GBP is the big underperformer overnight

Currencies: GBP is the big underperformer overnight after BoE member Sentence said Britain may return to recession. The EUR was weighed by concerns regarding Greece. CAD outperformed on the outsized and worrisome increase in inflation.

EUR/USD. Breach of downtrends compromised by Greece

EUR/USD (1.3559) is down overnight, and the gains since late-Feb have been undone by renewed tension regarding Greece. Spot had successfully broken downtrend resistance on the daily and weekly charts but is now back below both lines.

Technicals:

Trend: Daily higher; Weekly higher.
Overbought/Oversold (stochastics): Daily overbot; Weekly oversold.
Support / Resistance Levels: Support for EUR/USD lies at 1.3436 (Mar2 low), 1.3424 (May18 low), 1.3405 (61.8% Fibonacci retracement of Oct’08 to Nov’07 rally), 1.3330 (Jan27’09 high). Resistance lies at 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

The CFTC net non-commercial positioning has deteriorated to a new record short, -73.2K. This is strongly suggestive of EUR/USD either being near a bottom or collapsing from some new sovereign default problems.
The risk reversal (3m, 25delta) is off overnight, consistent with the fall in the currency.
Implied Vol (3m) is rising as EUR/USD sinks towards 1.35.

Cross-asset valuation: Who knew? Interest rates matter! EUR/USD has strong correlations with the 2yr (positive) and 10yr spreads (negative). The correlation with the S&P has disappeared.

GBP/USD. Lower – downtrend resistance holding

Cable (1.5150) is down overnight, and downtrend resistance off the Jan high continues to hold. Interestingly, spot has established an uptrending channel during March. The discrepancy with the downtrend resistance will resolve sometime next week.

Technicals:

Trend: Daily higher; Weekly lower.
Overbought/Oversold (stochastics): Daily oversold; Weekly oversold.
Support/Resistance Levels: Resistance lies at 1.5382 (Mar17 high), 1.5816 (Feb17 high), 1.6284 (Jan22 high), 1.6458 (Jan19 high),1.6479 (61.8% retracement of Nov to Dec decline), 1.6722 (Dec 3 high), 1.6878 (Nov16 high) and 1.7043 (Aug high). Support lies at 1.4784 (Mar 1 low) and 1.4338 (76.4% retracement of Jan-Aug’09 rally.)

Positioning:

The CFTC non-commercial net position rebounded slightly from last week’s record low to -63.1K, although it remains extreme suggestive of either an imminent rebound in GBP or some new implosions in either the banking system or economy there.
The risk reversal (3m, 25delta) is off overnight, consistent with the decline in spot.
Implied Vol (3mo) is up slightly overnight but has retreated from near the highs since Nov’09 as spot stabilizes.

Cross-asset valuation: The significant correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive), the S&P (positive) and crude oil (positive).

USD/CHF. Support holding

USD/CHF (1.0584) is up overnight, and support in the form of Fibonacci retracement and the Dec high appears to be holding.

Technicals

Trend: daily lower; weekly higher but losing momentum.
Overbought/Oversold (stochastics): Daily oversold; Weekly overbought.
Support/Resistance levels: Resistance lies at 1.0899 (Feb19 high) and 1.1023 (Jun high), while support lies at 1.0524 (38.2% Fibonacci retracement of Nov-Feb rally), 1.0513 (Mar17 low), 1.0508 (Dec17 high) and 1.05 (psychological).

Positioning:

The CFTC non-commercial net position moderated slightly to -5.4K, consistent with the stabilization in USD/CHF.
The risk reversal (3m, 25delta) is up overnight, consistent with the move higher in USD/CHF.
Implied Vol (3mo) has rebounded modestly with USD/CHF.

Cross-asset valuation: USD/CHF has correlated mostly strongly during the past 60 days with EUR/USD (negative), the USD index (positive), and gold (negative).

USD/CAD. Holding 1.01.

USD/CAD (1.0112) is down overnight, but 1.01 seems to be holding as support.

Technicals:

Trend: Daily crossing higher; weekly lower.
Overbought/Oversold (stochastics): Daily oversold; weekly neutral;
Support/Resistance Levels: Resistance lies at 1.0680 (Feb25 high), 1.0781 (Feb5 high), 1.0870 (Nov2 high), 1.0959 (Oct high), 1.0993 (Sep high), 1.10 (psychological), and 1.1125 (Aug 17 high). Support lies at 1.0071 (Mar17 low) and 1.00 (psychological).

Positioning:

The CFTC, non-commercial, net position rose to 62.1K, a new extreme since 2007 suggesting that this market segment has little to give in terms of pushing USD/CAD lower.
The risk reversal (3m, 25delta), is steady overnight but near the lows of the past six months, suggesting USD/CAD might rally.
Implied Vol (3m) is near the low since Sep’08.

Cross-asset valuation: In terms of other assets correlating with USD/CAD, watch the SPX (negative), DXY (positive), CRB (negative), and crude oil (negative).

USD/JPY. Sitting on 90.

USD/JPY (90.47) is down overnight and continues to trade just above 90. On the weekly chart, it continues to trace out a roughly downward wedge formation.

Technicals:

Trend: Daily higher; Weekly higher.
Overbought/Oversold (stochastics): Daily neutral; Weekly neutral.
Support/Resistance Levels: Support lies at 88.14 (Mar4 low), 87.37 (Dec9 low) and 84.83 (Nov27 low). Resistance lies at 91.09 (Mar12 high), 92.15 (Feb19 high) and 93.77 (Jan8 high).

Positioning:

The CFTC, non-commercial net position the JPY position moderated to 27.6K, consistent with the rally in USD/JPY.
The risk reversal (3m, 25delta) has risen towards an extreme, suggesting little support for USD/JPY upside from this market segment.
Implied vol (3m): remains at very low levels.

Cross-asset valuation: The correlations of USD/JPY with the US 10yr yield (positive), the US-JP 10yr (positive) spread, S&P (positive), and crude oil (positive) are significant.

AUD/USD. Stalling at downtrend resistance

AUD/USD (0.9198) is down overnight and holding below the downtrend resistance from Dec.

Technicals:

Trend: Daily lower; Weekly higher.
Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.
Support/Resistance: Technical support lies at 0.8979 (Mar4 low), 0.8801 (Feb25 low), 0.8579 (Feb5 low) and then 0.8500 (psychological). Resistance for AUD/USD exists at 0.9245 (Downtrend from Dec), 0.9406 (Nov16 high) and then 0.9850 (Jul’08 high).

Positioning:

The CFTC, non-commercial net position rebounded to 61.6K, consistent with the rebound to a high since Jan.
The risk reversal (3m, 25delta) is in neutral territory, and stalled, which is consistent with AUD/USD’s recent stall.
Implied Vol (3m) is down and remains at very subdued levels (low since Aug’08.)

Cross-asset valuations: AUD/USD has correlated most strongly with gold (positive), equities (S&P500, positive), commodities (CRB, positive) and the USD Index (negative.)

NZD/USD. Consolidating at 71.

NZD/USD (0.7118) is down overnight and appears to be consolidating the recent break above a 70 handle. On the weekly chart, the uptrend during March does not violate the modest downtrending channel in place since Oct’09.

Technicals:

Trend: Daily higher; Weekly lower.
Overbought/Oversold (stochastics): Daily overbot; Weekly oversold.
Support/Resistance: Resistance lies at 0.7179 (Mar17 high), 0.7442 (Jan14 high), 0.7500 (psychological) and 0.7635 (Oct21 high). Support lies at 0.6852 (Mar4 low), 0.6848 (Feb25 low), 0.6808 (Feb5 low), and 0.6594 (Jun high).

Positioning

The CFTC non-commercial, net position fell to 3.2K, and the opposing moves in AUD and NZD positioning is consistent with the recent 10yr high in AUD/NZD.
The risk reversal (3m, 25delta) is down slightly but still in the upper end of the 6-month range.
Implied Vol (3m) is down further to a new low since Aug’08.

Cross-asset valuations: The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive), the USD index (negative), stocks (S&P500, positive) and commodities (CRB index, positive).