A confounding disconnect

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 1.3846 – 17 August high – Medium
• R1 1.3787 – 18 August high – Medium
• S1 1.3600 – Figure – Medium
• S2 1.3572 – 20 July low – Strong

GBPUSD – fundamental overview

The Pound has been feeling heat from the broad based US Dollar rally, while also taking a bit of hit from softer UK inflation reads earlier in the week. Key standouts on Friday’s calendar come in the form of German producer prices, UK retail sales, Canada retail sales, and a Fed Kaplan speech.

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

The Yen has come under pressure from this latest wave of broad based US Dollar demand. Though the fact that a lot of this demand is also tied to flight to safety flow, has prevented the Buck from running too far and fast against the Yen. Key standouts on Friday’s calendar come in the form of German producer prices, UK retail sales, Canada retail sales, and a Fed Kaplan speech.

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.

• R2 0.7342 – 17 August high – Medium
• R1 0.7270 – 18 August high – Medium
• S1 0.7142 – 19 August/2021 low – Medium
• S2 0.7100 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has extended it yearly low against the Buck, this on broad based US Dollar demand from risk off flow, along with slumping iron ore prices and softer Aussie data. We've seen a real turnaround in RBA rate expectations as well, only adding further fuel to the Aussie bearishness. Key standouts on Friday’s calendar come in the form of German producer prices, UK retail sales, Canada retail sales, and a Fed Kaplan speech.

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 1.2882 – 28 January/2021 high – Strong
• R1 1.2850 – Mid-Figure – Medium
• S1 1.2645– 19 August low – Strong
• S2 1.2600 – Figure – Medium

USDCAD – fundamental overview

High beta currencies have come under intense pressure as risk off intensifies, with this flow trumping any demand we would otherwise seen for the Loonie on the back of this week's hotter Canada inflation reads. Political uncertainty into the September election and sinking OIL prices aren't helping either. On Thursday, the Loonie suffered the worst decline in 4 months against the Buck. Key standouts on Friday’s calendar come in the form of German producer prices, UK retail sales, Canada retail sales, and a Fed Kaplan speech.

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 0.7089 – 4 August high – Strong
• R1 0.6952 – 18 August high – Medium
• S1 0.6809 – 19 August/2021 low – Medium
• S2 0.6800 – Figure – Strong

NZDUSD – fundamental overview

All of this risk off flow and all of this renewed worry around COVID in New Zealand has forced the RBNZ to reconsider its rate hike outlook, and this in turn has resulted in a massive drag on the New Zealand Dollar to fresh yearly lows against the Buck. Key standouts on Friday’s calendar come in the form of German producer prices, UK retail sales, Canada retail sales, and a Fed Kaplan speech..

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 4500 – Psychological – Strong
• R1 4483 – 16 August/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.