Is inflation still transitory?

GBPUSD – technical overview

The market is in a consolidation 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 1.3984 – 30 July high – Strong
• R1 1.3892 – 3 September high – Medium
• S1 1.3680 – 27 August low – Medium
• S2 1.3572 – 20 July low – Strong

GBPUSD – fundamental overview

The Pound is coming off an impressive week of gains, mostly on the back of broad based US Dollar weakness. Dealers do however report some renewed sell interest up above 1.3900. Key standouts on Monday’s calendar come in the form of Aussie job ads, German factory orders, Eurozone construction PMIs, a BOE Saunders speech, and UK construction PMIs. Trading conditions will be very thin in North America on account of the long weekend holiday.

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 110.81 – 11 August high – Strong
• S1 108.72 – 4 August low – Medium
• S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

Friday's gains in the Yen, despite ongoing record high US stocks was somewhat interesting. Some of the Yen demand is coming from broad based US Dollar weakness, but others attribute demand to uncertainty around a potential change in leadership and a BOJ that could introduce even easier monetary policy, Key standouts on Monday’s calendar come in the form of Aussie job ads, German factory orders, Eurozone construction PMIs, a BOE Saunders speech, and UK construction PMIs. Trading conditions will be very thin in North America on account of the long weekend holiday.

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 high 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. Look for a weekly close above 0.7500 to force a shift in the structure.

• R2 0.7500 – Psychological – Medium
• R1 0.7479 – 3 September high – Medium
• S1 0.7285 – 30 August low – Medium
• S2 0.7222 – 27 August low – Medium

AUDUSD – fundamental overview

Traders have been happy to overlook weakness in iron ore prices, instead focusing on Aussie demand from the more favorable risk backdrop and broad based US Dollar outflows. Expectations are building for the RBA to stick with its taper plan this week. Key standouts on Monday’s calendar come in the form of Aussie job ads, German factory orders, Eurozone construction PMIs, a BOE Saunders speech, and UK construction PMIs. Trading conditions will be very thin in North America on account of the long weekend holiday.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent 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 1.2808 – 19 July high – Medium
• R1 1.2709 – 27 August high – Medium
• S1 1.2494– 3 September low – Medium
• S2 1.2422 – 30 July low – Strong

USDCAD – fundamental overview

The Canadian Dollar did manage to close out the previous week with a bid tone against the Buck, but at the same time, the Loonie was an underperformer against its peers. All of the political uncertainty around the upcoming election in which Trudeau is behind in the polls, and this latest Q2 negative growth print have been behind the relative underperformance. Key standouts on Monday’s calendar come in the form of Aussie job ads, German factory orders, Eurozone construction PMIs, a BOE Saunders speech, and UK construction PMIs. Trading conditions will be very thin in North America on account of the long weekend holiday.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, rallies should be well capped and 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. Back above the April high at 0.7317 would be required to force a shift in the structure.

• R2 0.7200 – Figure – Medium
• R1 0.7171 – 3 September high – Medium
• S1 0.6987 – 30 August low – Medium
• S2 0.6930 – 25 August low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar is coming off a strong week of performance, getting help from broad based US Dollar weakness, record US stocks, and a sharp drop in New Zealand virus cases. All of this has helped to get those expectations for and RBNZ rate hike in October back on track. Key standouts on Monday’s calendar come in the form of Aussie job ads, German factory orders, Eurozone construction PMIs, a BOE Saunders speech, and UK construction PMIs. Trading conditions will be very thin in North America on account of the long weekend holiday.

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 4600, with a break back below 4353 to strengthen the outlook.

• R2 4600 – Psychological – Strong
• R1 4552 – 3 September/Record high – Medium
• S1 4353 – 19 August low – Medium
• S2 4233 – 19 July 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 1835 – 15 July high – Medium
• S1 1700 – Round number – Medium
• S2 1677 – 8 March/2021 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.