Plenty of Volatility Despite Quiet Calendar

GBPUSD – technical overview

Setbacks have extended to fresh multi-year lows, with the latest break and daily close 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. Intraday rallies should be well capped below 1.4300, while only back above 1.4408 would take the immediate pressure off the downside.

• R2 1.4156 – 23Feb high – Strong
• R1 1.4027 – 24Feb high – Medium
• S1 1.3950 – Mid-Figure  – Medium
• S2 1.3900 – Figure  – Strong

GBPUSD – fundamental overview

Cable setbacks have extended to fresh 7 year lows as the pro-Brexit camp continues to gain momentum. At the same time, BOE Governor Carney testimony that the central bank would be prepared to provide additional stimulus if needed, has only helped to exacerbate the outlook for the beaten down UK currency. Technicians are now talking about a retest of the critical multi-year base at 1.3500 which could increase bearish bets in the days ahead. Of course, any deterioration in global sentiment or renewed downside pressure in the price of OIL, will only add to this negative Sterling outlook. Looking ahead, second tier data out of the UK and US is unlikely to factor into trade, with the market still very much focused on the broader themes. UK BBA loans and CBI reported sales are due along with US Markit services PMIs and new home sales.

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. Still, while the market holds below 116.00 the immediate pressure remains on the downside.

• R2 113.05 – 23Feb high – Strong
• R1 112.13 – 24Feb high – Medium
• S1 111.50 – Mid-Figure – Medium
• S2 110.98 – 11Feb/2016 low – Strong

USDJPY – fundamental overview

HFT and exporter accounts continue to hit the offer in this major pair, with risk liquidation flow influencing trade. There has been some talk of the BOJ checking rates, though this is completely unsubstantiated and would be somewhat surprising considering the market is still tracking above 110.00. The Fed Vice Chair gave a fairly balanced speech, with the message that the Fed is still on course to raise rates, but at the same time, reminding markets gradual rate hikes are an ‘expectation’ and not a decision. BOJ Kuroda was also out recently expressing his reservations with QQE policy, while noting his preference for negative rates as a monetary policy tool. But overall, it seems risk sentiment flow is what will continue to be the primary driver of price action. Second tier US data releases in the form of Markit services PMIs and new home sales unlikely to factor.

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 1.1029 – 23Feb high – Strong
• R1 1.1000 – Psychological – Medium
• S1 1.0910 – 20Jan low – Strong
• S2 1.0870 – 13Jan low – Medium

EURCHF – fundamental overview

Risk off flow returned to markets on Tuesday and this time round, it was the Swiss Franc that emerged as the standout currency, reluctantly reclaiming its traditional safe haven status. There has been a lot of talk in recent weeks of the threat to the SNB strategy of weakening the Franc in a world where other central banks are considering additional accommodation and global risk sentiment is deteriorating. If yield differentials narrow back in the Franc’s favour, even with the negative rates, and if the SNB is forced to consider intervening in a global backdrop that is seeing a mass exodus from risk, it will be very difficult for the SNB to prevent appreciation in the Franc. Perhaps SNB Jordan further contributed to Franc gains on Tuesday after highlighting the limitations of monetary policy, while also pointing out that ECB rate cuts would likely invite an appreciation in the Franc. Of course, Jordan continued to talk of an overvalued Franc, but this familiar message was lost in the face of his other comments.

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 (78.6% fib retrace), 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 0.7259 – 23Feb high – Medium
• S1 0.7150 – Mid-Figure – Medium
• S2 0.7136 – 22Feb low – Strong

AUDUSD – fundamental overview

The combination of a downturn in risk sentiment, pullback in commodities and softer Aussie data, have all weighed on the pair over the past 24 hours, with the market at risk of rolling over some more. On Wednesday, Aussie construction work and the wage price index both came in below forecast, which could give the RBA more to think about when it meets next week. While the RBA is not expected to make any move on rates, it may consider adopting a slightly more dovish tone, particularly in light of recent economic data and the downturn in risk. Looking ahead, risk flow and direction in commodities will dictate trade for the remainder of the day. Second tier US data releases in the form of Markit services PMIs and new home sales unlikely to factor.

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 1.3912 – 16Feb high – Strong
• R1 1.3847 – 19Feb high – Medium
• S1 1.3695 – 23Feb low – Medium
• S2 1.3639 – 4Feb/2016 low – Strong

USDCAD – fundamental overview

The Canadian Dollar has come back under pressure over the past 24 hours, with a pullback in the price of OIL and downturn in global sentiment weighing on the Loonie. Comments from both the Saudi and Iranian OIL ministers that there was no intention of cutting production were seen as a primary catalyst behind this latest wave of weakness in the price of OIL. Looking ahead, the economic calendar in Canada is empty and we only get second tier releases out of the US in the form of Markit services PMIs and new home sales. As such, the price of OIL and sentiment flow will continue to dictate trade.

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 0.6600 – Figure – Medium
• S2 0.6546 – 16Feb low – Strong

NZDUSD – fundamental overview

This latest downturn in sentiment and pullback in commodities has inspired a fresh round of offers from private clients and medium-term accounts. These accounts have already been looking to build into Kiwi shorts after last week’s round of horrid Kiwi data fueled increased expectations for additional RBNZ rate cuts in the months ahead. Looking ahead, risk flow and direction in commodities will dictate trade for the remainder of the day. Second tier US data releases in the form of Markit services PMIs and new home sales unlikely to factor.

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

Plenty of talk from central bankers in recent days about the limitations of accommodative monetary policy. This isn’t something that welcomes investment in stocks and could ultimately weigh more heavily going forward. Tuesday’s pullback in the price of OIL has also been a negative driver after the Saudi and Iranian OIL ministers said they wouldn’t be cutting production. 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 any 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 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 continues to show impressive 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 exhausted monetary policy.

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

It is going to be very hard for the Singapore Dollar to avoid additional downside in the weeks ahead, with global sentiment deteriorating, monetary policy exhausted and the Fed still on course for higher rates. Throw in escalating concern over the China outlook and softer commodities and the trajectory continues to point to a lower SGD rate. However, for the time being, the Singapore Dollar has managed to find some minor relief in Wednesday trade after GDP data came out above forecast. Also helping the emerging market Asia currency are comments from MAS Loh, who said the current monetary policy stance remained appropriate and unchanged.