The Return of Currency Demand?

GBPUSD – technical overview

A period of solid corrective activity within the broader underlying downtrend is finally showing signs of stalling out, with the market putting in a strong bearish outside day formation in the previous week. A lower top is now sought out at 1.5552 in favour of the next major downside extension below the 2015 low at 1.4951. Look for a break through 1.5316 to confirm and accelerate.

• R2 1.5552 – 26Feb high – Strong
• R1 1.5459 - 27Feb high – Medium
• S1 1.5333 – 23Feb low  – Medium
• S2 1.5316 – 17Feb low  – Strong

GBPUSD – fundamental overview

A US prime and model name have been on the offer in Cable, though the market has held up relatively well in recent trade. Perhaps the combination of Monday’s solid UK manufacturing PMIs and slightly weaker US economic data have contributed to some of the bid tone. Overall, this market hasn’t really gone anywhere of late and could continue to be more reserved ahead of Thursday’s Bank of England rate decision. Another story working its way into participants’ minds is the upcoming UK election, with many speculating on the uncertainty and risks associated with a hung UK parliament.

USDJPY – technical overview

A push in the major pair beyond multi-day triangle resistance has produced a lackluster follow through thus far, with the market stalling well ahead of the 121.85, 7 year peak from December. Still, the broader bullish structure is firmly intact, with eventual upside seen through 121.85 and towards 125.00 further up. Setbacks should continue to be well supported ahead of 117.00, while only back below 115.55 would delay the highly constructive outlook.

• R2 120.83 – 23Dec high – Strong
• R1 120.47 – 12Feb high – Medium
• S1 119.11 – 27Feb low – Medium
• S2 118.24 – 17Feb low – Strong

USDJPY – fundamental overview

The Yen is on the move in Tuesday trade, and while some of the gains are attributed to broad USD selling, the currency is finding its own relative strength on local merits. PM Abe’s adviser Honda has told the Wall Street Journal the USDJPY rate may be at the “upper limit of the comfort zone.” In recent weeks, we have already heard comments from Japanese officials that the BOJ may be done with policy easing for now, and this latest comment only strengthens this position.

EURCHF – technical overview

The recovery out from the historic low from several weeks back continues, with medium term technical studies breaking up from oversold levels. However, the correction has finally come into some stiff resistance just over 1.0800, with the market rolling back over and at risk for deeper setbacks in the seasons ahead. Still, the recovery remains intact while above 1.0415, with a higher low sought ahead of the next upside extension towards 1.1000. Only back below 1.0415 would give reason for pause.

• R2 1.1000 – Psychological – Strong
• R1 1.0815 – 20Feb high – Medium
• S1 1.0550 – 16Feb low – Medium
• S2 1.0415 – 9Feb low – Strong

EURCHF – fundamental overview

In line Eurozone PMIs, along with some hotter EZ inflation could be helping to keep the EURCHF market supported for now. However, economic data is never a big market mover for this one and we haven’t seen any real movement in response to today’s better than expected Swiss GDP. The market had recently been bid up above 1.0800 on talk of a EURCHF 1.0500-1.1000 corridor and ongoing dovish comments from SNB Jordan. But with plenty of uncertainty still out there and with the ECB embarking on its QE program, the SNB will need to keep a close watch, as plenty of scope still exists for additional safe haven Franc flow.

AUDUSD – technical overview

The recent range break through 0.7876 looks to have been a false break, with the market stalling out above 0.7900 and reversing back into the familiar multi-session range. This sets the stage for a more immediate bearish resumption, with a break back below 0.7740 to strengthen the outlook and expose a retest of the multi-year low from early February at 0.7625. Only back above 0.7913 negates.

• R2 0.7913 – 26Feb high – Strong
• R1 0.7842 - 2Mar high – Medium
• S1 0.7740 – 24Feb low – Medium
• S2 0.7625 – 3Feb/2015 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been getting most of the attention in Tuesday trade, with the currency not dropping off as many had thought, after the RBA surprised a little more than half the market, opting to hold steady on rates at 2.25%. But Aussie gains have been mild in the aftermath, with the RBA still very clear about leaving the door open for additional rate cuts. The next key focus for Australia will be tomorrow’s key Q4 GDP reading, which could shed more light on the likelihood for another cut at the next meeting.

USDCAD – technical overview

The outlook for this pair remains highly constructive, after recently breaking to fresh +5 year highs at 1.2800. This has opened the door for a push towards the next major objective in the form of the 2009 peak at 1.3065. However, the market has since entered a period of consolidation in search of the next medium-term higher low, and will need to break back through 1.2800 to trigger a bullish resumption. In the interim setbacks have been very well supported at 1.2350.

• R2 1.2664 – 24Feb high – Strong
• R1 1.2565 - 2Mar high – Medium
• S1 1.2449 – 27Feb low – Medium
• S2 1.2352 – 3Feb low – Strong

USDCAD – fundamental overview

Expectations for another rate cut from the Bank of Canada tomorrow have been downgraded following last week’s Governor Poloz comments. The central banker said the previous rate cut had bought the BoC time to see how the economy responded to the latest drop in oil prices. Still, the overarching themes of the Fed rate outlook and US oil dominate trade, and with oil unable to establish a meaningful recovery as of yet and US data increasing the likelihood for a sooner Fed rate hike, USDCAD should continue to remain very well supported on dips. For today, the focus will be on Canada GDP. However, with the Bank of Canada due tomorrow, many traders will tread lightly.

NZDUSD – technical overview

The market remains locked within a very well defined downtrend, with deeper setbacks seen ahead. Recent corrective gains have stalled out at critical previous support turned resistance just over 0.7600 and a fresh medium-term lower top is now sought out ahead of the next major downside extension through 0.7176 and towards the 0.6500 area further down. Ultimately, only a daily close back above 0.7614 would delay the bearish outlook.

• R2 0.7710 – 21Jan high – Medium
• R1 0.7614 - 26Feb high – Strong
• S1 0.7474 – 25Feb low – Medium
• S2 0.7422 – 24Feb low – Strong

NZDUSD – fundamental overview

Lack of any first tier New Zealand data has left this market trading on broader flows. For today, Kiwi has found a bid tone, benefitting from the gains of its commodity currency cousin after the RBA left rates on hold at 2.25%. Still, with the New Zealand Dollar so heavily tied to risk sentiment, and with global equities at risk for capitulation, Kiwi upside is expected to be limited. Larger macro accounts continue to sell around 0.7600.

US SPX 500 – technical overview

Still no signs of any material let up just yet, with the market extending gains to fresh record highs well beyond 2100. The recent 2100 break has ended a period of consolidation and could expose a fresh upside extension towards 2150 in the sessions ahead. At this point, a drop back below 2083 would be required at a minimum to take the immediate pressure off the topside.

• R2 2150.00 – Psychological – Medium
• R1 2120.00 – 25Feb/Record – Strong
• S1 2102.00 – 2Mar low – Medium
• S2 2083.00 – 17Feb low – Strong

US SPX 500 – fundamental overview

Stock markets were relieved with the latest batch of softer Monday US data, finding comfort in the fact this could contribute to a more dovish Fed outlook. Still, overall, the Monday data isn’t likely to factor too much, with data on the whole moving in the right direction and pushing the Fed closer to a hike. Expectations for a June rate hike have been increasing and any signs of additional strength in the remainder of this week’s US data, highlighted by Friday’s NFPs, will likely open the door for an overdue capitulation in artificially supported, record high US equities.

GOLD (SPOT) – technical overview

The market continues to show signs of medium-term basing off the 2014 low. As such, the pullback from January is viewed as corrective, with the market in search of the next higher low ahead of a bullish continuation towards 1345. Last Tuesday’s bounce from 1190 encourages the constructive outlook, with only a daily close back below this level to delay the recovery outlook and put the pressure back on the downside. Look for a push back towards the 1307, 2015 high in the days ahead.

• R2 1237.00 – 16Feb high – Strong
• R1 1223.00 – 2Mar high – Medium
• S1 1190.00 – 24Feb low – Strong
• S2 1183.00 – 17Dec low – Medium

GOLD (SPOT) – fundamental overview

Overall, accommodative central policy action around the globe has opened the door for significant currency depreciation, leaving longer-term investors with a lack of confidence in fiat currency. These participants are now comfortable holding the hard asset and continue to buy the metal on dips as the ripple effects from these central bank actions work their way through the rest of the market.

Feature – technical overview

US OIL has entered a period of legitimate correction since collapsing to fresh multi-year lows at 43.55. A recent push back above 50.00 has opened the door to the possibility for fresh upside towards next key resistance at 59.00 in the sessions ahead. But the market will now need to establish above 54.25 to keep the recovery structure intact. On the other hand, inability to establish above 54.25 followed by another downside break below 47.35 will put the pressure back on the downside for a retest of the 43.55 multi-year low from late January.

• R2 59.00 – 18Dec high – Strong
• R1 54.25 – 3Feb high – Medium
• S1 47.35 – 5Feb low – Medium
• S2 43.55 - 29Jan/2015 low – Strong

Feature – fundamental overview

Although there have been signs of stabilization around $50, the market is still having a hard time managing any decent recovery. Geopolitical risk, cutbacks and rig reductions have all helped to slow the rapid pace of declines, and yet the overbearing theme of global oversupply can not be shaken. The market will now need to break back above 54.25 to further encourage recovery prospects. It is also worth noting the role politics are playing at current levels, with many governments welcoming the lower price as a stimulus measure given the benefit to the consumer.