Are We Done with the Currency Run?

GBPUSD – technical overview

The 2018 breakdown has extended into the 1.2600s, which roughly coincides with a massive previous resistance zone from back in 2016 off the +30 year low. Technical studies are starting to turn back up from extended territory, and any additional weakness is expected to be well supported above 1.2500. Still, a break and close back above 1.3010 will be required to strengthen the case for a meaningful low and start to a much bigger recovery back towards the 2018 high up in the 1.4300s.

• R2 1.3010 – 6Aug high – Strong
• R1 1.2937 – 22Aug high – Medium
• S1 1.2800 – 24Aug low – Medium
• S2 1.2730 – 20Aug low  – Strong

GBPUSD – fundamental overview

The Pound did a nice job extending its recovery rally, helped along by more broad based profit taking on safe haven Dollar longs as the NAFTA outlook continued to look up. However, it’s been hard for the Pound to go more than a few sessions without shooting itself in the foot and late Tuesday, one of those shots went off, after Theresa May said the idea of no-deal Brexit remained on the table and the UK could still make a success of it all without an agreement with the EU. The market will get more updates as the sessions move on and this will continue to be a major point of focus for traders. As far as Wednesday’s calendar goes, absence of first tier data in the UK will leave the market with US readings in the form of GDP and pending home sales.

GBPUSD – Technical charts in detail

USDJPY – technical overview

Rallies continue to be very well capped, with the medium-term outlook still favouring lower tops and lower lows. Look for a daily close back below 110.00 to strengthen the bearish outlook, opening the door for the start to a move back down towards 108.00 which guards against the 104.60 area 2018 low.

• R2 112.16 – 1Aug high  – Strong
• R1 111.49 – 24Aug high – Medium
• S1 110.52 – 23Aug low – Medium
• S2 109.78 – 21Aug low – Strong

USDJPY – fundamental overview

Overall, the Yen hasn’t really been moving on domestic fundamentals and has instead been consumed with traditional drivers of global sentiment and positioning in the US Dollar. The ongoing bid in US equities has been a source of demand for the major pair, with the latest positives relating to NAFTA offsetting offers from concurrent broad based USD weakness. Still, with US stocks looking a lot less comfortable at record highs in a world of exhausted central bank stimulus and accommodation, the risk seems to be tilted more to the downside for the major pair. As far as today’s calendar goes, the focus will be on US releases in the form of GDP and pending home sales.

EURCHF – technical overview

A recent breakdown to a fresh 2018 low has put the pressure back on the downside, exposing the possibility for deeper setbacks towards next key support which comes in the form of the 2016 high at 1.1200. However, if tested, the barrier should prove to a very strong support zone that encourages a healthy push back to the topside. Ultimately, it would take a weekly close back below 1.1200 to negate what is a more constructive outlook.

• R2 1.1500– Psychological – Strong
• R1 1.1462 – 10Aug high – Medium
• S1 1.1325 – 17Aug low – Medium
• S2 1.1245– 15Aug/2018 low – Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and has recently reminded the market it will need to be careful about any attempts at buying the Swiss Franc. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation in the second half of this year, will likely invite a very large wave of demand for the Franc, which will put the SNB in the more challenging position of needing to back up its talk with action it may fall short on at this point in the monetary policy cycle. Red flags have been flying of late, with the run up in US stocks to record highs doing nothing to weaken the Franc. Instead, there seems to be a whole lot of demand, which should be very worrying for the central bank.

AUDUSD – technical overview

The market is in the process of correcting out from a 2018 and multi-month low down around 0.7200. Overall however, rallies should be well capped, with only a break back above 0.7500 to suggest otherwise.

• R2 0.7400 – Figure – Medium
• R1 0.7382– 21Aug high – Medium
• S1 0.7300 – Figure – Medium
• S2 0.7238– 24Aug low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been trying its best to consolidate its recovery out from a 2018 low against the Buck in early August. The pickup in global sentiment from the NAFTA news has been sourced as a major prop. And yet, at the same time, Aussie has struggled to extend the recovery, with plenty of uncertainty out there at the moment. Overall, we expect Aussie to run on the broader macro themes, with the market less inclined to be focusing on the domestic fundamentals, even with the change in government. As far as today’s economic calendar goes, key standouts come in the form of US GDP and pending home sales.

USDCAD – technical overview

The uptrend has entered a corrective phase, which could still invite a deeper corrective decline towards 1.2700 before the next upside extension gets underway. Still, look for any weakness to be well supported ahead of 1.2500 with only a break back below this psychological barrier to negate the constructive outlook.

• R2 1.3104 – 24Aug high – Strong
• R1 1.3000 – Psychological – Medium
• S1 1.2900 – Figure – Medium
• S2 1.2819 – 31My low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been building on a recent run of gains, on the back of solid economic data, an OIL recovery and some optimism around the fate of NAFTA. On Monday, the Loonie was pleased with the progress between the US and Mexico, and then on Tuesday, Treasury Secretary Mnuchin expressed confidence that a deal would get done with Canada in the days ahead. The Loonie upside has also been helped along by some broad based profit taking on long US Dollar exposure in recent sessions. Looking ahead, the market will continue to focus on the NAFTA headlines, while taking in the Canada current account, US GDP and US pending home sales.

NZDUSD – technical overview

The market is in the process of correcting out from a 2018 and +2.5 year low down at 0.6545. Overall however, rallies should be well capped, with only a break back above 0.6860 to suggest otherwise.

• R2 0.6767 – 3Aug high – Strong
• R1 0.6728 – 28Aug high – Medium
• S1 0.6620 – 24Aug low – Medium
• S2 0.6545 – 15Aug/2018 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has managed to hold up off the recent +2.5 year low, with broad based selling in the US Dollar and ongoing support for US equities to fresh record highs fueling the demand. Looking at Wednesday’s calendar, we get US GDP and pending home sales.

US SPX 500 – technical overview

A market that has been extended on the monthly chart is showing signs of potentially starting to top out, with the possibility for a massive double top formation. Any rallies should now continue to be very well capped around the record high from January, in favour of renewed weakness back below the 2530 area yearly low (double top neckline) and towards a retest of strong longer-term resistance turned support in the form of the 2015 high at 2140. Only a weekly close above 3000 would negate the outlook.

• R2 2950 – Psychological – Strong
• R1 2907 – 28Aug/Record – Medium
• S1 2846 – 22Aug low – Medium
• S2 2790 – 17Jul low – Strong

US SPX 500 – fundamental overview

Stocks have been bid right back to record highs in August, though investor immunity to downside risk is not as strong these days. The combination of Fed policy normalisation, US protectionism, ongoing White House drama and geopolitical tension are all warning of capitulation ahead, despite this latest run. The Fed has also finally acknowledged inflation no longer running below target in 2018, something that could very well result in less attractive equity market valuations given the implication on rates. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as this could be something that inspires a more aggressive decline in this second half of 2018.

GOLD (SPOT) – technical overview

Despite a recent run of of declines, the overall outlook remains constructive, with the market in the process of carving out a longer term base off the 2015 low. Look for any additional weakness to be well supported above 1150 on a daily close basis, in favour of the next major upside extension back towards critical resistance in the form of the 2016 high at 1375. Key resistance comes in at 1236, with a push back above to strengthen the outlook.

• R2 1266 – 9Jul high – Strong
• R1 1236 – 26Jul high – Strong
• S1 1160 – 16Aug/2018 low – Medium
• S2 1150 – Psychological  – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and trade war threats. All of this should 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.

BTCUSD – technical overview

The downtrend remains firmly intact despite the recent recovery back above $7,000, with the next lower top now sought out below $8,500 ahead of a retest and break below the current yearly low. Only a push back above $8,500 would negate and force a bullish structural shift, while below the yearly low could open a more intensified decline towards $3,000.

• R2 7,480 – 4Aug high – Strong
• R1 7,143 – 6Aug high – Medium
• S1 6,550– 26Aug low –Medium
• S2 5,860 – 14Aug low  – Strong

BTCUSD – fundamental overview

Bitcoin is doing its best to try and hold up above $6,000 after undergoing a massive decline in 2018. At the moment, the market has found some stability as it hangs onto the positives of wider market adoption, but also waits for additional clarity on the regulatory front. The recent news of the SEC delaying its decision on a cryptocurrency ETF and the latest bans out of China on all crypto related commercial activities, have been the latest thorns Bitcoin has needed to wrestle away from. Overall, while it certainly looks like there’s plenty of light at the end of the tunnel, we suspect the market will need to get back above $8,500 to really turn heads.

BTCUSD – Technical charts in detail

ETHUSD – technical overview

The market remains under pressure in 2018, extending its run of intense declines to fresh 2018 lows earlier in August. The next level of major support comes in around $160, which goes back to the low from July 2017. Daily studies are however unwinding from stretched readings, which could warn of a bigger corrective bounce before the next downside extension and bearish continuation. It would take a break back above $321 to officially take the pressure off the downside.

• R2 370 – 10Aug high – Strong
• R1 321 – 18Aug high – Strong
• S1 250 – 14Aug/2018 low – Medium
• S2 230 – September 2017 low  – Strong

ETHUSD – fundamental overview

We’ve been seeing quite a bit of weakness in the price of Ether in 2018 and there is still legitimate risk for deeper setbacks, given technical hurdles within the Ethereum protocol, ongoing regulatory oversight and a global macro backdrop exposing risk correlated projects on the Ethereum blockchain. This latest news of China banning all crypto related commercial activities has been yet another negative driver. Meanwhile, monetary policy normalisations around the globe and an anticipated reduction in global risk appetite are placing a tremendous strain on ERC20 projects that have yet to even produce proper use cases and proof of concept.