Week Closes Out with Key US Data

GBPUSD – technical overview

The break back above the previous weekly high suggests that an interim base could be in place at last week’s +30 year low of 1.2797. Still, the overall downtrend remains well intact and any additional upside from here is likely to run in formidable resistance in the 1.3800s. At this point, a break back below 1.3105 would be required to put the immediate pressure back on the downside.

• R2 1.3533 – 29Jun high – Strong
• R1 1.3500 – Psychological – Medium
• S1 1.3325 – 15Jul low – Medium
• S2 1.3105 – 14Jul high – Strong

GBPUSD – fundamental overview

The Pound is coming off a big day in which the Bank of England opted to leave policy on hold. In Thursday's BOE preview piece we outlined the rational behind an unchanged decision and were pleased to see the result, particularly after most of the market had been looking for a 25 basis point cut. Unsurprisingly, the Pound was an outperformer on the day as a result, with more short covering in play. But also unsurprisingly, the rally was well capped ahead of 1.3500, with the market fully aware of the fact that a cut or possibly more could be forthcoming in August.Looking ahead, UK and Brexit headlines will continue to dictate trade, though the market will also be paying close attention to a Carney speech in Toronto and batch of US data featuring retail sales, CPI and Michigan confidence.

USDJPY – technical overview

Signs of the possibility for a meaningful bullish reversal, though at this point the latest upside break would need to establish back above the 106.81 lower top to take the immediate pressure off the downside. Inability to break back above 106.81 will suggest the move is only corrective in nature ahead of a resumption of the current downtrend.

• R2 106.81 – 24Jun high – Strong
• R1 106.50 – Mid-Figure – Medium
• S1 105.05 –15Jul low – Medium
• S2 103.90 – 13Jul low – Strong

USDJPY – fundamental overview

The major pair continues to find support in Thursday trade, extending its recent recovery on the back of another record high US stock market print and supportive US Dollar data. The correlation with risk sentiment is still very much alive here and a better than expected JP Morgan earnings release, higher US producer prices and solid jobless claims all fueled the rally. Looking ahead, plenty of US data to take in on Friday with retail sales, CPI and Michigan confidence standing out.

EURCHF – technical overview

Dips continue to be very well supported despite a recent intense decline into the 1.0600’s. 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 1.0800 compromises the constructive outlook.

• R2 1.1013 – 24Jun high – Strong
• R1 1.0945 – 12Jul high – Medium
• S1 1.0864 – 12Jul low – Medium
• S2 1.0794 – 6Jul low – Strong

EURCHF – fundamental overview

The SNB is feeling more relieved in recent trade, with the cross rate initially having been well supported on SNB intervention post Brexit, but now benefitting greatly from a resurgence in risk appetite as Brexit risk pauses for a breather. The SNB remains committed to stepping in to defend against unwanted Franc appreciation, but could have a difficult time down the road if risk liquidation resumes. While fear of Brexit has subsided somewhat, there is still way too much uncertainty surrounding the event to rule out the possibility for another sharp pullback in risk and wave of demand for the Franc.

AUDUSD – technical overview

The market has been struggling on rallies above 0.7600 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835, in favour of the next major downside extension. But a break back below 0.7522 would be required at a minimum to alleviate immediate topside pressure. At the same time, a daily close above 0.7647 would negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7719 – 3May high – Strong
• R1 0.7677 – 15Jul high – Medium
• S1 0.7577 – 13Jul low – Medium
• S2 0.7522 –11Jul low – Strong

AUDUSD – fundamental overview

Although China GDP produced the slowest quarterly growth in 7-years, the data still came in better than forecast, along with retail sales and industrial production. This has helped to support Aussie into mild setbacks in early Friday trade. Dealers cite decent stops above 0.7700 and below 0.7550, though the market remains bid up this week on the back of healthy risk appetite and record high US equities. Looking ahead, plenty of data to take in with US retail sales, CPI and Michigan confidence standing out. Meanwhile, Aussie has found additional bids on cross related demand for AUDNZD following the news of a surprise RBNZ assessment next week.

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 1.3140 – 11Jul high – Strong
• R1 1.2986 – 14Jul high – Medium
• S1 1.2863 – 14Jul low – Medium
• S2 1.2832 – 4Jul low – Strong

USDCAD – fundamental overview

It seems the Canadian Dollar continued to benefit on carry over momentum from Wednesday’s upbeat policy decision. Certainly Thursday’s better than forecast Canada new housing price index didn’t hurt the Loonie, while gains many currencies against the Buck also helped. Interestingly, OIL was mostly offered, though this didn’t really factor into trade. Dealers do however cite plenty of USDCAD bids ahead of 1.2800 and the market will have a lot to take in on Friday, highlighted by US retail sales, CPI and Michigan confidence. Canada existing home sales and manufacturing shipments are also due.

NZDUSD – technical overview

The market has recently pushed to a fresh 2016 high which could open the door for additional upside in the sessions ahead. However, it’s worth noting the longer-term downtrend is still well intact and as such, the impressive 2016 run could soon be at risk of stalling out in favour of the next major downside extension. For now, a break back below 0.7080 would be required at a minimum to alleviate immediate tossed pressure.

• R2 0.7325 – 12Jul/2016 high – Strong
• R1 0.7238 – 13Jul low – Medium
• S1 0.7142 – 15Jul low– Medium
• S2 0.7080 – 6Jul low – Strong

NZDUSD – fundamental overview

Thursday’s news the RBNZ would issue an unscheduled assessment of the economy next week caught many off guard, with the New Zealand Dollar puling back as a result on dovish speculation from the announcement. Many feel the RBNZ will use the assessment as an opportunity to talk down the elevated exchange rate and potentially flag an August rate cut. Odds for an August rate cut have since increased quite a bit from 40% to 60% post announcement. The RBNZ assigned the reasoning for the assessment to a prolonged 11-week gap between the June and August decisions. The New Zealand Dollar was a standout underperformer as a result, with the currency topping out from recent 2016 highs against the Buck. AUDNZD related demand was also sourced for added Kiwi weakness. Looking ahead, key data on Friday out of the US includes retail sales, CPI and Michigan confidence.

US SPX 500 – technical overview

The market has stormed back to fresh record highs and there is scope from here for additional upside to fresh highs in the sessions ahead. Still overall, the prospect for the formation of a longer-term top is very much alive and any signs of exhaustion and a rolling back over below 2100 in the sessions ahead will strengthen this outlook and invite renewed downside pressure.

• R2 2200.00 – Psychological – Strong
• R1 2175.00 – 14Jul/2016 Record – Medium
• S1 2136.00 –12Jul low – Medium
• S2 2094.00 – 8Jul low– Strong

US SPX 500 – fundamental overview

Overall, it’s this across the board commitment from governments and central banks to continue to stimulate the global economy that has been fueling the ongoing bid tone in US equities. Expectations for more stimulus from the BOJ, and additional easing from the Bank of England next month are the latest stories to keep this rally going. Investors still don’t seem to be bothered in any way that these gestures are lacking substance given already exhausted monetary policy. For now, the idea of easy money and lower for longer continues to support the market. Of course, this is a market that will rally on anything at this point and if there was one thing the market had to assign Thursday’s record high surge to, it would have been the JP Morgan earnings beat. Plenty of data to take in on Friday with US retail sales, CPI and Michigan confidence standing out.

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 1300, with only a break below 1250 to compromise the outlook.

• 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 and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving head.

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 18.9435 – 6Jul high – Strong
• S1 18.2040 –14Jul low – Medium
• S2 18.0780 – 8Jun low – Strong

Feature – fundamental overview

Thursday’s Banxico Minutes confirmed what most already suspected. The latest aggressive decision to hike rates 50 basis points was purely driven off the central bank’s concern over the Peso’s loss of purchasing power and rapid deterioration. While the central bank also noted concerns over rising inflation, it was clear this worry was secondary to currency concerns. Going forward, the swaps curve is pricing an additional 50bps of hikes between now and year end. US data comes into focus on Friday with retail sales, inflation and Michigan confidence standing out.