A Legitimate Run for the US Dollar?

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 1.3279 – 26Aug high – Strong
• R1 1.3139 – 29Aug high – Medium
• S1 1.3060 – 29Aug low – Medium
• S2 1.3023 – 19Aug low – Strong

GBPUSD – fundamental overview

The Pound is back under pressure over the past few sessions, with last week’s more hawkish Fed sentiment followed up this week with a downbeat UK CBI report showing optimism about the business situation from UK consumer services tumbling to -37 in August versus +9 in May before the EU referendum. Looking ahead, it’s UK mortgage approvals, consumer credit and US consumer confidence that will get attention on Tuesday.

USDJPY – technical overview

Although we’ve seen an impressive bounce in recent trade, overall, the pressure remains on the downside with a lower top potentially in place at 102.65 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 102.65 – 8Aug high – Strong
• R1 102.39 – 29Aug high – Medium
• S1 101.00 – Figure – Medium
• S2 100.06 – 25Aug low – Strong

USDJPY – fundamental overview

The Yen has been under pressure in recent days and is finding more offers into Tuesday after Japanese PM advisor Hamada called for the MOF to ‘courageously’ intervene to offset Yen appreciation. Hamada was critical of the MOF, saying it had lost credibility after previous intervention threats lacked follow through. Hamada also offered an alternative strategy of buying securities. Overall, USDJPY has been caught between flows supporting the US Dollar on Fed rate hike prospects and a more dovish BOJ, and those flows supporting the Yen, namely broader risk off trade. Looking ahead, US consumer confidence is the only notable standout on the calendar 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.

• R2 1.1014 – 24Jun high – Strong
• R1 1.0960 – 26Aug high – Medium
• S1 1.0870 – 24Aug 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. The recent break back below 0.7637 strengthens this outlook and should accelerate declines towards 0.7400 in the sessions ahead. Ultimately, only back above 0.7758 will negate the newly adopted bearish outlook and invite a retest of the 2016 highs.

• R2 0.7693 – 26Aug high – Strong
• R1 0.7600 – Figure – Medium
• S1 0.7525 – 29Aug low – Medium
• S2 0.7421 –27Jul low – Strong

AUDUSD – fundamental overview

The Australian Dollar will be looking to build on Monday’s mild recovery, with the currency benefitting in the early week from a rebound in US equities and the early Tuesday release of a very solid Aussie building approvals showing. But overall, with the US Dollar more in demand following last week’s uptick in hawkish Fed sentiment, it’s unlikely Aussie is able to extend gains much further against the Buck before finding a fresh batch of offers. Looking ahead, US consumer confidence is the main standout for the remainder of the day.

USDCAD – technical overview

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 1.3201 – 5Aug high – Strong
• R1 1.3048 – 29Aug high – Medium
• S1 1.2900 – Figure – Medium
• S2 1.2831 – 26Aug low – Strong

USDCAD – fundamental overview

The market’s lack of confidence in the ability for oil producers to agree on a production freeze has been weighing on the commodity and by extension the Canadian Dollar. Despite gains in Aussie and Kiwi on Monday, the Loonie was lower on the day as it dealt with these OIL outflows. Overall, it’s been the uptick in hawkish Fed sentiment and more dovish expectations from the Bank of Canada that have been fueling renewed downside pressure in the the Loonie. Looking ahead, it’s the Canada current account and US consumer confidence that stand out.

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 0.7199 will get things going to the downside.

• R2 0.7381 – 26Aug/2016 high – Strong
• R1 0.7300 – Figure  – Medium
• S1 0.7199 – 16Aug low – Medium
• S2 0.7087 – 8Aug low – Strong

NZDUSD – fundamental overview

RBNZ Assistant Governor McDermott was singing a bit of a different tune to the one heard from Governor Wheeler in the previous week. McDermott was decidedly more accepting of the possibility of lower rates in New Zealand, commenting that monetary policy is still effective and the RBNZ will do what is necessary to inflate the economy. These comment in conjunction with a disappointing New Zealand building permits print early Tuesday have been inviting renewed Kiwi offers after the currency enjoyed a bit of a recovery in Monday trade. Looking ahead, US consumer confidence is the main standout on today’s calendar.

US SPX 500 – technical overview

Signs of a potential top after the market put in a bearish reversal week off fresh record highs. But a break and daily close below critical support at 2147 will be required to strengthen this outlook and accelerate declines. Inability to establish below 2147 will leave the market consolidating and focused on a push to fresh record highs through 2200.

• 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

US equities have come under pressure off record highs following this latest wave of hawkish commentary signaling the possibility for a rate hike as soon as September. But overall, there is a sense that even if the Fed ends up doing nothing in 2016 and holds off, with monetary policy already exhausted and the limitations of policy being reached, there is still the risk for a more intense period of weakness off the recently established record highs. Looking ahead, US consumer confidence is the only notable standout on today’s economic calendar.

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 1315.00 – 29Aug 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

USDZAR has come under a good deal of pressure in recent months, trading down to a fresh 2016 low around 13.2000. However, it now appears as though the market is finally ready to turn back up in favour of a resumption of the broader uptrend. In the interim, look for any setbacks to be well supported ahead of 13.2000, with fresh upside seen towards 15.0000 in the sessions ahead. Only back below 13.2000 gives reason for pause.

• R2 15.0000 – Psychological – Strong
• R1 14.6000 – 15Jul high – Medium
• S1 13.8850 – 24Aug low – Medium
• S2 13.2000 – 10Aug/2016 low – Strong

Feature – fundamental overview

Worry over fiscal policy and elevated political risk premiums in South Africa have been a major drag on the Rand. This has put SAGBs under pressure, with the yield on the 2026 paper pushing above 9.00%. Meanwhile, SARB rate hike odds have now jumped to 40bps from just 5bps a week ago. On the other side, the US Dollar has been bid up following this latest wave of hawkish Fed sentiment and all of this suggests we could soon see a fresh wave of downside pressure on the emerging market currency.