A Different Kind of Flow

GBPUSD – technical overview

The market is in the process of correcting out from the recent +30 year low of 1.2797. While the downtrend is firmly intact, there is still room for this rally to run before it looks for the next lower top and bearish resumption. Ideally, any upside should be limited to formidable previous support turned resistance in the 1.3800 area.

• R2 1.3481 – 15Jul high – Strong
• R1 1.3390 – Upper Bollinger – Medium
• S1 1.3200 – Figure – Medium
• S2 1.3117 – 28Jul low – Strong

GBPUSD – fundamental overview

An impressive performance for the beleaguered Pound on Tuesday, with the UK currency well bid throughout the day on the back of a not as bad UK construction PMI and more broad based selling in the US Dollar. The BOE kicks off its two day policy meeting today and there is also the possibility of the currency getting a bit of a boost on position squaring into the event risk. Most of the fireworks from this risk will come on Thursday, though we could see more volatility in the lead up today. UK services PMIs are due but shouldn’t factor much into price action, with more of the attention on US ADP employment and ISM non-manufacturing.

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 102.83 – 2Aug high – Strong
• R1 102.00 – Figure – Medium
• S1 100.68 – 2Aug low – Medium
• S2 99.99 – 8Jul low – Strong

USDJPY – fundamental overview

There hasn’t been any reaction to today’s BOJ Minutes and it comes as no surprise with the release already quite stale in the aftermath of the BOJ letdown. The Yen has been bid back up in a big way post BOJ, with the currency generating additional momentum from this latest downturn in US equities. The combination of a central bank starting to recognize the limitations of monetary policy and downturn in sentiment, could very well open the door for additional Yen upside in the days ahead. FinMin Asakawa has been out on the wires saying Yen moves are being watched, but this isn’t anything the market hasn’t seen before and it’s no surprise to see the Yen ignoring the comment. Looking ahead, US ADP employment and ISM non-manufacturing are the key standouts for the remainder of the day.

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. Earlier this week, 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 seems to be having a bigger impact on price action, while broader risk off flow is also helping to keep EURCHF weighed down. Still, dealers continue to sight solid bids in the 1.0700-1.0800 area, many of which could be official in nature.

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 0.7638 – 2Aug high – Medium
• S1 0.7488 – 2Aug low – Medium
• S2 0.7421 –27Jul low – Strong

AUDUSD – fundamental overview

A strange Tuesday for the Australian Dollar, with the currency shrugging off any and all negative drivers. Initially it was trade and building approvals that disappointed. This was followed by an RBA rate cut that wasn’t fully priced in and then capped off with a sharp pullback in US equities. Currency traders still seem to be looking for yield and will take it anywhere they can get it, even if that yield is coming from a country with an interest rate at a record low 1.50%. Still, all of the negative drivers are good reason to be expecting renewed offers in the sessions ahead. Of course, the wave of broad based US Dollar selling over the past week has been one of the offsetting variables that has been helping to prop Aussie. Looking ahead, US ADP employment and ISM non-manufacturing are the key standouts on Wednesday’s calendar.

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 1.3142 – 2Aug high – Medium
• S1 1.3002 – 29Jul low – Medium
• S2 1.2862 – 15Jul low – Strong

USDCAD – fundamental overview

If there ever were any doubt over the impact of OIL prices on the Canadian Dollar, Tuesday price action would have done a good job putting those doubts to rest. Initially, the Loonie was well bid on the back of this ongoing slide in the US Dollar, but any rallies in the Canadian Dollar were aggressively sold as OIL extended its declines and stoked fears of a more meaningful pullback in the black gold. Even the better than expected Canada RBC manufacturing PMIs could do little to inspire sustained Canadian Dollar demand. Looking ahead, the Canada calendar is empty today with the only notable standouts coming in the form of US ADP employment and ISM non-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, in favour 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 0.7257 – 2Aug high – Medium
• S1 0.7128 – 28Jul high – Medium
• S2 0.7062 – 28Jul low – Strong

NZDUSD – fundamental overview

Tuesday GDT auction results were solid, but won’t do enough to restore much confidence in this struggling data series. Moreover, the early Wednesday release of softer employment metrics will only further strengthen the case for an upcoming RBNZ rate cut. The New Zealand Dollar has been well bid over the past several sessions, with the risk correlated currency benefiting from broad based declines in the US Dollar and an ongoing search for yield. However, this search for yield will become a lot less compelling if the US equity market follows through Tuesday’s bearish performance with another round of declines. This will be the important thing to watch today, though US ADP employment and ISM non-manufacturing data will also get some attention.

US SPX 500 – technical overview

The market continues to push 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 2147.00 –2Aug low – Medium
• S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

The stock market has done a marvelous job steering clear of  underlying fundamentals, rallying at every turn and extending to fresh record highs this week. But with each passing day, there is a sense this artificial support from governments and central banks is running out, and even if there were more to pump in, there is no longer the same level of confidence this strategy will continue to be effective. Last Friday’s BOJ letdown could be sending a bigger message to this effect, reflecting the limitations of monetary policy and fiscal stimulus measures. The stock market got a taste of this on Tuesday, with the sharp setbacks intensified on more weakness in OIL and a beating up in European banking shares. Looking ahead, today’s focus will be on US ADP employment and any hints the data offers for Friday’s monthly employment report. We also get ISM non-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 1367.30 – 2Aug high – Medium
• S1 1310.90 – 21Jul low – Strong
• S2 1303.90 – 1May low – Strong

GOLD (SPOT) – fundamental overview

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

Today we get get the latest round of Turkish CPI data, with the market looking for another uptick in this series. Still, higher inflation isn’t likely to prevent the CBRT from cutting rates, with the central bank looking for inflation to come off over the medium-term. Overall the CBRT has been prioritizing risk to the local economy over inflation worry and will more than likely continue on the accommodative path, particularly in the aftermath of this latest coup attempt. On Tuesday, price action was more reflective of broader flow than anything else, with the Lira going nowhere, unable to decide whether it should be trading up on broad based US Dollar declines or trading down on the pullback in US equities. Looking to the remainder of the week, the big focus will be on the Moody’s rating review.