Special report: Currencies, stocks and the yellow metal
Today’s report: Stocks extend record run into July 4th festivities
The US equity market heads into the 4th of July holiday in good spirits, extending the record run, with the S&P 500 finally testing that 3,000 barrier. The move continues to be encouraged by the bond market, with the 10-year Treasury yield dipping down to its lowest level since November 2016.
- weak data
- BOJ Funo
- SNB's job
- building approvals
- Canada trade
- house inflation
- risk appetite
- Macro players
- Profit taking
- global economy
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month low in May. But with the downtrend looking exhausted, the prospect for a meaningful higher low is more compelling, with a higher low sought out above the multi-year low from 2017, ahead of the next major upside extension. Only a weekly close back below the psychological barrier at 1.1000 would compromise this outlook. Back above 1.1450 will strengthen the view.
- R2 1.1412 – 25 June high – Strong
- R1 1.1344 - 25 June low – Medium
- S1 1.1250 - Mid-Figure – Medium
- S2 1.1181 – 15 June low – Strong
EURUSD – fundamental overviewOn Wednesday, there were reports the EU cabinet chiefs had suggested the EU not hold disciplinary action against Italy for excessive debt. There was also news Italy would be upwardly revising its 2020 projections. Meanwhile, ECB Villeroy wanted to make it clear there was no doubt about the central bank's ability to increase stimulus if needed. ECB Nowotny was endorsing the choice of Lagarde for the next ECB President. Wednesday's run of services PMIs out of the zone were better than expected on the whole. Looking ahead, trading conditions will be exceptionally thin on Thursday, with the US out celebrating the July 4th holiday. The only notable standouts on the calendar come in the form of German construction PMIs, Eurozone retail sales and ECB speeches from Lane and Guindos.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe major has been well supported ahead of the 2019 low, helping to strengthen the case for a major base. Look for the market to start making its way back towards 1.3000, with a break above the psychological barrier to expose a retest of the 2019 high up at 1.3380. Only back below 1.2500 would delay the constructive outlook.
- R2 1.2784– 25 June high – Strong
- R1 1.2735 – 28 June high – Medium
- S1 1.2557 – 3 July low – Medium
- S2 1.2506 – 18 June low – Strong
GBPUSD – fundamental overviewIt hasn't been a good week for the Pound, with the currency taking its hits from a string of disappointing PMI readings, and renewed fears associated with no-deal Brexit. On Wednesday, BOE Cunliffe was on the wires highlighting increased odds of no-deal Brexit, while dismissing speculation of financial stability risk. BOE Broadbent was also out, downplaying risks associated with household debt levels. Looking ahead, there is no first tier data scheduled on the UK calendar and trading conditions will be exceptionally thin on Thursday, with the US out for the July 4th festivities.
USDJPY – technical overviewThe longer-term downtrend remains firmly intact, with the major pair gravitating back towards a retest of major support in the form of the 2018 and 2019 lows respectively, down in the 104s. Any rallies should now be well capped below 110.00, though only a break back above the yearly high at 112.40 would compromise the bearish outlook.
- R2 108.80 – 11 June high – Strong
- R1 108.54 – 1 July high – Medium
- S1 107.53 – 3 July low – Medium
- S2 106.78 – 25 June low – Strong
USDJPY – fundamental overviewJapan services PMIs improved from May readings. Meanwhile BOJ Funo said there was a fair chance rates would remain low well into 2020. PM Abe was also on the wires talking about his desire for the BOJ to stay focused on the 2% inflation objective and on improving employment. There were also reports of Japan considering imposing stricter export controls on South Korea. US equities continued their run of record gains, which helped to keep the major pair supported on dips. Looking ahead, trading conditions will be exceptionally thin, with the US out for the July 4th festivities.
EURCHF – technical overviewThe recent breakdown below critical range support in the 1.1200 area, has opened the door for the next wave of declines targeting a move back towards initial support in the form of the 1.1000 psychological barrier. The market is trading at its lowest levels in nearly two years and at this point, it would take a daily close back above 1.1279 to take the immediate pressure off the downside.
- R2 1.1265 – 12 June high – Strong
- R1 1.1173 – 2 July high – Medium
- S1 1.1057 – 20 June/2019 low – Medium
- S2 1.1000 – Psychological – Strong
EURCHF – fundamental overviewThe 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, 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, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.
AUDUSD – technical overviewThe market has been very well supported on dips since breaking down in early January to multi-year lows. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7100 to strengthen this outlook. In the interim, look for setbacks to continue to be well supported ahead of 0.6800.
- R2 0.7070 – 30 April high – Strong
- R1 0.7049 – 7 May high – Medium
- S1 0.6929 – 24 June low – Medium
- S2 0.6832 – 18 June low – Strong
AUDUSD – fundamental overviewAussie has been a real outperformer this week, benefiting from a more upbeat RBA decision (despite the rate cut), solid economic data and an ongoing bid in US equities. On Wednesday, Aussie building approvals produced an unexpected increase, while the trade surplus came in higher than expected. Aussie traded up to its highest levels in nearly two months as a result. Looking at the calendar, the market will be digesting the latest Aussie retail sales print, though Thursday conditions will be exceptionally thin, with the US off celebrating the July 4th holiday.
USDCAD – technical overviewThe market has come under intense pressure over the past several weeks, extending declines to a fresh 2019 low. However, the longer-term structure remains constructive, with dips expected to be well supported for fresh upside, eventually back above the 2018/multi-month high at 1.3665. At this point, only a weekly close below the psychological barrier at 1.3000 would delay the outlook.
- R2 1.3230– 21 June high – Strong
- R1 1.3200 - Figure – Medium
- S1 1.3060 – 28 June/2019 low – Strong
- S2 1.3000 – Psychological – Strong
USDCAD – fundamental overviewOn Wednesday, the price of OIL recovered and Canada trade data came in better than expected. This helped to keep the Canadian Dollar trading at fresh 2019 high levels against the Buck (USDCAD lows). Looking ahead, there is no first tier data scheduled on the Canada calendar and trading conditions will be exceptionally thin, with the US out for the July 4th festivities.
NZDUSD – technical overviewDespite recent weakness, there's a case to be made for a meaningful low in place at 0.6425 (2018 low). As such, look for setbacks to be well supported above the latter, in anticipation of renewed upside, with only a close below to compromise the outlook. The most recent rally has triggered a double bottom, further strengthening the constructive outlook. Look for a higher low to carve out ahead of 0.6500.
- R2 0.6783 – 15 April high – Medium
- R1 0.6727 – 1 July high – Strong
- S1 0.6595 – 26 June low – Medium
- S2 0.6535 – 20 June low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar has done a good job shrugging off some softer economic data this week, deferring to a focus on broader US Dollar outflows and an ongoing record run in US equities. The latest data out of New Zealand saw June house price inflation sinking to a seven year low. Looking ahead, trading conditions will be exceptionally thin, with the US out for the July 4th festivities.
US SPX 500 – technical overviewThere have been signs of a major longer term top, after an exceptional run over the past decade. Any rallies from here, are expected to be very well capped, in favour of renewed weakness targeting an eventual retest of strong longer-term previous resistance turned support in the form of the 2015 high at 2140. The initial level of major support comes in at 2729, with a break below to strengthen the outlook. A weekly close above 3000 would be required to compromise the outlook calling for a top.
- R2 3000 – Psychological – Strong
- R1 2998 – 3 July/Record high – Medium
- S1 2911 – 26 June low – Medium
- S2 2867 – 13 June low – Strong
US SPX 500 – fundamental overviewAlthough we've seen the market extend to another record high in 2019, exhausted monetary policy tools post 2008 crisis suggest the prospect for a meaningful extension of this record run at this point in the cycle is not realistic. Meanwhile, expected renewed tension on the global trade front, should continue to be a drag on investor sentiment. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that could be a major stress to the financial markets looking out.
GOLD (SPOT) – technical overviewThe recent breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1500, while in the interim, look for any setbacks to be well supported above 1300.
- R2 1488 – May 2013 high – Strong
- R1 1440 – 25 June/2019 high – Strong
- S1 1358 – 20 June low – Medium
- S2 1320 – 11 June low – Strong
GOLD (SPOT) – fundamental overviewThe 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 overviewThe market has enjoyed a nice run since breaking out above a consolidation between Q4 2018 and Q1 2019, though the rally had resulted in extended technical readings after racing through 10k psychological barrier. Overall, look for additional upside to be limited for now, to allow for these technical readings to unwind some more from stretched readings, before the market considers that next meaningful push. Setbacks should ideally be supported ahead of 7,000.
- R2 14,335– 15 January high (2018) – Strong
- R1 13,748 – 26 June/2019 high – Medium
- S1 9,721 – 2 July low – Medium
- S2 8,935 – 19 June low – Strong
BTCUSD – fundamental overviewBitcoin is enjoyed a spectacular run in the second quarter of 2019, racing to fresh yearly highs, surging through 10k, on the back of increased adoption and a clear readiness for the investment community to welcome the new digital asset into the mainstream. The news of tech giants now turning towards a world of crypto transactions has given Bitcoin a major boost, with the latest moves over at Facebook, only serving to give crypto assets additional credibility. The market is going through a period of technical adjustment after the fierce run up, though we anticipate renewed demand from institutional players into the dip.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe recovery has recently accelerated to a fresh 2019 high, surging through medium-term resistance at 300 and back into critical previous support from back in 2018 around 355. The upside break suggests the market is now looking to establish a meaningful base, in favour of bullish structural shift. Still, shorter-term, the run was looking stretched and before we see that next major upside extension, expect rallies well capped, to allow extended readings to continue unwinding before the market gets going again. Setbacks should now be well supported ahead of 200.
- R2 400 – Psychological – Strong
- R1 363 – 26 June/2019 high – Medium
- S1 272 – 2 July low – Medium
- S2 260 – 19 June low – Strong