Euro Bucks Trend, Holds Up Despite Negatives

GBPUSD – technical overview

Setbacks have been very well supported and the market could be looking to carve out a fresh higher low at 1.5350 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 1.5350 would negate the constructive outlook and compromise the bullish structure.

• R2 1.5733 – 1Jul high – Strong
• R1 1.5675 – 15Jul high – Medium
• S1 1.5451 – 14Jul low  – Medium
• S2 1.5352 – 8Jul low  – Strong

GBPUSD – fundamental overview

A reversal of fortune for the recently well bid Pound, with the UK currency standing out as an underperformer in Thursday trade. While the Euro was able to mount a decent recovery, the Pound moved in the opposite direction and came under a good amount of pressure following the release of a much weaker than expected UK retail sales print. The market had been feeling really good about an accelerated BOE rate hike schedule and this discouraging retail sales print put a damper on the outlook. Looking ahead, US new home sales is the only notable economic release in Friday trade.

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 has opened 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

Ex-MOF member Watanabe gave the Yen a bit of a lift in Thursday trade after the former official said not to expect any rapid Yen weakening ahead, even if the Fed does raise interest rates. While the Yen remains under broad pressure, there have been signs of a reduction in the pace of Yen selling and with the BOJ moving to a more neutral stance of late, this could lend more support for a beaten down Japanese currency. Another variable helping the Yen at the moment has been the downside pressure in equity markets and the resulting safe haven flows. Looking ahead, the economic calendar for Friday is exceptionally light, with US new home sales the only notable standout. Risk flows will probably play a larger role as a directional influence.

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 1.0700 – 19Mar high – Strong
• R1 1.0575 – 4Jun high – Strong
• S1 1.0397 – 15Jul 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 also been well received by investors, happy to ride on the central bank’s back. However, if this equity pullback gains momentum, it could invite renewed downside pressure on the cross rate. Dealers cite decent buy-stops above 1.0575.

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 could soon defer 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 0.7496 – 10Jul high – Strong
• R1 0.7362 – 24Jul high – Medium
• S1 0.7269 – 24Jul/2015 low – Medium
• S2 0.7240 – May 2009 low – Strong

AUDUSD – fundamental overview

The impact of intense commodity price declines has not been lost on the Australian Dollar, which remains under pressure at multi-year lows. RBA Stevens also made it clear the central bank may not be done with accommodation and this comes in sharp contrast to a Federal Reserve on the verge of rate liftoff. Solid US economic data in the form of US initial jobless claims also weighed on Aussie in Thursday trade, while a drop in US equities proved to be yet another negative driver. The market has already extended declines to fresh multi-year lows in early Friday trade following the dagger of 15 month low China manufacturing PMIs, coming in well below 50 and a good deal weaker than forecast. Looking ahead, US new home sales is the only data of note on the Friday calendar.

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

The Canadian Dollar hasn’t been able to catch a break, with the currency under intense pressure and sitting at multi-year lows against the Buck. Though Thursday’s Canada retail sales came in a good deal better than expected, solid US initial jobless claims offset, while yet another drop in OIL was the kicker that kept the Loonie trading just off the lows. There is no economic data on the Canada economic calendar for Friday, and US new home sales are the only notable standout. Overall, it seems performance in commodities markets and broader risk sentiment will play a larger role in the currency’s direction in Friday trade.

NZDUSD – technical overview

Daily studies have been turning up from deep oversold territory, and there is risk for additional consolidation 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 in favour of the existing downtrend.

• R2 0.6769 – 10Jul high– Strong
• R1 0.6695 – 23Jul high– Medium
• S1 0.6553 – 22Jul low – Medium
• S2 0.6498 – 16Jul/2015 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar enjoyed a nice rally post RBNZ rate cut, with the currency rallying on a ‘buy the fact’ reaction. The market had been aggressively pricing the RBNZ cut in the lead up, so it was only natural to see a bit of a rally once the decision was out of the way. But with commodities continuing to get hit hard, with the local dairy sector still in big trouble, with the reality of external risk in China and Europe, and with the Fed policy divergence still at the forefront, participants were quick to jump back in and sell the relatively higher yielding Kiwi into rallies. The market is still pricing in additional accommodation from the RBNZ, and this will likely result in further currency declines. Another weighing factor this week has been a reduction in risk sentiment, with correlated assets hit on the pullback in US equity prices.

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 daily close back below 2100 on Friday 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 above 2137 would negate and open a bullish continuation.

• R2 2137.00 – 19May/Record – Strong
• R1 2121.00 – 23Jul high – Medium
• S1 2062.00 – 7May low – Medium
• S2 2040.00 – 11Mar 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 US data was solid yet again this week, 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 this week. At the moment, there is very little out there GOLD bugs can source as a near term catalyst for a resurgence in demand, though additional 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 2.77510 – 16Jun high – Medium
• S1 2.6280 – 14Jul low – Medium
• S2 2.5615 – 21May low – Strong

Feature – fundamental overview

No surprises from the CBRT on Thursday, with the Turkish central bank leaving the benchmark repurchase rate at 7.50%. The CBRT promised to retain a cautious policy stance until there was a significant improvement to the inflation outlook. Overall, the CBRT was not as hawkish as many expected, with the central bank not showing any upgraded concern over the softer currency. Turkish economic minister Zeybecki was out downplaying the impact of a softer currency, once again reminding the central bank of the government’s preference for more accommodative policy. In response to the policy decision, the Lira extended declines and was also pressured on a pullback in US equities and downturn in sentiment.