Fed Minutes No Help to Ailing Buck

GBPUSD – technical overview

The market remains confined to an intense downtrend and is in the process of consolidating just off the recent +30-year low from July. Any rallies are classified as corrective ahead of what should be the next major break below 1.2800 and towards 1.2500. Only back above 1.3372 will take the immediate pressure off the downside and force a shift in the structure.

• R2 1.3175 – 5Aug high – Strong
• R1 1.3100 – Figure – Medium
• S1 1.3000 – Figure – Medium
• S2 1.2867 – 16Aug low – Strong

GBPUSD – fundamental overview

Another round of solid data out of the UK, though this time, the Pound wasn’t really able to muster added momentum. UK employment exceeded expectations on Wednesday, with the currency looking to extend its recovery sparked on Tuesday from the hotter UK inflation print. The Fed Minutes didn’t really offer any added colour, with the Fed split on the timing of its next move. Still, a majority of members seem to be content to wait and see and continue to assess economic data. Looking ahead, the focus will be on UK retail sales, US initial jobless claims and the Philly Fed survey. 

USDJPY – technical overview

The latest topside failure sets up a prospective lower top at 107.49 ahead of the next major downside extension below the recent yearly and multi-month low at 98.99. At this point, only a break back above 102.65 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 101.45 – 15Aug high – Strong
• R1 101.00 – Figure – Medium
• S1 99.54 – 16Aug low – Medium
• S2 98.99 – 24Jun/2016 low – Strong

USDJPY – fundamental overview

We didn’t get the same degree of hawkishness out of the Fed Minutes as we got from Fed Dudley and Lockhart comments in the previous day, and this most definitely added to downside pressure on the major pair, with USDJPY dipping back below 100.00 into Thursday. Today’s early release of some awful Japanese trade data has only fueled additional downside pressure with the market worried monetary policy isn’t capable of doing the trick. The other weighing variable at the moment is the onset of mild risk liquidation in US equities which has the potential to turn into something bigger. And if it does, there is every chance USDJPY will be moving a good deal lower than the current yearly low around 99.00 set back in June. Looking ahead, US initial jobless claims and the Philly Fed survey are the key standouts on the economic calendar.

EURCHF – technical overview

Not much doing here over the past several days, with the market confined to a range trade, roughly between 1.0800 and 1.1000. At this point, a daily close above 1.1000 or back below 1.0800 will be required for clearer directional insight. Until then, look for dips to be supported and rallies well capped.

• R2 1.1014 – 24Jun high – Strong
• R1 1.0945 – 12Jul high – Medium
• S1 1.0790 – 29Jul low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

SNB smoothing activity to prop the EURCHF rate has been helping to elevate the cross, but at the same time, any upside moves haven’t been sustainable with the cross rate continuing to get sold aggressively into rallies. Overall, this is a market going nowhere right now and it seems sell-stops need to get taken out below 1.0750 or above 1.1000 for clearer insight. US stocks have been supporting EURCHF but are also looking extended which could invite Franc demand if the market starts to roll over from record highs in the sessions ahead.

AUDUSD – technical overview

The market has struggled on rallies above 0.7700 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835 in favour of the next major downside extension. Wednesday’s break back below 0.7637 strengthens this outlook and should accelerate declines to 0.7500 in the sessions ahead. Ultimately, only back above 0.7758 will negate the newly adopted bearish outlook and invite a retest of the 2016 highs.

• R2 0.7758 – 11Aug high – Strong
• R1 0.7725 – 12Aug high – Medium
• S1 0.7610 – 17Aug low – Strong
• S2 0.7569 –3Aug low – Medium

AUDUSD – fundamental overview

The Australian Dollar has held up well in recent trade with the market still selling US Dollars across the board on lower for longer Fed expectations following a soft run of US data and this latest Fed Minutes showing most members comfortable to take a wait and see approach. The early Thursday release of an impressive headline Aussie employment print is also helping Aussie, though it’s unclear how much this data really helps with most of the job adds coming out of the part time sector. Looking ahead, US initial jobless claims and the Philly Fed survey come into focus.

USDCAD – technical overview

Despite the latest round of setbacks, this market looks to be in the process of carving out a longer-term base off the 1.2461 2016 low. Look for any additional weakness to be supported ahead of 1.2655 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2655 would delay the constructive outlook.

• R2 1.2976 – 15Aug high – Strong
• R1 1.2934 – 16Aug high – Medium
• S1 1.2799 – 16Aug low – Strong
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

OIL extended its recovery run, the US Dollar remained under pressure and the Fed Minutes leaned more dovish than anything else. All of this helped to keep the Canadian Dollar bid up, with the Loonie building on a nice rally over the past several days. Looking ahead, Canada international securities transactions are accompanied by US initial jobless claims and the Philly Fed survey. But of course, the direction in Oil will continue to play a major part in the Canadian Dollar’s direction.

NZDUSD – technical overview

Rallies to fresh 2016 highs above 0.7300 have been well capped, with the market looking to adhere to the broader downtrend. As such, look for this latest surge to once again fizzle out, in favour of a resumption of declines. Key support now comes in at 0.7087, but a break below 0.7165 will get things going to the downside.

• R2 0.7341 – 11Aug/2016 high – Strong
• R1 0.7322 – 17Aug high  – Medium
• S1 0.7199 – 16Aug low – Medium
• S2 0.7165 – 16Aug low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been caught between short and medium-term flows this week, with the currency bid up on a healthy GDT auction and strong Kiwi employment, but at the same time, running into stiff offers from larger accounts looking for the currency to stall out in anticipation of additional RBNZ rate cuts over the coming months. Wednesday’s slightly more dovish Fed Minutes has given Kiwi yet another prop, though looking ahead, with all of these sell orders above, it is going to be tough for Kiwi to extend much further. As far as today’s economic calendar goes, US initial jobless claims and the Philly Fed survey stand out.

US SPX 500 – technical overview

The market continues to push to fresh record highs and there is scope from here for additional upside in the sessions ahead through next key psychological barriers at 2200. Still overall, the prospect for the formation of a longer-term top is very much alive and any signs of exhaustion and a rolling back over below 2147 in the sessions ahead will strengthen this outlook and invite renewed downside pressure.

• R2 2200.00 – Psychological – Strong
• R1 2194.00 – 15Aug/Record – Medium
• S1 2147.00 –2Aug low – Medium
• S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

Stocks initially traded lower on Wednesday before recovering into the close and finishing slightly higher on the day. The move lower came from a round of hawkish Tuesday comments from Fed’s Lockhart and Dudley, with investors worried more about the Fed making a sooner than later move on rates. But a good deal of this fear was put to rest on Wednesday when the Fed Minutes still showed the balance of officials erring to the wait and see side on monetary policy. But overall, there is a sense that even if the Fed continues to hold off, with monetary policy already exhausted and the limitations of policy being reached, there could be a more intense period of weakness over the coming days. Looking ahead, US initial jobless claims and the Philly Fed survey stand out on today’s calendar.

GOLD (SPOT) – technical overview

The recent break above the previous 2015 peak at 1307 strengthens the case for a longer term base with the market confirming a medium-term higher low in the 1200 area, opening the door for the next major upside extension towards a measured move at 1450. Any setbacks should be very well supported ahead of 1300, with only a break below this level to compromise the outlook.

• R2 1375.20 – 6Jul/2016 high – Strong
• R1 1367.30 – 2Aug high – Medium
• S1 1329.90 – 8Aug low – Medium
• S2 1310.90 – 21Jul low – Strong

GOLD (SPOT) – fundamental overview

Overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Feature – technical overview

USDTRY has recently broken up to another fresh record high after a period of multi-month consolidation. The latest break through the previous peak from 2015 now opens the door for a measured move upside extension towards 3.3500 in the weeks ahead. At this point, current setbacks should be limited in favour of a higher low, with only a break back below 2.8395 to take immediate pressure off the topside.

• R2 3.0970 – 20Jul/Record – Strong
• R1 3.0270 – 4Aug high – Medium
• S1 2.9000 – Psychological – Medium
• S2 2.8755 – 14Jul low – Strong

Feature – fundamental overview

Emerging market currencies have held up nicely into Thursday, helped along by the lack of any hawkish surprises out from the Fed Minutes. Most Fed members prefer the wait and see approach and this is a welcome development to EM FX. Overall, the Lira has done a really good job recovering from record lows against the Buck these past weeks, with the currency also finding solid demand on the back of a run of softer US data. Still, going forward, the Lira will need to start looking inward again. Tomorrow, Moody’s is expected to deliver its rating assessment. There is concern the rating agency will follow in S&P’s footsteps and downgrade Turkey. While PM Simsek said such a downgrade would be unfair, he wouldn’t rule it out as a possibility.