Dovish Minutes Knock Buck Off Its Feet

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 1.5750 – Mid-Figure – Medium
• R1 1.5717 – 18Aug high – Strong
• S1 1.5562 – 18Aug low  – Medium
• S2 1.5425 – 7Jul low  – Strong

GBPUSD – fundamental overview

The Pound retains its bid tone into Thursday trade, with the currency holding near the weekly highs. Most of the gains this week have been driven off hotter Tuesday UK inflation readings, though Wednesday’s more dovish FOMC Minutes has helped to keep the UK currency supported. Still, with many contending the BOE will raise rates shortly after the Fed, the fact that the US Dollar took a hit on Wednesday also kept the Pound from running too far. Chances for a September Fed liftoff have now been scaled back from over 50% to 40%. Looking ahead, UK retail sales will get plenty of attention later today, and then the market will take in a batch of US data featuring initial jobless claims, existing home sales and the Philly Fed.

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 125.00 – Psychological – Medium
• R1 124.63 – 13Aug high – Strong
• S1 123.53 – 31Jul low – Medium
• S2 123.01 – 27Jul low – Strong

USDJPY – fundamental overview

Chances for a Fed September liftoff have scaled back quite a bit after the release of a dovish FOMC Minutes. The market is now only pricing in a 40% chance for a September hike after odds had been above 50% pre-Minutes. Concern over the inflation outlook and international risk was more intense than many had been expecting, and with the Minutes not even taking into consideration the latest slide in OIL and China devaluation, this only served to fuel additional dovishness. All of this in conjunction with a sliding equities market weighed more heavily on USDJPY, with the major pair falling off below 124.00. Yield differentials have been moving back in the Yen’s favour and there is risk for additional USDJPY downside in the sessions ahead. Looking at today’s calendar, US initial jobless claims, US existing home sales and the Philly Fed are the notable standouts.

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 1.0962 – 12Aug high – Strong
• R1 1.0850 – 18Aug high – Medium
• S1 1.0690 – 27Jul high – Strong
• S2 1.0575 – Previous Resistance – Medium

EURCHF – fundamental overview

The SNB has unquestionably benefitted from some razor thin summer trade, with the Franc selling off to more comfortable levels for the Swiss central bank. However, the selling has stalled out over the past few sessions and there are signs of renewed safe haven demand as China uncertainty and the threat of another blowup in Greece weigh on sentiment. Equity markets have been rolling over a bit over the past several days and should this liquidation intensify, it could open an unwelcome resurgence in Franc demand. Failure for the stock market to rally on the more dovish FOMC Minutes should be a worrying sign for the SNB. Swiss trade data is due in today’s session.

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

A relatively quiet week for the Australian Dollar, which continues to attempt recovery out from recent multi-year lows. Though Wednesday’s more dovish than expected FOMC Minutes helped to drive some demand, gains were tempered given the ongoing concern over the outlook for the commodity markets and China. Perhaps this was best reflected in correlated equities markets, with stocks selling off despite the more dovish Minutes. But with the US Dollar broadly selling off, dealers have started to talk about AUDUSD buy-stops above 0.7450. Looking ahead, US initial jobless claims, US existing home sales and the Philly Fed are due.

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 1.3178 – 19Aug high – Medium
• S1 1.3016 – 14Aug low – Medium
• S2 1.2952 – 12Aug low– Strong

USDCAD – fundamental overview

Plenty of currencies gaining ground against the Buck on Wednesday, but the Loonie wasn’t one of them. The Canadian Dollar has been under pressure over the past several months, with the currency not only getting hit on the diverging monetary policy, but on a collapse in OIL prices to 6 year lows. Yield differentials slid out of the US Dollar’s favour on Wednesday after the release of a more dovish than expected FOMC Minutes and the resulting price action saw a wave of profit taking on USD longs. But with OIL still extending declines, it was impossible for the Loonie to look the other way and this kept the currency under pressure. The slide in OIL is a major drag on the Canadian economy and increases the chances of another Bank of Canada rate cut. Looking ahead, what happens to OIL on Thursday will play major role in direction, while on the economic calendar we get Canada wholesale sales and a batch of US data including initial jobless claims, existing home sales and the Philly Fed.

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 0.6514 – 14Aug low – Strong
• S2 0.6468 – 12Aug/2015 low – Strong

NZDUSD – fundamental overview

Some welcome relief for the New Zealand Dollar this week, with the currency finally finding a few things to prop it up. This week’s solid GDT auction result and not as soft PPI data have contributed to Kiwi’s recovery, while the currency is also now benefitting on the yield differential front after the FOMC Minutes came in more dovish than expected. This has opened some broad based profit taking on USD longs which could invite additional Kiwi upside in the sessions ahead. Still, overall, with risk sentiment starting to falter, commodities on the slide and China uncertainty hanging in the balance, any rallies are expected to be met with good offers from medium-term players. Moreover, the RBNZ is still expected to cut rates some more which adds to the bearish New Zealand Dollar outlook.

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

Not an encouraging development for stocks on Wednesday, with the more dovish than expected FOMC Minutes failing to translate into a sustained rally. The market tried its best to recover on the release of the leaked Minutes but couldn’t hold onto gains despite the scaled back September rate hike chances. Stocks are looking increasingly vulnerable at these lofty heights and could be on the verge of capitulating, especially if even the prospect of a delayed Fed liftoff fails to inspire demand.

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 1166.00 – 10Jul high – Medium
• R1 1142.00 – Previous Base – Medium
• S1 1110.00 – 18Aug low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

GOLD continues to mount an impressive recovery out from recent multi-year lows below $1100. The metal managed to extend gains in Wednesday trade on a combination of a more dovish than expected FOMC Minutes, which fueled broad based selling in the US Dollar, and a pickup in safe haven demand with risk assets rolling over. The threat of risk associated with China (and even Greece) and the deterioration in emerging markets has finally invited renewed demand for the beaten down metal.

Feature – technical overview

USDTRY remains locked in a well defined uptrend, with the market breaking to fresh record highs beyond 3.0000. From here, there is risk for the current gains to extend towards the 3.1000 area, though with technical readings through the roof, additional upside could be hard to come by now that the 3 handle has been taken out. The monthly RSI reading is tracking above an already violently overbought level of 85, just shy of 90, quite often a red flag for some form of a bearish reversal.

• R2 3.1000 – Psychological – Medium
• R1 3.0030 – 20Aug/Record – Strong
• S1 2.8660 – 18Aug low – Medium
• S2 2.7610 – 11Aug low – Strong

Feature – fundamental overview

While the more dovish than expected FOMC Minutes may have stalled the depreciation in the Lira for the moment, the currency is going to need a lot more help right now to recover from record lows. Even though the Fed Minutes were more dovish, the Fed is still moving towards a rate hike this year and that hike could still very well come in September. The Lira is contending with a toxic combination of variables which on top of the Fed policy divergence theme include a broken down Turkish government, and already tight CBRT policy that is strangling the local economy.