Today’s report: UK Event Risk Takes Spotlight On Super Thursday
A bit of a Wednesday hiccup for the Buck on a weaker ADP employment report. Still, Dollar setbacks were broadly offset by the subsequent blowout ISM number. UK data and event risk takes centre stage in what has been dubbed ‘Super Thursday,’ highlighted by the BOE rate decision. The market will also position ahead of Friday NFPs.
Chart talk: Major markets technical overview video
- mixed data
- policy decision
- blowout ISM
- part-time jobs
- falling OIL
- Diverging policy
- Fed outlook
- Friday NFPs
Chart talk: Technical & fundamental highlights
EURUSD – technical overview
Difficult to determine if the market is in the process of rolling back over below 1.0800, or if there is still room for a bounce and another run higher. Ultimately, the downtrend remains firmly intact and a lower top is sought out in favour of a bearish resumption towards the critical multi-year low from March at 1.0462. In the interim, any rallies are viewed as corrective, with only a break back above 1.1130 to take the immediate pressure off the downside.
- R2 1.1130 – 27Jul high – Strong
- R1 1.0997 – 3Aug high – Medium
- S1 1.0838 – 5Aug low – Medium
- S2 1.0809 – 20Jul low – Strong
EURUSD – fundamental overview
A session of diverging economic data out of the US produced a mixed reaction from the Euro on Wednesday. US ADP employment came in weaker than expected and also produced a downward revision to the previous print, which opened some Euro bids, though gains were tempered by a very strong ISM services reading. Meanwhile, on the official circuit, Fed Powell was out with less hawkish comments than his colleague Mr. Lockhart, saying both he and the Fed were undecided on rate liftoff. Looking ahead, we get German factory orders and construction PMIs followed by US initial jobless claims. Mostly however, expect the market to now position ahead of Friday’s highly anticipated US NFP report.
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 1.5690 – 29Jul high – Medium
- S1 1.5526 – 5Aug low – Medium
- S2 1.5467 – 24Jul low – Strong
GBPUSD – fundamental overview
A quiet weak for the Pound is expected to pick up in today’s trade. The local calendar is stacked with data and event risk which includes UK manufacturing and industrial production, a Bank of England rate decision, BOE quarterly inflation report, BOE Minutes and Governor Carney conference. Overall, the Pound has been well supported into today’s risk, with the currency benefitting from a softer US ADP report and less hawkish comments from Fed Powell. Gains were tempered by the blowout US ISM reading, but buyers have been quick to emerge into dips. Looking beyond the UK risk, US initial jobless claims are due, though the market will be quick to look past this series to Friday’s highly anticipated NFPs. The consensus is for no change on policy from the BOE later today. Still, the Pound has found renewed demand in recent weeks on an expectation for sooner BOE hikes in 2016 and participants will be looking for additional insights later today.
USDJPY – technical overview
The latest push through internal resistance at 124.50 opens the door for fresh upside and a bullish continuation towards the critical multi-year high from June at 125.85. Still, with longer-term technical studies looking stretched, the risk for any meaningful appreciation could be limited, leaving the market vulnerable to another bearish reversal and corrective decline. A daily close back under 124.00 is however required to take the immediate pressure off the topside.
- R2 125.85 – 5Jun/2015 high – Strong
- R1 125.01 – 30Jul high – Medium
- S1 124.02 – 5Aug low – Medium
- S2 123.52 – 31Jul low – Strong
USDJPY – fundamental overview
An otherwise mixed session for the US Dollar was lost on this major pair in Wednesday trade, with the Buck breaking out to multi-session highs and piercing back above 125.00. Bulls were able to shrug off the less than stellar US ADP showing and instead chose to focus on the sum of the parts, with a blowout ISM reading more than offsetting and increasing the likelihood for a September liftoff. Yen traders were reminded of Fed Lockhart’s Tuesday comments, when the central banker said the bar would be set high for the Fed to hold off on a rate hike in September. The market is now within a stone’s throw of the multi-year high from June, though there have been some offers above 125.00, with stocks looking more vulnerable and BOJ Governor Kuroda’s line from several weeks back on additional Yen weakness leaving bulls somewhat reserved.
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 1.0575 on a daily close basis. However, ultimately, only a daily close below 1.0400 would delay the recovery outlook and give reason for pause.
- R2 1.0815 – 20Feb high – Strong
- R1 1.0692 – 27Jul high – Medium
- S1 1.0575 – Previous High – Medium
- S2 1.0532 – 31Jul low – Strong
EURCHF – fundamental overview
Softer Swiss inflation readings on Wednesday were a welcome development for an SNB that has already been benefitting from a renewed bid tone in the EURCHF rate over the past couple of weeks. The push higher in this rate gives the SNB more breathing room, with the Franc already well overvalued. The broad based US Dollar rally has also helped, with the move pushing USDCHF to its highest levels in months. Still, the SNB is far from out of the woods at this point. Global sentiment is looking shaky these days and any intensified downturn on this front will likely inspire sizable Franc inflows that will prove very difficult to offset.
AUDUSD – technical overview
The recent break back above 0.7350 has triggered a double bottom that could open the door for a push to 0.7500 in the sessions ahead. Ultimately however, the broader downtrend remains firmly intact and any gains should be very well capped ahead of 0.7800 in favour of the next lower top and bearish continuation.
- R2 0.7496 – 10Jul high – Strong
- R1 0.7428 – 4Aug high – Medium
- S1 0.7300 – Figure – Medium
- S2 0.7235 – 31Jul/2015 low – Strong
AUDUSD – fundamental overview
A Tuesday Aussie rally has stalled out for now, with a blowout US ISM number more than offsetting a softer US ADP employment report, helping to increase expectations for a September Fed rate hike. Aussie has found reason for added downside pressure into Thursday on the back of a deceptive Australia employment report. Though the headline number was well above forecast, the number was disturbingly dominated by part-time job gains. A tick up in the unemployment rate was somewhat positive given the implication that people were feeling good about looking to return to the workforce, but the fact that the unemployment rate uptick was 0.2% higher than the 6.1% forecast was perhaps a bit too alarming despite any of the positives. Looking ahead, US initial jobless claims are due, though equity market sentiment and positioning ahead of the Friday US NFP report will likely command more of the attention.
USDCAD – technical overview
The market is locked within a well defined, strong uptrend, pushing to fresh 11-year highs. However, with daily studies tracking in overbought territory, there is risk for some form of a meaningful corrective pullback in the sessions ahead to allow for these stretched studies to unwind. Ideally, any corrective declines should be well supported ahead of 1.2600, with a higher low sought out in favour of a bullish continuation.
- R2 1.3250 – Mid-Figure – Medium
- R1 1.3214 – 5Aug/2015 high – Strong
- S1 1.3080 – 3Aug low – Medium
- S2 1.2941 – 31July low– Strong
USDCAD – fundamental overview
A session that looked like it may finally offer some welcome relief for the Canadian Dollar proved to be a let down. Initially, the Loonie found some decent bids on the back of a weaker than expected US ADP reading and solid Canada trade, though the gains could not be sustained after a blowout US ISM number more than offset. As if this wasn’t enough, the Canadian Dollar came under added pressure and settled back near its 11 year low from this week after OIL prices fell out yet again and dropped to another multi-day low. Looking ahead, US initial jobless claims are the key standout today, though price action in OIL and positioning ahead of the Friday US NFP report will likely command more of the attention.
NZDUSD – technical overview
Daily studies are in the process of unwinding from oversold, and there is risk for additional consolidation in the sessions ahead to allow for these studies to further unwind before the market considers a legitimate bearish continuation below 0.6500. Still, any rallies should be well capped ahead of 0.6850 in favour of the existing downtrend.
- R2 0.6674 – 31Jul high– Strong
- R1 0.6565 – 5Aug high– Medium
- S1 0.6491 – 5Aug/2015 low – Strong
- S2 0.6450 – Mid-Figure – Medium
NZDUSD – fundamental overview
The outlook for the New Zealand Dollar looks increasingly suspect, with very little in the way of any positive fundamentals at the moment. An expectation for a Fed rate hike in September has already fueled a good portion of weakness these past few months, with the currency dropping to yet another multi-year low. Meanwhile, the RBNZ has been forced to move in the other direction, slashing rates and leaving the door wide open for additional accommodation. Another disappointing dairy auction and some softer New Zealand employment readings this week have only added to the currency’s miserable state ahead of what should be a volatile end of week, with US NFPs due. For today, there is little on the economic calendar to directly influence price action, though commodity prices and global sentiment will be monitored closely. Otherwise, US initial jobless claims are due later in the day.
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 topside failure 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 to fresh record highs.
- 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
Sellers continue to emerge into rallies ahead of the record high from May and there is a growing sense this market could be in the process of carving out some form of a material top. The reality of a September liftoff is something the equity market has not properly considered to date, but with Fed Lockhart saying this week a September rate hike would be appropriate, the market may be getting a little jittery. Wednesday’s blowout US ISM has strengthened the equity bearish case, though clearly Friday’s NFPs will be the critical decider this week. Anything at or above forecast will further cement September liftoff odds and could in turn trigger a more intensified liquidation.
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 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 GOLD market remains under pressure at multi-year lows, with the prospect for a Fed rate hike and broad based US Dollar demand opening intense downside pressure in the beaten down metal. Speculative positioning has recently shifted to the short side and the market is now contemplating the next major drop down towards critical barriers at $1000. The market will now look ahead to Friday’s critical monthly employment report out of the US, with anything at or above expectation to likely fuel additional liquidation in the beaten down metal.
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 1.3870 – 5Aug high – Medium
- S1 1.3609 – 22Jul low – Medium
- S2 1.3440 – 30Jun low – Strong
Feature – fundamental overview
Domestic fundamentals are much less of a factor for emerging market FX right now, with broader flows directing all of the traffic. The expectation for Fed liftoff in September has created a further narrowing in yield differentials back in the US Dollar’s favour, while risk correlated EM also struggles to contend with the negative forces of an overdone global equity market and slowing China economy. USDSGD is now approaching a retest of its multi-year high from March and plenty of demand is reported on dips from buy-side accounts. No stops reported until below 1.3750.