US Economic Recovery On Track

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, which also happens to coincide with the 200-Day SMA. However, a daily close below 1.5350 will open the door for a fresh wave of declines towards 1.5000 and take the immediate pressure off the topside.

• R2 1.5630 – 24Aug low – Strong
• R1 1.5509 – 27Aug high – Medium
• S1 1.5353 – 7Aug low/200-Day SMA  – Strong
• S2 1.5300 – Figure  – Medium

GBPUSD – fundamental overview

Wednesday’s blowout US durable goods orders were followed up on Thursday with another impressive round of data. This time, it was super impressive US GDP and above forecast initial jobless claims. The data further confirms the strong economic recovery in the US and should put the Fed closer to liftoff. Fed expectations were scaled back on China instability and commodity price declines, but we have since seen some stabilization and this is favouring US Dollar yield differentials. Looking ahead, UK GDP is the standout release on Friday, though we also get a batch of US data in the form of personal income, personal consumption, personal spending and Michigan confidence.

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 121.40 – 27Aug high – Medium
• S1 120.40 – 25Aug high – Medium
• S2 119.79 – 27Aug low – Strong

USDJPY – fundamental overview

The major pair has recovered rather impressively out from the extreme weekly low just shy of 116.00, to trade back above 121.00 thus far. The gains have been driven off a combination of factors which include PBOC stimulus measures and very strong data out of the US, highlighted by durable goods and GDP. USDJPY is all about risk and yield differentials, and with risk appetite returning in the latter half of the week and US data supporting a sooner Fed rate hike, the major pair is once again finding demand. Friday’s round of Japanese data isn’t really factoring into price action. Inflation readings were basically in line, household spending was a little softer, while unemployment and retail trade exceeded estimates. Looking ahead, we get a batch of US data in the form of personal income, personal consumption, personal spending and Michigan confidence.

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 1.0713 – 20Aug low – Strong
• S2 1.0575 – Previous Resistance – Medium

EURCHF – fundamental overview

The 180 in investor sentiment this week has been a welcome development for this correlated cross rate, which has retained a bid tone into Friday. Overall however, 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 the 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 GDP is getting digested in Friday trade but isn’t likely to factor too much into 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 managed to retain a bid tone in Thursday trade despite another solid round of data out of the US, this time in the form of impressive GDP. Any positive USD flows were offset by recovering commodities prices and a surge in US equities. The latest China measures have stabilized the market for now, and this is a welcome relief for the correlated Australian economy. The RBA will meet next week and is unlikely to make any changes to policy. Still, overall, there is plenty of uncertainty out there and more time will be needed to give investors a real sense of confidence. The Australian economy is also on the mend and the RBA will likely err on the dovish side. Looking ahead, we get a batch of US data in the form of personal income, personal consumption, personal spending and Michigan confidence.

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, any corrective declines should be well supported with a higher low sought out ideally above 1.2860 in favour of a bullish continuation.

• R2 1.3354 – 25Aug/2015 high – Strong
• R1 1.3305 – 27Aug high – Strong
• S1 1.3144 – 25Aug low – Medium
• S2 1.3025 – 19Aug low– Strong

USDCAD – fundamental overview

The Canadian Dollar was a standout outperformer in Thursday trade, with the Loonie doing a good job of shrugging off any offers from another solid round of US data. US GDP was super impressive and followed up Wednesday’s blowout durable goods. But the key variable for this market has been OIL price action and with the black gold having one of its best days in months, this was enough to open a nice recovery rally in the Loonie off fresh 11 year lows. Looking ahead, Canada industrial product and raw materials prices are due. Also out is a round of US data featuring personal income, personal consumption, personal spending and Michigan confidence.

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 0.6410 – 26Aug low – Medium
• S2 0.6130 – 24Aug/2015 low – Strong

NZDUSD – fundamental overview

Not much going on with Kiwi over the past few sessions, with market fundamentals pulling the currency in two directions. On one side, you have some meaningful China stimulatory measures and a rebound in commodities helping to prop the risk correlated currency, while on the other side, very strong US durable goods and GDP have inspired renewed US Dollar demand. But overall, with broader risk sentiment still looking shaky, the China recovery still very much in question, and the Fed on course for sooner than later rate hikes, the outlook for the New Zealand Dollar continues to favour additional weakness. Looking ahead, we get a batch of US data in the form of personal income, personal consumption, personal spending and Michigan confidence.

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 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 2032.

• R2 2032.00 – 21Aug high – Strong
• R1 2000.00 – Psychological – Medium
• S1 1938.00 – 27Aug low – Medium
• S2 1900.00 – Figure – Strong

US SPX 500 – fundamental overview

China has done its best this week to 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 are only being implemented because things are not so good. Moreover, with US economic data coming in so strong on Wednesday and Thursday, it reintroduces the possibility of the Fed raising rates in September. The prospect of higher rates is not something that sits comfortably with investors and this could once again start to weigh going forward.

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 was offset in the latter half of the week after China stepped 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 blowout US durable goods and GDP 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

Subdued price action in the Lira over the past few sessions could suggest the currency is finally ready to stabilize after recently dropping to fresh record lows. The other day, a large European bank came out with a call to buy the Lira. The bank cited already priced in political uncertainty, less exposure to China and lower OIL as the primary drivers behind the recommendation. Certainly the technicals would agree with this call as the Lira is well oversold and due for a correction. The Lira managed to rally a bit on Thursday despite a round of solid US data, with recovering commodities and a rebound in equities helping to support the emerging market currency.