Greece and China Scaring Markets, Fed Minutes Ahead

GBPUSD – technical overview

Tuesday’s break and close below 1.5550 shifts the focus back to the downside, with setbacks accelerating and eyeing a retracement to the June 1 low at 1.5170. At this point, a break and close back above 1.5550 would be required to suggest bullish resumption back towards the recent 2015 high at 1.5930.

• R2 1.5645 – 3Jul high – Strong
• R1 1.5530 – 6Jul low – Medium
• S1 1.5414 – 7Jul low  – Medium
• S2 1.5369 – 10Jun low  – Strong

GBPUSD – fundamental overview

Some mixed UK industrial and manufacturing production readings failed to factor into trade on Tuesday, with the Pound mostly dropping in sympathy with the Euro. Setbacks accelerated after Cable tripped stops below 1.5500 and it appears we are seeing some repositioning, with traders caught long and exiting what could be an overdone Sterling market after the major pair traded to fresh 2015 highs several days back. Last week’s more dovish BOE Haldane comments continue to resonate with traders, while expectations Chancellor Osborne will cut welfare spending in the UK budget have also weighed on the UK currency. Otherwise, the market will keep its eye out for a new Greece deal proposal, while waiting for the release of the Fed Minutes.

USDJPY – technical overview

Although the bullish structure remains firmly intact, following the recent break to fresh multi-year highs, the market has entered a period of healthy correction and consolidation after stalling ahead of 126.00. Medium-term stretched studies are unwinding from overbought, with room for further weakness below 122.00. But any setbacks below 122.00 should be very well supported ahead of 120.00 in favour of a bullish resumption.

• R2 123.72 – 2Jul high – Strong
• R1 123.19 –3Jul high – Medium
• S1 121.85 – 6Jul low – Medium
• S2 121.00 – Figure – Strong

USDJPY – fundamental overview

While there continues to be solid medium-term interest for the Yen short, the trade has lost some appeal in recent weeks, as uncertainty intensifies with Greece unraveling and China cooling down. Many had thought traditional safe haven correlations had been lost on the Yen, and yet, the fear in the market is inviting a resurgence in Yen demand. Yen longs are at their highest levels in quite some time. Looking ahead, the focus in Wednesday trade will continue to be on Greece, with the market waiting to see what comes out of the latest round of negotiations. But there is also some Fed risk that comes back into play, with the Fed Minutes due and Fed Williams offering his updated thoughts on the outlook for the US economy.

EURCHF – technical overview

The market has finally leveled out after a multi-day drop out from the February high at 1.0815. From here, there is risk for a recovery back towards 1.0815 in the days ahead, with any setbacks expected to be very well supported above 1.0300 on a daily close basis. Look for a push back above 1.0575 to strengthen the constructive outlook and accelerate gains. Ultimately, only a daily close below 1.0300 would compromise the recovery outlook and give reason for pause.

• R2 1.0575 – 4Jun high – Strong
• R1 1.0525 – 2Jul high – Medium
• S1 1.0355 – 6Jul low – Medium
• S2 1.0315 – 29Jun low – Strong

EURCHF – fundamental overview

Reassurances from the SNB that it will continue to support dips in this market have been well received by investors, happy to ride on the central bank’s back whenever we see downside pressure. The major cross rate has been impressively well supported, despite ongoing uncertainty surrounding Greece which includes a higher probability for a Grexit. Still, the SNB would probably be better served if a deal were reached, as any additional intensification on this front, could prove too difficult for the central bank to fight. Dealers cite stops below 1.0300 and above 1.0600. On the data front, Swiss unemployment will be digested on Tuesday but isn’t likely to factor into trade. On Tuesday, the Swiss unemployment rate came in at 3.1% as expected.

AUDUSD – technical overview

A multi-day bearish consolidation has finally been broken to the downside, with the market taking out the yearly/multi-year low at 0.7533 to open the door for the next major downside extension towards 0.7000 further down. Daily studies are however a little stretched leaving the door open for some corrective upside before bearish resumption. However, any rallies should be well capped below 0.7819.

• R2 0.7587 – 29Jun low – Strong
• R1 0.7533 – 6Jul high – Medium
• S1 0.7391 – 8Jul/2015 low – Strong
• S2 0.7350 – Mid-Figure – Medium

AUDUSD – fundamental overview

Although the RBA wasn’t as dovish as the market was expecting after leaving rates unchanged on Tuesday, the beaten down Australian Dollar continued to extend declines to fresh multi-year lows as the weight of falling iron ore, ongoing Greece risk and collapsing China equities could not be ignored. The Chinese government continues to implement stimulus measures to keep the market supported, but it seems the more that is thrown to prop the market, the more intense the capitulation, with China stocks down as much as a dramatic 8% at one point in early Wednesday trade. The economic calendar for Wednesday is exceptionally thin and Greece headlines should continue to dictate direction. However, we do get the release of the Fed Minutes along with a Fed Williams outlook late in the day, which could factor into price action.

USDCAD – technical overview

The recent push through 1.2563 confirms a fresh higher low at 1.2128 and opens the door for the next major upside extension through the 1.2835, 2015 high in the sessions ahead. A break above 1.2835 will then expose the 2009 peak at 1.3065 further up. At this point, look for any setbacks to be very well supported ahead of 1.2563, while only a drop below 1.2300 delays the highly constructive outlook for the pair.

• R2 1.2835 – 18Mar/2015 high – Strong
• R1 1.2780 – 7Jul high – Medium
• S1 1.2645 – 7Jul low – Medium
• S2 1.2563 – 6Jul low – Strong

USDCAD – fundamental overview

The last week or so hasn’t been a friend to the Canadian Dollar, which continues to get hit hard across many fronts. Though we have seen some softer data out of the US, this has been more than offset with disheartening data out of Canada as reflected through last week’s GDP and Tuesday’s trade data, which showed a ballooning deficit. Adding insult to injury, the commodity currency, heavily correlated to OIL flows, is taking an added hit with OIL prices pulling back sharply over the past few sessions. Finally, with risk markets sensitive to Greece and China, this has taken away from incentive to be long the Loonie. Looking ahead, Canada building permits and the Fed Minutes are the feature releases on Wednesday.

NZDUSD – technical overview

The market continues to extend declines to fresh yearly and multi-year lows, with the pair closing in on a measured move downside objective in the 0.6500 area. However, with daily studies now tracking in oversold territory, there is risk for a short-term corrective bounce in the sessions ahead. But any rallies should be well capped ahead of 0.7000.

• R2 0.6810 – 1Jul high– Strong
• R1 0.6715 – 6Jul high– Medium
• S1 0.6621 – 7Jul/2015 low – Strong
• S2 0.6600 – Figure – Medium

NZDUSD – fundamental overview

There has been an aggressive upgrade of RBNZ rate cut expectations, with the market pricing additional easings in the months ahead. Declining dairy prices have been a major drag on the economy, while this week’s NZIER Q2 business survey hasn’t done anything to inspire confidence, with sentiment crumbling to its lowest levels in three years. Moreover, Kiwi is still the highest yielding currency of the developed economies and as such, is deeply exposed in risk off settings. Clearly the latest slide in China stocks is not helping matters. Looking ahead, the market will continue to pay attention to Greece, while also digesting the Fed Minutes later today.

US SPX 500 – technical overview

The market has stalled out after posting record highs in May, with the lack of bullish momentum suggestive of exhaustion and warning of deeper setbacks ahead. Look for the latest topside failure and bearish reversal below 2100 to strengthen the outlook and open a break below critical support at 2040, which guards against 2000 further down. Rallies should now be well capped below 2100 on a daily close basis.

• R2 2100.00 – Psychological – Strong
• R1 2094.00 – 26Jun low – Medium
• S1 2040.00 – 11Mar low – Strong
• S2 2000.00 – Psychological – Strong

US SPX 500 – fundamental overview

The equity market has done a relatively good job absorbing the wave of uncertainty surrounding Greece and China, with stocks recovering nicely in Tuesday trade. Volumes have been unimpressive in the early week, suggesting larger funds are not as concerned with Greece risk, perhaps on the expectation a deal will get done or the crisis will be contained. We have also been hearing talk of the initiation of defensive hedging strategies from many players in anticipation of any additional shocks. Still, if there is no headway on Greece today and if China markets continue to unravel, the market may get jittery and look to head for the exits. Looking ahead, US equities will be contending with Fed risk on Wednesday, with the Fed Minutes and a Fed Williams speech due late in the day.

GOLD (SPOT) – technical overview

Tuesday’s bearish close diminishes the basing outlook for this market and opens the door for a more immediate retest of the the 2014 low at 1143, which guards against the critical multi-year base from 2014 at 1131 further down. At this point, a break back above 1175 will be required to take the pressure off the downside.

• R2 1206.00 – 18Jun high – Strong
• R1 1188.00 – 29Jun high – Medium
• S1 1149.00 – 7Jul low – Medium
• S2 1143.00 – 17Mar low – Strong

GOLD (SPOT) – fundamental overview

Quite surprisingly, the GOLD market has been unable to catch any bids in recent trade, despite a major cloud of uncertainty hanging over Greece and its future in the Eurozone. On top of everything going on in Greece at the moment, GOLD has even failed to find bids on the collapse in China’s financial markets. Medium-term players continue to step in but are starting to lose patience with the lack of follow through in the face of events that should otherwise be traditionally supportive of the commodity.

Feature – technical overview

USDZAR is locked within a well defined uptrend, with the market consolidating off recently established 2015 highs. A medium-term higher low is in place just over 11.6900, with any setbacks expected to be very well supported above the level ahead of the next major upside extension back above 12.6365. Ultimately, only a break and close below 11.6900 would negate.

• R2 12.6375 – 8Jun/2015 high – Strong
• R1 12.5385 – 7Jul high – Medium
• S1 12.0540 – 25Jun low – Medium
• S2 11.6945 – 6Apr low – Strong

Feature – fundamental overview

The South African economy is already not in the best shape, and when you throw in Grexit risk, collapsing Chinese financial markets, and declining commodities, this opens the door for a break to fresh lows in the emerging market currency. If we don’t get any signs of progress on the Greek front over the next couple of days, there is risk of a more pronounced and accelerated decline in the Rand. Meanwhile, the currency has also been dragged on the Fed monetary policy divergence theme, and more colour will be offered on this front in late Wednesday trade with the release of the Fed Minutes.