Strong NFPs and Fed Implications

GBPUSD – technical overview

The latest break below internal range support at 1.3057 ends a period of bearish consolidation and opens the door for a direct retest of the +30 year low from July just under 1.2800. A daily close below 1.3055 will strengthen the bearish outlook, while ultimately, only back above 1.3372 would take the immediate pressure off the downside.

• R2 1.3281 – 3Aug low – Strong
• R1 1.3175 – 5Aug high – Strong
• S1 1.3021 – 5Aug low – Medium
• S2 1.2972 – 12Jul low – Strong

GBPUSD – fundamental overview

The Pound has come back under pressure in recent trade, with the UK currency taking a hit on the back of last Thursday’s dovish BOE decision and Friday’s blowout US employment report. Sell stops were triggered on the break below 1.3050 and from here there is risk for a full retracement back to the +30 year low just under 1.2800 from July. Ongoing uncertainty surrounding Brexit, BOE growth downgrades and willingness to do even more and the prospect for a sooner Fed rate hike are all variables that should keep this market well capped into any rallies coming from profit taking from shorter-term accounts. Looking ahead, there is no data on the UK calendar and the only notable release on the day comes in the form of the US labor market conditions index.

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 103.99 – 26Jul low – Medium
• R1 102.83 – 2Aug high – Strong
• S1 101.00 – Figure – Medium
• S2 100.68 – 2Aug low – Strong

USDJPY – fundamental overview

The burst of Yen gains seen in recent days has stalled out for a moment, with the Japanese currency consolidating post BOJ stimulus letdown. But also factoring into the Yen pullback over the past few sessions is this ongoing demand for US equities, with the fresh record highs supporting the risk correlated USDJPY pair. Not much of a reaction to the slight miss on Japanese trade data early Monday. Looking ahead, risk sentiment flow will be important to watch in a calendar light Monday session. The only other notable release on the day is the US labor market conditions index.

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 rate has been helping into dips but hasn’t been all that effective with the cross rate continuing to get sold aggressively into rallies. Last week, the market wasn’t too bothered by SNB Jordan comments that there was still room to intervene, perhaps offset by his concern over the central bank’s large balance sheet. On balance, this is a market going nowhere and it seems sell-stops need to get taken out below 1.0750 or above 1.1000 for clearer insight. Looking ahead, Swiss CPI is the big event on Mondays calendar.

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 0.7677 – 15Jul high – Strong
• R1 0.7665 – 5Aug high – Medium
• S1 0.7569 – 3Aug low – Medium
• S2 0.7488 –2Aug low – Strong

AUDUSD – fundamental overview

The Australian Dollar is coming off a week where the currency performed remarkably well considering all of the bearish Aussie developments. A slew of softer economic data and an RBA rate cut and yet, the currency is higher over the past week. Still, there is plenty of medium-term sell orders up at current levels and the latest strong US employment report has opened renewed downside pressure after the data raised the chances for a Fed rate hike in either September or December of this year. Looking ahead, the economic calendar is exceptionally thin on Monday, with only the US labor market conditions index standing out.  Softer Aussie job ads and solid China trade and foreign direct investment data haven’t really had much of an impact in early Monday trade.

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 1.3254 – 27Jul high – Strong
• R1 1.3200 – Figure – Medium
• S1 1.3100 – Figure – Medium
• S2 1.2997 – 4Aug low – Strong

USDCAD – fundamental overview

The Canadian Dollar is coming off an awful Friday session of trade. The only slightly positive development for the Loonie was a modest push higher in the price of OIL. Otherwise, it wasn’t a pretty picture with the double dose of monthly employment reports and some trade data triggering a major sell-off in the Canadian Dollar. Whereas the US employment report was exceptionally strong, Canada employment was a major disappointment. Perhaps equally disappointing for Canadian Dollar bulls was the record Canada trade deficit. All of this has increases the odds of a sooner than later Fed hike and reopens the conversation about potential rate cuts from the Bank of Canada. Looking ahead, the economic calendar is exceptionally thin with only Canada building permits and the US labor market conditions index due for release.

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 0.7100 – Figure – Medium
• S2 0.7062 – 28Jul low – Strong

NZDUSD – fundamental overview

Momentum for the New Zealand Dollar is starting to fade with the latest run cooling off in the aftermath of an impressive US employment report, that increases odds for a sooner Fed hike. Moreover, with the RBNZ expected to cut rates this week, there is increased bearishness around the currency as participants recall the recent unscheduled RBNZ economic assessment which was downbeat and bearish the New Zealand Dollar. Perhaps the BOE’s move to do more than many had thought is also getting some to think about a similar outcome from the RBNZ, which is only adding to this latest downside pressure. Looking ahead, the only notable release on Monday’s calendar comes in the form of the US labor market conditions index.

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 – 5Aug/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. 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. But for now, we’re living in a Goldilocks world where investors are feeling good about US economic data, particularly after this super strong US employment report, but at the same time, aren’t expecting the Fed to move on rates. It will be interesting to see what Fed officials have to say post US jobs and if their comments change the trajectory of this market.

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. It’s worth noting this latest round of setbacks has come from another push in stocks and concurrent surge in the US Dollar post US employment report. But again, strong bids are reported ahead of $1300.

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 Turkish Lira dodged a bullet on Friday after Moody’s avoided issuing any statement on Turkey, saying the review was ongoing  and would be completed within 90 days of July 18th. Many had been worried about a downgrade on Friday, particularly after the recent S&P ratings downgrade post coup attempt. Otherwise, any setbacks from Friday’s very strong US employment report were offset by a push back to record highs in US equities. But overall, there is still plenty of risk associated with the Lira as the economy struggles and contends with rising inflation at the same time. Moreover, investors are proceeding with caution on fear Erdogan will be tightening up his grip going forward. Looking ahead, the economic calendar is thin and this market will likely trade off broader macro flows and sentiment.