It’s A Fickle Market

GBPUSD – technical overview

The drop below the previous multi-year base from earlier this year at 1.3836 has accelerated declines to +30 year lows, with market taking out critical psychological barriers at 1.3000. At this point, technical studies are extended across the board, though the intensity of the downtrend could open more weakness below 1.3000 in the sessions ahead. Any corrective rallies should be well capped and it will now take a break back above the previous weekly high at 1.3533 to alleviate immediate downside pressure.

• R2 1.3120 – 27Jun low – Strong
• R1 1.3027 – 6Jul high – Medium
• S1 1.2796– 6Jul/+30 Year low – Strong
• S2 1.2700 – Figure – Medium

GBPUSD – fundamental overview

Some temporary stabilisation in the Pound after dropping to fresh +30 year lows early Wednesday. The market had been hit on calls for additional easing from the BOE, news of redemption freezes at UK real estate funds and very light Wednesday Asia trade, but has since recovered off the lows. The better than expected US ISM non-manufacturing reading has however managed to cap recoveries for now, though the dovish reading of the Fed Minutes has offset some of the bearish flow. Looking ahead, fallout from Brexit will continue to command the market’s attention, while on the data front we get UK industrial production and housing data, along with US ADP employment and initial jobless claims later in the day.

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 unwinding from oversold territory, which could warn of additional consolidation before the market considers any additional meaningful declines. Still, any rallies should now be well capped below 106.00. Looking ahead, US ADP employment and initial jobless claims are the key standouts on the economic calendar.

• R2 102.59 – 5Jul high – Strong
• R1 101.76 – 6Jul high – Medium
• S1 100.20 – 6Jul low – Medium
• S2 98.99 – 24Jun/2016 low – Strong

USDJPY – fundamental overview

The major pair continues to track performance in the Nikkei, with weakness on that front ultimately keeping the market weighed down. Nothing new out from Governor Kuroda on Thursday, with the BOJ Governor saying Japan retains a moderate recovery trend, CPI is likely to be slightly negative for the time being, and the BOJ will ease further if needed. Lack of any official response should continue to keep the major pair weighed down for now. Looking at the economic calendar, we get US ADP employment and US initial jobless claims.

EURCHF – technical overview

Dips continue to be very well supported despite last week’s intense decline, with the market unable to establish a daily close below 1.0700. From here, there is risk for a more meaningful bounce that extends back to the range highs in the 1.1130 to 1.1200 area. Only a daily close below 1.0700 negates.

• R2 1.1013 – 24Jun high – Strong
• R1 1.0923 – 13Jun high – Medium
• S1 1.0770 – 28Jun low – Medium
• S2 1.0623 – 24Jun/2016 low – Strong

EURCHF – fundamental overview

This week’s SNB sight deposit data confirmed what the market already knew, which was that the SNB has been on the bid supporting the EURCHF rate in the midst of the intense post Brexit risk off flow. The sight deposit data also showed the highest levels since the SNB abandoned the EURCHF floor back in 2015. Overall, the SNB has done a good job offsetting this latest wave of unwanted inflow into the Franc post Brexit. But all of this uncertainty has made the Swiss Franc increasingly attractive even with 50 year Swiss yields sitting in negative territory. Of course, the SNB will be in deeper trouble if risk off price action intensifies in the days ahead.

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 towards the 2016 low at 0.6827 further down. A daily close above 0.7600 would be required to alleviate immediate downside pressure.

• R2 0.7526 – 22Jun high – Strong
• R1 0.7545 – 5Jul high – Medium
• S1 0.7408 – 6Jul low – Medium
• S2 0.7371 – 30Jun low – Strong

AUDUSD – fundamental overview

Worry that material government deficits may persist for several years in the absence of more forceful fiscal policy decisions has resulted in this latest S&P downgrade of Australia’s AAA rating to negative from stable. This has taken some of the wind out of the sails of the Australian Dollar, though setbacks have been contained. Looking ahead, US ADP employment and initial jobless claims are the key standouts on the economic calendar.

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 1.3189 – 24May high – Strong
• R1 1.3056 – 6Jul high – Medium
• S1 1.2832 – 4Jul low – Medium
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

Despite Wednesday’s highly unimpressive Canada trade data and solid US ISM non-manufacturing print, the Canadian Dollar managed to close out the day on a firmer note. It seems the combination of a dovish Fed Minutes reflecting a central bank in no hurry to raise rates, and higher OIL prices proved to be enough of a driver to influence the Loonie higher. Still overall, risk sentiment remains shaky in the world after Brexit and any rallies in the Canadian Dollar should continue to be met with sizable selling interest. Looking ahead, we Canada Canada building permits and Ivey PMI along with US ADP employment and initial jobless claims.

NZDUSD – technical overview

The rally to fresh 2016 highs has stalled out, with the market pulling back after trading up just shy of 0.7300. 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. Only back above 0.7300 negates.

• R2 0.7297 – 24Jun/2016 high – Strong
• R1 0.7241 – 4Jul high – Medium
• S1 0.7080 – 6Jul low– Medium
• S2 0.7057 – 30Jun low – Strong

NZDUSD – fundamental overview

Not much going on for the New Zealand Dollar into Thursday trade, with the currency having taken a bit of a hit on this week’s softer GDP auction and comments from Prime Minister Key. The PM had suggested additional rate cuts from the RBNZ would be warranted. Key is an ex-currency trader which makes any comments relating to monetary policy that much more significant. Dealers now cite more sell-stops below 0.7000. Looking ahead, US ADP employment and initial jobless claims are the key standouts on the economic calendar.

US SPX 500 – technical overview

Setbacks continue to be very well supported, with the market racing back through 2100 after taking out critical support the other week. Still, while the market holds below 2112 on a daily close basis, there is risk for another topside failure. However, a daily close back below 2065 will be required to strengthen the toppish outlook and accelerate declines.

• R2 2128.00 – 24Jun/2016 high – Strong
• R1 2113.00 – 4Jul high – Medium
• S1 2065.00 –30Jun low – Medium
• S2 2031.00 – 29Jun low– Strong

US SPX 500 – fundamental overview

The legitimacy of this latest recovery rally is in serious doubt given some very light volume behind the move and many unanswered questions over the outlook for the UK and global economy in the aftermath of the unsettling 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 open the door for another topside failure over the coming sessions, ultimately exposing an eventual retest of the 2016 lows just shy of 1800. Looking ahead, US ADP employment and initial jobless claims are the key standouts on the economic calendar.

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 1250.

• R2 1400.00 – Measured Move – Strong
• R1 1375.20 – 6Jul/2016 high – Medium
• S1 1305.55 – 28Jun low – Medium
• S2 1250.30 – 24Jun low – Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-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 and systemic threat. Interestingly, despite a recovery in risk assets since last week, the yellow metal has remained well supported, perhaps offering a red flag warning to the rest of the market not to throw too much weight behind any upticks in sentiment.

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 a daily close back below 18.0780 would take the immediate pressure off the topside.

• R2 19.5190 – 24Jun/Record High – Strong
• R1 19.0860 – 16Jun high – Strong
• S1 18.3930 –5Jul low – Medium
• S2 18.0780 – 8Jun low – Strong

Feature – fundamental overview

Forecasts for this emerging market pair in 2016 have now been lifted to 18.430 and 17.990 respectively, versus 18.000 and 17.650. The fact that the Peso has weakened even after last week’s aggressive 50bp rate hike from the Banxico is having  a lot to do with the revised outlook, with the swaps market now pricing nearly another 50bps of hikes by the end of the year. But the central bank will be breathing a little better into Thursday, with the Peso having recovered a bit on the back of a broader recovery in risk sentiment as post Brexit fears temporarily fade. Looking ahead, we get US ADP employment and US initial jobless claims.