US Dollar, Equities Move In Same Direction

GBPUSD – technical overview

Setbacks have been very well supported ahead of 1.5170 and the market could be looking to carve out a fresh higher low at 1.5330 in favour of the next major upside extension back towards and above the recent 2015 high at 1.5930. At this point, only back below 1.5330 would negate the constructive outlook and compromise the bullish structure.

• R2 1.5733 – 1Jul high – Strong
• R1 1.5675 – 15Jul high – Medium
• S1 1.5560 – 15Jul low  – Medium
• S2 1.5451 – 14Jul low  – Strong

GBPUSD – fundamental overview

The Pound comes into Friday trade as the standout outperformer on the week, even bettering the mighty US Dollar. The market was back to focusing on interest rate differentials this week, and although the Buck benefitted from Fed Chair comments alluding to a hike in 2015, the market was more surprised with the hawkish comments from BOE Governor Carney, who walked a similar line, signaling to UK markets that rate rises should be expected sooner than later. Perhaps this week’s rapid increase in UK wages has also helped to support the UK currency. Overall, just as with the Yellen, Carney has stressed the importance of focusing less on the timing of a hike and more on the trajectory. The emphasis is on a slow and steady path of tightening. The UK economic calendar is quiet on Friday, with US CPI, Michigan confidence and US housing data standing out.

USDJPY – technical overview

The broader uptrend remains firmly intact, with the market very well supported into the latest corrective dip ahead of 120.00. At this point, there could be a fresh medium-term higher low carving at 121.32 ahead of the next major upside extension back towards and above the recent multi-year high at 125.85. Still, with monthly technical readings overbought, additional corrective declines should not be ruled out.

• R2 125.00 – Psychological – Strong
• R1 124.45 –15Jun high – Medium
• S1 123.26 – 15Jul low – Medium
• S2 122.92 – 14Jul low – Strong

USDJPY – fundamental overview

The market wasn’t too bothered by a disturbing Philly Fed print, with participants choosing to focus more on the positive trending US initial jobless claims data and another round of Fed Chair Yellen testimony reaffirming the prospect for rate liftoff in 2015. Also helping to drive USDJPY to three week highs was another surge in US equities, now closing in on a retest of the record highs from May. Looking ahead, US CPI, Michigan confidence and US housing data are the key releases to watch in Friday trade. It is worth noting that dealers cite solid offers ahead of 125.00.

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 1.0235 would compromise the recovery outlook and give reason for pause.

• R2 1.0575 – 4Jun high – Strong
• R1 1.0525 – 10Jul high – Medium
• S1 1.0355 – 6Jul low – Medium
• S2 1.0315 – 29Jun low – Strong

EURCHF – fundamental overview

Although the market has welcomed news of a Greece agreement, the euphoria has worn off rather quickly, with investors realizing there is a lot of work that needs to get done. Still, overall, 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 SNB is likely to find some comfort in the fact that USDCHF is trading at its highest levels since April.

AUDUSD – technical overview

The downtrend remains firmly intact, with the market extending declines to fresh multi-year lows and gravitating closer to next key psychological barriers at 0.7000. In the interim, rallies should be very well capped ahead of 0.7600, with only a break back above to take the immediate pressure off the downside.

• R2 0.7533 – Previous Base – Strong
• R1 0.7496 – 10Jul high – Medium
• S1 0.7349 – 16Jul/2015 low – Strong
• S2 0.7240 – May 2009 low – Medium

AUDUSD – fundamental overview

Second tier Aussie data in the form of job ads and conference board leading indicators won’t factor into Friday trade, though the Australian Dollar has found some support off fresh multi-year lows. Hotter than expected Aussie consumer inflation expectations and a very soft US Philly Fed print have helped to inspire an Aussie bounce, while a resurgence in demand for global equities has also factored into the price action. But the recovery in the Australian Dollar could just as easily be attributed to some profit taking on shorts following an impressive move lower and dealers are confirming with talk of sizable offers into rallies. The key standouts on Friday’s economic calendar come in the form of US CPI, Michigan confidence and US housing data.

USDCAD – technical overview

Fresh multi-year highs for this pair, with the market surging through the previous 2015 high at 1.2835. From here, scope exists for a continuation of gains towards the 2009 peak at 1.3065 further up. Daily studies are however starting to look a little stretched, but any setbacks are expected to be well supported ahead of 1.2600.

• R2 1.3065 – 2009 high – Strong
• R1 1.3000 – Psychological – Medium
• S1 1.2905 – 16Jul low – Medium
• S2 1.2835 – Previous High– Strong

USDCAD – fundamental overview

There was no greater divergence in central bank actions this week than the divergence between the Bank of Canada and Fed. While the Bank of Canada slashed rates and downwardly revised growth forecasts, Fed Chair Yellen was out talking up the US economy and signaling a Fed liftoff in 2015. This divergence should continue to weigh on the Canadian Dollar over the medium-term, though the currency is starting to look a little stretched as it approaches a retest of 2009 lows against the Buck. Perhaps Friday’s economic data will invite more volatility, with CPI readings due out from both Canada and the US at the same time.

NZDUSD – technical overview

The market continues to extend declines to fresh yearly and multi-year lows, with the pair finally testing the critical psychological barrier at 0.6500. However, daily studies are tracking in deep oversold territory, and there is risk for some corrective upside in the sessions ahead to allow for these studies to unwind before the market considers a bearish continuation. Still, any rallies should be well capped ahead of 0.6850.

• R2 0.6667 – 14Jul low– Strong
• R1 0.6603 – 16Jul high– Medium
• S1 0.6498 – 16Jul/2015 low – Strong
• S2 0.6450 – Mid-Figure – Medium

NZDUSD – fundamental overview

The combination of an ongoing deterioration in the New Zealand dairy market and another soft inflation reading have weighed heavily on the New Zealand Dollar this week, already suffering from broad based US Dollar demand. Heading into Friday, Kiwi is the standout underperformer on the week, though the currency has found some relief off the lows on profit taking from short-term specs. The market is now pricing in additional accommodation from the RBNZ next Thursday, with some even calling for a 50bp cut. Commodity price declines have also factored into weakness and should not be overlooked. For Friday, US CPI, Michigan confidence and U housing data are the notable releases.

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 rally back above 2100 to stall out yet again ahead of the 2137 record peak in favour of deeper setbacks below the critical March low at 2040. At this point, only back above 2137 negates the topping outlook.

• R2 2137.00 – 19May/Record – Strong
• R1 2130.00 – 22Jun high – Medium
• S1 2064.00 – 13Jul low – Medium
• S2 2040.00 – 11Mar low– Strong

US SPX 500 – fundamental overview

US equities have been very well supported in recent trade, with the impressive recovery attributed to some peace of mind with Greece, an upbeat Fed Chair and solid Q2 earnings. However, investors need to be reminded of the double edged sword implications as all of these positives could further accelerate the Fed’s timeline and remove incentive to be long equities as the Fed tightens up and takes the free money off the table.

GOLD (SPOT) – technical overview

The recent bearish close below 1160 diminishes the basing outlook for this market and opens the door for a break below the 2014 low at 1131, which guards against the critical psychological barriers at 1000 further down. At this point, a push back above 1175 will be required to take the pressure off the downside.

• R2 1188.00 – 29Jun high – Strong
• R1 1175.00 – 6Jul high – Medium
• S1 1142.00 – 16Jul/2015 low – Medium
• S2 1131.00 – 2014 low – Very Strong

GOLD (SPOT) – fundamental overview

Quite surprisingly, the GOLD market has been unable to catch any decent bids in recent trade, despite what had been a decent wave of risk. 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. A broad based bout of US Dollar demand following solid US economic data and some hawkish Fed comments have been sourced as the driver behind the most recent setbacks.

Feature – technical overview

USDTRY continues to trade within a broader well defined uptrend. Although the market has been locked within some consolidation over the past several sessions, setbacks continue to be very well supported and a higher low looks to be carving out ahead of the next major upside extension beyond the recent record high at 2.8100 from June. Ultimately, only below 2.5500 would compromise the bullish outlook.

• R2 2.8100 – 8Jun/Record high – Strong
• R1 2.7170 – 6Jul high – Medium
• S1 2.6000 – Psychological – Medium
• S2 2.5615 – 21May low – Strong

Feature – fundamental overview

Still no coalition government in Turkey and with many now fearing another election, the Lira has begun to resume its downward trajectory. The Lira had benefitted earlier in the week from a pullback in OIL and news of the Iran deal, but with the local economy still on shaky ground and with the Fed looking to move on rates, more weakness is to be expected for the emerging market currency.