Key Takeaways into the Middle of the Week

GBPUSD – technical overview

The market has been trying to work off the 2018 low from August, with a recent poke above 1.3000 encouraging the possibility for a more meaningful recovery ahead. At the same time, setbacks will need to hold up around the 1.2800 area and push back through 1.3044 to strengthen this outlook. Inability to do so will expose a retest of the yearly low.

• R2 1.3044 – 30Aug high – Strong
• R1 1.2937 – 22Aug high – Medium
• S1 1.2800 – 24Aug low – Strong
• S2 1.2730 – 20Aug low  – Medium

GBPUSD – fundamental overview

The Pound has suffered this week from renewed demand for the US Dollar, ongoing uncertainty associated with Brexit and a run of disappointing UK PMI data. Today, we get some services PMIs out of the UK and then in the US, we get the trade balance and some Fed speak.

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 109.78 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. Only back above 113.20 would compromise the bearish structure.

• R2 112.16 – 1Aug high  – Strong
• R1 111.83 – 29Aug high – Medium
• S1 110.52 – 23Aug low – Medium
• S2 109.78 – 21Aug low – Strong

USDJPY – fundamental overview

The Yen hasn’t really been moving on domestic fundamentals, instead consumed with traditional drivers of global sentiment and positioning in the US Dollar. Overall, 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. We got a flavour of this last week and dealers are reporting a nice amount of sell-stops built up below 110.00. Looking ahead, we get US trade data and some Fed speak.

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 1.1455– 28Aug high – Strong
• R1 1.1314 – 23Aug high – Medium
• S1 1.1240 – 31Aug/2018 low – Medium
• S2 1.1200– 2016 high – Very Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. 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 that 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….and the global economy by extension.

AUDUSD – technical overview

Setbacks have extended to fresh yearly lows and the pressure remains on the downside, with the market looking back at levels from 2016 as next support. At this point, it would take a break back above 0.7382 to take the immediate pressure off the downside.

• R2 0.7382 – 21Aug high – Strong
• R1 0.7268– 31Aug high – Medium
• S1 0.7158 – 4Sep/2018 low – Medium
• S2 0.7145 – May 2016 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has dropped to another multi-month low this week on the back of renewed broad based demand for the US Dollar and some concurrent downside pressure in the equities and commodities markets. Aussie has however managed to outperform against its commodity currency cousins on account of Wednesday’s solid GDP print and an RBA decision earlier this week that was more upbeat than expected. Looking ahead, we get the US trade balance and some Fed speak.

USDCAD – technical overview

The uptrend has entered a corrective phase since topping out in June, which could still invite a deeper corrective decline 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 1.3291 –  20Jul high – Strong
• R1 1.3175 – 15Aug high – Medium
• S1 1.3046 – 3Sep low – Medium
• S2 1.2965 – 31Aug low – Medium

USDCAD – fundamental overview

It hasn’t been a good run for the Canadian Dollar of late. Last week, Canada GDP came in softer than expected last week, while a NAFTA deal that was expected to get done, didn’t. Risk sentiment has since deteriorated, while the US Dollar has come back in demand on a broad basis. Even commodities are sliding, with OIL pulling back a good deal from recent recovery highs. This sets up an interesting day, with the Bank of Canada decision on tap and more updates from the NAFTA negotiations expected. We also get the US trade balance and some Fed speak.

NZDUSD – technical overview

The declines continue, with setbacks extending to a fresh +2.5 year low and now approaching a major psychological barrier at 0.6500. Look for rallies to continue to be well capped, with only a break back above 0.6728 to take the immediate pressure off the downside. Below 0.6500 will open a drop that exposes the 2016 low around 0.6350.

• R2 0.6728 – 28Aug high – Strong
• R1 0.6622 – 3Sep high – Medium
• S1 0.6531 – 5Sep/2018 low – Medium
• S2 0.6500 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has succumbed to another round of selling and sits at its lowest levels in 2.5 years. Kiwi data hasn’t been great, the RBNZ has welcomed a weaker currency, Fonterra has lowered its payout to dairy farmers, Tuesday’s GDT auction results produced another negative print and risk for a capitulation in global equities is growing – all things that could expose Kiwi to deeper setbacks in the weeks ahead. As far as today goes, we get US trade data and some Fed speak.

US SPX 500 – technical overview

A market that has been extended on the monthly chart is at risk for a major correction, 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 2918 – 29Aug/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, 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 1183 – 24Aug low – Medium
• S2 1160 – 16Aug/2018 low  – 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 8,000 – Psychological – Strong
• R1 7,680 – 20Jul high – Medium
• S1 6,795– 30Aug 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.