Today’s report: US Dollar has seen better days
The rout in the US Dollar has intensified into Friday, with the Buck taking an added hit in the aftermath of discouraging Thursday data. The Buck has already been feeling the heat from the Fed’s dovish policy stance and ongoing escalation in trade tension, and this latest move has been really turning heads.
Wake-up call
- Eurozone GDP
- demand accelerates
- Yen strength
- tough challenges
- China PMIs
- Canada GDP
- option related
- Stocks vulnerable
- hard asset
- value play
- Ether exposed
Suggested reading
- Bitcoin's Hedge Fund Sharks Swimming With Whales, L. Laurent, Bloomberg (July 30, 2020)
- Cockroach Portfolio Shining in 2020, B. Arends, MarketWatch (July 30, 2020)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
A higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. The recent push back above 1.1500 strengthens the outlook, opening the door for a push towards 1.2000. Setbacks should now be well supported ahead of 1.1200.EURUSD – fundamental overview
The Euro has extended its run against the Buck to its highest levels since May 2018, with the single currency benefiting from broad based US Dollar outflow and a mostly supportive risk backdrop. However, with the major pair now well extended, we suspect sellers will start to emerge, as risk builds for a major correction. Looking ahead, key standouts on Friday’s calendar come in the form of German retail sales, Eurozone GDP and inflation, and US personal spending, personal income, core PCE, Chicago PMIs, and Michigan sentiment.EURUSD - Technical charts in detail
GBPUSD – technical overview
The market has rebounded sharply, after collapsing to a +30 year low below 1.1500. This supports the longer-term constructive outlook, with a major bottom sought out ahead of the start to a big run to the topside back through 1.3000 and towards the 2019 high at 1.3515. Look for the pair to hold up ahead of 1.2500 into setbacks.GBPUSD – fundamental overview
The Pound has extended its run against the Buck to its highest levels since March, with the single currency benefiting from broad based US Dollar outflow and a mostly supportive risk backdrop. However, with the major pair now well extended, we suspect sellers will start to emerge, as risk builds for a correction. Looking ahead, key standouts on Friday’s calendar come in the form of US personal spending, personal income, core PCE, Chicago PMIs, and Michigan sentiment.USDJPY – technical overview
We're seeing signs of a pickup in volatility in the major pair, with the market chopping around quite a bit. Still, there is no clear directional insight, with the price confined to a larger triangle formation. Overall, rallies have been well capped above 110.00 and dips well supported below 104.00.EURCHF – technical overview
The market remains very well capped into offers and the medium-term picture continues to favour the downside. A weekly close back above 1.1000 would be required to take the immediate pressure off the downside.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 renewed risk liquidation in 2020, 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
Technical studies have turned up in 2020, after the market traded down to its lowest levels since 2003 earlier this year. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a pullback to allow for shorter term studies to unwind. Next big resistance comes in the form of the 2019 high up at 0.7296. Setbacks should now be well supported ahead of 0.6500.AUDUSD – fundamental overview
Aussie has been well bid overall of late, on the back of broad based US Dollar outflow. Still, with the risk outlook shaky, and worry associated with the coronavirus ticking back up, we suspect additional upside will be limited for the time being. On the data front, China PMI reads came in mixed on Thursday. Looking ahead, key standouts on Friday’s calendar come in the form of US personal spending, personal income, core PCE, Chicago PMIs, and Michigan sentiment.USDCAD – technical overview
Has been in the process of correcting since topping out earlier this year above 1.4600. At this stage, with the correction well extended, the market is likely to find solid support in the 1.3200-1.3400 area, ahead of a resumption of gains. Ultimately, only a weekly close below 1.3300 would suggest otherwise.USDCAD – fundamental overview
The Canadian Dollar has enjoyed a nice run of late, with the currency getting a boost from ongoing broad based US Dollar outflow. Still, with the risk outlook shaky, and OIL pulling back, we suspect additional upside will be limited for the time being. Looking ahead, key standouts on Friday’s calendar come in the form of Canada GDP and producer prices, and US personal spending, personal income, core PCE, Chicago PMIs, and Michigan sentiment.NZDUSD – technical overview
There's a case to be made for a meaningful bottom, after the market collapsed below massive psychological support at 0.5500 earlier this year. The latest break back above the 0.6600 area further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud. Any setbacks are expected to be well supported ahead of 0.6200.NZDUSD – fundamental overview
The New Zealand Dollar has been well bid overall of late, on the back of broad based US Dollar outflow. Still, with the risk outlook shaky, and worry associated with the coronavirus ticking back up, we suspect additional upside will be limited for the time being. Dealers report option related selling interest in the New Zealand Dollar. Looking ahead, key standouts on Friday’s calendar come in the form of US personal spending, personal income, core PCE, Chicago PMIs, and Michigan sentiment.US SPX 500 – technical overview
The market has been in recovery mode since bottoming out in March. Still, the recovery is classified as corrective, with a lower top sought out below the record high from February, ahead of the next major downside extension, eventually back below the March low.US SPX 500 – fundamental overview
Although we've seen attempts at recovery in response to unlimited QE from the Fed and massive US stimulus, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with recovery post coronavirus, should weigh more heavily on investor sentiment in 2020.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1700.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, coronavirus fallout, 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
A higher low is sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 8,000 would delay the constructive outlook. The latest push back above 10,500 further encourages the bullish prospect. Shorter studies are however stretched and warn of a pullback ahead.BTCUSD – fundamental overview
Bitcoin has enjoyed a nice recovery since bottoming in March, with the runup in stocks and hype around the halving event contributing to a lot of the momentum. Interest from well known traditional market participants is helping to generate plenty of buzz as well. At the same time, given the extended nature of technical readings into important resistance, we see this as timing well for another period of weakness, especially with global equities once again looking vulnerable.BTCUSD - Technical charts in detail
ETHUSD – technical overview
The market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above 200, in favour of a push back towards and through the 2019 high up at 363.ETHUSD – fundamental overview
While there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a weighing influence into rallies, with Ether expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.