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USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: Neutral
The fundamental developments coming out of the U.S. economy may continue to undermine the long-term bullish outlook for USD/JPY as recent headlines point to a growing dissent within the Federal Open Market Committee (FOMC).
At the same time, capital flows will also be closely monitored as Japan kicks off its 2015 fiscal-year, but the fresh batch of Fed rhetoric may largely dictate dollar-yen price action going into April especially as the Bank of Japan (BoJ) endorses a wait-and-see approach for monetary policy.
With a slew of Fed officials (Stanley Fischer, Jeffrey Lacker, Dennis Lockhart, Loretta Mester, Esther George, John Williams Janet Yellen, Lael Brainard and Narayana Kocherlakota) scheduled to speak next week, the new commentary may highlight a further delay in the normalization cycle as an increasing number of central bank officials see scope to retain the zero-interest rate policy beyond mid-2015. As a result, a further deterioration in interest rate expectations may trigger another test of near-term support around 118.20 (61.8% retracement), and USD/JPY may continue to congest ahead of the second-half of the year as the central bank remains in no rush to normalize monetary policy.
Nevertheless, the U.S. Non-Farm Payrolls (NFP) report may generate a bullish reaction in dollar-yen as market participants anticipate another 250K expansion in employment, while the jobless rate is projected to hold at an annualized 5.5% - the lowest reading since May 2008. However, another unexpected downtick in Average Hourly Earnings may drag on the greenback as Fed Chair Yellen highlights a cautious stance on the economy, especially as the central bank struggles to achieve the 2% target for inflation.
With that said, the 118.20 (61.8% retracement) support zone will be closely watched going into the week ahead, and the pair remains vulnerable for a further decline as it continues to carve a series of lower-highs. In turn, a failure to preserve the March low (118.32) may open the door for a move back towards the 117.15 region (78.6% expansion) should the key event risks dampen bets for a mid-2015 Fed rate hike.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: Bearish
The British Pound fell for the third week of the past four versus the US Dollar, hurt by disappointing economic data and generally dour trading sentiment. Traders could push the Sterling to fresh lows on a key week ahead for the US Dollar and other currencies.
A relatively quiet week for UK economic event risk will keep traders focused on key event risk out of the United States and continental Europe. Yet any important surprises in final revisions to Q4, 2014 Gross Domestic Product growth figures could force GBP-led moves through Tuesday. Larger GBP/USD volatility nonetheless seems more likely on upcoming US Nonfarm Payrolls figures as the US Dollar itself remains volatile.
Interest rates remain the main driver of British Pound moves, and a disappointing UK Consumer Price Index inflation report sent domestic yields and the GBP noticeably lower. Traders had previously sent the British Pound and US Dollar higher versus major counterparts as the Bank of England and US Federal Reserve were the only central banks within the G10 expected to raise interest rates in 2015. Yet a significant correction in GBP/USD yield differentials helps explain recent Sterling underperformance, and it’s difficult to envision a meaningful recovery in BoE yield expectations through the foreseeable future.
Political uncertainty further clouds outlook for the British Pound with UK elections due through early May. FX options traders are clearly bracing for the political risks as GBP/USD volatility prices jump to their highest since the Scottish referendum. Traders remain skittish, and recent CFTC Commitment of Traders data showed that large speculators increased their net-short GBP position for the third-consecutive week.
The British Pound remains at risk ahead of a key week for the US Dollar, and it may take a substantial shift in trader sentiment to force a meaningful GBP recovery.
AUDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Australian Dollar: Neutral
Continued quiet on the domestic front is likely to see external forces as the dominant driver of Australian Dollar price action in the week ahead. The currency’s correlation with the MSCI World Stock Index has jumped to 0.68 (on 20-day percent-change correlation studies), the highest since November 2013. That points to an acute sensitivity to market-wide sentiment trends, warning that the breakout of risk aversion will send the Aussie lower while a pickup in investors’ mood will deliver the opposite result.
The spotlight initially falls on Greece. The government submitted a list of proposed reforms that it hopes will unlock the next round of bailout funding on Friday. The so-called “institutions” representing Greece’s creditors – the EU, the ECB and the IMF – will evaluate the plan over the weekend, with a decision expected on Monday. Athens faces €5.8 billion in maturing debt this month in addition to the on-going expense of running the country.
Investors fear that if external funding is not secured, a cash crunch and subsequent default may lead to the country’s exit from the Eurozone. Such an outcome would be unprecedented, carrying with as-yet unknown implications for the financial markets at large. Avoiding that trajectory with an accord that keeps Greece within the currency bloc is likely to prove supportive for risk appetite as well as the Aussie Dollar. Needless to say, failing to reach a deal stands to produce the opposite response.
Both sides of the negotiation are ultimately interested in a deal. Greek Prime Minister Alexis Tsipras and company surely realize that sticking to their campaign promise of ending austerity at the cost of disorderly redenomination will probably compound the country’s economic woes and likely cost them their jobs. Meanwhile, EU and IMF officials no doubt prefer to avoid a “Grexit” scenario for fear of the precedent it may establish, particularly in larger countries with strong anti-austerity movements such as Spain. On balance, this means that some kind of accommodation is probably more likely than not.
Thereafter, Federal Reserve monetary policy expectations return to the forefront. The week ahead will deliver a slew of high-profile economic data releases culminating in the March edition of the Employment report. The economy is expected to add 248,000 jobs while the unemployment rate is seen holding at 5.5 percent, a level broadly associated with “full employment” (a level such that reducing joblessness further would pressure inflation upward).
US labor-market data has bucked the trend of otherwise lackluster news-flow relative to expectations over recent months. Another upside surprise may rekindle bets that the Fed may move to raise rates by mid-year. The prospect of relatively sooner stimulus withdrawal is likely to weigh on sentiment considering the formative role of QE-linked funding in supporting risky assets in the years since the 2008-9 crisis. That means an upbeat payrolls reading stands to hurt the Aussie, and vice versa.
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: Neutral
Gold prices are higher for a second consecutive week with the precious metal advancing 1.48% to trade at 1199 ahead of the New York close on Friday. The advance amid a broader risk sell-off as mixed Fed rhetoric & rising geopolitical risks in the Middle East spurred demand for the yellow metal. Although the immediate rally in gold may is vulnerable here (+5% off the monthly low), the recovery remains in focus after last week’s key reversal off critical long-term support.
Looking into next week, all eyes turn to the US Non-Farm Payroll (NFP) report with consensus estimates calling for a 250K print for the month March as unemployment holds steady at 5.5%. Note that this would be the 13th consecutive month of 200+K gains as the jobless rate stands at the lowest level since 2008. However, another dismal wage growth figure may become a growing concern for the Fed and undermine expectations for a mid-2015 rate hike as the central bank struggles to achieve the 2% inflation target. As a result, the slew of Fed rhetoric lined up for the days ahead may continue to highlight the risk for a further delay of the normalization process, which could dampen the appeal of the greenback and spur greater demand for bullion.
From a technical standpoint, gold spiked into a key median-line resistance dating back to September at 1219 before reversing sharply back into the former resistance noted last week, now support, at 1196/98. The trade is vulnerable for a pullback early next week but the bias remains constructive while above the 1167/72 barrier where the 61.8% retracement of the advance converges with a former resistance line off the 2015 high (bullish invalidation). That said, key near-term resistance remains with the March opening range high / ML resistance noted earlier at 1219/23- with a breach above targeting the 200-day moving average at 1238 backed by key resistance at 1245/48. Note that the daily momentum signature has not topped 60 since the January high and a hold below this RSI level puts the long-side at risk heading into to the start April trade. A breach through alongside a move surpassing 1225 reaffirms a broader correction here for the yellow metal.
Nikkei forecast for the week of March 30, 2015, Technical Analysis
The Nikkei as you can see went back and forth during the course of the week involving quite a bit of volatility. That being the case, we ended up forming a negative candle, so it looks like we may pullback from here. If we break down below the ¥19,000 level, we could fall as low as ¥18,000 again and look for support. On the other hand, we break out to the upside we should then head to the ¥20,000 level. Either way, we don’t have any interest in selling this market.
DAX forecast for the week of March 30, 2015, Technical Analysis
The DAX as you can see spent most of the week falling, but found enough support at the €11,600 to turn things back around and form a hammer. The hammer suggests that the market is going to continue to find buyers just below, and as a result we are buying short-term pullbacks. As far as longer-term moves are concerned, we need to find enough support in order to go long for any significant amount of time. The market is a bit overextended though, so would not surprise us at all if this market simply went sideways.
NASDAQ forecast for the week of March 30, 2015, Technical Analysis
The NASDAQ as you can see fell during the course of the week, testing the 4800 level. That being the case, the market looks as if it is ready to try to find support in this general vicinity, but at this moment in time we feel that the market isn’t quite ready to be bought yet. We may have to find the signals off shorter-term charts, but ultimately we believe that breaking above the 5000 level is necessary in order to start going long with any type of significant confidence off of this chart.
Gold forecast for the week of March 30, 2015, Technical Analysis
Gold markets as you can see rose during the course of the week, testing the $1220 level. That being the case, the market pullback and formed a little bit of a shooting star like candle. If we can break down below the $1180 level, we feel that the market will then test the $1140 level. Ultimately, we have to wonder whether or not the $1140 level is a bit of a double bottom waiting to happen, so we don’t necessarily think that the markets going to break down below there. Ultimately, if we break the top of the shooting star, we should then go to the $1300 level given enough time.
USD/JPY forecast for the week of March 30, 2015, Technical Analysis
The USD/JPY pair fell during the course of the week, testing the 118 level at one point. That being the case, the market did find buyers though, and we did bounce enough to form a little bit of a hammer. We believe that if we can get above the 120 level, we would be buyers and recognize that the market should continue to go to the 122 level, and then possibly the 125 level after that. Even if we break down below the bottom of the range for the week, we feel that the market has plenty of support all the way down to the 115 level.
USD/CAD forecast for the week of March 30, 2015, Technical Analysis
The USD/CAD pair fell initially during the course of the week, but found enough support at the 1.24 level to turn things back around and form a hammer. The hammer of course suggests that the markets going to go much higher, and if we can break the top of that hammer we are buyers as the market should then go to the 1.28 level, followed by an attempt on the 1.30 level. We have no interest in selling, and even if we break below the bottom of the hammer, we think there’s going to be plenty of support down at the 1.20 handle as well.