563 to confirm and accelerate declines back towards next key support at 0.6347 lower down. Ultimately, only back above 0.6900 negates the bearish outlook.

• R2 0.6752 – 5Feb high– Strong
• R1 0.6677 – 15Feb high – Medium
• S1 0.6563 – 9Feb low – Medium
• S2 0.6508 – 3Feb low – Strong

NZDUSD – fundamental overview

RBNZ 2-year inflation expectations have dropped to their lowest levels since 1994 and this has done a good job increasing the chances for additional RBNZ easing in the months ahead. This in conjunction with a below forecast New Zealand retail sales print and the contrasting, relatively upbeat Aussie RBA Minutes, have been weighing heavily on Kiwi in Tuesday trade. Looking ahead, all eyes on the upcoming GDT auction, with anything on the disappointing side to open more downside pressure. Also out on Tuesday is a batch of data out of the US featuring empire manufacturing, NAHB housing and TIC flows.

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 recent break back below the critical August base at 1834 strengths the newly adopted bearish outlook and from here, any rallies are expected to be well capped below 1950 in favour of the next major downside extension towards 1700. But ultimately, only a daily close back above 1993 will take the immediate pressure off the downside.

• R2 1947.00 – 1Feb high – Strong
• R1 1921.00 – 5Feb high – Medium
• S1 1865.00 –12Feb high – Medium
• S2 1808.00 – 11Feb/2016 low – Strong

US SPX 500 – fundamental overview

China’s return to markets hasn’t been met with any upgraded fear, and this has helped rally beaten down stocks in the early week. Certainly, this latest dovish speak from ECB Draghi, signaling additional stimulus and an impressive recovery in the price of OIL on production cut talk have also been helping to inspire this latest rebound in equities. 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, Tuesday’s batch of US economic dat features empire manufacturing, NAHB housing and TIC flows.

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, extending above the critical October 2015 peak at 1192. From here, any setbacks should be well supported ahead of 1130, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only back below 1100 negates the constructive outlook.

• R2 1263.00 – 11Feb/2016 high – Strong
• R1 1210.00 – 16Feb high – Medium
• S1 1180.00 – 38.2% fib retrace – Medium
• S2 1164.00 – 8Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD has pulled back a bit in recent trade, though the yellow metal still stands out as the clear outperformer over the past week. Massive outflows across equities, high yield and emerging markets have left investors looking for an alternative investment. GOLD has become increasingly attractive in the current market environment. The wave of risk liquidation in 2016 has catapulted the metal on its status as a compelling hedge against uncertainty and negative interest rate policy. Dealers cite song bids into the $1160-1180 area.

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 last Friday’s solid US retail sales, increased risk for additional BOJ easing and a horrid China trade print earlier this week, is what’s driving this market, more than offsetting the latest recovery in global equities. Looking ahead, broader sentiment flow and a batch of second-tier US data will likely dictate trade.