Will Yellen and Draghi Shake Things Up?

GBPUSD – technical overview

Setbacks off the 2017 high from early August up near 1.3300 have extended all the way back down into the 1.2700s. This is an important area the market had broken out from in April, as it had previously defined the top of a range off the October 2016 +30 year low. From here, look for the market to be well supported, with any additional weakness limited to the 1.2600s in favour of a push back up to fresh 2017 highs and towards the next key objective in the 1.3500-1.4000 area further up. Only a close below 1.2590 would give reason for pause.

• R2 1.2918 – 18Aug high – Strong
• R1 1.2837 – 24Aug high – Medium
• S1 1.2774 – 24Aug low – Medium
• S2 1.2706 – 26Jun low – Medium

GBPUSD – fundamental overview

Thursday’s UK GDP data came in mostly in line with expectation and the Pound reacted accordingly, not really moving all the much on the day. In fact, while the Pound has extended its decline this week off the 2017 high, the currency is down less than a half percent since the weekly open into Friday. Dealers are now talking about good technical demand in the 1.2700s from accounts looking to buy back in at a previous breakout point from earlier this year. Looking ahead, absence of UK data will leave the focus on US durable goods and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

USDJPY – technical overview

The market has done a fabulous job adhering to a range trade this year, with rallies well capped above 114.00 and dips supported down into the 108.00s. The latest round of setbacks have extended back towards the range low, with scope for a retest of the 2017 base from April, just ahead of 108.00. A sustained break below 108.00 would compromise this outlook and open the door for a more pronounced decline, while inability to establish below 108.00 will keep the range intact and set the stage for a bounce, eventually back towards 114.00. But while below 111.00, the pressure remains on the downside.

• R2 110.95 – 16Aug high – Strong
• R1 109.83 – 23Aug high – Medium
• S1 108.60 – 18Aug low – Medium
• S2 108.13 – 17Apr/2017 low  – Strong

USDJPY – fundamental overview

There has been quite a bit of back and forth going on with this major pair right now. Overall, the direction has been dictated by broader macro themes relating to risk sentiment and US Dollar appetite. We haven’t seen any movement on these fronts this week, and this has left the major pair trading less than 0.2% away from weekly opening levels into Friday. On Thursday, US data was offsetting,with initial jobless claims coming in stronger and existing home sales disappointing. Earlier today, slightly hotter than expected Japan CPI was released but didn’t factor into price action. Looking ahead, the focus will be on US durable goods and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

EURCHF – technical overview

The market recently pushed up to a fresh 2017 and multi-month high through massive resistance in the form of the 2016 peak at 1.1200, taking the rate above 1.1500 and to its highest level since the collapse of January 2015. However, daily studies are unwinding from extended readings, warning of an additional corrective reversal in the sessions ahead, possibly back into previous resistance turned support around 1.1200, before the market considers a higher low and resumption of gains through 1.1539 and towards 1.2000.

• R2 1.1480 – 15Aug high – Strong
• R1 1.1425 – 23Aug high – Medium
• S1 1.1260 – 18Aug low – Medium
• S2 1.1200 – Previous high – Strong

EURCHF – fundamental overview

The sell-off in the Franc in recent weeks has been a welcome development for the SNB, with the central bank committed to weakening its overvalued currency. In early August, the EURCHF rate traded to its highest level since the great collapse of January 2015. However, the SNB may have also been taking extra measures to weaken the Franc in anticipation of a tougher battle ahead. A more intensified capitulation in US equities is likely to rattle global sentiment and invite a wave of unwanted Swiss Franc demand on the safe haven flow. And so, building a cushion in anticipation of this risk may have been a part of the central bank’s strategy.

AUDUSD – technical overview

Daily studies have been in the process of turning down after the market recently surged through the critical 0.8000 barrier to a fresh +2 year high. From here, there is risk for a deeper drop back towards a previous resistance turned support zone in the 0.7500 area. Rallies are now viewed as corrective, with a lower top sought out ahead of the next downside extension towards 0.7500. A break below 0.7800 will strengthen this outlook. Only a close back above 0.8000 would force a rethink.

• R2 0.8000 – Psychological – Strong
• R1 0.7963 – 17Aug high – Medium
• S1 0.7867 – 24Aug low – Medium
• S2 0.7809 – 15Aug low – Strong

AUDUSD – fundamental overview

The latest Aussie rally is showing signs of stalling out, with the market perhaps recognizing it’s had an impressive run in 2017 and the Australian Dollar may be looking a little too extended up at current levels. The RBA has also been more vocal about its dissatisfaction with a higher Aussie exchange rate, which has contributed to a recent pullback from plus two year highs above 0.8000. Meanwhile, the rally in base metals has cooled off and risk sentiment continues to look shaky, two developments which are inviting of more Aussie bearishness. Looking ahead, the focus will be on US durable goods and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

USDCAD – technical overview

Stretched medium-term technical studies are still warning of the possibility for a more significant bullish reversal to allow for these studies to unwind. A recent break above 1.2575 strengthens this outlook, opening the door for an eventual return towards the 38.2% fib retrace off the 2017 high-low move, which comes in at 1.2940. Only a daily close back below 1.2500 would compromise the recovery prospect and put the pressure back on the downside.

• R2 1.2691 – 18Aug high – Strong
• R1 1.2608 – 21Aug high – Medium
• S1 1.2500 – Psychological – Medium
• S2 1.2414 – 26Jul/2017 low– Strong

USDCAD – fundamental overview

The Canadian Dollar continues to hold up rather well. Much of the recent wave of positive momentum comes from last week’s hotter than expected Canada inflation print and this week’s Canada retail sales showing which produced a very impressive number less autos. Meanwhile, there haven’t been any major US data releases this week, but back to back disappointments from new home sales and existing home sales has been adding to the demand for the Loonie. Interestingly, OIL is tracking lower on the week into Friday, while President Trump has been talking about ending NAFTA again, and yet, these developments have done nothing to really weigh on the Canadian Dollar. Looking ahead, absence of data out of Canada will leave the focus on US durable goods, the price of OIL, and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

NZDUSD – technical overview

Daily studies have turned down after the market pushed up to a plus two year high through 0.7500 in late July. A recent break below 0.7200 has opened the door for a more meaningful reversal, that could be setting the stage for a drop all the way back down towards the 2017 low in the 0.6800s. From here, look for any rallies to be well capped below 0.7300 on a daily close basis in favour of the next downside extension towards the psychological barrier at 0.7000.

• R2 0.7338 – 21Aug high – Strong
• R1 0.7283 – 23Aug high – Medium
• S1 0.7192 – 24Aug low – Medium
• S2 0.7170 – 7Jun low– Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come under pressure in August, backing well off the late July plus two year high above that major psychological barrier at 0.7500. This week’s news of the New Zealand government cut of growth forecasts and budget surpluses has intensified declines, with the currency easily standing out as the weakest over the past week. Overall, economic data out of New Zealand has already been less impressive, as highlighted by recent GDP, CPI and employment readings, which is forcing the RBNZ to reconsider what had been a more hawkish stance. Of course, the RBNZ has also been talking down the Kiwi rate and this in conjunction with a more compromised risk environment offer an added layer of bearish Kiwi drivers. Looking ahead, the focus will be on US durable goods and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

After extending the record run earlier this month, the market has finally relented, acknowledging the need for a period of corrective decline to allow for highly extended longer-term studies to unwind. Still, while the market holds above 2400 on a weekly close basis, the uptrend remains firmly intact. A weekly close below 2400 would be required to signal the possibility for a more meaningful top and bearish structural shift.

• R2 2491.00 – 8Aug/Record high – Strong
• R1 2474.00 – 16Aug high – Medium
• S1 2417.00 – 21Aug low – Medium
• S2 2400.00 – Psychological – Strong

US SPX 500 – fundamental overview

The stock market has managed to put in an impressive rally off recent lows. But underneath it all, there is a feeling investors could be getting ready for a more significant reversal with the record run so extended and prices deviating from the fundamentals. Moreover, the fact that Fed monetary policy is reversing could be resonating a little more, with Fed balance sheet reduction coming into play as soon as next month and another rate hike still on the cards this year. It's too early to tell, though another topside failure followed by a break and drop below 2400 could open the door for what has been a highly anticipated intensified liquidation. Looking ahead, the focus will be on US durable goods and reaction to the Jackson Hole symposium speeches from Yellen and Draghi.

GOLD (SPOT) – technical overview

Setbacks have been well supported, with the latest push to a fresh 2017 high just over 1300 setting the stage for a bullish continuation towards the 2016 peak at 1375 further up. A higher low is now in place around 1265 and only back below this level would offset this latest wave of bullish momentum.

• R2 1308.00 – 2Nov 2016 high – Medium
• R1 1300.85 – 18Aug/2017 high – Strong
• S1 1267.35 – 15Aug low – Strong
• S2 1251.45 – 8Aug low  – Medium

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 well supported, 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 has added 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 for an extended period, GOLD will hold up on risk off macro implications.

Feature – technical overview

USDSGD has been under pressure in 2017, with the market recently dropping down to a fresh yearly low at 1.3544. However, stretched studies are starting to turn back up and there are signs of the possibility for a meaningful bullish reversal to allow for these studies to unwind. Setbacks have also stalled out around an important 78.6% fib retracement off the 2016 to 2017 low to high move. A recent daily close back above 1.3650 strengthens this outlook and opens the door for a more meaningful bounce towards 1.4000 further up. Only a close below 1.3500 negates.

• R2 1.3720 – 17Jul high – Strong
• R1 1.3690 – 16Aug high – Medium
• S1 1.3588 – 14Aug low – Medium
• S2 1.3544 – 27Jul/2017 low – Strong

Feature – fundamental overview

The Singapore Dollar hasn’t been doing much in recent days, with the currency trading on broader macro themes that have failed to produce anything new to chew on this week. US Dollar selling in 2017 has been a major supporter of the currency and we have seen some more of this into this week as White House instability and geopolitical tension keeps up. At the same time, US economic data is mostly moving back in the right direction, which could speed up the Fed’s monetary policy reversal process and fuel USDSGD demand as yield differentials widen in favor of the Buck. Risk sentiment is also looking a lot more shaky in recent days and any downside pressure here could invite safe haven US Dollar demand. Earlier this week, softer Singapore inflation data didn’t have any meaningful impact on the rate and the market will now digest today’s Singapore industrial production print. Of course, US durable goods and Jackson Hole symposium speeches from Yellen and Draghi will not be overlooked later in the day.