Navigating Rough Waters

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 1.3533 will take the immediate pressure off the downside and force a shift in the structure.

• R2 1.3445 – 6Sep high – Strong
• R1 1.3376 – 8Sep high – Medium
• S1 1.3253 – 2Sep low – Medium
• S2 1.3200 – Figure – Medium

GBPUSD – fundamental overview

Lack of economic data out of the UK on Thursday left the market focused on external risk, with the ECB decision standing out. In the end, the ECB left policy on hold as was widely expected, with the event falling flat. Instead the Pound was more focused on the broader recovery in the US Dollar, with another positive US initial jobless claims reading helping to fuel Dollar gains. There has also been a lot of talk about larger account building into existing GBP shorts following a decent correction, with these players still betting on deeper setbacks from the Brexit overhang. Looking ahead, UK trade, UK construction output and US wholesale sales are the only notable standouts for the remainder of the day. On the official circuit, we get speeches from Fed Rosengren and Kaplan.

USDJPY – technical overview

Although we’ve seen an impressive bounce in recent trade, overall, the pressure remains on the downside with a lower top sought out ahead of 107.49 in favour 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 105.00 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 104.32 – 2Sep high – Strong
• R1 102.80 – 2Sep low – Medium
• S1 101.20 – 7Sep low – Medium
• S2 100.93 – 22Aug high – Strong

USDJPY – fundamental overview

Plenty of chop for the Yen over the past several days. The market had been well offered in the early week on less dovish official speak out of Japan and a round of soft US data. However, the market has since found support after Thursday’s US initial jobless claims were able to produce yet another print below 260k. This has encouraged yield differentials back in the US Dollar’s favour and in turn opened a recovery in USDJPY. Still, market participants will need to be keeping an eye on broader risk appetite with any signs of weakness in the equity market to likely once again weigh on USDJPY. Looking at the calendar, speeches from Fed Rosengren and Kaplan are the major highlights 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 1.1001 – 1Sep high – Medium
• S1 1.0870 – 24Aug low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

While the Euro wasn’t able to gain any momentum against the Buck on Thursday, it certainly did a good job against the Swiss Franc, much to the delight of the SNB. It seems Draghi’s less dovish speak and ruling out of the need for additional stimulus was enough to inspire a nice amount of upside in the EURCHF cross rate. Overall, SNB smoothing activity to prop the EURCHF rate has also 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 towards 1.1000. This is a market going nowhere right now and it seems 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. Swiss unemployment data on tap.

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 daily close back below 0.7600 to strengthen this outlook and accelerate declines towards 0.7400 in the sessions ahead. Ultimately, only back above 0.7758 will negate the bearish outlook and invite a retest of the 2016 highs.

• R2 0.7758 – 11Aug high – Strong
• R1 0.7733 – 8Sep high – Medium
• S1 0.7616 –2Sep high – Medium
• S2 0.7563 –5Sep low – Strong

AUDUSD – fundamental overview

The Australian Dollar got an initial boost in Thursday trade after outgoing RBA Stevens said he was comfortable with current Aussie levels. But in the end, a broad based resurgence in demand for the US Dollar proved too much to ignore and Aussie succumbed to the pressure, with another solid US initial jobless claims print contributing helping to fuel the Aussie decline. No Aussie reaction to mixed China inflation data and looking ahead, the market will be interested to hear what Fed Rosengren and Kaplan have to say as the week comes to a close.

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 1.2996 – 5Sep high – Strong
• R1 1.2936 – 8Sep high – Medium
• S1 1.2823 – 7Sep low – Medium
• S2 1.2764 – 18Aug low– Strong

USDCAD – fundamental overview

Not even OIL could help the Canadian Dollar on Thursday, with the Loonie succumbing to broad based demand for the US Dollar, largely driven off another well received US initial jobless claims print. Plenty more volatility is expected today with the marquee event of the day coming in the form of Canada employment. Market participants will also need to keep their eyes on the price of OIL, second tier US data and some Fed speeches from Rosengren and Kaplan.

NZDUSD – technical overview

The market has broken out to a fresh 2016 high beyond 0.7400, with the rally stalling just shy of psychological barriers at 0.7500. However, daily studies have pushed into overbought territory and as such, there is risk for a topside failure in the sessions ahead. Ultimately, a break back below 0.7200 would be required to confirm this bearish outlook and take the immediate pressure off the topside.

• R2 0.7500 – Psychological – Strong
• R1 0.7486 – 7Sep/2016 high  – Medium
• S1 0.7350 – Mid-Figure – Medium
• S2 0.7299 – 6Sep low – Strong

NZDUSD – fundamental overview

It didn’t take long for the New Zealand Dollar to correct itself after we had pointed out in Thursday’s analysis that the currency was looking exceptionally overdone as reflected in the Daily Sentiment Index. And so, with the US Dollar gaining across the board momentum on a better initial jobless claims print, Kiwi finally succumbed to the pressure in a big way, dropping the most of any of the developed currencies. Looking ahead, second tier US wholesale sales and some Fed speak from Rosengren and Kaplan are the main highlights to close out the week.

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

While US equities have come off a bit on a run of hawkish Fed speak in recent days, this is getting offset by a softer run of US data pushing back the Fed rate hike timeline. But overall, there is a sense that even if the Fed ends up doing nothing in 2016, 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. Additionally, if upcoming US retail sales and CPI are above forecast, this could make a September hike a more legitimate reality and ultimately open the door for more intensified downside pressure in overinflated stocks. For now, the market’s focus will be on today’s Fed speeches from Rosengren and Kaplan.

GOLD (SPOT) – technical overview

The structure remains highly constructive with dips continuing to be very well supported. A recent round of setbacks were propped ahead of the 100-Day SMA and it looks like a fresh higher low could be in place around 1300 in favour of the next major upside extension beyond the current 2016 peak at 1375 and towards 1450-1500 further up.

• R2 1358.10 – 16Aug high – Strong
• R1 1352.70 – 6Sep high – Medium
• S1 1324.90 – 6Sep low – Medium
• S2 1302.50 – 1Sep 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 14.7540 – 1Sep high – Strong
• R1 14.4080 – 6Sep high – Medium
• S1 13.8330 – 8Sep low – Medium
• S2 13.2000 – 10Aug/2016 low – Strong

Feature – fundamental overview

A quadruple blow for the Rand on Thursday, with the currency hit on softer South African mining production, disappointing South African manufacturing production, better US initial jobless claims and a downturn in risk assets. The Rand had recently mounted an impressive recovery, though most of the demand had come from broad based US Dollar declines and scaled back Fed bets than anything else. Looking ahead, the Fed timeline will be back in focus on Friday with Fed Rosengren and Kaplan on the wires. The Rand could be in big trouble if the Fed considers a hike in September and US equities start to falter.