Early week about Fed event risk positioning

GBPUSD – technical overview

The major has been well supported on dips in 2019, but will need to hold up above 1.2400 on a monthly close basis, to keep the constructive outlook intact. If the market can close out July above 1.2400, it will keep the prospect alive for a higher low above the +30 year low from 2016, ahead of the next major upside extension. If however the market closes out the month below 1.2400, it will open the door for a retest of the sub-1.2000 2016 low. Back above 1.2579 will strengthen the outlook and take the immediate pressure off the downside.

• R2 1.2579 – 12 July high – Strong
• R1 1.2523 – 24 July low – Medium
• S1 1.2376 – 26 July/2019 low – Strong
• S2 1.2300 – Figure – Strong

GBPUSD – fundamental overview

The Pound continues to feel the heat of Brexit, with the new PM talking tougher and laying out a path to an exit on October 31st, deal or no deal. One of PM Johnson's demands is that the Irish backstop is abolished. This has resulted in more downside pressure on the Pound, all while the US Dollar has also been better bid on a broad basis. Recent data out of the US has been arguing for a less aggressive rate cut outlook from the Fed, which in turn, has made US Dollar yield differentials more attractive. Looking ahead, we get UK net lending, consumer credit and mortgage approvals, followed by Dallas Fed manufacturing in the US session.

USDJPY – technical overview

The longer-term downtrend remains firmly intact, with the major pair slowly 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 109.00 – 10 July high – Strong
• R1 108.84 – 26 July high – Medium
• S1 108.04 – 25 July low – Medium
• S2 107.22 – 19 July low – Medium

USDJPY – fundamental overview

Recent inflation data out of Japan came in above forecast, but didn't do anything to factor into price action in the major pair. Instead, the focus continues to be on the bigger themes of yield differentials and risk sentiment. The combination of stronger US economic data, supporting US yield differentials, and an ongoing run to record highs in US equities, have been behind a lot of the latest recovery rally in the major pair. Still, the equity market continues to look extended at current levels and soft Dollar policy out from the US administration is expected to turn up, both of which have the ability to force a move back in the Yen's favour. Monday's economic calendar is exceptionally thin. The market will digest the latest retail sales out of Japan, before turning to Dallas Fed manufacturing later on in the day.

EURCHF – technical overview

The recent breakdown below critical range support in the 1.1200 area, has opened the door for the next wave of declines into the 1.1000 area. The market is trading at its lowest levels in two years, and at this point, it would take a daily close back above 1.1173 to take the immediate pressure off the downside. A weekly close below 1.1000 opens the door for the next major downside extension towards 1.0600.

• R2 1.1173 – 2 July high – Strong
• R1 1.1111 – 17 July high – Medium
• S1 1.1000 – Psychological
• S2 1.0963 – 25 July/2019 low – 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, 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 overview

The 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 0.7083 – 19 July high – Strong
• R1 0.6985 – 25 July high – Medium
• S1 0.6900 – Figure – Medium
• S2 0.6865 – 17 May low – Strong

AUDUSD – fundamental overview

Last week, the Australian Dollar came under intensified pressure to the downside, on the back of dovish comments from RBA Governor Lowe, and on the back of a round of stronger US economic data. RBA Lowe said he would be ready to ease policy further if the recent round of rate cuts failed to revive economic growth, while also adding it was reasonable to expect an extended period of low rates. Meanwhile, US data was more robust, capped off with an impressive GDP read. Monday's economic calendar is exceptionally thin. Dallas Fed manufacturing is the only notable stand out.

USDCAD – technical overview

Despite the recent breakdown to a yearly low, the longer-term structure remains constructive, with dips expected to be well supported for renewed 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 compromise this outlook.

• R2 1.3230– 21 June high – Strong
• R1 1.3200 - 26 July high – Medium
• S1 1.3113 – 23 July low – Medium
• S2 1.3016 – 19 July/2019 low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been giving back some of its recent gains that had driven it to a fresh 2019 high against the Buck, with the Loonie taking a hit from a softer streak of Canada economic data, all while US data has been coming out on the stronger side. OIL has also stumbled in recent sessions, yet another driver of some of this recent bout of setbacks in the Loonie. Monday's economic calendar is exceptionally thin. Absence of first tier data out of Canada, leaves the focus on Dallas Fed manufacturing.

NZDUSD – technical overview

Despite 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. A confirmed higher low is in place at 0.6568 and only back below this level would delay the constructive outlook.

• R2 0.6791 – 19 July high – Strong
• R1 0.6724 –  24 July high – Medium
• S1 0.6600 – Figure – Medium
• S2 0.6568 – 10 July low – Strong

NZDUSD – fundamental overview

Calls out of Westpac leaning to the dovish side, have likely contributed to this latest bout of selling in the New Zealand Dollar, while a Bloomberg report from earlier last week, that the RBNZ was looking at updating unconventional policy strategy, has also weighed on Kiwi. At the same time, we've also seen broad demand for the US Dollar, as data out of the US comes in better than expected, making the case for aggressive Fed rate cuts less compelling. Monday's economic calendar is exceptionally thin. Dallas Fed manufacturing is the only notable stand out.

US SPX 500 – technical overview

There 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 monthly close above 3000 would be required to compromise the outlook calling for a top.

• R2 3050 – Psychological – Strong
• R1 3029 – 26 July/Record high – Medium
• S1 2960 – 9 July low – Medium
• S2 2911 – 26 June low – Strong

US SPX 500 – fundamental overview

Although we've seen the market extending to fresh record highs in 2019, on Fed signals of additional rate cuts, with so little room for additional easing, given an already depressed interest rate environment, the prospect for a meaningful extension of this record run, on easy money policy incentives, should no longer be as enticing to investors as it once was. 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 overview

The 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 1400.

• R2 1488 – May 2013 high – Strong
• R1 1453 – 19 July/2019 high – Strong
• S1 1382 – 1 July low – Strong
• S2 1358 – 20 June 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

Overall, look for additional upside to be limited for now, as the market continues to correct and consolidate, in the aftermath of a major surge in the second quarter of 2019. Any setbacks should be very well supported ahead of 7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high at 13,748. Only a weekly close below 7,000 would compromise the constructive outlook.

• R2 13,748– 26 June/2019 high – Strong
• R1 11,031 – 16 July high – Medium
• S1 9,075 – 17 July low – Strong
• S2 8,935 – 19 June low – Strong

BTCUSD – fundamental overview

Bitcoin enjoyed a spectacular run in the second quarter of 2019, racing to fresh yearly highs, surging towards 14k, on the back of increased adoption and more openness from the traditional investor community. The news of tech giants now turning towards the world of crypto has invited a higher profile that should be a net positive in the long run. At the same time, it also exposes the ethos to fresh critique from higher ups at the central bank and government levels. The market is also going through a period of technical adjustment after the fierce run up, though we anticipate demand from institutional players into dips.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market is in the process of a major correction after a surge in the second quarter of 2019. Look for setbacks to be well supported above of previous resistance turned support at 170 on a weekly close basis, in favour of the next major higher low and bullish resumption back towards and through the 2019 high up at 363. Ultimately, only a weekly close below 170 would compromise the longer term constructive outlook.

• R2 325 – 30 June high – Strong
• R1 290 – 11 July high – Medium
• S1 191 – 16 July low – Strong
• S2 170 – 24 February High  – Strong

ETHUSD – fundamental overview

There was 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 critique of the space from the likes of President Trump and Fed Chair Powell, along with worry associated with fallout in the global economy, are stories that could keep the more risk correlated crypto asset weighed down in the second half of the year.