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
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
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
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.