Quiet Consolidation In Thin August Trade

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. Look for a daily close above 1.5690 to confirm and accelerate gains. 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 – 14Aug high – Medium
• S1 1.5458 – 10Aug low  – Medium
• S2 1.5425 – 7Jul low  – Strong

GBPUSD – fundamental overview

The Pound was unfazed by Friday’s much softer UK construction data and has remained well supported on dips into Monday trade. In fact, the market is finding some fresh demand after UK Rightmove house prices came in solid on the whole. Looking ahead, the UK calendar is quiet for the remainder of the day and the focus will shift over to the US economic calendar with Empire manufacturing, NAHB housing and TIC flows due.

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 the latest topside failure 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

Solid US economic data has kept this major pair well supported on dips and within close proximity to the critical multi-year high from June at 125.85. Not much of a reaction in early Monday trade to some mixed Japanese GDP data. Overall, its monetary policy direction and yield differentials that will continue to play a major role in this market’s direction, though risk flows should not be discounted, with ay liquidation in risk correlated assets to likely invite a fresh wave of Yen demand. Looking ahead, the focus will be on the US economic calendar which produces Empire manufacturing, NAHB housing and TIC flows later in the day.

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. Swiss retail sales and sight deposits are getting digested in Monday trade.

AUDUSD – technical overview

While the downtrend remains firmly intact, with the market breaking to yet another multi-year low in the previous 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

The Australian Dollar has done a good job recovering off recent 6 year lows against the Buck, with some scaled back September liftoff expectations on the Yuan devaluation perhaps contributing to the recovery. Still, overall, Aussie isn’t expected to make any significant runs higher, with US economic data continuing to come out on the healthy side and most of the market still pricing in a September liftoff, even with the Yuan deval. Uncertainty surrounding the health of the Chinese economy is still a big concern for the correlated Australian Dollar and should continue to invite offers into rallies. Looking ahead, there isn’t anything of note on the Aussie calendar until tomorrow’s RBA Minutes. Until then, the focus will be on US data in the form of Empire manufacturing, NAHB housing and TIC flows.

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

The Canadian Dollar continues to be a victim of the ongoing slide in OIL prices. WTI has slipped below the critical March low of $42, trading to its lowest levels since 2009. Meanwhile, US data continues to come in on the healthy side as evidenced by Friday’s PPI and industrial production. 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 international securities transactions are due along with a round of US data in the form of Empire manufacturing, NAHB housing and TIC flows.

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

Not a lot going for the New Zealand Dollar at the moment, with the currency now contending with this latest wave of disappointing data in the form of New Zealand retail sales. FinMin English has warned of more RBNZ cuts to come and the market isn’t disagreeing, with Kiwi tracking just off last week’s fresh multi-year lows against the Buck. One of the major drags on the currency has been the ongoing slide in dairy prices and if we get another disappointing GDT auction on Tuesday, look out for some more Kiwi relative underperformance.  But before Tuesday’s GDT, the market will be watching a round of US economic data in the form of Empire manufacturing, NAHB housing and TIC flows.

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. But with US economic data continuing to come in on the healthy side, it is looking increasingly probable the Fed will in fact go ahead with a liftoff in September. Looking ahead, US Empire manufacturing, NAHB housing and TIC flows are due.

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 last week’s 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 latest recovery rally above $1100 has however been tempered after another round of solid economic data out of the US this past Friday. Looking ahead, the market will take in US Empire manufacturing, NAHB housing and TIC flows.

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 2.9000 – Psychological – Medium
• R1 2.8460 – 14Aug/Record – Strong
• S1 2.7975 – 31Jul high – Medium
• S2 2.7600 – 11Aug low – Strong

Feature – fundamental overview

Last week’s 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.