Market Still Playing September Guessing Game

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 1.5690 – 29Jul high – Strong
• R1 1.5660 – 12Aug high – Medium
• S1 1.5458 – 10Aug low  – Medium
• S2 1.5425 – 7Jul low  – Strong

GBPUSD – fundamental overview

Not the busiest of weeks for the UK, and the price action has been reflected in the Pound, which has mostly been confined to sideways trade. The big highlight of the week for this market was a discouraging employment report, though setbacks have been well supported on broad based US Dollar selling in the after math of the Yuan devaluation. Thursday was no exception, with another round of solid US data, featuring a better US retail sales print, unable to garner any significant support for the Buck. The market is still on the fence with regard to the September Fed decision and this is also contributing to the lackluster trade. Of course, August is already by default a thin month, with many traders off the desk for holiday. Looking ahead, UK construction is due followed by US data which includes PPI, industrial production and Michigan confidence.

USDJPY – technical overview

The rally has been well capped around 125.00 and ahead of the critical multi-year peak from June at 125.85. Though the broader uptrend remains firmly intact, longer-term studies are well overbought and warn of some form of a more meaningful correction before any bullish trend resumption beyond 125.85. As such, look for Wednesday’s bearish outside day to trigger deeper setbacks, initially towards 123.00. Ultimately, only a daily close back above 125.85 would force a shift in the outlook.

• R2 125.85 – 5Jun/2015 high – Strong
• R1 125.28 – 12Aug high – Medium
• S1 123.81 – 12Aug low – Medium
• S2 123.01 – 27Jul low – Strong

USDJPY – fundamental overview

Not much of a reaction from this major pair to the better round of Thursday US data, highlighted by a solid retail sales showing. While the data certainly lends itself to the idea the Fed will go ahead and move on rates in September, which is a net positive for USDJPY, the fact that the Fed may go ahead with liftoff despite all the uncertainty out there in global markets is risk negative, which is a negative for USDJPY. China’s move to devalue the Yuan is another consideration at the moment, and the market is also trying to figure out the implications of this development. There have been no signs of any willingness on the BOJ’s part to implement additional easing measures, and with USDJPY already at elevated levels, the market seems more comfortable trading within a range. Looking ahead, US PPI, industrial production and Michigan confidence are the standouts in Friday trade.

EURCHF – technical overview

The market looks to be in the process of carving a meaningful base since taking out key multi-day range resistance at 1.0575 several days back. This has opened the latest break above the February peak at 1.0815 which now exposes fresh upside towards psychological barriers at 1.1000 further up. At this point, daily studies are however a little stretched, so we are seeing a bit of a short-term retreat to allow for these studies to unwind. But any setbacks should be well supported ahead of 1.0575.

• R2 1.1000 – Psychological – Strong
• R1 1.0962 – 12Aug high – Medium
• S1 1.0828 – 13Aug low – Medium
• S2 1.0771 – 11Aug low – Strong

EURCHF – fundamental overview

There has been a lot of talk of the SNB taking advantage of the very thin summer months to cheaply intervene and weaken the Franc to more comfortable levels. Though there has been no clear indication, whatever the case, the Swiss central bank is certainly sitting more comfortable than it had been just a few weeks back. The SNB has also had the added advantage of potentially doing all this while staying under the radar with the market so focused on the timing of Fed liftoff and a Yuan devaluation. Overall, with the SNB balance sheet ballooning to around 85% of GDP, it is unlikely there is a lot left in the tank for future interventions. But at least at current levels, any downturn in global sentiment that invites renewed Franc bids will be more palatable, now that the EURCHF rate is closer to 1.1000 and well off earlier lows.

AUDUSD – technical overview

While the downtrend remains firmly intact, with the market breaking to yet another multi-year low this week, there is risk for a period of consolidation in the days ahead to allow for some stretched studies to unwind before any meaningful bearish resumption. Still, rallies are expected to be well capped and look for any corrective gains to stall out ahead of 0.7700.

• R2 0.7500 – Psychological – Medium
• R1 0.7440 – 11Aug high – Strong
• S1 0.7283 – 11Aug low – Strong
• S2 0.7215 – 12Aug/2015 low – Medium

AUDUSD – fundamental overview

A recovery in stocks and some scaled back expectations for a Fed liftoff in September, on the back of the latest Yuan devaluation have helped prop the Australian Dollar off 6 year lows seen earlier this week. Comments from RBA Kent may also be helping a bit today after the central banker said the labour market has proven to be more resilient than expected. Mostly however, Aussie has been content on consolidating Wednesday gains into Friday and saw very little reaction to a round of better Thursday US data, highlighted by solid US retail sales. The Fed timeline and China news will likely continue to dictate direction ahead. Looking to today’s economic calendar, the focus will be on US data in the form of PPI, industrial production and Michigan confidence.

USDCAD – technical overview

The market is locked within a well defined uptrend, recently pushing to fresh 11-year highs. However, with daily studies now unwinding from overbought territory, there is risk for some form of a more meaningful corrective pullback towards support at 1.2861 in the sessions ahead to allow for these stretched studies to unwind. Ultimately, any corrective declines should be well supported ahead of 1.2600, with a higher low sought out in favour of a bullish continuation.

• R2 1.3214 – 5Aug/2015 high – Strong
• R1 1.3157 – 12Aug high – Medium
• S1 1.2952 – 12Aug low – Medium
• S2 1.2861 – 29Jul low– Strong

USDCAD – fundamental overview

While most currencies saw little movement in Thursday trade, this was not the case for the Canadian Dollar, which continues to be a victim of the ongoing slide in OIL prices. WTI slipped below the critical March low of $42, trading to its lowest levels since 2009. Meanwhile, US data was also solid, with retail sales and business inventories contributing to the Loonie weakness. Some scaled back Fed liftoff expectations on the back of the Yuan devaluation haven’t helped the Canadian Dollar that much, and the direction in this market will continue to be heavily tied to OIL. Weakness in the commodity could very well invite additional accommodation from the Bank of Canada in the coming months. Looking ahead, Canada manufacturing shipments are due, along with a batch of US data in the form of PPI, industrial production and Michigan confidence.

NZDUSD – technical overview

Daily studies are in the process of unwinding from oversold off fresh multi-year lows 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 0.6739 – 29Jul high– Medium
• R1 0.6648 – 12Aug high– Medium
• S1 0.6468 – 12Aug/2015 low – Strong
• S2 0.6400 – Figure – Medium

NZDUSD – fundamental overview

New Zealand FinMin English already talked about additional rate cuts earlier this week and the need for more accommodation from the RBNZ has been backed up in early Friday trade following another weak round of economic data. New Zealand retail sales came in at 0.1% q/q against a forecast of 0.5% q/q and versus a more lofty 2.7% q/q previous. Declining dairy prices and the threat of a more rapid cooling off in the China economy only add to downside pressures on Kiwi, which has posted another fresh multi-year low this week. The only supportive development has been some broad based US Dollar selling on scaled back expectations for a September Fed liftoff in light of recent currency moves out of China. Looking ahead, US data will be in focus, with the key standouts coming in the form of PPI, industrial production and Michigan confidence.

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 weakness 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 2117.00 – 31Jul high – Medium
• S1 2052.00 – 12Aug low – Medium
• S2 2040.00 – 11Mar low– Strong

US SPX 500 – fundamental overview

The stock market is trying to figure out how to react to the latest Yuan devaluation, not knowing if the move will support the global economy on the commitment to keep the Chinese economy moving along, or if the intervention efforts are a sign of instability in a shaky emerging economy showing signs of worrying deterioration. The resulting price action has been quite choppy, though setbacks have been supported as investors try to focus on the positives. One such positive investors are hoping for is a scaled back Fed liftoff timeline that will keep looser monetary policy incentivizing further investment. Looking ahead, US PPI, industrial production and Michigan confidence standout in today’s trade.

GOLD (SPOT) – technical overview

Finally some signs of a potential base since breaking down to fresh multi-year lows below 1100. Still, the downtrend remains firmly intact and the market could be looking for a fresh lower top ahead of the next major downside extension towards critical psychological barriers at 1000. At this point a daily close back above the previous 2015 low at 1142 would be required to take the immediate pressure off the downside.

• R2 1142.00 – Previous Low – Strong
• R1 1127.00 – 13Aug high – Medium
• S1 1102.00 – 12Aug low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

Despite broader downside pressure in commodities markets, GOLD has managed to mostly shrug off these flows to mount a decent recovery of recent multi-year lows. The initial reaction to the Yuan deval news was negative for the commodities markets, though the ensuing USD sell-off on the back of scaled back Fed rate liftoff expectations has been a positive driver for the yellow metal which shares inverse correlations with the Buck. Longer-term gold bugs have also been circling following the dip below $1100 and have been looking to do some bargain buying with inflation expected to pick up over the coming months and the GOLD hedge projected to make a comeback. The rally this week was however tempered into Friday after a round of solid US data was US Dollar supportive, tilting the odds back in the favour of a September Fed liftoff.

Feature – technical overview

USDTRY remains locked in a well defined uptrend, with the market breaking to fresh record highs beyond 2.8000. From here, there is risk for the current gains to extend towards a measured move in the 2.9000 area, though with monthly technical readings through the roof, additional upside could be hard to come by. The monthly RSI reading is tracking at a violently overbought level of 85, quite often a red flag for some form of a reversal the other way.

• R2 2.8500 – Psychological – Medium
• R1 2.8390 – 14Aug/Record – Strong
• S1 2.7975 – 31Jul high – Medium
• S2 2.7600 – 11Aug low – Strong

Feature – fundamental overview

Confirmation from Turkish PM Davutoglu that the AKP and CHP could not find any common ground for a coalition government has opened the door for more political instability, setting the stage for an early election. The political risk and instability in the Turkish government has been a major weight on an already struggling Lira these past few months and this latest development has resulted in a drop to yet another record low TRY. Perhaps the only thing going for the Lira at the moment is the collapse in OIL prices, significantly reducing the bill for the OIL importer.