Hating on the US Dollar

Next 24 hours: A Shred of Dignity

Today’s report: Hating on the US Dollar

At every turn this year, there has been another round of US Dollar offers waiting in the wings. The Buck bashing has now ascended to new heights in the aftermath of the Fed decision, with many currencies trading through critical levels and to +2 year highs.

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Chart talk: Major markets technical overview video

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has finally traded up through a critical range high that had capped gains since 2015. The breakout now suggests a longer term base is in place ahead of a more significant recovery over the coming weeks and months. Still, daily studies are extended on a shorter-term basis and risk is building for a bearish reversal. Support comes in at 1.1613 and a break below this level would be required to inspire a correction.

  • R2 1.1800– Figure – Medium
  • R1 1.1748 – 27Jul/2017 high – Medium
  • S1 1.1613 – 26Jul low – Strong
  • S2 1.1480 – 20Jul low – Strong

EURUSD – fundamental overview

There weren’t really any surprises in the Fed decision, though that was enough to keep the market feeling good about a more dovish take on the Fed’s normalization path. The expectation into the decision was that the Fed would acknowledge softer inflation, while flagging an announcement on the horizon with respect to balance sheet reduction. That’s exactly how it played out and even with all of this being priced, the Euro couldn’t resist trading up to a 2.5 year high, easily through the previous peak from 2015. Looking ahead, the market will continue to digest whatever it can from the Fed decision, while on the data front, key standouts come in the form of German Gfk consumer confidence, US initial jobless claims and US durable goods.

GBPUSD – technical overview

Although the rate has managed to extend to a fresh 2017 high, the market continues to struggle to sustain gains. On a medium to longer-term basis, the breakout in April through 1.2775 does suggest the major pair has put in a meaningful base off the October 2016 +30 year low at 1.1840. But on a short-term basis, there is risk for a period of consolidation before that next big push and bullish continuation towards a measured move extension objective at 1.3500. Setbacks are now expected to be well supported in the 1.2700s, with only a break back below 1.2590 to compromise the constructive outlook.

  • R2 1.3200 – Figure – Medium
  • R1 1.3150 – 27Jul/2017 high – Medium
  • S1 1.3000 – Psychological – Medium
  • S2 1.2933 – 20Jul low – Strong

GBPUSD – fundamental overview

Wednesday’s UK GDP data proved to be a non-event, with the Pound taking in an as expected result. This left the UK currency trading on Fed risk and this was enough to push the Cable rate back up to 2017 highs. There weren’t any surprises from the Fed decision, but the market has been looking to sell the US Dollar at every turn in 2017 and there appeared to be enough for USD bears to grab a hold of to justify the post Fed run up. Looking ahead, we get UK CBI distributive trades, US initial jobless claims and US durable goods as the main standouts.

USDJPY – technical overview

The market remains confined to a multi-day range. The latest topside failure above 114.00 strengthens this outlook, leaving the door open for a drop back towards range support in the 108.00s, also coinciding with the 2017 low from April. Ultimately, it would take a clear break through 115.50 to negate this outlook and shift the focus back on the topside.

  • R2 112.42 – 20Jul high – Strong
  • R1 112.20 – 26Jul high – Medium
  • S1 110.83 – 25Jul low – Medium
  • S2 110.62 – 24Jul lowl  – Strong

USDJPY – fundamental overview

No matter how much it looks like this major pair wants to break down, there appears to be an eternally persistent bid on dips. The Yen has been well bid for many sessions, but bargain buyers have crept in this week on dips into the 110.00s. While the US Dollar has been hurting of late on a dovish leaning Fed policy normalisation, the BOJ is nowhere even close to considering a reversal of its own policy, which still keeps those yield differentials attractive on the US Dollar side. Meanwhile, record high equities have offered another layer of support for USDJPY. Looking ahead, the market will continue to digest the Fed decision while taking in US initial jobless claims and US durable goods.

EURCHF – technical overview

The market has pushed up to a fresh 2017 high through a critical psychological barrier at 1.1000, opening the door for an extension to retest the major 2016 peak at 1.1200. Only a break back below 1.0980 would take the pressure off the topside.


  • R2 1.1200 – 2016 high – Very Strong
  • R1 1.1176 – 26Jul/2017 high – Medium
  • S1 1.1080 – 26Jul low – Medium
  • S2 1.0980 – 10Jul low – Strong

EURCHF – fundamental overview

Elevated risk sentiment has been a big friend to an SNB committed to doing what it can to discourage appreciation in the Franc. This, along with solid Eurozone data, hawkish ECB expectations and ongoing SNB activity have helped to push the exchange rate comfortably back towards the 1.1200 peak from 2016, the highest level for this market since the January 2015 crisis. SNB Jordan was out adding to the bid tone on Wednesday, reaffirming the central bank’s view of a Franc that was overvalued. However, the SNB could have a much tougher battle on its hands in the days ahead if it wishes to keep the Franc from appreciating. Any capitulation in US equities is likely to rattle global sentiment and invite an intense wave of unwanted Swiss Franc demand on the safe haven flow.

AUDUSD – technical overview

The latest surge through major resistance in the 0.7800 area suggests the market could be in the process of carving out a meaningful longer-term base. The next major resistance level comes in at 0.8163, the high from May 2015. A clear break above would confirm the bullish structural shift. However, shorter-term technicals are extended and risk is building for a healthy bearish reversal in the sessions ahead. A daily close below 0.7876 would set up this anticipated pullback.

  • R2 0.8163 – May 2015 high – Very Strong
  • R1 0.8048 – 26Jul/2017 high – Strong
  • S1 0.7876 – 21Jul low – Medium
  • S2 0.7787 – 18Jul high – Medium

AUDUSD – fundamental overview

Quite a turn of events for the Australian Dollar over the past several hours. Early Wednesday, it looked like the Australian Dollar was about to fall off on the back of softer Aussie inflation data and another wave of Aussie bearish comments, this time from RBA Governor Lowe. Remember, last Friday Deputy Governor Debelle talked the currency down. But none of this was enough to prevent the currency from racing up to +2 year highs in the Fed aftermath. While we really didn’t get anything new from the Fed and everything the central bank laid out in the policy statement was anticipated, market participants were quick to launch a fresh attack on the Buck, soaking in whatever dovishness they could from the Fed message. Early Thursday, China industrial profits have come in better than expected, fueling more Aussie upside. Looking ahead, the market will continue to digest the Fed decision while also taking in a US economic calendar that features initial jobless claims and durable goods.

USDCAD – technical overview

There has been a clear shift in the outlook for this market over the past several days, with declines holding below 1.3000 and the market collapsing to a fresh 2017 low through the 2016 base at 1.2461. However, technical studies are tracking in deep oversold territory, warning of the possibility for an imminent bullish reversal to allow for these studies to unwind. Look for a daily close back above 1.2700 to take the pressure off the downside and trigger such a reversal.

  • R2 1.2609 – 21Jul high – Strong
  • R1 1.2553 – 24Jul high – Medium
  • S1 1.2414 – 26Jul/2017 low – Medium
  • S2 1.2400 – Figure–  Strong

USDCAD – fundamental overview

The Canadian Dollar has extended its impressive run in 2017, with the currency up 10% since trading at 2017 lows in early May and at a +2 year high. The Bank of Canada’s hawkish policy shift that resulted in its first rate hike in seven years comes at a time when the Fed has seemingly shifted to a less hawkish normalisation path, US economic data is struggling and the US administration continues to battle intense headwinds. This week’s rally in the price of OIL and an upbeat Fitch outlook on Canada have only added to the Loonie demand. Looking ahead, absence of Canada data will leave the market digesting Wednesday’s Fed decision, watching OIL and taking in US economic data that features initial jobless claims and durable goods.

NZDUSD – technical overview

The market has extended through a major barrier at 0.7500 with the breakout opening the door for a bullish continuation towards next key resistance going back to April of 2014 at 0.7740. Daily studies are however overbought, suggesting we could initially see a period of healthy corrective declines before the market considers a resumption of the strong uptrend. A break back below 0.7400 would be required to take the immediate pressure off the topside.

  • R2 0.7600 – Figure – Strong
  • R1 0.7546 – 26Jul/2017 high – Medium
  • S1 0.7459 – 21Jul high – Medium
  • S2 0.7401 – 25Jul low– Strong

NZDUSD – fundamental overview

Earlier this week, RBNZ McDermott was out welcoming a lower Kiwi rate to help rebalancing, though the comments have fallen on deaf ears. The US Dollar slide has been too much of an event to ignore. There weren’t any surprises from Wednesday’s Fed decision, but this was enough to reinforce the markets dovish take on Fed policy. Kiwi tripped stops above 0.7500 in the aftermath and has pushed up to a +2 year high. Looking ahead, the market will continue to digest the Fed decision while also taking a US economic calendar that features initial jobless claims and durable goods.

US SPX 500 – technical overview

The market has extended its record run, trading into a key measured move objective at 2480. Though this trend is quite stretched, setbacks continue to be well supported on the smallest of dips and only a daily close back below 2400 would suggest the market is contemplating a possible reversal.

  • R2 2500.00 – Psychological – Strong
  • R1 2482.00 – 26Jul/Record high – Medium
  • S1 2464.00 – 21Jul low – Medium
  • S2 2403.00 – 31May low – Strong

US SPX 500 – fundamental overview

The US equity market has done a good job proving it can hold up into any dip and can keep pushing to record highs as it focuses on rates staying lower for longer and the Fed continuing to underdeliver on forward guidance. While there wasn’t much in the way of any surprise from Wednesday’s FOMC decision, it was enough of a confirmation of the Fed Chair’s less hawkish testimony earlier this month to justify investor expectations. Rates may not be going lower in the US, but it seems a dovish policy normalisation is the next best thing and enough to keep the artificially supported rally going.

GOLD (SPOT) – technical overview

Setbacks have been well supported ahead of 1200, with the latest push back above 1230 setting the stage for a bullish resumption towards 1300. Only below 1200 would compromise the constructive outlook.

  • R2 1281.20 – 14Jun high – Strong
  • R1 1266.75 – 15Jun high – Medium
  • S1 1232.85 – 18Jul low – Medium
  • S2 1204.90 – 10Jul low  – Strong

GOLD (SPOT) – fundamental overview

Solid demand from medium and longer-term players continues to emerge on dips, with these players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity supported around 1200, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax. Certainly the US Dollar under pressure in 2017 is adding to the metal’s bid tone as well, but there is a growing sense that even in a scenario where the US Dollar is bid, GOLD will hold up on risk off macro implications.

Feature – technical overview

USDZAR is showing signs of the formation of a meaningful base since bottoming out around 12.30 earlier this year. A recent push back above 13.00 strengthens this outlook and sets the stage for a continuation of gains towards next key resistance at 13.71 further up. Any setbacks should ideally be well supported ahead of 12.55, with only a break back below this level to negate the constructive outlook.

  • R2 13.63 – 11Jul high – Strong
  • R1 13.28 – 13Jul high – Medium
  • S1 12.80 – 27Jun low – Medium
  • S2 12.55 – 14Jun low – Strong

Feature – fundamental overview

The Rand has held up exceptionally well despite last week’s surprise SARB move to cut rates for the first time in 5 years. The deteriorating growth outlook had the central bank wanting to lean in this direction and an improving inflation expectation allowed the central bank to make the move. And yet, with broad US Dollar selling continuing to be a major theme and with US equities sitting at record highs, the Rand has been able to hang on, even with the lower rates. But overall, there is risk for renewed Rand downside when considering South Africa political instability including a never ending string of Zuma corruption charges, recessionary forces, yield differentials shifting in favor of the major central banks and the looming prospect for a material reversal in elevated global equities. Looking ahead, the key risk for Wednesday will come from the Fed decision.

Peformance chart: Five day performance v. US dollar

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