Activity to pick up into month end

Next 24 hours: Euro leaps back above parity

Today’s report: Activity to pick up into month end

Market conditions were a little thinner on Monday, with a light economic calendar and UK holiday factoring into the dynamic. In the end, it was mostly a day of consolidation in the aftermath of last Friday’s intense bout of risk liquidation.

Wake-up call

Chart talk: Technical & fundamental highlights

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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 has set up a dip below 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.

  • R2 1.0146 – 17 August high – Medium
  • R1 1.0091 - 26 August high – Medium
  • S1 0.9900 - 23 August/2022 low – Strong
  • S2 0.9800 – Figure – Strong

EURUSD – fundamental overview

The Euro finally got a bit of a boost on Monday, this on news the EU plans to intervene in the power market. Meanwhile, the single currency has also responded positively to all of this latest hawkish talk out from ECB officials. ECB Holzmann and Knot have floated the possibility for a 75 basis point rate hike in September. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

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. Next key support comes in at the multi-year low from 2020 in the 1.1400 area. Look for a push back above 1.1900 to take the immediate pressure off the downside.

  • R2 1.2004– 5 August low – Strong
  • R1 1.1901 – 26 August high – Strong
  • S1 1.1649 – 29 August/2022 low – Medium
  • S2 1.1600 – Figure – Strong

GBPUSD – fundamental overview

The Pound can't catch a break right now, extending declines to its lowest levels since the pandemic lows. There's been plenty of worry around the energy crisis and costs to households, all while Goldman Sachs has downgraded its outlook for the UK economy. UK markets will get back to fuller form on this Tuesday following the Monday holiday break. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped into the 140.00 area. Next key support comes in at 135.81.

  • R2 139.39 – 14 July/2022 high – Strong
  • R1 139.01 – 29 August high – Medium
  • S1 135.81 – 23 August low – Strong
  • S2 134.65 –18 August low – Medium

USDJPY – fundamental overview

As much as the Yen has been sold of late on the intensely favorable US Dollar yield differential, the currency has at least managed to avoid extending fresh multi-year declines against the Buck. It seems rocketing inflation in Japan has been difficult for even the BOJ to ignore, something that could at least force policy that is somewhat less accommodative than what we've come to see from the central bank. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

AUDUSD – technical overview

Overall pressure remains on the downside despite the recent recovery and conditions remain quite choppy. A break back above 0.7137 would be required to take the pressure off the downside. Until then, scope exists for a lower top below 0.7284 and deeper setbacks towards 0.6500.

  • R1 0.7200 – Figure – Medium
  • R2 0.7137 – 11 August high – Medium
  • S1 0.6841 – 29 August low – Medium
  • S2 0.6800 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar did a good job holding up into the latest bout of risk off flow, getting help from Monday's much better than expected Aussie retail sales print. We also saw some stability in risk markets on Monday, which proved to be an additional prop for the currency. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

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.

  • R2 1.3079 – 17 June high – Strong
  • R1 1.3076 – 29 August high  – Medium
  • S1 1.2828 – 17 August low – Medium
  • S2 1.2728 – 11 August low – Strong

USDCAD – fundamental overview

The Canadian Dollar was able to benefit from a more stable risk sentiment on Monday, allowing the currency to focus on the boost from an ongoing run higher in the price of oil. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

NZDUSD – technical overview

Overall pressure remains on the downside despite the recent recovery and conditions remain quite choppy. A break back above 0.6469 would be required to take the pressure off the downside. Until then, scope exists for a lower top below 0.6577 and deeper setbacks below 0.6000.

  • R2 0.6500 – Psychological – Strong
  • R1 0.6469 – 12 August high – Medium
  • S1 0.6102– 29 August low – Medium
  • S2 0.6061 – 14 July/2022 low – Strong

NZDUSD – fundamental overview

The local New Zealand jobs market remains robust, with filled-jobs up 0.5% m/m for the fourth consecutive gain. Meanwhile, signs of stability in risk assets following last Friday's rout, has also helped to prop up the New Zealand Dollar. Key standouts on Tuesday’s calendar come from BOE consumer credit, Eurozone sentiment reads, German inflation, the Canada current account, US Case Shiller, and US JOLTs job openings. We also get Fed speak from Fed Williams late in the day.

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 4,500 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.

  • R2 4422 – 3 March high – Strong
  • R1 4328 – 16 August high – Strong
  • S1 4007 – 29 August low – Medium
  • S2 4000 – Psychological – Strong

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. We have seen an attempt at recovery in recent weeks, with softer CPI reads helping. But overall, we expect inflation to continue to be a problem that results in renewed downside pressure into rallies.

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.

  • R2 1880 – 13 June high – Strong
  • R1 1815 – 4 July high – Medium
  • S1 1700 – Round Number – Strong
  • S2 1681 – 21 July/2022 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 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.

Peformance chart: 30 Day Performance vs. US dollar (%)

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