Next 24 hours: Central bank speak trumps economic data
Today’s report: When bad news is bad news
It seems there could be a limit to the bad news is good news for stocks trade, this after a surprising round of discouraging PMI data out of the US this past Friday, which didn’t do anything to bolster stocks.
Wake-up call
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Lagarde’s ‘Whatever It Takes’ Sequel Isn’t a Hit Yet, J. Authers, Bloomberg (July 22, 2022)
- Financial Exclusion in the Gypsy Community, R. Wright, Financial Times (July 20, 2022)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market has come under intense pressure in recent months, with setbacks accelerating below the critical multi-year low from 2017 at 1.0340. This sets up a test of monumental support in the form of parity. At the same time, technical studies are tracking in oversold territory, suggesting additional setbacks should be limited. Back above 1.0500 would be required to take the immediate pressure off the downside.EURUSD – fundamental overview
The Euro came under some pressure on Friday following a weak PMI read, with Eurozone and German composite PMIs slipping into contractionary territory. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.EURUSD - Technical charts in detail
GBPUSD – technical overview
The market continues to be exceptionally well supported on dips below 1.2000. Unless we see a monthly close below 1.2000, we expect this to continue to be the case. Look for a break back above 1.2200 to take the immediate pressure off the downside.GBPUSD – fundamental overview
The Pound saw some relative outperformance to close out the previous week, getting a boost from solid PMIs and better than expected retail sales. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.USDJPY – technical overview
The market has rocketed higher to its highest levels since 1998 after breaking through the 2002 high. Technical studies are however looking stretched, with scope for a sizable consolidation and correction in the weeks ahead. Look for additional upside from here to be well capped ahead of 140.00. A break back below 134.00 would take the immediate pressure off the topside.USDJPY – fundamental overview
We've seen some demand for the Yen in recent sessions. Most of this price action comes from position adjusting from shorter-term accounts in the aftermath of a massive decline in the Yen. There has also been a round of position adjusting in favor of the Yen as the market prices out the odds for a 100 basis point rate hike from the Fed, and as the market takes in some hot CPI data out of Japan. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.AUDUSD – technical overview
Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.7070 would be required at a minimum to take the immediate pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6500.AUDUSD – fundamental overview
Analysts have been calling for more aggressive rate hikes from the RBA in the months ahead which has supported the Australian Dollar. At the same time, risk off flow has limited gains to the topside. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.USDCAD – technical overview
A recent surge back above 1.3000 signals an end to a period of bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.3500 area. Setbacks should be very well supported down into the 1.2500 area.USDCAD – fundamental overview
Ongoing weakness in oil prices and renewed downside pressure on stocks have invited a resurgence in selling of the Canadian Dollar. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.NZDUSD – technical overview
Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.6400 would be required to force a shift in the structure and suggest we are seeing a more significant bullish reversal. Until then, scope exists for fresh yearly lows and a retest of the major psychological barrier at 0.6000.NZDUSD – fundamental overview
The New Zealand Dollar has been in minor recovery mode in recent sessions, getting a boost out from the yearly low on account of a bounce in US equities, broad based declines in the US Dollar, and hot inflation data out of New Zealand. At the same time, we have seen Friday's bout of risk off flow and lower US equities open renewed downside pressure on the New Zealand Dollar. Key standouts on Monday’s calendar come in the form of German Ifo reads, UK CBI trends, the Chicago Fed national activity index, and Dallas Fed manufacturing.US SPX 500 – technical overview
Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 4,206 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.US SPX 500 – fundamental overview
We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. And so, naturally, stocks have been under intense pressure in 2022.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1700 on a monthly close basis.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 inflation risk and a less upbeat global growth outlook. 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.