Tuesday Shows More Promise for Volatility

GBPUSD – technical overview

The latest bullish reversal week ends a sequence of consecutive weekly lower tops and suggests that an interim base could be in place at the recent +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 1.3481 – 15July high – Medium
• S1 1.3200 – Figure – Medium
• S2 1.3105 – 14Jul high – Strong

GBPUSD – fundamental overview

Lack of meaningful economic data out of the UK and US on Monday left the market focused on comments from BOE Weale who said more evidence would be needed for the BOE to cut rates. This helped to inspire some more profit taking on Cable shorts, though ultimately, the market didn’t really move all that much, instead preferring to mostly consolidate into a heavy week of first tier UK data. Today, the focus will be on UK inflation, with consumer and producer prices due. US data shouldn’t really factor, with housing starts and building permits taking a back seat.

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 106.33 – 19Jul high – Medium
• S1 104.63 –15Jul low – Medium
• S2 103.90 – 13Jul low – Strong

USDJPY – fundamental overview

Japan is back online after a Monday holiday and USDJPY has been well supported into Tuesday, largely as stocks continue to drive higher. Meanwhile, expectations for additional Japanese stimulus have also been propping the major pair, though offers are reported above 106.00 with much of this being priced and participants waiting on fresh headlines. Moreover, with this run up in stocks once again looking vulnerable, any pullback could invite renewed downside pressure in USDJPY. As far as Tuesday data goes, we only get US housing starts and building permits.

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. Moreover, one wonders how much longer the market will remain immune to ongoing geopolitical risk wreaking havoc around the globe.

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 and daily close back below 0.7500 would be required at a minimum to alleviate immediate topside pressure. At the same time, a daily close above 0.7677 would negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7677 – 15Jul high – Strong
• R1 0.7607 – 18Jul high – Medium
• S1 0.7500 – Psychological – Medium
• S2 0.7467 –7Jul low – Strong

AUDUSD – fundamental overview

Although there wasn’t anything all that surprising from the RBA Minutes, the fact that the release leaned more to the dovish side seemed to be enough to fuel a fresh round of offers. The RBA’s concern over subdued inflation and the elevated Australian Dollar were the main drivers weighing on the commodity currency, ultimately fueling expectations for a potential rate cut at the August meeting, especially if next week’s inflation data comes in soft. Looking ahead, US housing starts and building permits are the only notable standouts on the calendar for the remainder of the day.

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 1.3023 – 18Jul high – Medium
• S1 1.2862 – 15Jul low – Medium
• S2 1.2832 – 4Jul low – Strong

USDCAD – fundamental overview

Not much to talk about with respect to Monday’s price action. Second tier US data came in softer, which may have helped to keep the Canadian Dollar bid into dips, though OIL weakness proved to offset this flow and in the end, the market didn’t end up going anywhere at all. Looking ahead, the only notable standouts on Tuesday’s calendar come in the form of US housing starts and building permits. 

NZDUSD – technical overview

Rallies to fresh 2016 highs above 0.7300 have been well capped, with the market looking to adhere to the broader downtrend. Monday’s break below 0.7080 strengthens the bearish outlook and should now accelerate declines back towards 0.6963, which guards against more critical medium-term support further down at 0.6675. At this point, only back above 0.7325 negates.

• R2 0.7154 – 18Jul high – Strong
• R1 0.7080 – 6Jul low – Medium
• S1 0.6963 – 15Jul low– Strong
• S2 0.6893 – 7Jun low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was a standout underperformer in a boring day of Monday trade. The currency took another hit, continuing to fall away from recent 2016 highs after New Zealand CPI came in cooler than expected. The currency had already come under pressure at the end of last week, when the RBNZ announced an unscheduled economic assessment for this Thursday. The general consensus is the RBNZ update will only be dovish and bearish Kiwi. More downside pressure early Tuesday after RBNZ Governor Wheeler said that there’s a high risk of house prices correcting from lofty levels across the country. The focus will now shift to today’s GDT auction results, which could very well have a major intraday impact on the currency. Otherwise, it’s second tier US data later in the day in the form of building permits and housing starts.

US SPX 500 – technical overview

The market has stormed back to fresh record highs and there is scope from here for additional upside 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. 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, surprisingly, even in the face of rising geopolitical risk and fear from an escalation in terrorist threats. Last week’s Nice attacks and attempted military coup in Turkey have done nothing, or very little to rattle the market.

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 climax. Moreover, this rising geopolitical risk and fear of an escalation in terrorist activities is also inviting hard asset demand.

Feature – technical overview

USDTRY has been confined to a very well defined uptrend, with the market locked in a bullish consolidation off the record high from 2015. Any setbacks should be very well supported into the 2.7500 area, with an eventual break seen back above the 3.0750 record high exposing a fresh upside extension towards 3.5000 further up.

• R2 3.0610 – 20Jan/2016 High – Strong
• R1 3.0495 – 15Jul high – Medium
• S1 2.9000 –Psychological – Medium
• S2 2.8390 – 24Jun low – Strong

Feature – fundamental overview

The Lira has regained some composure after Friday’s shocking collapse into the market close on news of the coup. Still, there is plenty of risk still associated with these events that could continue to weigh on the emerging market currency, particularly if Erdogan uses this as an excuse to tighten up his autocratic grip, ultimately inviting tension with the western world and undermining key relationships. Moreover, comments from the Turkish Deputy PM that the country will not intervene to support the Lira and warnings of a potential rating agency downgrade to Turkey’s credit rating have also been helping to keep the currency well offered into any rallies.