Flight to Safety

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 1.2984 – 5Sep high – Strong
• R1 1.2963 – 6Sep high – Medium
• S1 1.2894 – 6Sep low – Strong
• S2 1.2856 – 3Sep low  – Medium

GBPUSD – fundamental overview

The Pound comes into the end of the week trying figure out how seriously it should be taking the news of German and UK governments willing to set aside various demands in the interests of making sure a deal is done. The Pound has done a good job holding up since the Brexit story broke on Wednesday, managing to brush off setbacks from earlier in the week on the back of the Brexit uncertainty and round of softer manufacturing and construction PMIs. It’s worth noting that Wednesday’s more encouraging Brexit news was accompanied by a better than expected UK services PMI reading. As far as today goes, absence of first tier data in the UK will leave the focus on the US jobs report, Brexit and any headlines out of Washington.

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

Risk off flow continues to move to the Yen on the traditional correlations, though into Friday, the risk off flow takes on a different type of meaning for the Yen, given that the source of a lot of this flow stems from the reports of the US administration getting ready to take aim at Japan on tariffs. Meanwhile, US stocks are already looking a lot less comfortable at record highs in a world of exhausted central bank stimulus and accommodation. And this in conjunction with the US administration pushing a soft Dollar agenda, should continue to invite flight to safety bids into the Yen. Looking ahead, the market will be watching the US jobs report, though most of the attention will centre on the developments on the political front.

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 1.1212 – 7Sep/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 0.7236 to take the immediate pressure off the downside.

• R2 0.7236 – 4Sep high – Strong
• R1 0.7203– 7Sep high – Medium
• S1 0.7138 – 7Sep/2018 low – Medium
• S2 0.7100 – Figure – Strong

AUDUSD – fundamental overview

The Australian Dollar is dropped to fresh multi-month lows 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. The possibility of more US tariffs on China (and now talk of Japan tariffs) is getting a lot of the credit for this latest downturn in risk appetite. Aussie has however managed to outperform against Kiwi on account of Tuesday’s more upbeat RBA decision, Wednesday’s solid GDP print and Thursday’s well received trade data. Looking ahead, we get the US jobs report, though most of the volatility is expected to come from the headlines out of the White House.

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 1.3227 – 6Sep high high – Medium
• S1 1.3046 – 3Sep low – Medium
• S2 1.2965 – 31Aug low – Medium

USDCAD – fundamental overview

The Canadian Dollar is having a hard time trying to figure out which way it wants to run. On the one side, you have broad based US Dollar declines and a relatively upbeat Bank of Canada, which are supportive of the Loonie and have been helping to rally the Canadian Dollar back off its weekly low against the Buck. On Thursday, BoC Wilkins was on the wires talking more to the hawkish side, which reinforced demand for the Loonie. But on the other side, you have a recent run of softer data, falling OIL prices, downside pressure in equities  and a very nervous NAFTA situation, with a deal that was supposed to get done last week, now not even looking like it will get done this week. Of course, all of this being Canadian Dollar bearish. As far as today goes, any NAFTA updates will be important to look out for, while the market will also take in the double whammy of employment reports out of Canada and the US.

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

RBNZ Governor Orr was on the wires early Friday to give Kiwi a bit of a boost with his upbeat talk, or relatively upbeat talk after saying the outlook for the economy was ‘not that bad’ given low interest rates, a low jobless rate, supportive currency and ‘fantastic’ terms of trade. But overall, the New Zealand Dollar has been under a lot of pressure. sitting just off fresh 2.5 year lows from earlier this week on the back of the bigger picture macro driver of risk off. The tension around US protectionism is the primary source of this, though a super extended US equities market already due for a major pullback is certainly factoring as well. Looking ahead, we get the US jobs report, though most of the volatility is expected to come from the headlines out of the White House.

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 in recent weeks, 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, with the next lower top now sought out around $7,000 ahead of a retest and break below the current yearly low. Only a push back above $8,500 would ultimately negate and force a bullish structural shift, while below the yearly low could open a more intensified decline towards the September 2017 low around $2,975.

• R2 7,402 – 4Sep high – Strong
• R1 6,983 – 6Sep high – Medium
• S1 6,223– 21Aug low –Medium
• S2 5,860 – 14Aug low  – Strong

BTCUSD – fundamental overview

This week’s report of Goldman Sachs pulling back its plan to build up a cryptocurrency desk has been the latest headline to knock the price back down, though it’s clear there are other forces at play, including broader deterioration in global risk sentiment and a technical picture that has been warning of ongoing offers into rallies. The report cited the regulatory challenges and uphill battle on that front as primary driver behind Goldman’s decision. Overall, 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 around the $6,000 barrier, with buyers stepping in on the view that the regulatory challenges will soon work themselves out, leaving a very bullish picture for a technology with tremendous potential. Other recent stories that have hurt bitcoin have been the SEC delaying its decision on a cryptocurrency ETF and bans out of China on all crypto related commercial activities.

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. The next level of major support comes in around $160, which goes back to the low from July 2017. Daily studies are however oversold, 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 321 – 18Aug high – Strong
• R1 247 – 6Sep high – Medium
• S1 211 – 6Sep/2018 low – Medium
• S2 160 – July 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 challenges and a global macro backdrop exposing risk correlated projects on the Ethereum blockchain. This latest news of Goldman Sachs pulling back on plans to build up a cryptocurrency desk 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.