Sterling, Kiwi Hold Up Well In USD Bull Market

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 1.5529 – 21Jul low  – Medium
• S2 1.5451 – 14Jul low  – Strong

GBPUSD – fundamental overview

The US Dollar was up pretty much across the board in Tuesday trade with one notable exception. The Pound was the only major currency to beat out the Buck, with the gains attributed to a more hawkish than expected BOE Minutes. The Pound has been a relative outperformer over the past week or so on hawkish BOE Carney speak and higher wage growth and the Minutes confirmed the likelihood for sooner than later rate hikes in 2016, with more members expressing concern for higher inflation and the need to move to higher rates. Looking ahead, UK retail sales will be the big release on Thursday, while US initial jobless claims should not be overlooked.

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 123.57 – 22Jul low – Medium
• S2 122.92 – 14Jul low – Strong

USDJPY – fundamental overview

A bit of a consolidation session for the Yen in Wednesday trade after a bout of Yen demand on Tuesday. The major pair was propped off the lows, with a solid US existing home sales print generating fresh demand. Still, with US equities looking top heavy and with the market already sensitive to additional US Dollar gains following last month’s Kuroda comments that additional Yen weakness was unlikely, the market remained well capped above 124.00. Japan trade data is getting digested today after showing the benefits of a weaker Yen on the improving export sector. The only other data of note on the day comes later on in the form of US initial jobless claims. 

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

Demand for the EURCHF rate has been impressive in recent trade, particularly in light of the downturn in equities markets and some broader risk off price action that normally would be supportive of the Franc. It seems the market is finding more comfort in the fact that the Greece saga is behind us and this has been helping to prop the rate a bit. 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 consolidation and 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

Aussie continues to be well offered on rallies, with market participants mostly pricing in an ongoing narrowing of yield differentials in the US Dollar’s favour as the Fed moves towards a September liftoff. Balanced comments from RBA Stevens and a relatively in line Aussie CPI print haven’t really factored into trade, though the ongoing decline in commodities has probably played a role in some of the selling we saw on Wednesday. Also weighing on Aussie has been the best US existing home sales print since 2007. Aussie NAB business confidence readings came in a good deal better than previous, but haven’t really factored into trade. Looking ahead, the market will take in US initial jobless claims while also paying attention to commodities prices.

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 through the 2009 peak at 1.3065. Daily studies are however tracking in overbought territory and this suggests that gains could soon stall out, with the market deferring to corrective downside before the uptrend reasserts. Still, 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 1.3053 – 22Jul/2015 high – Medium
• S1 1.2917 – 21Jul low – Medium
• S2 1.2835 – Previous High– Strong

USDCAD – fundamental overview

It hasn’t been a good run for the Canadian Dollar, weighed down on diverging BoC, Fed policy outlooks and falling commodities prices. The Canadian Dollar remains heavily correlated to the price of OIL and the recent declines in the black gold back below $50 have not gone unnoticed, with USDCAD closing in on a retest of the 1.3065, 2009 peak. Looking ahead, things are sure to heat up later today with the release of Canada retail sales. Also due at the same time are US initial jobless claims.

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 0.6553 – 22Jul low – Medium
• S2 0.6498 – 16Jul/2015 low – Strong

NZDUSD – fundamental overview

As was widely expected, the RBNZ went ahead and slashed rates by 25bps to 3.00%. The market had been waiting for the cut in light of a further deterioration in the outlook for the New Zealand economy these past several weeks, with a declining dairy sector and softer inflation standing out. Some had even been calling for as much as 50bps and the fact that the RBNZ delivered an as expected result inspired a sell the rumour, buy the fact reaction, with Kiwi rallying post event risk. Perhaps also helping with the post announcement rally was the removal of the language in the monetary policy statement that the current level of Kiwi was ‘unjustified.’ The RBNZ did however leave the door open for additional easing, and with commodities falling and the Fed expected to hike in September, additional sell interest is sure to emerge into rallies.

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 open a bullish continuation.

• 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

The US equity market is once again showing signs of exhaustion, 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 equity weakness and rising inflation could be the spark to get this market bid up again.

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 2.7235 – 22Jul high – Medium
• S1 2.6280 – 14Jul low – Medium
• S2 2.5615 – 21May low – Strong

Feature – fundamental overview

The CBRT is out today with its latest policy decision, though no change is expected. While the Lira remains under pressure overall, it has managed to recover a bit from recent record lows, which is a welcome relief for the CBRT. Inflation has been coming down a little bit and while it is still quite elevated at 7.20%, this takes some of the pressure of a central bank battling the risk of collapsing currency against a struggling local economy. The government has been at odds with the CBRT and has tried to put pressure on the central bank to cut rates. Though with the currency where it is at near record levels, it is a hard argument for the central bank to adopt.