EU Summit Commands Tuesday Attention

GBPUSD – technical overview

The major pair has collapsed, taking out the entire year’s range in a single day this past Friday, in what could prove to be the most intense bearish outside day on record, after initially surging to a 2016 high. The drop below the previous multi-year base from earlier this year at 1.3836 has accelerated declines to +30 year lows. At this point, technical studies are extended, though the focus is now on next major psychological support at 1.3000. Any rallies should be well capped into the previous base 1.3836 base and ahead of 1.4000. A daily close back above 1.4000 will now be required to alleviate immediate downside pressure.

• R2 1.3836 – Previous Base – Strong
• R1 1.3484 – 27Jun high – Medium
• S1 1.3120– 27Jun/2016 low – Medium
• S2 1.3000 – Psychological – Strong

GBPUSD – fundamental overview

With so much uncertainty swirling around the fate of the UK, the Pound continues to take a beating, trading at +30 year lows. The latest downside pressure has come from news of UK rating agency downgrades. The threat of capital outflows, a ballooning deficit and slower growth are all worrying developments that are expected to continue to weigh on the Pound going forward. Headlines out of the EU summit will be watched closely, with many looking for some form of timeline clarity on the triggering of Article 50. Also out on Tuesday is a batch of data out of the US including GDP, personal consumption and consumer confidence.

USDJPY – technical overview

The downtrend remains firmly intact with the market collapsing to fresh 2016 lows below critical psychological barriers at 100.00, exposing next key medium-term support in the form of the June 2013 base at 93.80. Daily studies are however tracking in oversold territory, which could warn of some form of a correction and period of consolidation before the market considers any additional meaningful declines. Still, any rallies should not be well capped below 106.00.

• R2 106.81 – 24Jun high – Strong
• R1 103.55 – Previous Base – Medium
• S1 98.99 – 24Jun/2016 low – Medium
• S2 95.00 – Psychological – Strong

USDJPY – fundamental overview

While the Yen still seems to be quite capable of rallying on safe haven flow as evidenced by price action post Brexit, the currency has finally found some offers into the new week. Comments from Japan PM Abe that the government is watching FX and stock market moves and comments from BOJ Kuroda that central banks have pledged cooperation to boost liquidity, have been helping to infuse some renewed USDJPY buying around 100.00. Looking ahead, Brexit headlines and a batch of US data featuring GDP, personal consumption and consumer confidence, come into focus.

EURCHF – technical overview

The recent decline below 1.0700 is a significant development and could warn of a structural shift putting pressure back on the downside. Look for a daily close below 1.0700 to confirm the bearish outlook, opening the door for a drop back towards next key support around 1.0500. However, should the market manage to continue holding above 1.0700 on a close basis, it could leave the outlook more constructive and invite renewed demand.

• R2 1.0923 – 13Jun high – Strong
• R1 1.0852 – 22Jun high – Medium
• S1 1.0698 – 27Jun low – Medium
• S2 1.0623 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

The cross rate has done a good job absorbing this latest wave of unwanted inflow into the Franc post Brexit. The unsettling Brexit development has invited the safe haven bids, with the SNB sitting very uneasy and already stepping in to intervene on behalf of the overvalued Franc. The market has since stabilized after taking out critical support at 1.0700, but things will get more intense if the cross rate inches closer to 1.0500 and certainly back towards 1.0000. Looking ahead, price action in this rate will be dictated by all things Brexit and risk.

AUDUSD – technical overview

The latest topside failure suggests the market is looking to carve a lower top below the 2016 high at 0.7835, in favour of the next major downside extension. Look for a break below 0.7145 to confirm the 0.7647 lower top, opening the door for an acceleration back towards the 2016 low at 0.6827 further down. A daily close back above 0.7500 would be required to alleviate immediate downside pressure.

• R2 0.7491 – 23Jun low – Strong
• R1 0.7447 – 27Jun high – Medium
• S1 0.7285 – 16Jun low – Medium
• S2 0.7145 – 24May low – Strong

AUDUSD – fundamental overview

Lack of economic data out of Australia this week leaves this market more focused on external developments. Certainly any risk off trade from Brexit will be sure to weigh on the correlated commodity currency, though dips have been supported into Tuesday, helped along by the higher USDCNY fixing. Looking ahead, Brexit headlines and a batch of US data featuring GDP, personal consumption and consumer confidence will be watched closely in Tuesday trade. Large options barriers are reported at 0.7450.

USDCAD – technical overview

The market could finally be in the process of establishing a meaningful base following this latest impressive reversal out from multi-month lows below 1.2500. A higher low looks to be carving at 1.2655 with a break back above 1.3189 to confirm the higher low and basing outlook, opening an acceleration of gains towards 1.3500 further up. Only back below 1.2655 negates.

• R2 1.3296 – 24Mar high – Strong
• R1 1.3189 – 24May high – Strong
• S1 1.2861 – 20Jun high – Medium
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

Risk off flow from Brexit uncertainty and a pullback in the price of OIL have been driving Canadian Dollar weakness over the past few sessions. News of rating agency downgrades to the UK has fueled this latest round of Loonie weakness, though the Loonie is also reportedly nervous about the deterioration in the price of the Yuan. Looking ahead, Brexit headlines and a batch of US data featuring GDP, personal consumption and consumer confidence will be in focus.

NZDUSD – technical overview

The rally to fresh 2016 highs has stalled out, with the market sharply reversing course after trading up just shy of 0.7300 this past Friday, putting in an intense bearish outside day formation. From here, look for a daily close below 0.6963 to officially confirm the bearish shift and open a further drop to next key support at 0.6675 further down.

• R2 0.7297 – 24Jun/2016 high – Strong
• R1 0.7148 – 9Jun high – Medium
• S1 0.6963 – 15Jun low– Strong
• S2 0.6893 – 7Jun low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar is a currency very tied to risk given its higher yield amongst the developed currencies and as such, will continue to be linked to the fate of the market’s attitude towards the UK exit and broader sentiment. Certainly the RBNZ will be relieved to see the local currency off recent unwanted elevated levels, though this week’s better than expected New Zealand trade data could be helping to slow Kiwi depreciation amidst broader risk off flow. Looking ahead, Brexit headlines and a batch of US data featuring GDP, personal consumption and consumer confidence will be in focus.

US SPX 500 – technical overview

The latest intense drop back below critical support at 2020 officially puts the pressure on the downside, opening more pronounced declines over the coming sessions. Last Friday’s failure to clear the record high from 2015, followed by this sharp pullback now opens the door for a deeper drop to the 2016 base at 1808. Any rallies from here should be very well capped ahead of 2080.

• R2 2128.00 – 24Jun/2016 high – Strong
• R1 2050.00 – 16Jun low – Medium
• S1 1990.00 –27Jun low – Medium
• S2 1968.00 – 10Mar low– Strong

US SPX 500 – fundamental overview

The US equity market is really going to be put to the test in the days ahead. The market has come back under intense pressure in the aftermath of the Brexit vote. The expectation is that this event could now pose a systemic threat to the global economy. And even if governments and central bank’s try to prop the market up as they have done since the 2008 financial crisis, with monetary policy tools exhausted, there isn’t a lot of incentive left in the tank. This could ultimately open the door for a more accelerated decline back to the 2016 lows just ahead of 1800. The market is likely to shrug off local data for now and focus on the implications of this event in the days ahead. But as far as data on Tuesday goes, we get GDP, personal consumption and consumer confidence out of the US.

GOLD (SPOT) – technical overview

The recent break above the 2015 peak at 1307 strengthens the case for a longer term base with the market confirming a medium-term higher low in the 1200 area, opening the door for the next major upside extension towards a measured move at 1400. Any setbacks should be very well supported ahead of 1200.

• R2 1400.00 – Measured Move – Strong
• R1 1358.45 – 24Jun/2016 high – Medium
• S1 1250.30 – 24Jun low – Medium
• S2 1234.95 – 7Jun low – Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium-term players on the back of fears over the limitations of exhausted monetary policy, a downturn in risk sentiment and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with a fresh batch of interest stemming from this latest uncertainty surrounding Brexit.

Feature – technical overview

USDMXN has recently broken to a fresh record high, with the market trading up to as high as 19.5190 thus far. From here, look for any setbacks to be very well supported ahead of 18.0800 in favour of the next major upside extension through 19.5190 and towards major psychological barriers at 20.000 further up. Only back below 18.0780 would take the immediate pressure off the topside.

• R2 20.0000 – Psychological – Strong
• R1 19.5190 – 24Jun/Record High – Strong
• S1 18.4720 –22Jun low – Medium
• S2 18.0780 – 8Jun low – Strong

Feature – fundamental overview

There is no denying the Peso’s role as a proxy for risk, with the emerging market currency hit hard this past week post Brexit, trading down to fresh record lows against the Buck. This of course will add pressure on the Banxico to act when it meets later this week, with a 25bp hike viewed as a realistic possibility in an effort to help stabilize the declining currency.