Broader Macro Themes in Light Monday

Next 24 hours: Dollar Struggles with Weak Data Run

Today’s report: Broader Macro Themes in Light Monday

The market is coming off an interesting Friday, which saw the Buck stronger into the close despite a softer batch of data including retail sales, producer prices and Michigan confidence. Looking ahead, risk appetite and broader macro themes will likely dictate direction in a calendar light Monday.

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Wake-up call

Chart talk: Major markets technical overview video

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The market remains confined to a broader downtrend with any rallies classified as corrective. This latest bounce has stalled out yet again into the 100-Day SMA, setting up the possibility for a lower top and bearish resumption towards 1.0912. At this point, only back above the 100-Day SMA will delay the outlook and give reason for pause.

Screen Shot 2016-08-14 at 8.42.38 AM

  • R2 1.1234 – 2Aug high – Strong
  • R1 1.1200 – Figure – Medium
  • S1 1.1112 – 10Aug low – Medium
  • S2 1.1046 – 5Aug low – Strong

EURUSD – fundamental overview

The Euro did its best to take advantage of Friday’s very soft run of US data, with the single currency rallying up after retail sales, producer prices and Michigan confidence all came in below forecast. But as quickly as the market rallied, it faded back into the close, presumably on the broader risk off implication from the US data and worry over the ripple effect into the global economy. The 100-Day moving average has also been a formidable sell zone and a fresh batch of offers emerged on Friday into the longer-term indicator. Looking ahead, Monday’s calendar is exceptionally thin, with only US NAHB housing standing out. Instead, broader sentiment flow is likely to dictate trade.

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. Once taken out, this will expose a fresh drop towards next major psychological barriers at 1.2500. At this point, only back above 1.3372 will take the immediate pressure off the downside.

Screen Shot 2016-08-14 at 8.42.58 AM

  • R2 1.3094 – 10Aug high – Strong
  • R1 1.3035 – 12Aug high – Medium
  • S1 1.2900 – 15Aug low – Medium
  • S2 1.2798 – +30-Year low – Strong

GBPUSD – fundamental overview

The Pound is coming off another run of softer UK data, with the currency continuing to underperform post June referendum. Last week, the UK currency was the only developed currency to trade lower against the Buck, with even Friday’s weaker round of US data failing to offer any relief to the Pound. Looking ahead, we get a healthy batch of UK data this week, featuring CPI, retail sales and employment. The market will also start to get a flavour for how the data looks in a post Brexit vote world which could weigh even more heavily. Clearly there is a lot of talk about stops built up below 1.2800 and if this recent +30-year low level goes, we could see a further acceleration in the Cable rate towards 1.2500. But for Monday, the calendar is very light with only US NAHB housing due.

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.

Screen Shot 2016-08-14 at 8.43.22 AM

  • R2 102.66 – 8Aug high – Strong
  • R1 102.27 – 12Aug high – Medium
  • S1 100.83 – 12Aug low – Medium
  • S2 100.68 – 2Aug low – Strong

USDJPY – fundamental overview

The Yen is coming off a Friday session which saw the currency well ind demand on the back of the combination of a batch of softer US economic data and mild risk off trade. Early Monday, the market has taken in a weaker than expected Japanese GDP print, with the data showing no growth for the quarter and ramping up speculation the BOJ will need to do more. This has opened renewed Yen selling, though overall, the flow of trade continues to favour USDJPY lower. Looking ahead, US NAHB housing is the only notable release for the remainder of the day.

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.

Screen Shot 2016-08-14 at 8.43.34 AM

  • 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 to elevate the cross, but at the same time, any upside moves haven’t been sustainable with the cross rate continuing to get sold aggressively into rallies. 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. US stocks have been supporting EURCHF but are also looking extended which could invite Franc demand if the market starts to roll over from record highs in the sessions ahead.

AUDUSD – technical overview

The market has struggled on rallies above 0.7700 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. Friday’s bearish close strengthens this outlook and should accelerate declines towards 0.7500. Ultimately, only back above 0.7758 will negate the newly adopted bearish outlook and invite a retest of the 2016 highs.

Screen Shot 2016-08-14 at 8.45.04 AM

  • R2 0.7758 – 11Aug high – Strong
  • R1 0.7700 – Figure – Medium
  • S1 0.7598 – 8Aug low – Strong
  • S2 0.7569 –3Aug low – Medium

AUDUSD – fundamental overview

The Australian Dollar enters the new week under pressure following an impressive run that ended mid last week. Initial selling came in the aftermath of the RBNZ rate cut decision, with Aussie riding the up and down wave of that event risk. Then on Friday, Aussie extended declines, this time despite softer US data in the form of retail sales and producer prices. It seems the risk off implications from the data was what had more of an impact on the risk correlated currency. Looking ahead, the calendar is exceptionally light with only US NAHB housing data due.

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. As such look for this latest round of setbacks to be very well supported ahead of 1.2800.

Screen Shot 2016-08-14 at 8.45.51 AM

  • R2 1.3254 – 27Jul high – Strong
  • R1 1.3080 – 11Aug high – Medium
  • S1 1.2925 – 12Aug low – Strong
  • S2 1.2862 – 15Jul low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been enjoying a nice run of gains over the past week or so. A healthy recovery in the price of OIL has been attributed to much of the Loonie inflow, while Friday’s softer US data in the form of retail sales and producer prices has only added to the Canadian Dollar bid tone. Looking ahead, the direction in OIL will continue to play a major role, though there is some data out on Monday with Canada existing home sales and US NAHB housing due.

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 surge to once again fizzle out, in favour of a resumption of declines. Key support now comes in at 0.6952, but a break below 0.7087 will get things going to the downside.

Screen Shot 2016-08-14 at 8.46.19 AM

  • R2 0.7341 – 11Aug/2016 high – Strong
  • R1 0.7265 – 10Aug high  – Medium
  • S1 0.7159 – 10Aug low – Medium
  • S2 0.7087 – 8Aug low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar tried its best to recovery in Friday trade on the back of soft US data, but any rallies were very well capped, with the currency ultimately closing lower on the day. US retail sales and producer prices were soft, but it seems the risk off implications from the data were more influential than any Dollar negative reaction to softer US data. Meanwhile, Kiwi is already feeling pressure from this past week’s RBNZ rate cut and signal for additional cuts over the coming months. Remember, the RBNZ is also not comfortable with the Kiwi rate at current elevated levels. Looking ahead, the only notable calendar release on the day is US NAHB housing.

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 2147 to take the immediate pressure off the topside.

Screen Shot 2016-08-14 at 8.46.43 AM

  • R2 2200.00 – Psychological – Strong
  • R1 2189.00 – 11Aug/Record – Medium
  • S1 2147.00 –2Aug low – Medium
  • S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

Interestingly, US equities were unable to extend their run to another fresh record high on Friday, despite the discouraging batch of US data suggesting the Fed would be in no rush to make any moves on rates. While stocks didn’t pull back all that much, the fact that the market couldn’t rally on the softer US data could be a warning sign that we are getting close to the end of the line with soft US data and a lower for longer Fed having any real uplifting influence on risk assets. Plenty of talk over the limitations of monetary policy around the globe and if investors are no longer excited about lower for longer, any bad data could actually start translating once again into a more intuitive risk off reaction.

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.

Screen Shot 2016-08-14 at 8.47.12 AM

  • 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 recently 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, setbacks should be limited with only a break back below 2.8390 to take immediate pressure off the topside.

Screen Shot 2016-08-14 at 8.47.25 AM

  • R2 3.0970 – 20Jul/Record – Strong
  • R1 3.0270 – 4Aug high – Medium
  • S1 2.9450 –50-Day SMA – Medium
  • S2 2.9260 – 18Jul low – Strong

Feature – fundamental overview

A soft run of US data on Friday and despite any lower for longer Fed implications, risk markets took the data for what it was and came under pressure across the board. The deterioration in sentiment was by no means intense, but enough to knock emerging market FX and weigh on the Lira a bit. US retail sales, producer prices and Michigan confidence were all soft. Looking ahead, the market will keep on eye on broader risk sentiment, while also focusing on a dovish CBRT battling rising inflation, not a pretty combination for any bullish Lira prospects. Plenty of Lira offers are reported out there and the market is expected to come back under pressure. 

Peformance chart: Five day performance v. US dollar

Screen Shot 2016-08-14 at 8.40.49 AM

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