Buck Enters New Week in the Doghouse

GBPUSD – technical overview

A recent bullish reversal week ends a sequence of consecutive weekly lower tops and suggests that an interim base could be in place at the +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 ahead of 1.3800. Key levels to watch above and below over the coming sessions come in at 1.3315 and 1.3057 respectively.

• R2 1.3313 – 18Jul high – Strong
• R1 1.3302 – 29Jul high – Medium
• S1 1.3117 – 28Jul low – Medium
• S2 1.3057 – 26Jul low – Strong

GBPUSD – fundamental overview

Plenty of US Dollar weakness across the board in the aftermath of last week’s more dovishly perceived FOMC and disappointing US GDP. Still, while the Pound did trade higher against the Buck on the week, it was still the laggard, standing out as the weakest of the developed currencies. The hangover from the Brexit vote continues to be a thorn at the side of the Pound, with market participants unwilling to get bullish the currency, particularly with a BOE rate cut expected this week after the central bank held off at the last decision. Looking ahead, UK manufacturing PMIs and US ISM manufacturing are the key standouts today.

USDJPY – technical overview

The latest topside failure sets up a prospective lower top at 107.49 ahead of the next major downside extension below the recent yearly and multi-month low at 98.99. At this point, only a break back above 107.49 would negate this outlook and give reason for pause.

• R2 103.99 – 26Jul low – Strong
• R1 103.00 – Figure – Medium
• S1 101.00 – Figure – Medium
• S2 99.99 – 8Jul low – Strong

USDJPY – fundamental overview

Friday’s BOJ decision was a big letdown to the market, with USDJPY collapsing as a result. Perhaps the decline would have been even more intense had it not been for an expansion in ETF purchases, doubling in the size of its USD lending program and setup of a new facility to lend JGBs. But again, not what the market was looking for with the QQE program and monetary base unchanged at Yen 80 tln and the policy rate holding steady at -0.10%. Of course, the subsequent release of a terrible US GDP report, well below forecast, only added to the downside pressure and it looks like USDJPY could be getting ready for a drop to fresh 2016 lows below 99.00. Looking ahead, US ISM manufacturing is the only notable standout on Monday’s calendar.

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 1.0778 compromises the constructive outlook.

• R2 1.1014 – 24Jun high – Strong
• R1 1.0945 – 12Jul high – Medium
• S1 1.0790 – 29Jul low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

Last week, the SNB was reportedly active in the market in an effort to prop up the EURCHF rate. And yet, all of those gains were given back, with the BOJ stimulus letdown only adding to a potentially dangerous situation for global risk appetite and the SNB’s strategy by extension. There is no doubting the tough battle the SNB will have on its hands if risk assets start to come under pressure and US equities capitulate off record highs. The resulting safe haven flow could prove too much for the SNB to defend against, which could ultimately open another major pullback in the EURCHF rate.

AUDUSD – technical overview

The market has struggled 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. Look for a break back below 0.7421 to strengthen this outlook and accelerate declines. Ultimately, only a daily close back above 0.7677 would negate the newly adopted bearish outlook and invite a retest of the 2016 highs.

• R2 0.76777 – 15Jul high – Strong
• R1 0.7650 – Mid-Figure – Medium
• S1 0.7487 – 28Jul low – Medium
• S2 0.7421 –27Jul low – Strong

AUDUSD – fundamental overview

Reduced odds for a September Fed rate hike in the aftermath of Friday’s horrid US GDP showing has rocketed the Australian Dollar higher into the new week. Perhaps end of month flows have also factored into price action, though it’s hard to see the commodity currency pushing much more with the RBA policy decision due Tuesday. The market is looking for a rate cut from the central bank and if confirmed, should keep Aussie well capped. As far as today’s calendar goes, US ISM manufacturing is the only notable release.

USDCAD – technical overview

Finally a major breakout in this pair, with the price clearing critical range resistance at 1.3189. The break ends a period of multi-week basing off the 2016 low and opens the door for a fresh upside extension towards a measured move objective into the 1.3500-1.4000 area. Any setbacks from here should be very well supported ahead of 1.2800.

• R2 1.3187 – 29Jul high – Strong
• R1 1.3100 – Figure – Medium
• S1 1.3002 – 29Jul low – Medium
• S2 1.2862 – 15Jul low – Strong

USDCAD – fundamental overview

All of the developed currencies were higher against the Buck in the previous week, though the Canadian Dollar was one of the laggards. The steep pullback in the price of OIL over the past several days has managed to offset a good chunk of Canadian Dollar demand amidst this broad currency rally post FOMC. Looking ahead, the economic calendar is exceptionally light this week, with the market trading thinner on this Canada Civic Holiday Monday. On Tuesday, we get Canada RBC manufacturing PMIs but that’s it until Friday when things finally pick up with the release of the highly anticipated Canada monthly employment report. Canada trade and Ivey PMIs are also due on Friday. And so, for today, the focus will be on OIL flow, broader sentiment and US ISM manufacturing.

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. As such, look for this latest bounce to once again be well capped ahead of a resumption of declines. Key support now comes in at 0.6952, with a break below to accelerate.

• R2 0.7325 – 12Jul/2016 high – Strong
• R1 0.7229 – 29Jul high – Medium
• S1 0.7128 – 28Jul high – Medium
• S2 0.7062 – 28Jul low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was the second strongest amongst the developed currencies last week, with the risk correlated Kiwi benefitting greatly from a major selloff in the Buck post Friday’s gruesome US GDP print and ongoing demand for US equities, sitting at record highs. But there has been plenty of chatter in recent days of an aggressively dovish RBNZ going forward, with some even calling for a 50bp rate cut in August. This should keep Kiwi well capped into additional rallies. On Monday, the only data of note comes in the form of US ISM manufacturing.

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 towards next key psychological barriers at 2200. 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. But initially, we would need to see a daily close below 2150 to take the immediate pressure off the topside.

• R2 2200.00 – Psychological – Strong
• R1 2182.00 – 1Aug/Record – Medium
• S1 2149.00 –14Jul low – Medium
• S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

Last week, US equities got a lot of good news, with the Fed’s more upbeat outlook failing to get the central bank thinking more about a definitive rate hike timeline. And so, the combination of solid data and a Fed going nowhere were once again eaten up by US stock market investors. Friday’s awful US GDP showing did nothing to stall the rally and may have even helped, with the market perhaps more comforted by the fact that overall data is still solid and the GDP print will only give the Fed more of an excuse to hold of on raising rates. Today, we get the release of US ISM manufacturing.

GOLD (SPOT) – technical overview

The recent break above the previous 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 1375.20 – 6Jul/2016 high – Strong
• R1 1357.75 – 12Jul high – Medium
• S1 1310.90 – 21Jul low – Strong
• S2 1303.90 – 1May low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal has propelled higher over the past few sessions on broad based US Dollar weakness from a more dovishly perceived FOMC decision and much weaker US GDP print. But overall, 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.

Feature – technical overview

USDTRY has finally broken up to another fresh record high after a period of multi-month consolidation. The latest break through the previous peak from 2015 now opens the door for a measured move upside extension towards 3.3500 in the days ahead. At this point, a break back below 2.8390 would be required to take the immediate pressure off the topside.

• R2 3.3500 – Measured Move – Strong
• R1 3.0970 – 20Jul/Record – Medium
• S1 2.9550 –6Jul high – Medium
• S2 2.9260 – 18Jul low – Strong

Feature – fundamental overview

There is still quite a bit of tension and uncertainty in Turkey post coup attempt and there is a lot of worry over this week’s Moody’s ratings review, which if negative, could fuel a fresh round of Lira declines. But for now, the currency has been in process of recovering from record lows, helped along by some broad based US Dollar selling in the aftermath of last week’s dovishly perceived FOMC decision and much weaker US GDP showing. Looking at today’s calendar, US ISM manufacturing is the only notable standout.