USD Off, Risk Off, UK Jobs and Fed Minutes Ahead

GBPUSD – technical overview

The market remains confined to an intense downtrend and is in the process of consolidating just off the recent +30-year low from July. Any rallies are classified as corrective ahead of what should be the next major break below 1.2800 and towards 1.2500. Only back above 1.3372 will take the immediate pressure off the downside and force a shift in the structure.

• R2 1.3175 – 5Aug high – Strong
• R1 1.3094 – 10Aug high – Medium
• S1 1.3000 – Figure – Medium
• S2 1.2867 – 16Aug low – Strong

GBPUSD – fundamental overview

A most impressive and overdue performance for the Pound on Tuesday with the UK currency initially benefitting from an uptick in UK inflation and then getting an added jolt on a massive round of US Dollar selling from ongoing weakness in US data and the implication this will keep the Fed from moving on rates anytime soon. However, hawkish comments from Fed’s Dudley and Lockhart did manage to temper gains a bit, with these officials not ready to rule out a September rate hike just yet. Looking ahead, all eyes on a very important round of UK employment data. This is then followed up by the late Wednesday release of the anticipated Fed Minutes.

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 102.65 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 101.45 – 15Aug high – Strong
• R1 101.00 – Figure – Medium
• S1 99.54 – 16Aug low – Medium
• S2 98.99 – 24Jun/2016 low – Strong

USDJPY – fundamental overview

The Yen has been in rally mode these past few sessions, with the currency benefitting from the combination of broad based US Dollar weakness on soft US data and the onset of risk liquidation flow. While hawkish comments from Fed’s Lockhart and Dudley, not willing to rule out a September hike may have been US Dollar supportive on yield differentials, the fact that the comments triggered a round of selling in equities was the more influential driver and in the end, it was risk off that took precedence over yield, with USDJPY trading back below 100.00. It’s worth noting USDJPY bids off the lows on verbal intervention from Vice Minister of Finance Asakawa. Looking ahead, all eyes on the Fed Minutes.

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 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. Look for a break back below 0.7637 to strengthen this outlook 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.

• R2 0.7758 – 11Aug high – Strong
• R1 0.7725 – 12Aug high – Medium
• S1 0.7637 – 15Aug low – Strong
• S2 0.7569 –3Aug low – Medium

AUDUSD – fundamental overview

The Australian Dollar has been bid up in recent days, though the gains have been less impressive than other currency’s performance against the Buck over this period. It seems much of this can be attributed to cross related interest in these other currencies which is weighing on Aussie a bit. On Tuesday and Wednesday we saw strong GDT auction results and Kiwi employment which have been fueling AUDNZD selling and in turn weighing on AUDUSD into rallies. Nevertheless, AUDUSD is still well supported and within striking distance of the 2016 high from April. Looking ahead, the Fed Minutes is the major event standing out for the remainder of the day.

USDCAD – technical overview

Despite the latest round of setbacks, this market looks to be in the process of carving out a longer-term base off the 1.2461 2016 low. Look for any additional weakness to be supported ahead of 1.2655 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2655 would delay the constructive outlook.

• R2 1.2976 – 15Aug high – Strong
• R1 1.2934 – 16Aug high – Medium
• S1 1.2799 – 16Aug low – Strong
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

When you combine broad based US Dollar selling with a very healthy rally in the price of OIL, you are going to get a very strong Canadian Dollar. In fact, the Canadian Dollar has emerged as one of the strongest currencies over the past week, benefitting from this positive flow. However, the market will need to be careful heading into the Fed Minutes later today, with any signs of a less dovish central bank, more inclined to move on rates sooner than later, to likely inspire a major round of profit taking on Canadian Dollar longs.

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 0.7087, but a break below 0.7165 will get things going to the downside.

• R2 0.7341 – 11Aug/2016 high – Strong
• R1 0.7304 – 16Aug high  – Medium
• S1 0.7165 – 15Aug low – Medium
• S2 0.7087 – 8Aug low – Strong

NZDUSD – fundamental overview

The RBNZ is going to have a tough time talking down the New Zealand Dollar if we get a run of data like we’ve been getting these past couple of sessions. First it was Tuesday’s release of the very healthy GDT auction results that helped to drive Kiwi, and then, this was followed up by a super strong New Zealand employment report, coming in well above forecast. Broad based US Dollar weakness has already been propping the currency and this leaves scope for a run to fresh 2016 highs should the US Dollar selling persist. Looking ahead, the Fed Minutes is the major standout on Wednesday’s calendar.

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 through 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 2147 in the sessions ahead will strengthen this outlook and invite renewed downside pressure.

• R2 2200.00 – Psychological – Strong
• R1 2194.00 – 15Aug/Record – Medium
• S1 2147.00 –2Aug low – Medium
• S2 2136.00 – 12Jul low– Strong

US SPX 500 – fundamental overview

While Tuesday’s softer US inflation data may have been a source for a jump in demand on lower for longer Fed implications, this wasn’t the case, with Fed comments taking centre stage and having a more significant influence on investor appetite. Comments from Fed’s Dudley and Lockhart, both not willing to rule out a September rate hike were enough to shake confidence in record highs stocks and inspire a round of profit taking. Looking ahead, all eyes will be on Wednesday’s Fed Minutes release for any additional insights into monetary policy direction.

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 1450. Any setbacks should be very well supported ahead of 1300, with only a break below this level to compromise the outlook.

• R2 1375.20 – 6Jul/2016 high – Strong
• R1 1367.30 – 2Aug high – Medium
• S1 1329.90 – 8Aug low – Medium
• S2 1310.90 – 21Jul 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, current setbacks should be limited in favour of a higher low, with only a break back below 2.8395 to take immediate pressure off the topside.

• R2 3.0970 – 20Jul/Record – Strong
• R1 3.0270 – 4Aug high – Medium
• S1 2.9160 –16Aug low – Medium
• S2 2.8755 – 14Jul low – Strong

Feature – fundamental overview

The Lira has done a really good job recovering from record lows against the Buck, with the currency finding solid demand in recent sessions on the back of a run of softer US data and ongoing appetite for risk assets. Overall, these flows have been beneficial to the entire emerging market FX space, though going forward, the Lira will need to start looking inward again. Later this week, Moody’s is expected to deliver its rating assessment. There is concern the rating agency will follow in S&P’s footsteps and downgrade Turkey. While PM Simsek said such a downgrade would be unfair, he wouldn’t rule it out as a possibility.