US Dollar’s Next Move in Question

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

The Pound was an underperformer in Monday trade, with the UK currency initially hit on a softer round of UK manufacturing PMIs. There wasn’t much of a reaction from a mixed round of US data, though upbeat comments from Fed’s Kaplan and Dudley, both unwilling to rule out a September hike, kept the market weighed down into the close. Looking ahead, we get UK construction PMIs and the US core PCE inflation gauge.

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

The Yen paused for a bit of a breather in Monday trade following a super impressive surge in the previous week on the less dovish than expected BOJ policy decision. Tuesday’s economic calendar isn’t all that busy and there’s still a good chance we will continue to see reaction from the BOJ, with the Yen moving higher up and USDJPY sinking back to retest the post-Brexit low around 99.00. The US core PCE inflation gauge is the major release on the day, though again, look for more post BOJ trade and risk sentiment flow to drive this major pair.

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

SNB smoothing activity to prop the EURCHF rate hasn’t been all that effective in recent trade, with the cross rate continuing to get sold aggressively into rallies. On Monday, the market wasn’t too bothered by SNB Jordan comments that there was still room to intervene and the Franc was overvalued. Instead, his acknowledgment of a large balance sheet seemed to have a bigger impact on price action, while broader risk off flow also factored into the lower rate. Dealers continue to sight solid bids, many of which could be official in the 1.0700-1.0800 area.

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 0.7616 – 1Aug high – Medium
• S1 0.7487 – 28Jul low – Medium
• S2 0.7421 –27Jul low – Strong

AUDUSD – fundamental overview

Commodity currencies were under pressure on Monday, and the Australian Dollar was the hardest hit of the bunch, with the currency finding additional offers on pre-RBA positioning. Many market participants were seen booking profits on longs, not wanting to get caught should the RBA cut rates and deliver a more dovish decision.  Disappointing Aussie trade and building approvals out early Tuesday were mostly shrugged off and the market will now take the remainder of the day to digest the fallout from the RBA. The market was pricing about a 66% chance for an RBA cut into the decision. Also out on Tuesday is US core PCE.

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

The Canadian Dollar couldn’t muster any momentum from another round of softer US economic data on Monday, this time in the form of ISM manufacturing. The Canadian currency is still very much driven off the direction in OIL, which has come under intense pressure in recent days. We also saw some broader risk off flow and upbeat Fed comments on Monday which added to the downside pressure in the Canadian Dollar. Looking ahead, Canada RBC manufacturing PMIs and US core PCE are the key standouts on Tuesday.

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

New Zealand inflation expectations and the GDT auction will be in focus on Tuesday, with the results of these prints to influence direction in the risk correlated currency. The market is already pricing more RBNZ rate cuts over the coming months and the results of these two releases could have an impact on just how dovish the RBNZ is likely to get over the coming months. Otherwise, US core PCE is due late Tuesday, while the fallout from the RBA decision will also likely factor into Kiwi trade.

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 2183.00 – 1Aug/Record – Medium
• S1 2149.00 –14Jul low – Medium
• S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

On Monday, US data was mixed overall, but it seems the market was weighed down after an early surge to fresh record highs on a couple of Fed official appearances. Fed Kaplan warned it was premature to rule out a September hike, while Dudley said the market had become too complacent with the idea there would be no more rate hikes in 2016. Overall, stocks remain elevated on the back of last week’s more dovishly perceived FOMC and horrid US GDP print, but Monday’s Fed comments may have ignited a corrective spark. Looking ahead, Tuesday’s US core PCE inflation gauge will be the big piece of data to watch.

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. Still, Lira rallies have been well capped, with Monday’s pullback in stocks and softer Turkish manufacturing PMIs containing the move.