Next 24 hours: Risk sentiment deteriorates in Monday trade
Today’s report: Pound still looking for a bottom
While most currencies are consolidating, with perhaps even a slight bias to the bearish Dollar side, the already Brexit stressed Pound continues to take heavy hits. The most recent slide to fresh multi-month lows comes on the back of last Fridayâ€™s UK GDP disappointment, which produced the first contraction for the series since 2012.
- Shrugs off
- GDP contraction
- Huawei decision
- SNB policy
- RBA revises
- higher earnings
- talking dovish
- artificial support
- hard asset
- Attractive alternative
- traditional markets
Chart talk: Technical & fundamental highlights
EURUSD â€“ technical overviewThe major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month. 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 1.1412 will strengthen the view.
- R2 1.1286 â€“ 11 July high â€“ Strong
- R1 1.1250 - 6 August high â€“ Medium
- S1 1.1167 - 6 August low â€“ Medium
- S2 1.1100 â€“ Figure â€“ Strong
EURUSD â€“ fundamental overviewThe Euro has done a good job holding up of late, despite softer economic data and the prospect of another Italian election. It seems the single currency is absorbing additional inflow from carry unwind, on account of US administration soft Dollar policy, while also taking in some flow from cross related demand against the Pound, amdst this latest decline in the UK currency. Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
EURUSD - Technical charts in detail
GBPUSD â€“ technical overviewThe recent breakdown below 1.2400 has opened the door for a fresh downside extension towards the major cycle low from 2016 in the 1.1800s. Longer-term studies continue to suggest the market should be looking to start turning back up, though at this stage, the pressure remains on the downside and it will take a break back above 1.2400 to take the immediate pressure off the downside and revive the outlook supporting a longer-term base.
- R2 1.2210 â€“ 6 August high â€“ Strong
- R1 1.2100 â€“ Figure â€“ Medium
- S1 1.2025 â€“ 9 August/2019 low â€“ Medium
- S2 1.2000 â€“ PsychologicalÂ â€“ Strong
GBPUSD â€“ fundamental overviewA discouraging UK GDP print is behind the latest slide in the Pound, with the data series producing its first contraction since 2012. The Cable rate sunk to its lowest level in 2.5 years, while Sterling crosses were also making multi-month lows. There were some attempts to offset weakness after the UK Chancellor of the Exchequer said he didn't expect a recession, and NIESR reported the UK could avoid recession if the third quarter data rebounded. Still, these communications failed to inspire much confidence, with the Pound already heavily stressed about the Brexit outlook. Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
USDJPY â€“ technical overviewThe 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. Rallies should continue to be well capped below 110.00.
- R2 107.57 â€“ 2 August high â€“ Strong
- R1 107.09 â€“ 6 August high â€“ Medium
- S1 105.27 â€“ 9 August low â€“ Medium
- S2 105.00 â€“ Psychological â€“ Strong
USDJPY â€“ fundamental overviewThe major pair continues to fund good selling pressure at every turn, with the latest downside pressure coming from a stronger than expected Japan GDP print and flight to safety play on news the US is holding off on a decision about licenses for US firms to restart businesses with Huawei. Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
EURCHF â€“ technical overviewThe 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. The latest breakdown below 1.1000 opens the door for the next major downside extension towards 1.0600.
- R2 1.1064 â€“ 26 July highÂ â€“ Strong
- R1 1.1000 â€“ Psychological â€“ Strong
- S1 1.0864 â€“ 5 August/2019 low â€“ Medium
- S2 1.0834 â€“ 2017 23 June low â€“ Strong
EURCHF â€“ 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 â€“ technical overviewThe market has been under pressure over the past several months, but has also been well supported on dips. 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 above 0.6700 on a weekly close basis.
- R2 0.6868 â€“ 1 August high â€“ Strong
- R1 0.6822 â€“ 8 August high â€“ Medium
- S1 0.6700 â€“ FigureÂ â€“ Strong
- S2 0.6677 â€“ 7 August/2019 lowÂ â€“ Strong
AUDUSD â€“ fundamental overviewThe Australian Dollar gave back recovery gains this past Friday, with the downside pressure coming from the RBA's downward revision to 2019 growth, and another communication from RBA Lowe that the central bank would be willing to ease again if needed.Â Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
USDCAD â€“ technical overviewDespite 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 1.3433â€“ 18 June high â€“ Strong
- R1 1.3345 - 7 August high â€“ Medium
- S1 1.3178 â€“ 5 August low â€“ Medium
- S2 1.3105 â€“ 31 July lowÂ â€“ Strong
USDCAD â€“ fundamental overviewThe Canadian Dollar initially suffered from a weaker than expected Canada employment report that produced the worst reading since August 2018. However, the rise in hourly earnings, jump in OIL, and news Aramco was moving the timetable for its IPO forward, proved to be strong offsetting forces. Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
NZDUSD â€“ technical overviewDespite recent weakness, there's a case to be made for a meaningful low, with the market trading back down to medium-term cyclical low territory in the 0.6300-0.6400 area. As such, look for setbacks to be well supported in the days ahead, in anticipation of renewed upside. Only a weekly close below 0.6300 would give reason for rethink. Back above 0.6600 will take the immediate pressure off the downside.
- R2 0.6589 â€“ 6 August high â€“ Strong
- R1 0.6500 â€“Â Psychological â€“ Medium
- S1 0.6400 â€“ FigureÂ â€“ Medium
- S2 0.6378 â€“ 7 August/2019 low â€“ Strong
NZDUSD â€“ fundamental overviewConcerns about the New Zealand growth outlook and talk about more rate cuts from RBNZ Governor Orr and Deputy Governor Bascand, have been behind some of the recent downside pressure in the Kiwi rate, after the currency did a good job recovering from its lowest level against the US Dollar since January 2016. Mondayâ€™s calendar is exceptionally thin, with no first-tier data scheduled. Instead, market participants will likely focus on the bigger picture macro themes influencing global sentiment, with updates on trade front and center.
US SPX 500 â€“ 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 monthly close above 3000 would be required to compromise the outlook calling for a top.
- R2 3029 â€“ 26 July/Record highÂ â€“ Strong
- R1 2961 â€“ 2 August high â€“ Strong
- S1 2777 â€“ 6 August low â€“ Medium
- S2 2729 â€“ 3 June low â€“ Strong
US SPX 500 â€“ fundamental overviewAlthough we've seen the market extending to fresh record highs in 2019, on the back of the Fed policy reversal, 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) â€“ 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 1600, while in the interim, look for any setbacks to be well supported above 1400.
- R2 1600 â€“ Round number â€“ Strong
- R1 1511 â€“ 7 August/2019 high â€“ Strong
- S1 1400 â€“ PsychologicalÂ â€“ Strong
- S2 1382 â€“ 1 July low â€“ Strong
GOLD (SPOT) â€“ fundamental overviewThe yellow metal continues to be well supported on dips withÂ 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.Â All of this should keep the commodity well supported, withÂ 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 â€“ technical overviewOverall, 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 13,748â€“ 26 June/2019 high â€“ Strong
- R1 12,310 â€“ 6 August high â€“ Medium
- S1 10,000 â€“ Psychological â€“ Strong
- S2 9,075 â€“ 17 July low â€“ Strong
BTCUSD â€“ fundamental overviewBitcoin 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 continued demand from institutional players starved for yield in a world where global equities are increasingly vulnerable.
BTCUSD - Technical charts in detail
ETHUSD â€“ technical overviewThe 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 290 â€“ 11 July high â€“ Strong
- R1 250 â€“ Psychological â€“ Medium
- S1 191 â€“ 16 July low â€“ Strong
- S2 170 â€“ 24 February HighÂ Â â€“Â Strong