USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: Neutral
The Japanese Yen traded lower versus the US Dollar
for the third week in four and left the USDJPY exchange rate near the
key ¥120 level. Why might the week ahead finally bring a major breakout?
Traders have shown little interest in pushing the
Yen beyond its narrow three-month trading range, but any significant
surprises in upcoming US Personal Income/Spending and Nonfarm Payrolls labor data could change outlook for the otherwise-rangebound USD/JPY
exchange rate. A fairly consistent rally from January lows near ¥116
suggests that the next major USDJPY move will be to the topside.
Relatively low trader volumes in recent weeks nonetheless limits
our enthusiasm for fresh USDJPY-long positions, however. We would
ideally see a major shift in market conditions and trader attitudes to
justify calling for a sustained break higher.
The key question remains unchanged: when will the US
Federal Reserve begin raising interest rates? Yield-seeking investors
have typically sold the Japanese Yen against higher-yielding currencies
through normal rate environments. And indeed, the fact that the US Fed
appears to be the only major central bank to act in 2015 has helped push
the US Dollar to 8-year peaks versus the JPY.
Expectations can only take the Greenback so far, and
eventually investors will need to see action. Consistent improvements
in US Nonfarm Payrolls figures suggest the coming week’s result will
further build the case for Fed rate hikes. Yet fundamental risks seem
weighed to the downside as few predict that hiring matched the
impressive pace seen through January’s report.
Technical forecasts paint a similarly mixed picture for the Dollar/Yen exchange rate,
and indecision helps explain why recent CFTC Commitment of Traders data
shows speculative JPY-short positions (USDJPY-longs) have fallen to
their lowest since November, 2012.
It’s certainly possible that strong US economic data
could force a larger break higher in the USDJPY. As far as
probabilities go, however, we put relatively low odds on a sustained US
Dollar move higher in the week ahead.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: Neutral
The Bank of England’s (BoE) March 5 interest rate decision may have a limited impact on GBP/USD
as the central bank is widely anticipated to retain its current policy,
but the fundamental developments coming out of the U.K. may continue to
boost the appeal of the sterling should the data prints highlight an
improved outlook for growth and inflation.
Following the BoE testimony, it seems as though the Monetary Policy Committee (MPC) will continue to move towards a rate hike especially as Governor Mark Carney
only sees a ‘temporary’ decline in U.K. inflation and retains the
hawkish forward-guidance for monetary policy. With that said, a further
pickup in U.K. Mortgage Approvals along with a faster expansion in the Purchasing Manager Indices (PMI)
may boost interest rate expectations as a growing number of central
bank officials show a greater willingness to normalize monetary policy
over the near to medium-term.
At the same time, the U.S. Non-Farm Payrolls (NFP)
report will also largely be in focus as it remains a race between the
Fed and the BoE as to who will be the first to normalize monetary
policy. Indeed, another 240K expansion in U.S. employment may further
the argument for a mid-2015 rate hike, but Chair Janet Yellen
and Co. may ultimately share a similar fate to their U.K. counterpart
especially as Average Hourly Earnings are expected to narrow to an
annualized 2.1% in February. As a result, the disinflationary
environment may push the Fed to further delay its normalization cycle,
while a pickup in U.K. economic activity may underpin a larger rebound
in the British Pound as the central bank continues to prepare households and businesses for higher borrowing-costs.
Nevertheless, the lack of momentum to push and close
above the former support zones around 1.5510-55 may produce range-bound
prices in GBP/USD ahead of the key event risks, but the pair may make a
more meaningful effort to retrace the decline from the previous year
should the fundamental developments sway the interest rate outlook for
the U.S. and U.K. As we open up the March trade, the opening monthly
range may dictate the short-term outlook for the pound-dollar as the Fed
is scheduled to deliver its next interest rate decision on March 18.
AUDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Australian Dollar: Neutral
The Australian Dollar spent a fourth week in
consolidation having started the month with a drop to the lowest level
in nearly six years against its US counterpart. That move was triggered
by a surprise interest rate cut from the Reserve Bank of Australia, and
prices have since stalled as investors weigh the possibility of further
easing. The deadlock is likely to be broken in the week ahead as
policymakers gather for another policy meeting.
A survey of 29 economists polled by Bloomberg is
narrowly leaning toward stimulus expansion, with 18 of those queried
calling for the benchmark lending rate to be lowered by 25 basis points
to 2 percent. Traders are bit more dubious: priced-in expectations
reflected in OIS rates reflect a 56 percent probability of a reduction.
This means that regardless of which direction the RBA opts to take,
nearly half of investors will find themselves wrong and scrambling to
readjust portfolios accordingly. Needless to say, this is likely to make
for a volatile response no matter what outcome ultimately hits the
Whatever the initial reaction however,
follow-through will be far from certain as high-profile event risk
emerges on the external front and threatens to pull the Aussie into its
orbit. February’s US Employment report stands out as particularly
critical as investors continue to speculate about the timing of the
first post-QE interest rate hike from the Federal Reserve. Expectations
call for a slight slowdown in job creation, with payrolls posting a
235,000 increase compared with 257,000 added in the prior month.
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: Neutral
snapped a four week losing streak with the precious metal rallying
1.27% to trade at $1216 ahead of the New York close on Friday. The fresh
batch of central bank rhetoric from the Humphrey-Hawkins testimony
suggests that the Fed remains cautiously on course to normalize monetary
policy, but the fundamental developments due out in the days ahead may
heavily influence interest rate expectations as the central bank
struggles to achieve its 2% target for price growth.
Beyond the slew of central bank rate decisions
kicking off the March trade (RBA, ECB, BoE & BoC), the U.S. Non-Farm
Payrolls report may have the biggest implications for gold on the back
of the USD strength
story. Despite the stronger-than-expected 4Q GDP print, the
disinflationary environment may put increased emphasis on the wage
growth figures due out on Friday, and signs of subdued household
earnings may undermine the bullish sentiment surrounding the dollar
especially as market participants anticipate Average Hourly Earnings to
narrow to an annualized 2.1% in February. We’ll look for possible
softness in the greenback to further support the recent gold rally with
prices closing out the week just below key resistance.
Last week we highlighted key technical support
at $1196/98, a level defined by “the confluence of the 61.8%
retracement of the November advance & the 1.618% extension of the
decline off the January high and is backed closely by a basic trendline
support off the November low. We’ll reserve this region as our near-term
bullish invalidation level and although the broader bias remains
weighted to the down-side, near-term this structure may offer stronger
support. Interim resistance (near-term bearish invalidation) stands at
$1218/24… Bottom line: looking for a low early next week with a general
topside bias in play near-term while above $1196/98.” - Indeed the
market fell to a fresh low on Monday before rebounding to test the
$1218/24 resistance range. Our outlook remains unchanged heading into
March with the 1196-1224 range in focus to start the week. A topside
breach keeps the long-bias in play targeting resistance objectives at
1234 & 1248/50 with a break sub 1195 (close basis) risking
substantial declines into subsequent support targets at $1171 &
DAX forecast for the week of March 2, 2015, Technical Analysis
The DAX as you can
see broke higher during the course of the week, closing at the very top
of the range for that candle. With that being the case, looks like the
market should continue to go higher, but at this point time we feel that
the market is a little overbought. We would like to see some type of
pullback in order to start going long again, and feel a little bit
apprehensive of going long at this point, as pullbacks should offer
value in one of the most trusted markets.
NASDAQ forecast for the week of March 2, 2015, Technical Analysis
The NASDAQ as you can
see broke out to the upside during the week, but turned back around to
form a little bit of a shooting star. We are just below the 5000 handle,
and that of course can be a psychological barrier. If we break down
below the bottom of the shooting star, we could see quite a bit of
support below. The 4800 level was previously resistive, so it should now
be supportive. If we find supportive candles below, we would be willing
to buy this market as it should build up enough momentum to break out
above that area.
Gold forecast for the week of March 2, 2015, Technical Analysis
initially fell during the course of the week, but bounced as the $1200
level below offered enough support. With that being the case, the market
looks as if there is plenty of support in that area, based upon the
horizontal support, as well as the uptrend line. The hammer of course
looks very positive, so we can break above the top of the hammer we are
buyers but recognize that the $1240 level above probably causes a bit of
a headache for the buyers. After that though, we feel that the market
ultimately goes to the $1500 level after that.
USD/JPY forecast for the week of March 2, 2015, Technical Analysis
The USD/JPY pair
initially fell during the course of the week, but slammed into the 120
level to find resistance. With that, we believe the pullbacks continue
to offer value as the market should go higher due to the long-term
uptrend. With that being the case, we are bullish and have no interest
whatsoever in selling this market. We believe that the 115 level is
massively supportive, and essentially the “floor” in this marketplace.
We do believe ultimately that the uptrend continues going forward,
heading to the 125 handle.
USD/CAD forecast for the week of March 2, 2015, Technical Analysis
The USD/CAD pair
went back and forth during the course of the week, forming a fairly
neutral candle. Because of this, we feel that this market should
continue to go back and forth in this general vicinity but we were also
looking at this chart in thinking that perhaps we could break down and
head to the 1.20 and a. If we do, we would love to buy a supportive
candle at that area as it is essentially the “floor” in this market. If
we break above the 1.27 level, we would be buyers there as well. We
don’t really have any interest in selling.
NZD/USD forecast for the week of March 2, 2015, Technical Analysis
The New Zealand dollar initially
fell against the US dollar during the week, but as you can see found
enough support below the 0.75 level to bounce and form a nice-looking
hammer. However, if you can imagine this market going above the top of
the hammer, it’s difficult to start buying this market at that point
anyway. There is a massive amount of resistance all the way to the 0.80
level. With that, we have no interest in buying this market but would
sell on a break down below the bottom of the hammer for the week.