Currencies Recover, Stocks Off, BOE Minutes Digested

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

All has been relatively quiet for this major pair in the early week, with the market content on some quiet summer consolidation. There has been no economic data of note to influence price action, and the Pound is mostly supported on dips from broad based profit taking on US Dollar longs. Still, we did get a lot of good Sterling demand in the previous week following some hawkish BOE Carney comments and a surge in UK wages, and the market will be looking to today’s BOE Minutes for added confirmation of the central bank’s move towards a more restrictive monetary policy in the coming months.

USDJPY – technical overview

Although the broader uptrend remains firmly intact, the market has been showing signs of exhaustion off fresh multi-year highs at 125.85. Tuesday’s bearish reversal day now opens the door for deeper setbacks in the sessions ahead, potentially back down towards the recent 121.32 low. Monthly studies are highly overextended and have been warning of the need for additional consolidation and correction, to allow for these studies to unwind. As such, for the time being, rallies may continue to be well capped towards 125.00.

• R2 125.00 – Psychological – Strong
• R1 124.48 –21Jul high – Medium
• S1 123.26 – 15Jul low – Medium
• S2 122.92 – 14Jul low – Strong

USDJPY – fundamental overview

The quiet economic calendar has this market focused on other themes at the moment, and it seems the downside pressure in US equities on the back of some disappointing earnings has inspired some profit taking. The Yen is still finding solid demand in flight to safety environments and any signs of additional downside pressure in risk assets could invite a deeper appreciation. While comments from BOJ Kuroda offered nothing new on Tuesday, the fact that the central banker reaffirmed there was no need for additional QE may have also contributed to Yen gains. Looking ahead, Wednesday’s calendar is also quite light, with some second tier Japan data unlikely to influence, with the only standout coming in the form of US existing home sales.

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

While Swiss trade data came in a good deal better than expected on Tuesday, the data may have been a little deceiving with strong imports driving the healthy result. Exports on the other hand were down a good deal from previous, slipping into negative territory, something clearly impacted by an unwelcome appreciation in the Franc. Interestingly enough, even with some intensified downside pressure in US equities, the EURCHF rate managed to hold up well on Tuesday. 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. However, if this equity pullback gains momentum, it could invite more downside pressure on the cross rate.

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. Still, with daily studies looking a little stretched, the market has deferred to a period of short-term correction. But look for rallies to 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

Overall, the Australian Dollar has benefitted in recent trade from some broad based profit taking on long US Dollar positions. Early Wednesday developments haven’t offered much in the way of any new directional insight, with Aussie CPI coming in on the whole as expected, while RBA Stevens sounded rather balanced after leaving the door open for additional rate cuts but also saying rates were appropriate at current levels and that he was optimistic with the outlook for the economy. Otherwise, commodities prices remain under pressure and as such, should continue to act as a strain on the correlated currency.

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. Daily studies are however starting to correct from overbought readings and this could open the door for some downside over the coming sessions before the uptrend reasserts for an assault on 1.3065. Look for any setbacks to be very well supported ahead of 1.2600 in favour of the next higher low and bullish continuation.

• 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 found a little relief in recent sessions, with the beaten down currency rallying on some broad based US Dollar selling in very light summer trade. Lack of economic data in the early week has left the pair trading mostly on flows, and with short-term USD bulls getting a little anxious, this has opened some mild Loonie gains. Also seen supporting the Canadian Dollar a bit has been a modest recovery in the price of OIL. But dealers cite plenty of CAD sellers into rallies, with these traders still playing into the monetary policy divergence, expecting USDCAD to breakout above the 2009 peak at 1.3065. Looking ahead, the only notable standout on the economic calendar is US existing home sales.

NZDUSD – technical overview

Daily studies have been turning 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 below the recent multi-year low at 0.6498. Still, any rallies should be well capped ahead of 0.6850.

• R2 0.6769 – 10Jul high– Strong
• R1 0.6700 – Figure– Medium
• S1 0.6558 – 21Jul low – Medium
• S2 0.6498 – 16Jul/2015 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to extend its recovery off fresh multi-year lows, with some broad based profit taking on USD longs in Tuesday trade fueling the latest wave of demand. We had already been seeing some relative outperformance in the beaten down currency on Monday after NZ PM Key was out bolstering local sentiment, talking up areas of strength in the New Zealand economy while also expressing his concern with the pace of Kiwi declines. Nevertheless, an ongoing deterioration in the dairy sector and softer inflation print last week have all but sealed the deal on a 25bp RBNZ rate cut this Thursday.

US SPX 500 – technical overview

The market has stalled out just shy of the May record high, with the lack of bullish momentum suggestive of exhaustion and warning of deeper setbacks ahead. Look for a break back below 2100 to strengthen the bearish outlook in favour of deeper setbacks below the critical March low at 2040. At this point, only a break and daily close back above 2137 would negate and force a shift in the structure.

• R2 2137.00 – 19May/Record – Strong
• R1 2133.00 – 20Jul high – Medium
• S1 2097.00 – 14Jul low – Medium
• S2 2064.00 – 13Jul low– Strong

US SPX 500 – fundamental overview

A very well bid equity market showed signs of weakness on Tuesday, with the market stalling ahead of the May record high and rolling over on some disappointing Q2 earnings numbers. Overall, stocks are looking quite expensive at current levels and 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 2015 liftoff last week 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 Tuesday equity weakness and USD selling has been helping to support.

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

A mild recovery for the Lira in Tuesday trade, with the currency mostly benefitting from some broad based profit taking on USD longs in some very light summer trade. Also seen propping the Lira a bit has been news that Turkish government coalition talks are moving in the right direction. But overall, it is the monetary policy divergence theme with the Fed that has been, and should continue to be the ultimate driver of medium-term direction, which favours additional downside pressure in the Lira.