Fed balance sheet above all

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 1.3984 – 30 June high – Strong
• R1 1.3888 – 11 August high – Medium
• S1 1.3791 – 13 August low – Medium
• S2 1.3690 – 22 July low – Strong

GBPUSD – fundamental overview

An economist survey downgraded UK 2021 GDP forecasts to 6.8% versus 7%. This was seen weighing on the Pound in an otherwise uneventful Monday session of trade. Key standouts on Tuesday’s calendar come in the form of UK employment data, Eurozone GDP, Eurozone employment, Canada housing starts, Canada foreign securities purchases, US retail sales, US industrial production, US business inventories, US NAHB housing, a Fed Chair Powell speech, and the New Zealand GDT auction.

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

Japanese growth data came in better than expected on Monday, helped along by positive momentum from the Olympics. The Yen was bid overall on the back of this data and some risk off flow. Key standouts on Tuesday’s calendar come in the form of UK employment data, Eurozone GDP, Eurozone employment, Canada housing starts, Canada foreign securities purchases, US retail sales, US industrial production, US business inventories, US NAHB housing, a Fed Chair Powell speech, and the New Zealand GDT auction.

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 0.7427 – 4 August high – Medium
• S1 0.7290 – 21 July/2021 low – Strong
• S2 0.7200 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar continues to struggle into any rallies on Aussie virus setbacks and more discouraging China outlook. Key standouts on Tuesday’s calendar come in the form of the RBA Minutes, UK employment data, Eurozone GDP, Eurozone employment, Canada housing starts, Canada foreign securities purchases, US retail sales, US industrial production, US business inventories, US NAHB housing, a Fed Chair Powell speech, and the New Zealand GDT auction.

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 1.2808 – 19 July high – Strong
• R1 1.2608 – 23 July high – Medium
• S1 1.2422– 30 July low – Medium
• S2 1.2425 – 14 July high – Strong

USDCAD – fundamental overview

We saw some relative weakness in the Canadian Dollar on Monday. This came from uncertainty around the September 20 election, fallout from a more downbeat China outlook, and softer Canada data in the form of manufacturing sales and existing home sales. Key standouts on Tuesday’s calendar come in the form of UK employment data, Eurozone GDP, Eurozone employment, Canada housing starts, Canada foreign securities purchases, US retail sales, US industrial production, US business inventories, US NAHB housing, a Fed Chair Powell speech, and the New Zealand GDT auction.

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 0.7089 – 4 August high – Medium
• S1 0.6881 – 20 July/2021 low– Medium
• S2 0.6800 – Figure – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has struggled of late from worry around a less upbeat outlook for China, but has also been better supported into dips on hawkish expectations for the RBNZ. The market will be looking for the central bank to hike rates 25 bps to 0.50% on Wednesday. Key standouts on Tuesday’s calendar come in the form of UK employment data, Eurozone GDP, Eurozone employment, Canada housing starts, Canada foreign securities purchases, US retail sales, US industrial production, US business inventories, US NAHB housing, a Fed Chair Powell speech, and the New Zealand GDT auction.

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 4374 – 3 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.