Pound Weakness Standing Out in Early Week

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 1.3175 – 5Aug high – Strong
• R1 1.3097 – 8Aug high – Strong
• S1 1.2972 – 12Jul low – Medium
• S2 1.2900 – Figure – Medium

GBPUSD – fundamental overview

The Pound continues to suffer on the back of last week’s BOE stimulus package, with the dovish slant paving the way for more relative underperformance going forward. The latest comments from BOE McCafferty only add to the bearish outlook for the Pound after the central banker said the BOE could cut further and add to QE. Looking ahead, UK industrial and manufacturing production stand out along with NIESR GDP estimates.

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 101.85 – 8Aug low – Medium
• S2 100.68 – 2Aug low – Strong

USDJPY – fundamental overview

Last Friday’s healthy US employment report has been helping to prop the major pair into the new week, while bid up US equities and this latest weakness in Japan’s current account have only added to the latest run of Yen weakness. Looking ahead, the economic calendar is exceptionally thin for the remainder of the day, with broader macro flows to influence direction.

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

Monday’s firmer Swiss CPI data hasn’t really factored into price action, with the EURCHF rate responding more to this latest wave of risk on trade post Friday’s impressive US jobs report. SNB smoothing activity to prop the EURCHF rate has also been helping, but overall, any upside moves haven’t been sustainable 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. Overall, this is a market going nowhere right now and it seems sell-stops need to get taken out below 1.0750 or above 1.1000 for clearer insight.

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 0.7672 – 8Aug high – Medium
• S1 0.7569 – 3Aug low – Medium
• S2 0.7488 –2Aug low – Strong

AUDUSD – fundamental overview

The Australian Dollar has extended its impressive run post last week’s RBA cut and it seems with the RBA out of the way and no additional guidance offered, the market is pricing in the bottom and thinking about other central banks that still have more room to accommodate. And so, we’ve seen a lot of cross related Aussie demand against the Yen, Pound and Kiwi. The BOJ could very well throw more stimulus down the road, while the BOE has already signaled such a move. Meanwhile the RBNZ is next up and many speculate the central bank will accompany a rate cut with a downbeat tone and bearish Kiwi talk. All of this has been helping to fuel gains in AUDUSD, though offers are reported ahead of 0.7700.

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 has been hit with such a bad dose of data these past few sessions, that even an impressive OIL recovery has done little to invite renewed bids. Last Friday we got a discouraging Canada employment report and record trade deficit. This has been followed up on Monday with a weaker building permits. Looking ahead, there is no data of note out of Canada or the US on Tuesday and the market will be focused on OIL and broader macro flow.

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 0.7257 – 2Aug high – Strong
• R1 0.7200 – Figure – Medium
• S1 0.7087 – 8Aug low – Medium
• S2 0.7062 – 28Jul low – Strong

NZDUSD – fundamental overview

Though Monday’s setbacks were supported, the New Zealand Dollar has come under pressure in recent sessions as market participants start to position for this week’s RBNZ meeting. The consensus is for a rate cut of 25 basis points, though the RBNZ could deliver an uber dovish decision in light of recent warnings from the central bank, this latest soft inflation gauge, and an aggressive BOE stimulus package. It’s also worth noting that Goldman has been out building a bearish case for NZDUSD, citing yield differentials, with the Fed moving towards rate hikes while the RBNZ moves in the opposite direction. Looking ahead, the economic calendar for Monday is quiet with broader macro flows and sentiment expected to dictate direction.

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 2188.00 – 8Aug/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, and 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 on the matter this week and if any hawkish comments spook this overinflated 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 last 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, particularly in the aftermath of a recent S&P downgrade post coup attempt. But overall, there is still plenty of risk associated with the Lira as the CBRT maintains loose policy despite rising inflation. Moreover, investors are proceeding with caution on fear Erdogan will be tightening up his grip going forward. SocGen has come out with piece calling for more Lira weakness going forward, doubting the ability for the USDTRY rate to hold below 3.0000 for any meaningful period of time on