The China spillover

GBPUSD – technical overview

The market is in a corrective phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3500 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

• R2 1.3911 – 12 July high – Strong
• R1 1.3895 – 27 July high – Medium
• S1 1.3690 – 22 July low – Medium
• S2 1.3572 – 20 July low – Strong

GBPUSD – fundamental overview

Calls from the street for earlier rate hikes from the BOE, along with solid CBI data helped to prop up the Pound on Tuesday. Deutsche was the latest bank looking for an August 2022 hike, six months earlier than their prior call. Key standouts on Wednesday’s calendar come in the form of German confidence reads, Canada inflation, US trade, and the FOMC decision.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 113.00 to negate the outlook.

• R2 111.00 – Figure– Medium
• R1 110.70 – 14 July high – Strong
• S1 109.07 – 19 July low – Medium
• S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

The Yen was higher on Tuesday on account of all the risk off flow from the fallout out of China. Key standouts on Wednesday’s calendar come in the form of German confidence reads, Canada inflation, US trade, and the FOMC decision.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 earlier this year. At this stage, there is risk for additional declines, though setbacks are expected to be well supported down into the 0.7000 area.

• R2 0.7504 – 13 July high – Strong
• R1 0.7411 – 19 July high – Medium
• S1 0.7290 – 21 July/2021 low – Strong
• S2 0.7200 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar was under pressure on Tuesday as virus cases in Sydney hit new highs and fallout in Chinese markets intensified. Key standouts on Wednesday’s calendar come in the form of Aussie inflation, German confidence reads, Canada inflation, US trade, and the FOMC decision.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. The weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

• R2 1.2882 – 28 January/2021 high – Strong
• R1 1.2808 – 19 July high – Medium
• S1 1.2526– 21 July low – Medium
• S2 1.2425 – 14 July high – Strong

USDCAD – fundamental overview

Not a lot of activity in the Canadian Dollar on Tuesday. The rally in oil stalled out and equity markets were under pressure, which did contribute to some of the mild selling in the Loonie. Key standouts on Wednesday’s calendar come in the form of German confidence reads, Canada inflation, US trade, and the FOMC decision.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, there is still room for deeper setbacks into the 0.6500-0.6800 area before we see an attempt at a higher low and resumption of upside pressure.

• R2 0.7106 – 6 July high – Strong
• R1 0.7045 – 15 July high – Medium
• S1 0.6881 – 20 July/2021 low– Medium
• S2 0.6800 – Figure – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was lower on Tuesday, taking its hits from the fallout in risk sentiment in China, which then spread to the US market. Key standouts on Wednesday’s calendar come in the form of German confidence reads, Canada inflation, US trade, and the FOMC decision.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4500, with a break back below 4139 to strengthen the outlook.

• R2 4450 – Psychological – Strong
• R1 4426 – 26 July/Record high – Medium
• S1 4233 – 19 July low – Medium
• S2 4139 – 21 June low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment into the second half of 2021.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

• R2 1917 – 1 June high – Strong
• R1 1850 – Mid-Figure – Medium
• S1 1750 – 29 June low – Medium
• S2 1724 – 13 April low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.