US Employment Report and Fed Pricing

GBPUSD – technical overview

The market is in the process of consolidating off the recent +30 year low of 1.2797. At this point, the downtrend remains firmly intact and a break and daily close below 1.3057 will do a good job of strengthening the bearish outlook, opening a retest and break below the 1.2797 low, exposing next key psychological barriers at 1.2500.

• R2 1.3372 – 3Aug high – Strong
• R1 1.3200 – Figure – Medium
• S1 1.3057 – 26Jul low – Strong
• S2 1.2972 – 12Jul low – Medium

GBPUSD – fundamental overview

Thursday was all about the Bank of England policy decision, which in the end didn't disappoint the doves. The BOE responded with a 25 basis point rate cut and GBP 60 bln boost to QE, while also signaling it would buy up to GBP 10 bln of corporate bonds. The rate cut took rates down to their lowest level since the Bank of England was founded in 1694 and it was no surprise to see the Pound under immediate pressure, trading down some 1.5% on the day. The BOE cautioned that even with all this additional stimulus it projected 2.5% of GDP would be lost over the next 3 years and that another rate cut would probably be needed. Looking ahead, the market will continue to digest the implications from the BOE decision while also positioning for today’s anticipated US monthly employment report and US trade data.

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. In the interim, look for any rallies to be well capped ahead of 104.00.

• R2 102.83 – 2Aug high – Strong
• R1 101.67 – 4Aug high – Medium
• S1 100.68 – 2Aug low – Medium
• S2 99.99 – 8Jul low – Strong

USDJPY – fundamental overview

The second half of this week has been a quiet one for the Yen, with the currency once again not doing much on Thursday, with all of the attention on the Bank of England and Sterling. But the market hasn’t forgotten about last week’s BOJ letdown and this in conjunction with another topside failure in US equities, could ultimately be what drives USDJPY to fresh 2016 lows below 99.00. Looking ahead, the focus will be on the highly anticipated monthly employment report out of the US, while US trade data should also not be overlooked.

EURCHF – technical overview

Not much doing here over the past several days, with the market confined to a range trade, roughly between 1.0800 and 1.1000. At this point, a daily close above 1.1000 or back below 1.0800 will be required for clearer directional insight. Until then, look for dips to be supported and rallies well capped.

• 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 has been helping into dips but hasn’t been all that effective 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. Instead, his acknowledgment of a large balance sheet seems to be having a bigger impact on price action, while the introduction of some broader risk off flow is also helping to keep EURCHF weighed down. Still, dealers continue to sight solid bids in the 1.0800 area where it appears the SNB is trying to make a stand.

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 0.7641 – 4Aug high – Medium
• S1 0.7569 – 3Aug low – Medium
• S2 0.7488 –2Aug low – Strong

AUDUSD – fundamental overview

What a strange week for the Australian Dollar. If you didn’t know where the currency was trading and were asked to guess based on this week’s calendar and events, the overwhelming response would have been a good deal lower. And yet, in the face of soft building approvals, discouraging trade, weak retail sales and an RBA rate cut to fresh record lows, the Australian Dollar was higher on the week against the Buck into Friday trade. This is not a pleasant development for the RBA, already uncomfortable with Aussie at more elevated levels. Friday’s release of the RBA SOMP hasn’t offered anything new in terms of forward guidance and the market will be looking ahead to the monthly employment report out of the US and US trade data.

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 1.2862.

• R2 1.3187 – 29Jul high – Strong
• R1 1.3148 – 3Aug high – Medium
• S1 1.3002 – 29Jul low – Medium
• S2 1.2862 – 15Jul low – Strong

USDCAD – fundamental overview

There hasn’t been a whole lot of data out of Canada this week and the primary drivers of any Loonie strength have come from an OIL recovery and some broad based US Dollar weakness. Perhaps news that Fitch affirmed Canada’s AAA rating and stable outlook has also helped the Loonie. But all of that will change today, with the market getting ready to digest the double whammy of monthly employment data out of Canada and the US. Canada Ivey PMIs and US trade data are also due and should not be overlooked.

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

The New Zealand Dollar didn’t really want to go anywhere in Thursday trade, failing to show any follow through from Wednesday’s bearish close. It seems with most of the attention on the BOE event risk, Kiwi was more comfortable resigning itself to a period of consolidation ahead of today’s US employment report and trade data and next week’s RBNZ decision. Given what we’ve been hearing from the RBNZ and given recent moves from the RBA and BOE, the risk for additional RBNZ rate cuts is certainly on the rise.

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. Looking ahead, all eyes on Friday’s US employment report and trade data.

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 weeks 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

The rise in Turkish inflation this week has not been a concern for the CBRT and this has helped to keep the Lira weighed down on the expectation the central bank will remain on the dovish path, considering additional easing despite rising inflation, in an effort to stimulate the local economy. This sentiment was backed up on Thursday with Chief Advisor Ertem saying inflation was not a problem. Looking ahead, the Lira will have a lot to take in with the Moody’s ratings review due, followed by the monthly employment report out of the US.