US Dollar Looking to Reassert

GBPUSD – technical overview

Despite the latest round of intense declines below 1.5500, the broader structure is still constructive while the market holds above 1.5350 on a daily close basis. However, a daily close below 1.5350 will open the door for a fresh wave of decline towards 1.5000 and take the immediate pressure off the topside.

• R2 1.5720 – 26Aug high – Strong
• R1 1.5630 – 24Aug low – Medium
• S1 1.5425 – 7Aug low  – Medium
• S2 1.5353 – 8Jul low  – Strong

GBPUSD – fundamental overview

Lack of economic data did nothing to stop the Pound from moving in Wednesday trade, with the UK currency triggering major sell-stops and collapsing three big figures. The US Dollar had already found renewed bids on the back of Tuesday, Wednesday moves from the PBOC. Tuesday’s China interest rate and RRR cuts were followed up on Wednesday with a CNY140bln liquidity injection via SLO. But if this wasn’t enough to weigh on the Pound, the currency came under intensified pressure in the aftermath of a very solid US durable goods showing. Even dovish comments from Fed Dudley that a September rate hike was less compelling failed to attract Sterling demand. There is now chatter making the rounds that the BOE may hold off until 2017. Looking ahead, UK Nationwide house prices aren’t expected to be market moving, and all of the attention will be on US data in the form of GDP, initial jobless claims and pending home sales.

USDJPY – technical overview

The market has finally rolled over after stalling out ahead of the multi-year high from June at 125.85. Monthly technical studies were severely overbought and warned of such a correction, and the pullback has not let down, with the market collapsing back towards 116.00 ahead of the latest bounce. Rallies are now classified as corrective, and the market could be looking to carve out a fresh lower top ahead of 122.00 in favour of the next downside extension. Only a daily close back above 122.00 would negate the newly adopted bearish outlook and take the pressure off the downside.

• R2 122.03 – 24Aug high – Strong
• R1 120.40 – 25Aug high – Medium
• S1 118.25 – 25Aug low – Medium
• S2 116.12 – 24Aug low – Strong

USDJPY – fundamental overview

The major pair has been doing its best to recover over the past few sessions, with big moves from the PBOC propping the market. Tuesday’s China interest rate and RRR cuts were followed up on Wednesday with a CNY140bln liquidity injection via SLO. This opened a recovery in risk assets, which in turn pushed the major pair higher. Also fueling gains in North American trade was the blowout US durable goods orders print, which came in at a shocking 2.0% versus the -0.4% expected. But even with this latest rally, investors are still concerned about any lasting impact China plunge protection measures will have, and this leaves the market exposed to more downside if safe haven flows come back into play. Looking ahead, the focus will be on US GDP, initial jobless claims and pending home sales.

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 through psychological barriers at 1.1000 and towards 1.1500 further up. Any setbacks should now be well supported ahead of 1.0575.

• R2 1.0962 – 12Aug high – Strong
• R1 1.0881 – 25Aug high – Medium
• S1 1.0690 – 27Jul high – Strong
• S2 1.0575 – Previous Resistance – Medium

EURCHF – fundamental overview

Risk appetite returned to markets on Tuesday, with participants buying back into correlated assets in reaction to another round of China moves, this time by way of liquidity injection. Interestingly enough, the Franc traded higher on Wednesday despite the rebound in sentiment. The most logical explanation for this counterintuitive move is that the SNB has been working so hard to weaken the Franc when risk comes off, that it needs to take its foot off the gas when fundamentals are more favourable. Overall, there is still a lot of uncertainty out there, and investors are growing increasingly wary of the impact of stimulatory moves by central banks and governments. As such, if risk market does come back under pressure, it could spell major trouble for the SNB. The SNB balance sheet has ballooned to around 85% of GDP, which means it is unlikely there is a lot left in the tank for future interventions. Swiss industrial production is due, though this release is not likely to have any influence on price action.

AUDUSD – technical overview

Setbacks have accelerated sharply to the downside to yet another multi-year low, with the market stalling just shy of critical psychological barriers at 0.7000. At this point, technical studies are unwinding from stretched levels, and there is risk for some choppy consolidation in the sessions ahead before the possibility of a bearish resumption below 0.7000. Any rallies should however be well capped below 0.7440.

• R2 0.7312 – 24Aug high – Strong
• R1 0.7250 – 25Aug high – Medium
• S1 0.7040 – 24Aug/2015 low – Medium
• S2 0.7000 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar traded relatively flat in Wednesday trade, with the market driven on diverging flow. The currency was supported on the back of another round of PBOC intervention, with the China central bank this time injecting CNY140bln of liquidity via SLO. On the other side, the blowout US durable goods orders print gave the US Dollar a nice lift, with the data further solidifying the US economic recovery and putting the prospect for a sooner than later Fed rate hike back on the table. Comments from Fed Dudley that a September rate hike was less than compelling, didn’t do much to help Aussie, with the market already confident the Fed would hold off next month. Aussie Q2 capex came in softer, but hasn’t factored into price action in early Thursday trade. Looking ahead, the focus will be on US data in the form of GDP, initial jobless claims and pending home sales.

USDCAD – technical overview

The market is locked within a well defined uptrend, pushing to fresh 11-year highs and closing in on next major psychological barriers at 1.3500. However, with medium-term studies looking stretched, there is risk for some form of a meaningful corrective pullback in the sessions ahead to allow for these stretched studies to unwind. Ultimately however, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of a bullish continuation.

• R2 1.3400 – Figure – Medium
• R1 1.3354 – 25Aug/2015 high – Strong
• S1 1.3251 – 26Aug low – Medium
• S2 1.3151 – 24Aug low– Strong

USDCAD – fundamental overview

OIL declines have finally shown signs of stalling out and this has been a welcome relief for a Canadian Dollar at fresh 11-year lows against the Buck. The stabilization in OIL prices and latest moves by the PBOC have helped the Loonie mount a mild recovery, though Cad gains have been tempered by a blowout US durable good orders print. Looking ahead, price action in OIL should continue to be watched closely for directional insight in the Canadian Dollar, while on the economic calendar, the focus will be on a batch of US data which includes GDP, initial jobless claims and pending home sales.

NZDUSD – technical overview

Daily studies are in the process of unwinding from oversold off a violent decline to 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 0.6130. Still, any rallies should be well capped below 0.6740 in favour of the existing downtrend.

• R2 0.6607 – 21Aug low– Medium
• R1 0.6562 – 25Aug high– Medium
• S1 0.6400 – Figure – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

Much like its commodity currency cousin, the Australian Dollar, Kiwi has been pulled in two directions in recent trade. On one side, you have some meaningful China stimulatory measures helping to prop the risk correlated currency, while on the other side, a very strong US durable good orders showing has inspired renewed US Dollar demand. Overall, Kiwi is looking more vulnerable than strong right now, with commodity weakness, a slowing China and diverging yield differentials between the RBNZ and Fed weighing on the currency. Dovish comments from Fed Bullard who see a September rate hike less compelling have perhaps been helping to support Kiwi a bit, but dealers continue to talk about sizable offers into rallies. Looking ahead, the major focus for Thursday will be on a batch of US data in the form of GDP, initial jobless claims and pending home sales.

US SPX 500 – technical overview

The recent breakdown below 2040 has been a significant development, with the move confirming the formation of a major top off record highs. We have since seen a rapid acceleration of declines, with the market crashing through a measured move downside extension objective at 1940, stalling just shy of 1800 thus far. Technical studies are now unwinding a bit from super stretched readings, so there is risk for some additional consolidation before the market looks for a bearish continuation below 1800. Still, any rallies are now expected to be well capped below 2000.

• R2 2000.00 – Psychological – Strong
• R1 1968.00 – Previous Support – Medium
• S1 1900.00 – Psychological – Medium
• S2 1833.00 – 24Aug low – Strong

US SPX 500 – fundamental overview

China has been doing its very best to try and inspire renewed confidence in markets after following up Tuesday’s PBOC interest rate and RRR cuts with a CNY140bln liquidity injection via SLO. This has helped the market extend its recovery off the recent collapse. Still, overall, investors are becoming increasingly uneasy with a shaky global economic outlook and finding confidence in central bank measures that can no longer offer much more in the way of accommodation. Over the past week, we have seen a dovish FOMC Minutes and further PBOC accommodation have marginal positive impact on risk assets, something that should be a worrying development for bulls.

GOLD (SPOT) – technical overview

Finally signs of a potential base since breaking down to fresh multi-year lows below 1100. The recent recovery back above the previous 2015 base at 1142 strengthens the outlook and could open the door for additional upside towards 1233 over the coming days. Look for the latest round of setbacks to now be well supported on dips ahead of 1100. Only a daily close below 1100 negates and puts the pressure back on the downside.

• R2 1188.00 – 29Jun high – Strong
• R1 1175.00 – 6Jul high – Medium
• S1 1110.00 – 18Aug low – Medium
• S2 1073.00 – 20Jul/2015 low – Strong

GOLD (SPOT) – fundamental overview

A resurgence in the price of GOLD on the back of a massive wave of risk liquidation has been offset into the latter half of the week as China steps up with risk supportive measures in the form of interest rate and RRR cuts and a CNY140bln liquidity injection via SLO. This in conjunction with some US Dollar demand on a blowout US durable goods orders print has opened the latest drop in the yellow metal back towards $1100. But overall, there is still plenty of uncertainty out there, and with stocks starting to show signs of topping off record highs and China doing its best to keep its economy going, there is plenty of interest for safe haven GOLD at current levels, just off multi-year lows.

Feature – technical overview

USDTRY remains locked in a well defined uptrend, with the market breaking to fresh record highs beyond 3.0000. However, at this point, the rally has stalled out to allow for stretched technical readings to unwind from severe overbought levels. Daily, weekly and monthly RSI readings are all overextended and in need for some form of decent corrective pullback before a bullish trend resumption. Still, any setbacks should be very well supported ahead of 2.7600.

• 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

A large European bank has come out with a bold call to buy the Lira. Still the call is slightly overstated in that the bank is only looking for a modest recovery. The bank contends the worst of the political uncertainty in Turkey has been priced in, while the economy is also less exposed to China than other emerging markets. The bank also talks about lower OIL and the favourable impact this has on the local economy given Turkey’s status as a major importer of OIL. The Lira has found some bids off its recent record low against the Buck, with this week’s stimulatory China measures helping to attract renewed interest in beaten down EMs. Looking ahead, US GDP, initial jobless claims and pending home sales are in focus, but this market should continue to trade off broad risk sentiment and flows.