Euro Bid But US Dollar in Control

GBPUSD – technical overview

The latest break below 1.2800 opens the door for the next major downside extension exposing fresh +30 year lows into the 1.2000 to 1.2500 area in the days and weeks ahead. At this point, any rallies are classified as corrective, with only a break back above 1.3533 to negate the downtrend and take the overall pressure off the downside.

• R2 1.3058 – 9Sep high – Strong
• R1 1.2860 – 4Oct high – Medium
• S1 1.2719 – 4Oct/+30 year low – Medium
• S2 1.2500 – Psychological – Strong

GBPUSD – fundamental overview

The Pound has extended declines to fresh 31-year lows this week as the market responds to comments from PM May that exit negotiations will be tough and the UK will be leaving the single market. Brexit overhang should continue to act as a weight on the UK currency going forward, while hawkish comments from Fed Lacker that rates in the US need to rise a lot have not done anything to help the beleaguered Pound. Looking ahead, we get UK services PMIs and a batch of US data including ADP employment, trade and ISM non-manufacturing.

USDJPY – technical overview

Overall, the pressure remains on the downside with a lower top sought out at 104.32 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 104.32 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.

• R2 103.36 – 14Sep high – Strong
• R1 102.97 – 4Oct high – Medium
• S1 102.00 – Figure – Medium
• S2 101.57 – 4Oct low – Strong

USDJPY – fundamental overview

Some interesting price action in the Yen over the past few sessions, with the currency getting hit rather hard despite a wave of risk off flow. It seems the Yen is now more focused on yield differentials with the US Dollar influenced by a fresh wave of hawkish Fed speak. Fed Lacker has certainly contributed to Yen weakness after saying that many hikes in the US were needed, while even the more dovish Fed Evans conceded he would be ok with a rate hike this year. Looking ahead, we get a batch of US data featuring ADP employment, trade and ISM non-manufacturing.

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 1.1000 – Psychological – Medium
• S1 1.0828 – 17Aug low – Medium
• S2 1.0778 – 16Jun low – Strong

EURCHF – fundamental overview

Overall, 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 towards 1.1000. Ultimately, 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 now looking extended which could invite additional Franc demand if the market continues 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 0.7421 to strengthen this outlook and accelerate declines towards 0.7000 in the days 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 0.7711 – 29Sep high – Medium
• S1 0.7590 –30Sep low – Medium
• S2 0.7531 – 20Sep low – Strong

AUDUSD – fundamental overview

Risk off flow, a dump in the price of GOLD and hawkish Fed speak have been weighing on the Australian Dollar, though the currency has managed to find some offsetting flow into Wednesday. Aussie retail sales have come in better than expected, while cross related Aussie demand against the New Zealand Dollar is also supportive after Tuesday’s GDT auction came in on the soft side. Looking ahead, we get a healthy batch of US data featuring ADP employment, trade and ISM non manufacturing.

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 through 1.3300 and towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2655 would delay the constructive outlook.

• R2 1.3281 – 27Sep high – Strong
• R1 1.3215 – 4Oct high – Medium
• S1 1.3110 – 4Oct low – Medium
• S2 1.3048 – 29Sep low– Strong

USDCAD – fundamental overview

Although OIL has been well bid in recent trade, any positives from this flow to the Canadian Dollar have been more than offset by a wave of hawkish Fed speak and IMF downgrades to Canada growth forecasts. Looking ahead, we get some Canada trade data along with a batch of US releases featuring ADP employment, trade and ISM non manufacturing.

NZDUSD – technical overview

Finally signs of a potential top after the market stalled out at 2016 highs ahead of major psychological barriers at 0.7500. Daily studies had already traded up into overbought territory warning of the reversal and this latest bearish reversal strengthens the toppish outlook. Look for a daily close back below 0.7200 to confirm the structural shift and accelerate declines.

• R2 0.7369 –22Sep high – Strong
• R1 0.7311 – 4Oct high  – Medium
• S1 0.7198 – 4Oct low – Medium
• S2 0.7165 – 15Aug low – Strong

NZDUSD – fundamental overview

Any hopes for an uptick in GDT auction results have been let down, with the previous two releases coming in well below market forecast. Tuesday’s negative print has opened a fresh wave of downside in the market, with the rate taking out stops below 0.7200. This has also fueled cross related Aussie demand as market participants rotate into long AUDNZD positions. Finally, a healthy dose of hawkish Fed speak on Tuesday has been adding to the downside pressure in Kiwi. Looking ahead, we get a healthy batch of US data featuring ADP employment, trade and ISM non manufacturing.

US SPX 500 – technical overview

Signs of a potential top after the market recently broke below critical support at 2147. This now opens the door for a meaningful period of weakness exposing a more pronounced decline towards the June base at 1990. Look for any rallies to now be well capped ahead of 2180, with only a daily close back above this level to compromise the newly adopted bearish outlook. Below 2108 accelerates.

• R2 2194.00 – 15Aug/Record high – Strong
• R1 2180.00 – 222Sep high – Medium
• S1 2108.00 – 12Sep low – Medium
• S2 2073.00 – 6Jul low– Strong

US SPX 500 – fundamental overview

It all feels like it’s starting to come to a head for the US equity market. In recent weeks, we have been hearing a lot about the limitations of monetary policy, while at the same time getting a healthy dose of hawkish Fed speak and even chatter of ECB plans to taper. The September low at 2108 will be the critical level to watch. If the market holds above this level, then it can be argued that accommodative policy gestures are still helping to artificially support the market. If however the market turns lower in the sessions ahead and breaks down below 2108, we could see a major intensification of declines as it becomes quite clear that monetary policy has in fact reached its limits, leaving investors to stand on their own two feet in the face of systemic risk. This is an unpleasant prospect in the face of a still recovering US economy and global economy dealing with systemic risk.

GOLD (SPOT) – technical overview

Despite the latest major setback, the overall structure remains highly constructive with the market in the process of carving out a longer-term base. Look for additional weakness to be very well supported above 1250, with only a close back below this level to negate the bullish outlook and give reason for delay.

• R2 1343.75 – 22Sep high – Strong
• R1 1309.30 – 100-Day SMA – Medium
• S1 1267.05 – 4Oct low – Medium
• S2 1256.50 – 200-Day SMA – Strong

GOLD (SPOT) – fundamental overview

Reports the ECB will start to wind down bond purchases had a major impact on the yellow metal, with the market exiting the risk hedge on the pricing out of uncertainty from expansive ECB policy. Broad based US Dollar demand on hawkish Fed speak was also attributed to some of GOLD’s sharp Tuesday decline. But 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, extended global equities and systemic risk. 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 could be 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 14.0680 – 30Sep high – Medium
• S1 13.3800 – 22Sep low – Medium
• S2 13.2000 – 10Aug/2016 low – Strong

Feature – fundamental overview

The SARB’s monetary policy review revealed the central bank’s reluctance to consider any rate cuts for the foreseeable future given elevated inflation forecasts. Structurally, this presents problems for a South African economy forced to try and battle through a period of slow growth with the strain of higher rates. Rating downgrades are also a worry for South Africa and should keep the currency well capped into any rallies. Finally, the emergence of systemic risk in the global economy and downside pressure in equities is not supportive of the Rand, while hawkish Fed speak has opened more downside pressure this week. Looking ahead, we get a healthy batch of US data featuring ADP employment, trade and ISM non manufacturing.