Keep An Eye On These Major Levels

GBPUSD – technical overview

Setbacks have extended to fresh multi-year lows, with the latest break below previous support at 1.4080 setting the stage for the next major downside extension towards a measured move objective at 1.3500. The 1.3500 barrier also coincides with the critical multi-year base from 2009. A daily close below 1.4080 will strengthen this outlook. However, inability to close below 1.4080 could suggest some form of a base and potential double bottom in favour of a corrective recovery. A push back above 1.4408 would however be required to take the immediate pressure off the downside.

• R2 1.4306 – 22Feb high – Strong
• R1 1.4235 – 17Feb low – Medium
• S1 1.4058 – 22Feb/2016 low  – Medium
• S2 1.4000 – Psychological  – Strong

GBPUSD – fundamental overview

Uncertainty over the UK referendum intensified on news London Mayor Boris Johnson joined the campaign for Brexit. This ultimately resulted in a drop to a fresh 7-year low in the Cable rate, with the market sinking to 1.4058 before mild profit taking finally kicked in. A major US bank increased odds for Brexit, which also factored into the bearish price action. There is likely to be more volatility in the lead up to the referendum as participants continue to weigh the risk of Brexit. It is worth recalling the Scottish referendum, which opened heavy setbacks in the Pound, before the UK currency rallied sharply ahead of the event risk. Overall, the risk still favours the UK staying in the EU, and this might make itself better known closer to the referendum. Looking ahead, aside from Brexit headlines, the market will be focused on BOE testimony from Carney, Shafik, Vieghe, and Weale. US Case Shiller, consumer confidence and existing home sales also out.

USDJPY – technical overview

The correction out from the recent multi-month low at 110.98 has stalled out, with the market contemplating the formation of a lower top at 114.88 ahead of the next major downside extension below 110.98 and towards the 107.00 area further down. However, a break below 110.98 would be required to confirm the lower top and strengthen the bearish outlook. Ultimately, while the market holds below 116.00 the immediate pressure remains on the downside.

• R2 113.38 – 22Feb high – Strong
• R1 113.05 – 23Feb high – Medium
• S1 111.97 – 23Feb low – Medium
• S2 110.98 – 11Feb/2016 low – Strong

USDJPY – fundamental overview

Plenty of solid offers into this latest USDJPY rally, with a plethora of accounts waiting in the wings. HFTs, leveraged accounts, macro names and exporters have all been selling aggressively over the past 24 hours. A pullback in global equities has weighed more heavily into Tuesday, with the weakest PBOC Yuan fix since early January contributing to the negative sentiment. Looking ahead, sentiment flow will dictate direction, with the market also focused on a batch of US data featuring US Case Shiller, consumer confidence and existing home sales.

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 1.1096 – 8Feb high – Strong
• R1 1.1062 – 17Feb high – Medium
• S1 1.0950 – 11Feb low – 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 at the same time, with signs of risk liquidation flow intensifying in 2016 and with the other traditional safe haven currencies rallying sharply to their detriment, the SNB battle could get a lot tougher going forward. 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 reiterated its commitment to offset Franc inflows at every turn, but it will be interesting to see what happens if risk sentiment takes another turn for the worse. SNB Jordan is on the wires today and the market will be paying close attention.

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 0.7265 – 78.6% fib – Strong
• R1 0.7247 – 22Feb high – Medium
• S1 0.7200 – Figure – Medium
• S2 0.7136 – 22Feb low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been well bid in recent trade, with the market benefitting from a healthy recovery in global equities and renewed appetite for commodities. While the currency has found bids on the surge in OIL prices, the 1.6% jump in copper and iron ore jump back above the $50 handle have also been major drivers. Still, with sentiment waning a bit into Tuesday, and with the market having run so far so fast, there is risk medium-term players will once again step in as sellers at these higher, more attractive levels. Looking ahead, macro flow will continue to dictate trade, while the market will also focus on a batch of US data featuring US Case Shiller, consumer confidence and existing home sales.

USDCAD – technical overview

The market has entered a period of 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 to the 1.3600 area, which coincides with medium-term rising trend line support. At this point, only back above 1.4017 would suggests the correction has run its course, with the market poised for bullish resumption.

• R2 1.3847 – 19Feb high – Strong
• R1 1.3793 – 22Feb high – Medium
• S1 1.3654 – 18Feb low – Medium
• S2 1.3639 – 4Feb/2016 low – Strong

USDCAD – fundamental overview

The Canadian Dollar has managed to retain a solid bid tone over the past several days, with the currency mostly benefitting from a healthy recovery in the price of OIL. On Monday, IEA forecasts of declining shale oil production in the US were seen driving the price of OIL higher, which pressured USDCAD back below 1.3700. Also on Monday, the Canadian government committed to bigger deficits to help the slowing economy. But with global equities at risk for coming back under pressure and with the OIL run potentially running out of steam, additional upside in the Canadian Dollar could be limited to the 1.3600 area in the sessions ahead. Technicians note the 1.3600 level coincides with major rising trend-line support in USDCAD off the May 2015 low. Looking ahead, lack of data on the Canada calendar will leave he market focused on a batch of US data featuring US Case Shiller, consumer confidence and existing home sales.

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 break below 0.6546 to strengthen the outlook and expose fresh declines towards next key support at 0.6347 further down. Ultimately, only back above 0.6900 negates the bearish outlook.

• R2 0.6752 – 5Feb high– Strong
• R1 0.6726 – 22Feb high – Medium
• S1 0.6622 – 22Feb low – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

Kiwi has been benefitting in the early week from a bout of risk on flow and resurgence in commodities demand, which is supporting the correlated currency. However, selling from private clients and medium-term accounts is likely to keep the New Zealand Dollar well capped into additional rallies. Last week’s horrid round of Kiwi data has fueled increased expectations for additional RBNZ rate cuts in the months ahead, which should weigh more heavily going forward. Looking to the rest of Monday’s calendar, the focus will continue to be on sentiment flow, price action in commodities. The market will also look to a batch of US data featuring US Case Shiller, consumer confidence and existing home sales.

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 previous support at 1993 in favour of the next major downside extension towards 1700. Ultimately, only a daily close back above 1993 will take the immediate pressure off the downside.

• R2 1993.00 – Previous Support – Strong
• R1 1947.00 – 22Feb high – Medium
• S1 1902.00 –19Feb low – Medium
• S2 1808.00 – 11Feb/2016 low – Strong

US SPX 500 – fundamental overview

Stocks have enjoyed a healthy recovery in recent days, largely supported by a bounce in the price of OIL and round of dovish Fed speak. But overall, with the OIL outlook still highly suspect, with central bank monetary policy exhausted and with fears escalating over a deterioration in China, it feels as though these rallies should continue to be well capped in favour of additional downside in the days and weeks ahead. Throw in evidence of rising inflation in the US, which only increases prospects the Fed will need to tighten in the months ahead, and there is very little to get too excited about right now. It’s also becoming increasingly apparent in 2016 that even if the Fed in fact opts to scale back its rate hike timeline, this might not be as supportive as many had thought.

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 1160, 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 1240.00 – 18Feb high – Medium
• S1 1191.00 – 16Feb low – Medium
• S2 1164.00 – 8Feb low – Strong

GOLD (SPOT) – fundamental overview

GOLD has pulled back from recent highs, but is still showing plenty of demand on dips. 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. Also supporting the metal a bit in recent trade has been some selling in the US Dollar against the commodity bloc currencies and EM FX. Dealers continue to talk strong bids into dips.

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 1.4110 –17Feb high – Medium
• S1 1.3965 – 16Feb low – Medium
• S2 1.3860 – 11Feb/2016 low – Strong

Feature – fundamental overview

Not much of a reaction on Tuesday to the relatively as expected Singapore inflation data. Overall, the combination of Asian central bank policy easing, broader risk off flow in 2016 and ongoing expectation the Fed will need to move to higher rates, should continue to keep the Singapore Dollar under pressure. Global equities are coming back under pressure in Tuesday trade, and this is inviting renewed bids in the US dollar, which remains in the driver’s seat. Looking ahead, keep an eye on risk sentiment flow and commodities prices. We also get a batch of US data featuring US Case Shiller, consumer confidence and existing home sales.