Yellen Speech Headlines Friday Trade

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 1.3372 – 3Aug high – Strong
• R1 1.3273 – 24Aug high – Medium
• S1 1.3129 – 23Aug low – Medium
• S2 1.3023 – 19Aug low – Strong

GBPUSD – fundamental overview

An outperforming Pound in recent trade got a bit of a reality check on Thursday, with the UK currency succumbing to pressure, perhaps on profit taking ahead of Yellen’s Jackson Hole speech. Even the stronger UK CBI trends data wasn’t able to help extend Cable’s recovery, though with US durable goods and US initial jobless claims looking healthy, it wasn’t all that surprising to see the Pound give back gains. Looking ahead, aside from the Fed Chair, we also get UK and US GDP prints, along with US trade and Michigan confidence.

USDJPY – technical overview

The latest topside failure sets up a prospective lower top at 102.65 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 100.93 – 22Aug high – Medium
• S1 99.54 – 16Aug low – Medium
• S2 98.99 – 24Jun/2016 low – Strong

USDJPY – fundamental overview

The Yen has barely nudged this week with the currency taking a rest in lighter August trade, with many participants off the desks on holiday. The currency is also getting pulled in opposing directions which is contributing to the lack of movement, with solid US data and the possibility for a more hawkish Fed getting offset by negative risk implications and a market less confident in the effectiveness of additional BOJ stimulus. Looking ahead, we get the all important Yellen speech from Jackson Hole, along with key US data featuring GDP, trade and Michigan confidence. It’s worth noting BOJ Governor Kuroda is also slated to speak at the Jackson Hole Symposium and any comments from the central banker will also be watched closely.

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. The recent break back below 0.7637 strengthens this outlook and should accelerate declines towards 0.7400 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 0.7656 – 23Aug high – Medium
• S1 0.7584 – 22Aug low – Strong
• S2 0.7569 –3Aug low – Medium

AUDUSD – fundamental overview

Lack of first tier data out of Australia this week has left the Australian Dollar trading on broader flows which have been less than impressive. Aussie will try and take its cues from the Fed Chair on Friday, though important US data should not be overlooked, with GDP, trade and Michigan confidence due.

USDCAD – technical overview

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 1.3000 – Psychological – Strong
• R1 1.2976 – 15Aug high – Medium
• S1 1.2859 – 23Aug low – Medium
• S2 1.2764 – 18Aug low – Strong

USDCAD – fundamental overview

Some offsetting flows in Thursday trade ultimately resulted in a flat Canadian Dollar. The Loonie was initially propped on a recovery in the price of OIL but then found renewed offers as headline US durable goods and US initial jobless claims produced solid results. Looking ahead, the main event for the day will be the Fed Chair Yellen speech at Jackson hole, though US GDP readings, US trade and Michigan confidence should not be overlooked. There is no data of note out of Canada today.

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 0.7199 will get things going to the downside.

• R2 0.7400 – Figure – Medium
• R1 0.7345 – 23Aug/2016 high  – Strong
• S1 0.7266 – 23Aug low – Medium
• S2 0.7199 – 16Aug low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is sitting up at 2016 highs, with the currency benefitting from less dovish RBNZ Wheeler comments earlier in the week. Interestingly, there hasn’t been a whole lot of pullback despite softer Kiwi trade data, and solid US durable goods and initial jobless claims. It feels like the market is waiting for Yellen today to make a decision on its next big move, though US GDP, trade and Michigan confidence should not be overlooked.

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

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 off the recently established record highs over the coming days. Much of investor attention is now on the Jackson Hole Symposium and an anticipated speech from the Fed Chair later today, which could shed further light on the Fed’s monetary policy outlook. Certainly hawkish comments from Fed Fischer earlier this week could be setting the stage for Yellen’s speech, which if confirmed, would add to downside pressure on record high stocks as the reality of a rate hikes this year discourages investors. Also out on Friday is a US GDP reading, US trade and Michigan confidence.

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 1318.10 – 26Aug 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 been in the process of correcting off recent record highs. Though setbacks have been significant over the past several days, the price action is still very much classified as corrective, with current setbacks expected to be limited to the 2.9000 area in favour of the next meaningful higher low and bullish resumption. Only a break back below 2.8395 will take immediate pressure off the topside.

• R2 3.0270 – 4Aug high – Medium
• R1 2.9685 – 24Aug high – Strong
• S1 2.9135 – 18Aug low – Medium
• S2 2.8755 – 14Jul low – Strong

Feature – fundamental overview

President Erdogan got more accommodation from his central bank this week but still isn’t satisfied with the degree of policy easing as he continues to call for more rate cuts to help stimulate the local economy. This was a major point of contention with the previous CBRT Governor, though the current Governor is cut more to the mold of Erdogan’s liking. The challenge for the CBRT going forward is to balance the need for stimulatory measures amidst rising inflation. All of this paints a gloomy picture for the Lira going forward, with the currency already battling a recent coup attempt, downgrades from the rating agencies and stress over the EU-Turkey migrant deal. Looking ahead, much of the price action here will hinge on the tone of today’s Fed Chair Yellen speech. Anything hawkish will weigh on the Lira, while anything leaning more dovish could invite demand.