Commodity currencies get boost from oil surge

Next 24 hours: Positioning into mid-week event risk

Today’s report: Commodity currencies get boost from oil surge

We come into Tuesday with the US Dollar extending an impressive run against the Euro and Pound, while coming under mild pressure against most other currencies.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro remains well supported on dips following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0500 in favor of a bullish continuation. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Next key resistance comes in the form of the February 2022 high at 1.1496.

  • R2 1.1200 – Figure – Medium
  • R1 1.1147 - 24 July high – Medium
  • S1 1.1000 - Psychological – Medium
  • S2 1.0943 – 10 July low – Medium

EURUSD – fundamental overview

The Euro was dealt another blow on Monday, this time from a round of softer PMI reads out of Germany and the Eurozone. German manufacturing PMI reads crashed, while Eurozone and France reads slid deeper into contraction. Implied peak rates have been impacted as a consequence, sliding 10bps over the past several days. Implied peak rates now sit at 3.85%. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.3500.

  • R2 1.2965 – 20 July high – Medium
  • R1 1.2905 – 21 July high – Medium
  • S1 1.2750 – 10 July low – Medium
  • S2 1.2658 – 3 July low – Medium

GBPUSD – fundamental overview

Monday's PMI reads out of the UK weren't pretty and weighed on the Pound as a consequence. The composite PMI read slumped to the lowest level in 6 months, while the manufacturing PMI print was a lowly 45, trading to a post-pandemic low. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

USDJPY – technical overview

The major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported ahead of 135.00 in favor of the next higher low.

  • R2 143.01 – 10 July high – Medium
  • R1 141.96 – 21 July high– Medium
  • S1 139.75 – 21 July low – Medium
  • S2 139.11 – 20 July low – Medium

USDJPY – fundamental overview

There has been plenty of news in recent days backing up the view the BOJ is unlikely to shift YCC policy this week. All of this has led to a flood of renewed selling in the Yen. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. Next key resistance comes in at 0.7284. Setbacks should continue to be well supported in the 0.6500 area. Only a monthly close below 0.6500 would give reason for rethink.

  • R1 0.7000– 16 June high – Strong
  • R2 0.6847 – 20 July high – Medium
  • S1 0.6706 – 4 July high – Medium
  • S2 0.6595 – 29 June low – Strong

AUDUSD – fundamental overview

The Australian Dollar took an early hit on Monday from a round of discouraging PMI reads that slipped into contractionary territory. However, setbacks were supported on help from a solid performance in US equities. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

USDCAD – technical overview

Above 1.3000 signals an end to a period of longer-term bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3387 – 7 July high – Strong
  • R1 1.3244 – 18 July high – Medium
  • S1 1.3093 – 14 July/2023 low – Medium
  • S2 1.3000 – Psychological – Strong

USDCAD – fundamental overview

Monday's round of outperformance in the Canadian Dollar was mostly about the surging price of oil, though we also saw some gains from higher stocks. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

NZDUSD – technical overview

Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside. A monthly close below 0.6000 would intensify bearish price action.

  • R2 0.6316 – 19 July high – Strong
  • R1 0.6242 – 21 July high – Medium
  • S1 0.6117 – 23 June low – Medium
  • S2 0.6050 – 29 June low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar held up well on Monday on account of higher US equities and an impressive jump in New Zealand key exports. Milk powder, butter and cheese exports were up 11%, while oil, iron and steel sales were also solid. Key standouts on Tuesday’s calendar come from German Ifo reads, UK CBI data, Canada manufacturing sales, US Case Shiller, US house prices, US consumer confidence, and Richmond Fed manufacturing.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4600 will be required to take the immediate pressure off the downside. Next key support comes in at 4376.

  • R2 4600 – Round Number – Strong
  • R1 4579 – 19 July/2023 high – Medium
  • S1 4496 – 17 July low – Medium
  • S2 4376 – 10 July low – Strong

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2023 that results in downside pressure into rallies despite market expectations that would argue otherwise.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at 2100, above which opens the next extension towards 2,500.

  • R2 2076 – Record high/2020 – Strong
  • R1 1988 – 20 July high – Medium
  • S1 1900 – Round Number – Medium
  • S2 1893 – 29 June 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 inflation risk and a less upbeat global growth outlook. 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.

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

Suggested reading

Daily Reports Global FX Insights   LMAX Exchange  

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.