Today’s report: Fed Powell Testimony in Focus on Tuesday
We haven’t seen all that much activity to start the week and we’re coming out of a Monday session that was less about anything Monday specific and more about carryover from last Friday’s price action, which saw US Dollar demand ramp up post the better than expected US NFP print. Looking ahead, all eyes on Fed Powell testimony.
- ECB Coeure
- Boris Johnson
- Fed bets
- SNB's job
- business confidence
- housing starts
- US JOLTs
- Powell testimony
- 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 1.1348 – 7 June high – Strong
- R1 1.1296 - 4 July high – Medium
- S1 1.1207 - 8 July low – Medium
- S2 1.1181 – 15 June low – Strong
EURUSD – fundamental overviewQuiet start to the week, though the Euro remained under pressure on carryover from last Friday's above forecast US NFP print that had the market scaling back on Fed rate cut bets. There was some soft data out of German on Monday and downbeat comments from ECB Coeure, that contributed to the downside pressure as well. Looking ahead, Tuesday's calendar is light, with only US JOLTs job openings and testimony from the Fed Chair standing out.
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 a weekly close back below 1.2500 would delay the constructive outlook.
- R2 1.2649– 2 July high – Strong
- R1 1.2601 – 3 July high – Medium
- S1 1.2500 – Psychological – Strong
- S2 1.2481 – 5 July low – Strong
GBPUSD – fundamental overviewThe Pound has been pressured to the downside over the past several days, with softer UK data and worry about Brexit fueling weakness on the UK side, while a better than expected US NFP print, has generated additional downside pressure. On Monday, there wasn't much going on at all, and the Pound was comfortable consolidating off recent lows in the 1.2500 area. We did hear from Boris Johnson, who reiterated his willingness to leave the EU without a deal. Looking ahead, absence of first tier data on the UK calendar, will leave the focus on a Fed Powell testimony and US JOLTs job openings.
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 109.93 – 26 May high – Medium
- R1 109.00 – Figure – Medium
- S1 108.00 – Figure – Medium
- S2 107.53 – 3 July low – Strong
USDJPY – fundamental overviewThe major pair has made a healthy bounce out from recent lows, with most of the demand coming from the US Dollar side, with market participants reconsidering Fed rate cut bets after last Friday's US NFP print came in well above forecast. At the same time, this has brought about downside pressure in stocks, something that could inspire US Dollar offers into rallies, given the major pair's correlation with risk. Looking at the Tuesday calendar, key standouts come in the form of US JOLTs job openings and Fed Powell testimony.
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 overviewBroad based US Dollar demand on a reconsideration of Fed rate cut bets post the better than expected US NFP print, has opened a round of selling in the Australia Dollar after it had put in a healthy multi-session rally. The commodity currency had also been feeling less enthusiastic about a recent slide in the price of iron ore. On Tuesday, Aussie will digest the latest NAB business confidence readings, while looking ahead to Fed Powell testimony and US JOLTs job openings.
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 1.3146 - 1 July high – Medium
- S1 1.3038 – 4 July/2019 low – Strong
- S2 1.3000 – Psychological – Strong
USDCAD – fundamental overviewSetbacks in the price of OIL and carryover from last week's contrasting employment reports out of Canada and the US, have been responsible for the latest selling in the Canadian Dollar out from 2019 highs against the Buck (USDCAD lows). Looking ahead, Tuesday's calendar features Canada housing starts and building permits, along with Fed Powell testimony and US JOLTs job openings.
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 0.6727 – 1 July high – Strong
- R1 0.6700 – Figure – Medium
- S1 0.6602 – 5 July low – Medium
- S2 0.6535 – 20 June low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar had been enjoying a nice rally in recent weeks on the back of improving Kiwi data, rallying stocks and better bid commodities. But the commodity currency has since relented, on account of a repricing of Fed rate cut expectations after last week's US NFPs came in above forecast. Looking ahead, Tuesday's calendar features Fed Powell testimony and US JOLTs job openings.
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 3050 – Psychological – Strong
- R1 3001 – 5 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
ETHUSD – fundamental overviewThere has been a lot more buzz around adoption following the Q2 2019 Bitcoin surge, with many mainstream names coming out in support of blockchain integration. Demand for web 3.0 applications is on the rise, and Ethereum is the blockchain with the biggest front end application potential. At the same time, profit taking in the aftermath of the rapid Q2 appreciation has triggered a healthy period of correction, while worry associated with fallout in the global economy, could be a theme that keeps the more risk correlated crypto asset weighed down, or at least underperforming against Bitcoin in the second half of the year.
- Deutsche Bank Starts Shrinking, M. Levine, Bloomberg (July 8, 2019)
- Kyriakos Mitsotakis Sworn in as Greek Prime Minister Financial Times (July 8, 2019)