Markets Brace For Fed Impact

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 constructive outlook.

• R2 1.5733 – 1Jul high – Strong
• R1 1.5675 – 15Jul high – Medium
• S1 1.5528 – 28Jul low  – Medium
• S2 1.5467 – 24Jul low  – Strong

GBPUSD – fundamental overview

The Pound was delighted with the latest UK GDP release, as the data lent additional support to the case for sooner than later BOE rate hikes, as intimated by Governor Carney the other week. The UK currency also received another prop in Tuesday trade as M&A related flows factored. In an all cash deal, Honeywell International will buy a unit of UK’s Melrose Industries for Gbp 3.3B. Of course, a plunge in US consumer confidence didn’t do anything to hamper Sterling gains. Looking ahead, second tier UK data is unlikely to move this market too much, with traders more focused on the highly anticipated FOMC rate decision.

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. The break back below 124.00 has opened the door for deeper setbacks in the sessions ahead, potentially towards the recent 121.32 multi-day low. Monthly studies are highly overbought 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 124.48 – 21Jul high – Strong
• R1 123.84 – 27Jul high – Medium
• S1 123.01 – 27Jul low – Medium
• S2 122.42 – 13Jul low – Strong

USDJPY – fundamental overview

Comments from Goldman Sachs that its investors believe the Fed will now look to hold off on hikes until 2016, in light of  China uncertainty, haven’t done much to move this market. Instead, the major pair is comfortable consolidating ahead of today’s FOMC rate decision. Contrary to the opinion of Goldman investors, the Fed is likely to back up recent Yellen hints for a 2015 rate hike, although the Fed is equally likely to downplay any hawkishness from a hike, stressing the importance of a deliberately slow tightening trajectory. Interestingly enough, the Dollar managed to recover on Tuesday, despite the much softer US consumer confidence reading. It seems the market was bid up more on risk sentiment than anything else, with the rebound in US equities helping to prop. Dealers also talked of decent real money USD demand on dips.

EURCHF – technical overview

The market looks to be in the process of carving out a meaningful base. From here, there is risk for a recovery back towards the February 1.0815 peak, with any setbacks expected to be very well supported above 1.0400 on a daily close basis. However, ultimately, only a daily close below 1.0235 would compromise the recovery outlook and give reason for pause.

• R2 1.0815 – 20Feb high – Strong
• R1 1.0692 – 27Jul high – Medium
• S1 1.0600 – Figure – Medium
• S2 1.0558 – 27Jul 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 mostly behind us and this has been helping to prop the rate a bit. Still, the ASX is remains closed and the ECB has refused to reopen the market on fear of capital outflows. Athens has reassured bailout agreements will be implemented to the last detail, but we aren’t out completely of the woods just yet. 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, or Greece bailout negotiations falter, it could invite renewed downside pressure on the cross rate.

AUDUSD – technical overview

Although the downtrend remains firmly intact, with the market considering a drop to psychological barriers at 0.7000, there are signs the market could be looking for some form of a short-term bottom to allow for stretched studies to unwind. Tuesday’s bullish outside day formation strengthens this outlook and could be the catalyst for additional corrective upside in the sessions ahead. Ultimately however, any gains should be well capped ahead of 0.7800 in favour of the next lower top and bearish continuation.

• R2 0.7496 – 10Jul high – Strong
• R1 0.7362 – 24Jul high – Medium
• S1 0.7257 – 28Jul/2015 low – Medium
• S2 0.7240 – May 2009 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has done a formidable job recovering from the early Tuesday 6-year low, after the market had taken a hit on declining China equities and ongoing weakness in commodities. But an impressive rebound in stocks helped fuel support off the lows, with the market gaining momentum and sustaining the gains on the back of a much weaker than expected US consumer confidence report. Absence of first tier Australia economic data on Wednesday leaves this market squarely focused on the upcoming FOMC rate decision.

USDCAD – technical overview

Finally some cooling off after the market broke to fresh multi-year highs just over 1.3100. Technical studies were well stretched and the current round of setbacks is welcome to allow for these studies to normalize. There risk for additional declines in the sessions ahead, with the market looking for the next medium-term higher low ahead of a bullish continuation. Ultimately, any setbacks should be well supported ahead of 1.2600.

• R2 1.3103 – 24Jul/2015 high – Strong
• R1 1.3043 – 28Jul high – Medium
• S1 1.2900 – 27Jul low – Medium
• S2 1.2805 – 14July high– Strong

USDCAD – fundamental overview

A welcome recovery for the Canadian Dollar into Wednesday, with the beaten down commodity currency benefitting from an equally welcome rebound in OIL prices. Short-term accounts have been heading for the exits, booking profit on US Dollar longs, with the Buck looking overextended ahead of today’s FOMC rate decision. Another variable factoring into the Loonie gains has been a horrid Tuesday US consumer confidence showing, with the series plunging 9 points.

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 in favour of the existing downtrend.

• R2 0.6924 – 25Jun high– Strong
• R1 0.6768 – 10Jul high– Medium
• S1 0.6657 – 28Jul low – Medium
• S2 0.6556 – 24Jul low – Strong

NZDUSD – fundamental overview

Nothing new from the latest RBNZ Wheeler comments, with the central banker saying the New Zealand Dollar needs to fall further and additional rate cuts were likely to be needed. Lack of any refreshing insights here have actually been taken as a net Kiwi positive, with market participants using this as an opportunity to square up on Kiwi short positions ahead of today’s highly anticipated FOMC rate decision. Also seen helping the still higher yielding commodity currency has been a recovery in risk appetite as reflected through global equities and a much softer Tuesday US consumer confidence reading.

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 the latest daily close back below 2100 to now 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 2063.00 – 27Jul low – Medium
• S2 2040.00 – 11Mar low– Strong

US SPX 500 – fundamental overview

An impressive rebound for stocks on Tuesday, with the market halting a 5 day slide ahead of today’s highly anticipated FOMC rate decision. It seems the market was more focused on some better earnings data than the discouraging US consumer confidence print, although the plunge in consumer confidence may also have factored into gains given Fed policy implications. Still, overall, stocks are looking quite expensive at current levels and investors seem to ignoring Fed liftoff implications, with the move to higher rates taking away from the incentive to be long stocks. More clarity on this issue will be offered later today.

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 daily close back above the previous 2015 base at 1142 would be required to take the immediate pressure off the downside.

• R2 1175.00 – 6Jul high – Strong
• R1 1142.00 – Previous Low – 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 July, with the primary driver coming from an accelerated Fed rate liftoff timeline. The expectation for higher rates has resulted in another liquidation in the yellow metal, this time 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. In fact, the latest speculative positioning data shows the market actually net short the yellow metal for the first time. There seems to be very little out there GOLD bugs can source as a near term catalyst for a resurgence in demand, though if the Fed leans more to the dovish side later today, this could open a welcome recovery in the beaten down market.

Feature – technical overview

USDSGD remains locked in a very well defined uptrend, with the market closing in on a retest of the multi-year peak from March at 1.3938. Look for any setbacks to now be very well supported ahead of 1.3500, while only a break back below 1.3284 would compromise and force a shift in the structure.

• R2 1.3938 – 13Mar/2015 high – Strong
• R1 1.3758 – 24Jul high – Medium
• S1 1.3609 – 22Jul low – Medium
• S2 1.3440 – 30Jun low – Strong

Feature – fundamental overview

Panic in Asia markets has temporarily abated after China equities finally stabilised. This has helped the Singapore Dollar into Wednesday, with the currency recovery off recent multi-day lows. Also contributing to SGD gains has been a highly disappointing US consumer confidence showing, with the data series plunging 9 points. Local developments haven’t really been influencing direction and the market will focus in on today’s FOMC rate decision and accompanying monetary policy statement. Anything on the dovish side will invite additional Singapore Dollar upside, while a hawkish slant will almost certainly open a resurgence in US Dollar demand. Macro funds have been reported as meaningful buyers on dips in USDSGD.