Goldilocks is Back

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 1.3952 – 26Feb low  – Medium
• S2 1.3879 – 24Feb/2016 low – Strong

GBPUSD – fundamental overview

The Cable market could be looking for some form of an interim base, after sinking to another 7 year low this week at 1.3879. It seems Brexit risk is receding a bit into the end of the week, and this has inspired some profit taking from shorter-term accounts. Perhaps Thursday’s UK GDP data is also helping the Pound. While the data did show weakness in some of the underlying components, overall, the headline produced an as expected result. Initial weakness in the aftermath of a strong US durable goods print was shrugged off, with the major pair closing higher on the day. UK consumer confidence data has come out on the softer side early Friday, but has failed to factor into price action, with the Pound extending its recovery. Looking ahead, US GDP and Michigan confidence are the standouts for the remainder of the day.

USDJPY – technical overview

The market is 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 113.39 – 22Feb high – Strong
• R1 113.05 – 23Feb high – Medium
• S1 111.77 – 23Feb low – Medium
• S2 110.98 – 11Feb/2016 low – Strong

USDJPY – fundamental overview

JGB yields are coming off another round of fresh lows, with the Yen also finding offers in recent trade on the back of a recovery in risk sentiment and soft Japanese inflation data. Inflation in Japan continues to be non-existent and this will only add to pressure for the BOJ to increase easing next month, despite concerns over the potential damage of negative interest rate policy. Still, with risk rallies continuing to be well capped in 2016, the Yen could once again emerge as an outperformer on its traditional correlation with safe haven flow. Looking ahead, US GDP and Michigan confidence are the key standouts on Friday’s calendar. There will probably be some talk about the G20 with pressure building for a coordinated policy response to help the global economy. Though as is usually the case with the G20, it is unlikely to have any market moving effect.

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 1.0715 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 1.0715 would delay the outlook.

• R2 1.1029 – 23Feb high – Strong
• R1 1.0949 – 25Feb high – Medium
• S1 1.0865 – 24Feb low – Strong
• S2 1.0800 – Figure – Medium

EURCHF – fundamental overview

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 this week 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 0.7301 – 4Jan/2016 high – Strong
• R1 0.7265 – 78.6% fib – Medium
• S1 0.7200 – Figure – Medium
• S2 0.7146 – 24Feb low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been well supported in recent trade on the back of a recovery in risk sentiment. Still, the currency has been lagging its commodity cousins following recent data weakness highlighted by softer Aussie employment and Thursday’s discouraging CAPEX components. Participants are already looking ahead to next week’s RBA decision, and there is a growing expectation the RBA will adopt a more dovish stance. Still, no change is seen on rates just yet, though the market is pricing additional cuts over the next twelve months. Looking ahead, the key standouts on Friday’s calendar are US GDP and Michigan confidence. There will probably be some talk about the G20 with pressure building for a coordinated policy response to help the global economy. Though as is usually the case with the G20, it is unlikely to have any market moving effect.

USDCAD – technical overview

Setbacks have intensified in recent sessions, with the market breaking back below critical rising trend-line support off the May 2015 low. This opens the door for a deeper drop into previous resistance turned support at 1.3457 before the market considers the possibility of a medium-term higher low and bullish resumption back towards the recent near 13 year peak at 1.4690. Back above 1.3860 will be required to take the immediate pressure off the downside.

• R2 1.3654 – 18Feb low – Strong
• R1 1.3600 – Figure – Medium
• S1 1.3500 – Psychological – Medium
• S2 1.3457 – Previous Resistance – Strong

USDCAD – fundamental overview

The Canadian Dollar has emerged as a strong outperformer over the past 24 hours, with the market finding additional bids beyond those from a pickup in global sentiment. The impressive recovery in the price of OIL has been fueling outperformance, while the Canadian government’s commitment to fiscal policy is also taking pressure off the Bank of Canada to cut rates, which has been moving yield differentials back in the Loonie’s favour. Dealers do cite strong demand for USDCAD towards 1.3400. Looking ahead, the key standouts on Friday’s calendar are US GDP and Michigan confidence. There will probably be some talk about the G20 with pressure building for a coordinated policy response to help the global economy. Though as is usually the case with the G20, it is unlikely to have any market moving effect.

NZDUSD – technical overview

The market remains confined to a broader downtrend with any rallies seen very well capped. Look for this latest correction to stall out in the 0.6800 area, in favour of a medium-term lower top and next major downside extension. A break below 0.6546 will 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 0.6835 – 4Jan/2016 high– Strong
• R1 0.6800 – Figure – Strong
• S1 0.6700 – Figure – Medium
• S2 0.6642 – 25Feb low – Strong

NZDUSD – fundamental overview

A much stronger than expected New Zealand trade print has been driving outperformance in the New Zealand Dollar in Friday trade. The risk currency had already been benefiting from a recovery in equities and rebound in commodities, and has managed to clear stops through 0.6750 on the back of the impressive local data. Still, with data on the whole coming out on the softer side out of New Zealand, and with the risk environment quite shaky, additional rallies should prove hard to come by. Moreover, the RBNZ has expressed its discomfort on many occasions with the higher Kiwi rate, and the central bank will likely look to ease further in the months ahead. Looking to the remainder of the day, the key standouts on the calendar are US GDP and Michigan confidence. There will probably be some talk about the G20 with pressure building for a coordinated policy response to help the global economy. Though as is usually the case with the G20, it is unlikely to have any market moving effect.

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 1973.00 – 8Jan high – Medium
• S1 1890.00 –24Feb 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. 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. Looking ahead, the key standouts on the calendar are US GDP and Michigan confidence.

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 1200, in favour of a higher low and the next major upside extension to medium-term resistance at 1307. Ultimately, only a weekly close back below 1191 would delay the newly adopted constructive outlook.

• R2 1263.00 – 11Feb/2016 high – Strong
• R1 1253.00 – 24Feb 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

Solid economic data out of Singapore this week and a fresh wave of risk buying in global markets has been helping to keep the Singapore Dollar supported. The latest comments from PBOC Zhou that the central bank has monetary space to boost the China economy is also generating bids in the correlated emerging market currency. But overall, despite this latest SGD bounce, it should continue to be a tough go going forward. Investors have been losing confidence in exhausted monetary policy and unless central bankers and governments come up with an alternative solution involving fiscal policy reform, risk assets are likely to see additional downside pressure, which will ultimately translate into a lower Singapore Dollar. There will probably be some talk about the G20 with pressure building for a coordinated policy response to help the global economy. Though as is usually the case with the G20, it is unlikely to have any market moving effect. US GDP and Michigan confidence due late Friday.