Quiet Calendar Invites Thin Trading Conditions

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 1.5500 – Figure  – Medium
• S2 1.5451 – 14Jul low  – Strong

GBPUSD – fundamental overview

Though we didn’t get a lot of movement in markets on Monday, the Pound was the standout underperformer on the day. Still, the lack of volatility only produced marginal declines, with the rest of the market trading relatively unched. Perhaps some profit taking on long Sterling positions after a very strong week factored into the light trade, while expectations from Fed Bullard for a more than 50% chance of a Fed rate hike in September may also have influenced. The economic calendar was a non-factor and the market appears to be going through some summer doldrum price action. Looking ahead, UK public finance data is the only event of note in Tuesday trade.

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. A daily close back below 123.73 will put the short-term pressure back on the downside.

• R2 125.00 – Psychological – Strong
• R1 124.45 –15Jun high – Medium
• S1 123.73 – 16Jul low – Medium
• S2 122.92 – 14Jul low – Strong

USDJPY – fundamental overview

The major has benefitted in recent days from a round of solid US economic data and some hawkish talk from the Fed Chair, who has signaled rate hikes in 2015. But even with the added boost of a collapse in GOLD and some hawkish Fed Bullard comments on Monday, the market hasn’t really been able to build on momentum above 104.00. There has been talk from some major Japanese banks of limited upside in USDJPY for now, with plenty of solid offers starting to work their way in ahead of 105.00 and around Kuroda levels. Another variable factoring into price action has been global sentiment and performance in equity markets and with stocks looking elevated at current levels, any capitulation in the days ahead, could open the door for a fresh round of Yen bids and USDJPY selling. The BOJ Minutes have been a non-event, with the central bank reiterating its line that it will continue with easing until the 2% inflation target is reached. Looking ahead, the economic calendar is once again empty in the US.

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

News of Greek banks opening back up and the Greek government giving the order for EUR6.8B to be sent to creditors, has definitely been a welcome development for this rate. But the market isn’t prepared to completely abandon its concerns for Greece, knowing full well there is a rocky road ahead. Moreover, ECB President Draghi reminded investors last week of the central bank’s commitment to QE. All of this has kept the EURCHF rate well capped into rallies. 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. At this point, it seems the biggest risk to the SNB, is a potential capitulation in global equity markets.

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 0.7327 – 20Jul/2015 low – Strong
• S2 0.7240 – May 2009 low – Medium

AUDUSD – fundamental overview

Leveraged sell-stops and more hedge fund offers were sourced as the primary driver behind Monday’s drop to fresh multi-year lows against the Buck. But overall, price action has been rather subdued and some corporate bids managed to support the market off the lows. The market is still a victim to the pronounced monetary policy divergence theme between the RBA and Fed, and Monday’s hawkish Fed Bullard comments have inspired more sellers into rallies. Softer commodities prices should also not be ignored as a contributing variable to Aussie weakness and this will also weigh going forward. Market participants will now digest the latest RBA Minutes for the remainder of Tuesday trade, which is otherwise an extremely light day.

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 1.3024 – 20Jul/2015 high – Medium
• S1 1.2905 – 16Jul low – Medium
• S2 1.2835 – Previous High– Strong

USDCAD – fundamental overview

The Canadian Dollar has entered the new week, posting yet another multi-year low against the Buck. The Loonie has come under intensified pressure in recent days following the Bank of Canada rate cut and ramped up expectations for a Fed rate hike in September. But the monetary policy divergence theme hasn’t been the only source for Canadian Dollar weakness, with another soft round of Canada data on Monday, in the form of wholesale sales, and more downside pressure in OIL prices, also factoring into price action. Looking ahead, the economic calendar for Tuesday is empty and this market is expected to trade off broader macro flows.

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 finally staring to turn up from deep oversold territory, and there is risk for additional corrective upside in the sessions ahead to allow for these studies to further 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

Perhaps RBNZ rate cut expectations have been scaled back a bit in the early week, after PM Key was out on the wires trying to downplay some of this latest negative sentiment for the currency. Interestingly enough, it was Key who himself projected an NZDUSD rate of 0.6500 some time back, but this time, he was out commenting that the pace of declines had been faster than expected, while also advising locals not to be gloomy about the economic outlook with PMI reports showing strong demand. The RBNZ will meet later this week and the market is pricing in a 25bp rate cut. An ongoing deterioration in the dairy sector and softer inflation print last week have all but sealed the deal on this week’s easing.

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 a break and daily close back above 2137 negates the topping outlook.

• R2 2137.00 – 19May/Record – Strong
• R1 2133.00 – 20Jul high – Medium
• S1 2110.00 – 16Jul low – Medium
• S2 2064.00 – 13Jul low– Strong

US SPX 500 – fundamental overview

Q2 earnings season is quite busy this week, with 30% of the firms on the S&P500 reporting. Stocks have been very well bid in recent days, with the market now close to retesting record highs from May. However, investors need to be reminded of the risk for Fed rate liftoff, with the move to higher rates taking away from the incentive to be long stocks. It seems participants have been ignoring this fact despite it being priced in other asset classes. But after Yellen confirmed the probability for rate hikes in 2015 and Fed Bullard warned of the likelihood for a September hike on Monday, the market should probably be paying more attention to this prospect.

GOLD (SPOT) – technical overview

The market remains under intense pressure, breaking to fresh multi-year lows below 1100. At this point, the downside break opens the door for the possibility of another drop towards major psychological barriers at 1000. However, it is worth noting that daily studies are extremely oversold and there is room for a short-term bounce. But a break back above 1175 would be required to take the immediate pressure off the downside.

• R2 1175.00 – 6Jul high – Strong
• R1 1146.00 – 17Jul high – Medium
• S1 1073.00 – 20Jul/2015 low – Medium
• S2 1000.00 – Psychological – Strong

GOLD (SPOT) – fundamental overview

The downside pressure in the GOLD market has intensified in recent days, with the primary driver coming from an accelerated Fed rate liftoff timeline. The expectation for higher rates in the US has invited a fresh wave of demand for the inversely correlated US Dollar and the resulting price action has seen another liquidation in the yellow metal below $1100. Recent data also shows China buying less GOLD as had been forecast, and this has been yet another let down for the commodity. At the moment, there is very little out there GOLD bugs can source as a near term catalyst for a resurgence in demand, though rising inflation would be a good candidate for renewed interest.

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 2.6280 – 14Jul low – Medium
• S2 2.5615 – 21May low – Strong

Feature – fundamental overview

The Lira was a standout underperformer in Monday trade. While most markets deferred to some quiet consolidation, the Lira came under intensified pressure on the emergence of geopolitical risk. The fall in the local currency coincided with news out of the Turkish town of Suruc of over 30 dead in a terrorist attack on a gathering of pro-Kurdish supporters. Fear that the battle with IS in Syria will spillover into Turkey is becoming more of a reality and is not helping the Lira’s cause. Overall, the Lira has been exposed to softer Turkish economic prospects, with a widening current account deficit of note. The struggle to form a coalition government has also been a source for currency weakness, while Fed policy divergence can not be ignored. Perhaps the only thing going the Lira’s way at the moment has been the pullback in OIL prices.