Delayed reaction

Next 24 hours: Euro sinks to fresh 2021 low

Today’s report: Delayed reaction

We thought it was a little strange to see stocks so well bid and the US Dollar offered in the aftermath of last week’s Fed decision. After all, the Fed signaled a taper on the horizon and bumped up median expectations for a rate hike into 2022.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported down towards 1.1600 in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up. Only a weekly close below 1.1600 would force a rethink.

  • R2 1.1909 – 3 September high– Strong
  • R1 1.1800 - Round number – Medium
  • S1 1.1668 - 28 September low – Medium
  • S2 1.1664 – 20 August/2021 low – Strong

EURUSD – fundamental overview

There has been a wave of demand for the US Dollar in the aftermath of the Fed decision. The market is pricing the start to a Fed taper and a rate hike in 2022. But the Euro has held up relatively well in recent sessions, getting some support from a stronger round of Tuesday data in the form of German and French confidence reads. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

EURUSD - Technical charts in detail

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 1.3751 – 23 September high – Strong
  • R1 1.3700 – Figure – Medium
  • S1 1.3521 – 28 September low – Medium
  • S2 1.3500 – Psychological – Strong

GBPUSD – fundamental overview

As if broad US Dollar demand post Fed wasn't enough, the Pound has taken hits of its own of late, on the back of dovish BOE comments. BOE Mann was out on the wires saying inflation was transitory and not troubling. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

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 112.00 – Figure– Medium
  • R1 111.69 – 29 September high – Medium
  • S1 110.93 – 28 September low – Medium
  • S2 110.45 – 8 September high – Medium

USDJPY – fundamental overview

Broad based US Dollar demand post last week's Fed is having a decisive impact of widening US spreads versus JGBs, which has weighed on the Yen quite a bit despite traditional flight to safety demand for Yen. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

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 0.7410 – 10 September high – Strong
  • R1 0.7348 – 16 September high – Medium
  • S1 0.7201 – 24 August low – Medium
  • S2 0.7106 – 20 August/2021 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been doing a great job holding up of late despite all of the risk off flow. It seems the currency has been getting a lot of help from recent Aussie retail sales data which came in better than expected. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

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 1.2949 – 20 August/2021 high – Strong
  • R1 1.2896 – 20 September high – Medium
  • S1 1.2583– 10 September low – Medium
  • S2 1.2494 – 3 September low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been able to mostly shrug off selling pressure from risk off flow and broad based USD demand. The Loonie has benefited from solid employment data from StatCan who said Canadian non-farm payrolls were up 324.8k in July, and weekly earnings advanced to 1.8% year on year. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

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 0.7171 – 3 September high – Medium
  • R1 0.7094 – 23 September high – Medium
  • S1 0.6937 – 29 September low – Medium
  • S2 0.6881 – 20 July low – Strong

NZDUSD – fundamental overview

Not a lot to talk about on the local front, with most of this latest Kiwi selling pressure coming from broad based US Dollar demand and risk off flow. Key standouts on today’s calendar include German import prices, UK mortgage approvals, Eurozone confidence and sentiment reads, Canada producer prices, US pending home sales, and speeches from Fed Chair Powell and BOE Bailey.

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 4552 – 3 September/Record high – Strong
  • R1 4485 – 27 September high – Medium
  • S1 4307 – 20 September 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 Q4 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. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2021/09/15seplmaxaudio.mp3"][/audio]

Peformance chart: 30 Day Performance vs. US dollar (%)

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